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State-chartered digital asset bank Custodia, formerly known as Avanti, has raised $7 million, according to a filing submitted to the Securities and Exchange Commission. 

The startup, which was founded in 2020 by Wall Street veteran Caitlin Long, raised a $37 million Series A round in March of last year. Its backers include Binance.US, Coinbase Ventures and Lemniscap. 

The startup’s total funding now amounts to $51 million. 

The company declined to respond to multiple requests for comment. Investors in the round were not disclosed in the filing. 

The date of the first sale for this equity round took place in early October and the firm has a total of 36 investors, according to the filing. 

The path to launching a digital bank

Custodia is designed to provide real-time settlement finality for U.S.-dollar payments in digital asset transactions, according to the company’s website. It is designed to provide real-time settlement finality for U.S. dollar payments in digital asset transactions, according to the company website. 

Custodia states on its website that being referred to as a “crypto bank” is a misnomer because it will not take cryptocurrency deposits on its balance sheets. It will instead provide custody services for digital assets. 

In 2020, the startup secured a bank charter from the state of Wyoming to make these banking services possible. The charter means that the firm must comply with regulations such as the Bank Secrecy Act, anti-money laundering laws as well as other rules and regulations. 

The funds raised from Custodia in its Series A round were leveraged to provide the capital needed to launch the bank as required by regulators. 

The bank aimed to launch in the second quarter of this year where it would provide U.S.-dollar deposit accounts for business customers, according to a February release. However, the bank isn’t yet in operation. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Hong Kong’s regulator has detailed the basic requirements that exchange-traded fund managers need to meet in order to list crypto products in the city.

The list forms part of a wider effort by city officials to re-establish Hong Kong as a center for virtual assets. The finance minister and other senior officials on Monday laid out plans to attract crypto-related companies including clearer trading rules.

Hong Kong’s regional government also re-emphasized its participation in China’s broader experiment with central bank digital currencies. 

Among those plans were crypto futures ETFs with underlying assets in instruments linked to bitcoin and ether futures traded on the Chicago Mercantile Exchange (CME), Securities and Futures Commission Deputy CEO Julia Leung announced at Hong Kong Fintech Week today.

A circular published after the forum closed for the day spelt out more details on what the SFC expected from any ETF issuer that sought regulatory approval to list a futures crypto product in Hong Kong. 

• Any product needs to meet requirements governing unit trusts, mutual funds and unlisted structured products.
• The ETF issuer needs to show a minimum three-year track record and record of regulatory compliance.
• Issuers will need to demonstrate digital asset ETFs have adequate liquidity.
• Net derivative exposure cannot exceed 100% of the ETF’s total net asset value.
• Issuers are required to carry out investor education efforts before launch.

”It has been observed that there are meaningful developments in the VA ecosystem recently and some of the initial concerns over VA Futures ETFs have become increasingly manageable and could be adequately addressed with proper safeguards, disclosure and investor education,” the SFC said in its regulatory notice.

But despite the announcement the agency raised caution about cryptocurrencies and other virtual assets. The SFC’s announcement noted that, “a good part of the VA ecosystem (e.g., VA trading platforms) is still not subject to the same robust regulation as service providers or products in traditional financial markets, investment products that invest directly in spot VAs may continue to present investor protection issues.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Digital asset manager CoinShares has released its third-quarter earnings, showing a marked improvement over its second-quarter performance.

Adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA — a popular measure of a company’s financial performance — was £6.4 million (just over $7.3 million). However, this is down from the adjusted EBITDA of £26.1 million a year ago.

Source: CoinShares

The asset manager reported more than $21 million in losses in the second quarter. The losses were attributed to the TerraUSD collapse and the costs related to its ongoing expansion.

During the second quarter, the firm’s assets under management fell below £2 billion; by September 30, it had recovered to £2.02 billion.

The asset manager announced the launch of a Twitter bot that helps traders understand the value of NFTs as well as an algorithmic trading tool for retail investors.

CoinShares’ earnings call is set for tomorrow, November 1, at 10 am ET. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Justice Department is returning to a probe into potential bank fraud at stablecoin operator Tether, Bloomberg reports, citing unnamed sources. 

The probe focuses on Tether’s controversial banking relationships, which have drawn scrutiny from U.S. regulators in the past. Bloomberg originally reported on a banking-related investigation last summer.

Since then, the case has largely gone unnoticed. The Southern District of New York under U.S. Attorney Damian Williams is said to be taking on the investigation, per Bloomberg.

Tether responded with a statement dismissing the report: “This is Bloomberg recycling old news that isn’t even factual.” A representative for the firm said of any investigation that “[t]here’s nothing new that we know of.”

Last year, Tether and crypto exchange Bitfinex settled a high-profile case with the New York Attorney General that saw both firms, owned by the same parent company, forced out of the state.

Core to that case was the use of Tether’s stablecoin deposits to cover $850 million of Bitfinex funds held by Panama-based payments processor Crypto Capital, which had in turn had them seized. Crypto Capital founder Reggie Fowler pled guilty to criminal charges earlier this year. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• $8.4bn in Q3’22 loan originations, +4% QoQ and +140% YoY on a quarterly basis gains 
• $2.8bn in total active loans, (43%) QoQ and (75%) YoY on a quarterly basis decline 
• $18.7bn derivatives volume traded, (44%) QoQ and (24%) YoY on a quarterly basis decline 
• $9.6bn spot volume traded in Q3’22, (30%) QoQ and (25%) YoY on a quarterly basis decline
• Figures in line with the broader market pull back from digital assets as investors seek risk-off assets and cash

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Quick Take

• Reddit has sterilized NFTs by using euphemistic lingo.
• Through this savvy rebranding, Reddit has managed to infiltrate NFTs into a community that has been notoriously opposed to NFTs.
• Although the number of wallets holding a collectible avatar has surged to a monumental 2.9mm, only a tiny fraction has traded collectible avatars on the secondary market.

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Private equity firm Apollo Global Management has expanded its crypto offering through a partnership with crypto custodian platform Anchorage Digital. 

Anchorage, a federally charted crypto bank in the U.S., will store the large majority of the digital assets the firm handles for its clients, according to a release Monday.

Apollo participated in Anchorage’s $350 million Series D funding round in December 2021, with its custody relationship beginning in the middle of last year, per a Reuters report. It follows previous Anchorage partnerships with institutions in Asia. 

“As we explore creative ways to apply blockchain technology across Apollo’s business, we look forward to collaborating with Anchorage for the safekeeping of client assets,” said the chief operating officer of Apollo’s digital asset team, Adam Eling. 

In April, the private equity giant hired Christine Moy, formerly a crypto executive at JP Morgan. Moy joined as a partner to head up the investment firm’s digital-asset strategy. A source at the time told The Block that, while she’ll help the firm invest in web3 and blockchain projects that have a token, it’s unlikely that the firm will purchase bitcoin. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Braavos has raised $10 million to launch a self-custodial wallet on StarkNet, an Ethereum scaling solution. 

The seed round is led by Pantera Capital. Other backers include Brevan Howard Digital, Crypto.com, Road Capital, Matrixport and Starkware, according to a company release. 

Braavos was co-founded at the start of this year by Motty Lavie, Abraham Makovetsky and Yoav Gaziel. The startup closed the all-equity fundraise at the beginning of the bear market, according to Lavie. 

Leveraging StarkNet

StarkNet is a Layer 2 scaling solution for the Ethereum network developed by Starkware. The technology leverages zero-knowledge roll-ups and has the security of the Ethereum network while also allowing for scale. 

Starkware was founded in 2017 and raised $100 million in a Series D round earlier this year, which brought the company’s valuation to $8 million. 

The technology available on StarkNet enables Braavos to create smart contract-based wallets, which Lavie believes significantly improves the user experience. “For us, we are very technical people and still the experience was intimidating,” Lavie said in an interview with The Block. “Crypto today, or at least let’s say decentralized self-custodial crypto, has put on the user’s shoulders a big burden in terms of taking care of their security.” 

“It was a very, very bad user experience, frankly speaking,” he added. “It was a user experience that in under no circumstances today would pass in what we call the web2 world.” 

The smart contract technology means that Braavos can bring familiar components of the web2 world to self-custodial wallets. Features like a daily withdrawal limit or enabling a time delay in withdrawing funds from the account can now be made possible with smart contract technology, Lavie explained.

Making the hardware wallet redundant?

Braavos could even make dedicated hardware wallet redundant through its new built-in hardware signer feature, Lavie claims.

The tool leverages existing mobile devices’ Trusted Execution Environment capabilities and their biometric identification tools, like face and touch ID, to secure wallets — which means that users no longer need to rely only on a seed phrase. 

“This is very powerful because we actually use a private key that no one knows,” Lavie said, noting that “it’s not exposed to any human, not the user itself, and certainly not to an adversary. He explained,”this means that even if my phone gets hacked, the hacker does not have access to my seed phrase. These are just some of the things that smart contract-based wallets and account abstraction allow us to do.” 

There is even no security issue if you lose your device because the key is saved inside the hardware security model, Lavie explained. For example, it’s not known that anyone has been able to hack into the security enclave inside an iPhone. The challenge revolves more around regaining access to those funds without the device.  

For now, users will be able to recover the account using their seed phrase, Lavie explained. However, there will be a four-day delay with any request, which means that if someone has stolen the seed phrase, the user will have time to move the funds or change the phrase.

Braavos will be available as an extension on web browsers, as well as on iOS and Android devices. 

The team will be rolling out features, such as a “forgot my password” mechanism and multi-factor authentication, to make the experience of managing a self-custodial wallet more familiar to a web2 audience.

The funds from the raise will be put toward product development, and to accelerate hiring and marketing. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Reserve Bank of India, the country’s central bank, will on Tuesday begin a pilot wholesale digital currency with the goal of reducing transaction costs and the need for collateral when trading government securities.

Using the digital rupee will pre-empt the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk, the Indian central bank said in a statement.

Nine banks including HSBC, ICICI Bank, State Bank of India and Union Bank of India were participating in the pilot, which will be a model for further pilots to test other wholesale transactions and cross-border payments using the digital currency, the RBI said.

A digital rupee pilot designed for retail transactions is expected to start within a month.

The digital rupee pilot “is expected to make the inter-bank market more efficient,” the RBI said in the statement. “Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk. Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto prices continue to trend higher today as crypto earnings take center stage this week. 

Bitcoin was trading at $20,727 on Coinbase, down roughly 0.1% in the past 24 hours, according to exchange data. Meanwhile, ether gained 1% in the same period as Ethereum’s native coin traded at $1,620.

ETHUSD chart by TradingView

Altcoins also ticked higher on Monday. Binance, Solana and Avalanche’s native coins added 5.2%, 4.9%, and 3.5%, respectively. 

Elsewhere, the HUSD stablecoin was down over 60% in the last few hours, according to data from CoinGecko. The stablecoin has traded below its peg since Oct. 28, after Huobi announced its delisting a day prior.

Crypto earnings calls

Coinshares kicks things off today with its earnings report. The asset manager had a busy third quarter — launching several new product lines, including a Twitter bot that helps NFT traders judge the fair value.

MicroStrategy delivers its earnings on Tuesday. The software firm last purchased bitcoin in September, bringing its total holdings to 130,000 BTC.

Robinhood will share its results on Wednesday. Last quarter, the retail investing app took steps to trim costs after missing earnings in August.

Coinbase is the main event on Thursday, while Block, PayPal, and Mercado Libre are also due. 

Macro matters

It’s another big week regarding macroeconomic developments as the U.S. Federal Reserve is set to announce its next interest hike on Wednesday. The central bank is expected to increase rates by 75 basis points again.

CME FedWatch tool

The market is pricing in an 89% possibility of a 75 basis point increase, according to interest rate traders, based on the CME’s FedWatch tool.

In Europe, inflation in the Eurozone hit a record high of 10.7% on Monday. The ECB hiked rates by 75 basis points last week as it continues to combat red-hot inflation. 

The Bank of England is expected to raise rates by 75 basis points on Thursday.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.