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Quick Take

• This research piece is a two-part series, with the first part focusing on the core issue of tokenizing in-game currencies.
  
• In the second part, we will delve deeper into the design of various token models and identify which games would benefit from having their currency tokenized.
  
• Tokenizing in-game currencies frequently leaves game developers without control over the value of their currencies, leaving them vulnerable to market speculation.
• The core issue can be easily understood via an international economic theory “Impossible Trinity” and we will explore the potential solutions.

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© 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.

On Monday, a group of Cosmos contributors released a new whitepaper that outlines a plan to add two new functionalities to the central blockchain of the Cosmos ecosystem called the Cosmos Hub.

Cosmos is a blockchain network consisting of interoperable, application-specific blockchains. These chains can interact with one another using the Inter Blockchain Communication (IBC) protocol. The Cosmos Hub is an independent blockchain and is secured by validators who stake Cosmos’ native token called ATOM.

One problem Cosmos Hub has always had is that the value of its native token isn’t directly linked to the growth of the entire Cosmos ecosystem. This is because it is just one blockchain among many in the ecosystem, while other blockchains typically have applications built on top of their native chains — a much closer connection. As a result, the new whitepaper looks at different ways the Cosmos Hub can attempt to become more valuable by leaning on its position in the ecosystem.

In a new whitepaper, Cosmos contributors have proposed a couple of new functionalities for the Cosmos Hub. The first functionality is the Interchain Scheduler, a cross-chain marketplace for maximum extractable value (MEV). MEV is a term given to on-chain frontrunning. It’s used by arbitrageur traders who like to pay a fee to block producers to ensure their transactions get preferential treatment.

The Interchain Scheduler is expected to form a Cosmos-based multi-chain relay service (similar to Flashbots on Ethereum) that will let Cosmos users bid on blockspace across chains connected to the Hub, according to the whitepaper.

“By buying block space on different chains, users can lock-in arbitrage opportunities with strong execution guarantees,” the document stated. The Scheduler will redirect fees generated from the cross-chain MEV marketplace into the Cosmos Hub treasury, according to the contributors. 

The second functionality is called the Interchain Allocator: a proposed software module letting Cosmos-based chains to work together on “economic coordination.” The aim of this functionality is to allow chains to build “common good” applications on the Cosmos Hub that accrue value to the ATOM token.

“The Scheduler and Allocator are essential steps for transforming ATOM from Interchain Meme coin to true utility in the IBC economy,” Zaki Manian, a Cosmos contributor and co-author of the whitepaper, told The Block.

Both Interchain Schedule and Interchain Allocator are in the proposal phase. The two functionalities will be launched in addition to previously announced Cosmos Hub core features like interchain security and liquid staking of ATOM tokens that remain in the pipeline as well.

© 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.

Robinhood’s self-custody wallet has launched in beta to 10,000 iOS customers globally. 

Robinhood Wallet, a standalone app on the Apple Store, allows users to trade and swap crypto without network fees. The app is initially launching with Polygon support but will support multiple networks in the future, according to Robinhood.

Polygon was chosen for its low-cost model, Seong Seog Lee, head of product at Robinhood Crypto, told The Block.

“Launching the Robinhood Wallet beta marks a significant step forward in our journey to make Robinhood the most trusted and simple crypto platform for customers,” said Johann Kerbrat, chief technology officer at Robinhood Crypto. Robinhood aims to emulate what it did with stock trading for crypto.

Circle’s USDC stablecoin will be the primary fiat-representative token on the app during the beta period, according to Robinhood. There will also be a rewards center on the app where users can accrue rewards, such as earning the MATIC token for creating their wallet. 

Robinhood Wallet will offer more tokens than Robinhood’s main platform. Kerbrat said that between 25 and 30 tokens will be available during the beta. The firm also plans to add NFTs to the platform after the beta period is completed.

The retail investing platform’s expansion into web3 and self-custody comes as a growing number of crypto exchanges in the U.S. drop fees for trading pairs in an effort to capture market share. Such moves have come in reaction to slumping crypto exchange volumes.

© 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 ongoing downturn in cryptocurrency markets is giving global regulators “more time” to identify the weaknesses and work that needs to be done, says Jerome Powell, Chair of the U.S. Federal Reserve.

“Crypto winter did not have a significant effect on the broader banking system and financial stability,” Powell said while addressing global financial leaders and crypto regulation experts in a conference focused on central banks and digital currencies held in Paris.

The overlap between traditional finance and banking systems and decentralized finance (DeFi) is limited, which Powell argued is good news for regulators. 

“This demonstrates the weaknesses and work that needs to be done,” Powell said, referring to the “significant” structural and transparency issues in DeFi. “Crypto winter gives us a little bit of time. That situation will not persist indefinitely.”

There are several pressure points that need more work, according to Powell, regarding novelties like the need to regulate unhosted wallets or algorithms.

As DeFi attracts more retail investors, Powell reiterated the need for “appropriate” regulation to be put in place.

Powell previously called for legislation to “appropriately” regulate stablecoins. While lawmakers in the U.S. were unsuccessful in adopting legislation on stablecoins this summer, a more stringent piece of legislation has begun taking shape. The bill, however, will not include a central bank digital currency (CBDC) issuance.

During his remarks, Powell said the U.S. decided “not to proceed” with the issuance of a central bank digital currency, thereby giving policymakers a few more years to evaluate policy issues and technology issues as well as increase public confidence. Such work would involve different branches of the U.S. government as well. 

© 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.

Billionaire Fosun International co-founder Liang Xinjun led a $6 million funding round for open-source software company Smart Token Labs’s Tokenscript project. 

The company has now quadrupled the valuation of TokenScript from $50 million to $200 million. In July last year, it raised an initial $6 million from investors such as Mark Cuban, Crypto.com, Framework Ventures and Mechanism Capital, it said. 

This latest deal, which closed earlier this month, also involved investors such as HashGlobal, Bodl and Fenbushi Capital, according to an announcement. 

Smart Token Labs raised the money via a simple agreement for future tokens or a SAFT, it said over email. SAFTs are investment contracts offered to investors by startups that agree to the eventual transfer of their native tokens. It will use these funds to further develop TokenScript, a framework that aims to improve upon the functionality of tokens. 

“TokenScript has enormous potential as a programmable smart token interface, an open source middleware that can connect Web2 and Web3,” said Xinjun in the statement. “We are very encouraged by the traction the team is gaining via projects with global brands and integrations with major platforms.”

The TokenScript product BrandConnectors enables websites to respond based on the tokens in a user’s wallet and is currently being integrated with platforms such as Shopify and Galaxy with other platform partnerships in sports and loyalty in the works, it said. 

Smart Token Labs also said the framework is interoperable across blockchains, with successful implementations on Solana, Flow and Ethereum virtual machine networks such as Optimism, Polygon, Avalanche, and Ethereum. 

The SAFT raise comes at a time venture capitalists have started to shun tokens as viable investment vehicles. According to The Block reporting, 2022 has seen a growing number of crypto startups offer up both equity and tokens to potential backers. This comes amid a 22% decline in blockchain venture funding in the second quarter of this year according to The Block Research. 

Blockchain/crypto venture funding by quarter from The Block Research

© 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.

Gemini, the cryptocurrency platform founded by the Winklevoss twins, is partnering with financial advisory firm Betterment.

Through the partnership Gemini will act as the crypto custodian for Betterment, enabling the financial advisory firm to open up crypto access to its customer base, which is a little over 730,000 users. Betterment customers will have access to crypto portfolios from October. 

Marshall Beard, Gemini’s chief strategy officer, said that the firm is continuing to expand its institutional partnerships, to provide “responsible access to crypto.” Beard noted that the firm is providing crypto infrastructure to a growing number of asset managers and financial institutions, around the globe.

Gemini also partnered with Plaid, the data connectivity company, in July. Through this partnership customers are able to share their crypto account information, including asset types, balances and transactions, with other services they use to help with financial planning, tax advisory services and net worth calculations.

Crypto exchanges continue to announce partnerships and expand services despite the current bear market. One explanation for the continued expansion of firms in the space could be the dwindling volumes on crypto exchanges over the past twelve months. 

On top of partnerships a whole host of crypto exchanges announced staking services in the lead up to The Merge this month, with Gemini launching new feature called Gemini Staking.

© 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 lender Nexo has bought a stake in Summit National Bank, a U.S. federal bank regulated by the Office of the Comptroller of the Currency (OCC).

Sharing the news exclusively with The Block on Tuesday, Nexo said the deal will expand its presence in the U.S., enabling the firm to offer bank accounts, lending and card services to both retail and institutional clients. The bank’s clients will be able to access Nexo’s crypto services, said the firm.

“It is a minority stake” acquisition in the bank, or less than 50%, Nexo co-founder Antoni Trenchev told The Block. He declined to comment on the deal size but said it is all in cash and the transaction has been completed.

The news comes a day after eight U.S. states — California, Kentucky, New York, Maryland, Oklahoma, South Carolina, Washington and Vermont — brought actions against Nexo, alleging that the firm offered unregistered, interest-bearing crypto accounts to users.

Commenting on the actions, Trenchev said Nexo voluntarily ceased the onboarding of new U.S. clients for its yield product and stopped the product for new balances for existing clients after the Securities and Exchange Commission (SEC) issued an order against the firm’s rival BlockFi in February 2022. BlockFi at the time settled state and federal actions with a $100 million penalty.

“Nexo is committed to finding a clear path forward for the regulated provision of products and services in the U.S., ideally on a federal level,” said Trenchev.

The bank deal

Summit National Bank, formerly Hulett National Bank, was formed in 1984. Its founders remain unknown, but the current majority shareholder and chairman of the board is Forrest Gilman, said Trenchev.

Gilman has previously held positions at banking giants UBS, Deutsche Bank and Citigroup, according to his LinkedIn profile. “We are delighted to welcome Nexo aboard,’’ Gilman said in a statement. “This is the culmination of more than two years of unfaltering dedication to combining Summit National Bank’s traditional approach and values with our vision for the bank’s future.”

The deal had been in the works for more than two years, according to Trenchev. Asked if regulatory approvals have been sought, he said “whatever approvals were needed have been secured,” declining to comment on specific details.

The deal has been “reviewed” by the OCC as part of the bank’s general overhaul plan, per the statement. 

A Summit National Bank spokesperson declined The Block’s request for comment on this story, but said Hulett Bancorp (doing business as Mode Eleven) is the entity that owns Summit National Bank. Gilman is also the chairman of Mode Eleven’s board, per his LinkedIn profile.

As part of the deal, Nexo co-founder and managing partner Kalin Metodiev has joined the bank’s board of directors.

Summit National will continue to operate independently, said Trenchev, adding that there are about 50 people working for the bank.

Law firm Schulte Roth & Zabel acted as the legal advisor for the deal, according to Trenchev. There were no banking advisers, he said, adding that Nexo’s internal mergers and acquisitions (M&A) team evaluated the transaction. 

Nexo is also looking to acquire a stake in a European bank, said Trenchev, declining to provide further details.

Alongside banking acquisitions, the lender is also considering acquiring rival troubled crypto lender Vauld. It recently extended its due diligence period on Vauld, meaning a decision won’t be known until at least the first week of October. Trenchev also declined to provide an update on the potential Vauld deal.

© 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 UK’s Financial Conduct Authority (FCA) added fintech unicorn Revolut to its cryptoasset register this week, bringing the list of companies permitted to carry out cryptoasset activities in the country to 38. 

From January 2020, firms carrying out certain cryptoasset activities in the country have been required to register with the FCA. Some companies already offering such services were able to continue under the FCA’s Temporary Registration Regime, the deadline for which was meant to expire in March 2022.

Amid a glut of applications for approval, the FCA later extended the deadline. The neobank was the last remaining firm on the register until yesterday. Over 60 other applications were denied or had withdrawn from the official register.

The announcement follows a string of other regulatory victories for Revolut around the world as it seeks to roll out crypto services to more customers. In August, it gained approval to launch crypto services to users in Singapore, and a couple of weeks later was granted authorization to do the same within the EEA.

Revolut launched in the UK in 2015 and today claims more than 20 million customers across the world making 250 million transactions a month.

Crypto trading on Revolut remains something of a closed system: most tokens cannot be transferred off of the app and cryptocurrencies cannot be added from other wallets, although this is something the company plans on addressing in the future.

It is also seeking a banking license in the UK. However, earlier this month the Financial Times reported that UK financial regulators had found flaws in its auditing process. 

© 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.

Two new reports by the International Monetary Fund (IMF) on regulating stablecoins and unbacked cryptoassets have called on the Financial Stability Board (FSB) to set and lead global efforts on crypto regulation.

The reports, published on Monday, state that the watchdog is “well placed to take the lead in coordinating and establishing global standards to support national regulation of crypto assets,” as well as guiding the national implementation of regulation of crypto assets while considering sector-specific standards.

Some of the measures in the reports include the development of common global categories to inform cross-sectoral standards and guide data collection. They also tout a risk-based approach with additional requirements for “entities and activities that generate more risk” as well as recommending the backing of stablecoins with safe and liquid assets.

The FSB will report to G20 finance ministers and central bank officials in October on “high-level recommendations” regarding crypto and particularly stablecoins, according to a statement issued by the FSB from this summer.

The IMF has also mentioned its close collaboration with FSB in the past in a blog post from December 2021 to develop regulatory frameworks for cryptoassets. The results of the collaboration are visible as the reports lean on the Basel-based organization’s existing research, frameworks and definitions as a basis for its recommendations.

The FSB was created in the wake of the 2008 financial crisis as a successor to the Financial Stability Forum.

© 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.