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Metaverse infrastructure developer Hadean raised $30 million in Series A funding with participation from Epic Games, creator of the hit game Fortnite. 

European investment firm Molten Ventures led the round, with 2050 Capital, Alumni Ventures, Aster Capital, Entrepreneur First and InQTel also providing support, Hadean said in a press release.

Hadean builds out virtual worlds, and will use the funding to continue building out secure, interoperable and scalable metaverse infrastructure. 

“Hadean’s computing power will provide the infrastructure that’s needed as we work to create a scalable metaverse,” said Marc Petit, vice president of Epic’s Unreal Engine Ecosystem. “The company’s technology complements Epic’s Unreal Engine by enabling massive amounts of concurrent users and unlocking new tools for creators and developers.”

Unreal Engine is a photorealistic 3D creation tool that can be used for gaming, film, simulations and more. It is this engine that powers the hit video game Fortnite, which has more than 80 million monthly active users and 3 million users online at any given time, reports GamesRadar. 

Hadean inked other deals with video game giants, such as Sony and the firm behind Minecraft, the company said. 

© 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.

Fnality International, the London-based blockchain payments firm backed by a bevy of big banks, is pitching investors for a Series B fundraise.

The company is looking for £50 million ($56 million), the same amount raised through its Series A round in June 2019, a person with knowledge of the matter said — adding that Broadhaven Capital Partners, the investment bank, is assisting with the raise. Another person close to Fnality said that a U.S. buy-side firm and a mid-tier investment bank have already quietly invested, but refused to name them due to commercial sensitivity.

“Following on from its successful Series A investment round, Fnality is currently raising funding as part of an ongoing Series B investment round. Full details will be provided by Fnality upon the completion of the round,” a spokesperson for Fnality International said. They declined to comment on the value of the raise. 

Fnality’s Series A raise three years ago saw a raft of big banks back the company’s vision for a blockchain-based payments system for wholesale markets. Fnality counts 16 major financial institutions as backers: Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, Euroclear, ING, KBC Group, Lloyds Banking Group, Mizuho Financial Group, MUFG Bank, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Corporation and UBS. 

In March this year, Belgium-based securities settlement firm Euroclear announced that it had bought a small stake in Fnality.

From USC to Fnality

Fnality first made headlines as a consortium of banks — spearheaded by UBS — focused on how to use blockchain technology and tokenized assets to settle trades. At that time, the initiative was known as Utility Settlement Coin (USC). Its Series A round in June 2019 also marked the formation of Fnality as a commercial entity, which was billed as the next phase of the project.

At that time, Fnality’s stated goal was to create a network of wholesale blockchain-based payments systems denominated in five currencies: U.S. dollars, Canadian dollars, euros, British pounds and yen. In each case, tokenized currencies would be fully backed by fiat currency held by the relevant central bank in whichever country Fnality set up one of its systems. The issuance and redemption of bonds is one example of a potential use case for Fnality’s payment rails.

In September 2020, Reuters reported that the project had faced delays in its bid for regulatory approval.

The following year, in April, the Bank of England (BoE) announced it would allow innovators to access central bank money through so-called omnibus accounts, in order to “support a greater range of payment systems.” Fnality quickly announced in a blog post that it had applied for access.

In February this year, Fnality ran a proof-of-concept for issing a tokenized security on Ethereum, with Fnality handling the payment part of the process. NatWest and Santander were involved as issuer and investor, respectively. Fnality’s CEO Rhomaios Ram, who previously spent over 19 years at Deutsche Bank, said at the time of the test that the firm was on track to finally launch its payment system in October 2022, thanks in part of the rollout of the BoE’s omnibus accounts.

The pace at which the project develops is, at present, largely determined by its ability to secure the green light from regulators. Despite the delays, the person close to Fnality said that the latest £50 million fundraising effort is broadly in line with the funding plan drawn up at the company’s formation. The crucial next step is to get its payments systems up and running.

Fnality is not the only bank-backed company with dreams of rewiring financial markets using blockchain technology. R3, which also began as a bank consortium, has raised more than $100 million from institutional backers to develop its enterprise blockchain Corda. R3 recently announced that DTCC, the clearing and settlement group, built its alternative settlement platform Project Ion using Corda. Fnality also contributed to the initiative.

© 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 U.S. Internal Revenue Service (IRS) has been granted the power to issue a so-called “John Doe” summons to M.Y. Safra Bank, allowing the tax agency to obtain data on customers of the bank’s partner SFOX, a crypto prime broker.

The news is the result of a court ruling on Thursday. The court order, which U.S. district judge Paul G. Gardephe approved, authorizes the IRS to serve the summons against M.Y. Safra Bank, asking for information about SFOX customers that may not have reported their crypto transactions on tax returns.

M.Y. Safra Bank partnered with SFOX in 2019 and offers SFOX users access to cash-deposit bank accounts. The IRS has identified at least ten SFOX users who failed to report their crypto transactions as required by law.

The IRS treats crypto transactions as property, levying capital gains tax on every transaction. In August, the IRS received authorization to serve a John Doe summons on SFOX itself. At the time, the IRS was looking for information about any “U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX.”

M.Y. Safra Bank and SFOX themselves are not accused of violating any laws. A John Doe summons is one made out to an unidentified defendant, who is referred to as John Doe.

 “Taxpayers are required to truthfully report their tax liabilities on their returns, and liabilities that arise from cryptocurrency transactions are not exempt,” said Damian Williams, the U.S. attorney for the Southern District of New York, in a statement. “The government is committed to using all of the tools at its disposal, including John Doe summonses, to identify taxpayers who have understated their tax liabilities by not reporting cryptocurrency transactions, and to make sure that everyone pays their fair share.”

The IRS has previously served such summons on crypto companies like Kraken, Circle and Coinbase. Earlier this year, IRS official Carolyn Schenck warned that crypto investors should “expect more” John Doe summonses from the tax agency.

© 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

• In this weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• As L1 ecosystems continue to become more interconnected, teams in the Cosmos ecosystem are taking a variety of approaches to address the problem of fragmented liquidity. 
• The Solana network is nearing the release of a critical upgrade that promises to significantly improve its ability to handle user demand. Meanwhile, the Near ecosystem is seeing a spike in usage after the launch of its step-to-earn protocol Sweat Economy

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Bitso soon will launch a new QR code payment tool in its wallet app that allows shoppers in Argentina to pay with crypto at a wide array of supermarkets, restaurants and other stores around the country, providing an alternative to the peso, as inflation batters the economy. 

The Latin America-focused cryptocurrency exchange, which counts more than a million customers in Argentina, will start progressively rolling out the QR code option to users there starting Sept. 27. 

“The idea is to make crypto more useful in more places, and allow all citizens to live their lives in crypto by buying everyday services,” Bitso’s Senior Vice President of Product Santiago Alvarado told The Block in an email. 

The QR codes provide an additional option for Argentine consumers to save in crypto and spend it while visiting physical stores, especially relevant as inflation in the country approaches 80% compared with last year, and the peso’s purchasing power declines. 

Many stores in Argentina already offer the option of paying in fiat currency via QR codes, and Bitso’s wallet app will be able to scan these and offer users the option of paying with U.S.-dollar pegged stablecoins, the Dai stablecoin, ether, bitcoin or Argentine pesos. Bitso will then automatically convert the crypto into Argentine pesos for merchants at the time of purchase.

Bitso’s wallet will be able to scan two of the most popular types of QR codes from payment services Mercado Pago and Modo, Alvarado said. Furthermore, Bitso’s app will be able to scan QR codes from “all other systems approved by the central bank,” he added. 

QR codes are a popular payment method in Argentina. The country has the highest rate of QR code usage in Latin America, local economic publication El Cronista reported in August, citing data from the Mastercard New Payments Index. 

Argentina ranked 13 on Chainalysis’ 2022 Global Crypto Adoption Index. 

© 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.

In a first, the Commodity Futures Trading Commission (CFTC) has sued a decentralized autonomous organization, including the holders of governance tokens. 

The CFTC unveiled late Thursday a $250,000 penalty and settlement with bZeroX, LLC and its founders, Kyle Kistner and Tom Bean. The two oversaw the development of the bZx protocol, a protocol for decentralized lending and other activities. The bZx protocol drew headlines in 2020 after suffering code exploits, resulting in the loss of hundreds of thousands of dollars with of crypto. 

But the CFTC’s action today including the filing of a lawsuit against Ooki DAO, which in 2021 was used to govern the protocol as part of a decentralization effort, could have the broader impact. 

The suit was filed in the U.S. District Court for the Northern District of California. In its complaint, the CFTC accused Ooki DAO of using its structure to evade regulatory oversight:

“A key bZeroX objective in transferring control of the bZx Protocol (now the Ooki Protocol) to the bZx DAO (now the Ooki DAO) was to attempt to render the bZx DAO, by its decentralized nature, enforcement-proof. Put simply, the bZx founders believed they had identified a way to violate the Act and Regulations, as well as other laws, without consequence.”

“The bZx founders were wrong, however,” the agency stressed. “DAOs are not immune from enforcement and may not violate the law with impunity.”

The CFTC identifies Ooki DAO as “an unincorporated association comprised of holders of Ooki Tokens,” liable in the suit. 

“The Ooki DAO has never been registered with the commission in any capacity,” the complaint added. The agency goes on to characterize the varying governance decisions made by token holders, including the rebrand from bZx DAO and Ooki DAO. 

“During the DAO Relevant Period, multiple Ooki DAO members have resided in the United States and have conducted Ooki DAO business (for example, voting Ooki Tokens to govern the Ooki DAO and operate the Ooki Protocol) from within the United States,” the complaint states.

According to a separate settlement order published by the CFTC, Kistner, Bean and bZeroX “unlawfully engaged in activities,” that required registration through existing commodities laws. The commission also accused the founders of not following anti-money laundering laws. 

According to the order, the three neither admitted or denied the CFTC’s findings.

Commissioner dissents

Notably, one CFTC commissioner, Summer Mersinger, issued a dissent, saying that she disagreed with the agency’s approach in the matter. 

Mersinger, a Republican, argued that while the commission could and should act against individuals that allegedly broke the law, the CFTC in this case did not have the legal authority or standing to hold the DAO token holders accountable for violations.

The CFTC should have issued an enforcement action that, “is appropriately based on a person’s culpability rather than status,” as a DAO tokenholder, Mersinger wrote in her dissenting statement, and “is grounded squarely in the authorities granted to the CFTC,” she added, raising an argument that the action relied on thin case law.

She added that if the co-founders and original owners of bZeroX were the only focus of the action, she would have voted yes on the enforcement.

“I cannot agree with the Commission’s approach of determining liability for DAO token holders based on their participation in governance voting,” wrote Mersinger.

The Ooki DAO complaint can be found below:

En Fook i Complaint 092222 by MichaelPatrickMcSweeney on Scribd

Colin Wilhelm and Aislinn Keely contributed to this report. 

© 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.

Bitcoin mining hosting provider Compute North has filed for Chapter 11 bankruptcy in a Texas court.

The petition was submitted on Thursday to the US Bankruptcy Court for the Southern District of Texas.

“After any administrative expenses are paid, no funds will be available for distribution to unsecured creditors,” the company claimed in the filing.

The company is seeking “the opportunity to stabilize its business and implement a comprehensive restructuring process,” said Kristyan Mjolsnes, head of marketing and sustainability. “(It) will enable us to continue servicing our customers and partners and make the necessary investments to achieve our strategic objectives.”

Compute North has between $100 million and $500 million both in estimated liabilities and estimated assets, according to the filing.

The company raised $385 million in equity and debt funding earlier this year to finance its new bitcoin mining data centers.

Among Compute North’s list of clients are some of the biggest bitcoin mining companies, including Marathon, which secured a 42-megawatts hosting deal in July.

178148591946 by MichaelPatrickMcSweeney on Scribd

© 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 crypto industry is “sort of agnostic to mildly negative” on the idea of a central bank digital currency, according to the head of the Blockchain Association.

Blockchain Association Executive Director Kristin Smith raised privacy concerns about a potential CBDC during a Brookings Institute forum on Thursday. Smith appeared alongside Treasury Department Undersecretary for Domestic Finance Nellie Liang and other financial policy experts at a virtual event focused on digital assets and the future of payment systems. 

Conversations about a government-issued digital currency continue to heat up in Washington. The Federal Reserve is weighing issuing a CBDC, which would act as a national stablecoin, and the Biden administration released a series of digital asset reports last week that touched on the topic. Lawmakers on the House Financial Services Committee also recently drafted a new version of a stablecoin bill after months of negotiations, which includes a provision mandating that the Fed continue its study of the issue and report to Congress its thinking on a digital dollar. 

“In my view, I do think we need legislation,” around stablecoins, Liang said.

The design choices that go into a CBDC are “incredibly important” and depend on whether the currency is intended for retail or wholesale, Smith said. While Smith, whose association represents major crypto firms like Circle, Kraken and Grayscale, as well as investors like Union Square Ventures and SkyBridge Capital, had critiques for the Biden administration’s digital asset reports, she offered praise for its look at CBDCs.

“I appreciated that the reports acknowledge having democratic values and privacy as part of the CBDC,” Smith said. “Particularly at the retail level, the last thing we do is the government has a database of all the transactions. We don’t necessarily want them to be able to get in and follow every little single thing that every individual citizen is doing.”

Smith pointed to China, a country that is poised to launch its own digital currency, as a cautionary example for the United States.

“If we look at China’s vision for a CBDC, that is largely a tool for surveillance on their citizens. We don’t want that here in the U.S.” Smith said.

Fed Vice Chair Lael Brainard says that a CBDC decision isn’t imminent, and that one consideration will be whether issuing one could displace financial intermediaries like banks, credit unions, and other consumer financial companies, an outcome that might upset the entire financial system. For now the central bank is more focused on its longtime faster payments project, FedNow, which it hopes to roll out next year. 

Smith argued that by the time the Fed decides on a digital dollar, stablecoins may render one irrelevant. 

“Eight years later, when you figure this out, we will have already taken over the world. … Look at FedNow, right? It’s more like FedWhen. Is that coming anymore?” Smith said, joking and eliciting a laugh from Liang. 

© 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.

Almost all bitcoin mining stocks tracked by The Block trended downwards Thursday, as bitcoin continued to trade around the $19,000 mark.

The coin’s price had slipped down to $18,200 Wednesday evening but rose back up to around $19,300 at market close on Thursday, according to data from TradingView.

Northern Data’s stock fell 12.28%, followed by Mawson Infrastructure Group (-7.70%), Greenidge Generation (-6.07%) and Hut 8 (-5.76%).

Here’s how crypto mining companies performed on Thursday, Sept. 22:

© 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.

Russia’s finance ministry and central bank reportedly have agreed on a bill to allow cross-border settlements in crypto, reversing the Bank of Russia’s previous opposition.

The bill could give Russian citizens the ability to access crypto wallets and use cryptocurrencies under supervision of the central bank to ensure compliance with anti-money laundering legislation and to ensure crypto is not used for illegal transactions, Deputy Finance Minister Alexsey Moiseev told state news agency RIA Novosti. The news was first reported by Russian business newspaper Kommersant.

This is a reversal for Russia’s central bank, which Moiseev earlier this month said was “too rigid” in its rules governing crypto. Moiseev noted that people are creating crypto wallets outside of the Russian Federation, and that “it is necessary this can be done in Russia” and supervised by its central bank.

Russia’s involvement with cryptocurrencies has been under the spotlight lately, with its involvement dating back to its ties with the Venezuela’s Maduro regime and the Venezuelan crypto-financial infrastructure build-out, as highlighted in crypto analytics and security firm Inca Digital’s report.

© 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.