FreeCryptoCurrency.Me

Quick Take

• Less than 30% of Tornado Cash deposit originates from stolen funds and sanctioned entities, while a significant portion possibly comes from legitimate sources, according to Chainalysis.
• The number of unique users has dropped significantly after the sanction, whereas previous depositors rushed to withdraw their funds from the protocol. 
• Some privacy advocates sent ether to crypto notables via the sanctioned protocol without their consent, as cryptocurrency wallets cannot reject incoming payments.

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

Derivatives protocol dYdX confirmed on Thursday morning that it blocked user accounts that previously interacted with Tornado Cash, in line with new US sanctions.

dYdX added in a blog post that it is working with a “compliance vendor” that flagged certain accounts that had received funds from the Tornado Cash app. 

Tornado Cash, a privacy and transaction mixing service on Ethereum, has been in the spotlight in recent days after the protocol was sanctioned by the US Treasury. 

In the blog post, dYdX wrote: “Many accounts were blocked because a certain portion of the wallet’s funds (in many cases, even immaterial amounts) were associated at some time with Tornado Cash, which was recently added to the sanctions list by the U.S.”

The exchange, though, clarified that it inaccurately banned several accounts, which had to be reversed. dYdX noted that these users hadn’t directly engaged with Tornado Cash and that they may not have known the origin of the funds transferred to them.

“We have made adjustments, within the limits of our compliance policies, that have unbanned certain accounts and we will continue to make efforts to limit flagging and track this issue moving forward,” dYdX added.

Due to compliance needs, exchanges like dYdX may refuse to do business with users who try to bring assets to their platforms from Tornado Cash-linked accounts. However, exchanges are not the only kind of crypto firms taking action in response to Tornado getting sanctioned. In fact, there are broader ramifications seen in the crypto sector in relation to this development.

For instance, Ethereum infrastructure provider Alchemy blocked Tornado Cash users from accessing its nodes. In another example, GitHub deleted accounts of Tornado’s contributors, wiping out of all of their software repositories on the platform.

© 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.

LongHash Ventures, one of the top venture funds for Asian web3 startups, announced a new $100 million fund on Wednesday.  

LongHash Ventures Fund II was funded by Hashkey Capital, NGC Ventures, Protocol Labs, Gnosis Safe and MEXC among others, according to a release. LongHash hopes its second fund will be $100 million in size, but CEO Emma Cui told TechCrunch that it has not yet raised the full amount. 

LongHash Ventures Fund II will finance web3 projects from pre-seed to Series A stage, with a focus on those building out multi-chain infrastructure for decentralized finance, non-fungible tokens, blockchain-based gaming and the metaverse.  

This is the second fund from LongHash Ventures. The first was launched in 2021 at $15 million. The firm also has an accelerator program dubbed LongHashX, which was launched in 2018 and partnered with notable firms in web3 such as Protocol Labs to provide mentorship and financial support to web3 startups.  

“By running both an accelerator and an early-stage fund that provides hands-on support, our unique value lies in leveraging LongHashX to bootstrap the Asia ecosystem for the protocols that we invested in,  as well as in identifying founders and projects with massive potential very early on,” Cui said in a statement. “The second fund will enable us to support more founders and through subsequent rounds.” 

LongHash Ventures has financed Polkadot, Coinshift, Balancer and over 60 other web3 projects in the past.  

© 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

• Fintech funding continued its slump from the high of 2021. July saw fintech startups raise only $6 billion from investors, compared to $13.3 billion this time last year. 
• The largest raise came from payments company and buy now, pay later company Klarna which raised an $800 million down round. 

This feature story is available to
subscribers of The Block News Plus.
You can continue reading
this News Plus feature on The Block.

Ethereum developers have executed the third and final test merge on the Goerli test network.

The move is the final step before the mainnet merge, which will see Ethereum transition from proof-of-work (PoW) consensus to proof-of-stake (PoS). The merge has been eagerly anticipated by crypto developers, who hope that it will make the Ethereum network significantly more energy efficient and cheaper to use. 

At around 9:50 PM ET on Thursday, developers simulated the merge on Goerli and switched from PoW to PoS consensus. To do so, they had to “merge” Goerli’s code with its PoS-based fork called Prater. The task involved node operators from both chains updating their client software in tandem.

While the Goerli merge has been activated, the success of the event will be determined after a thorough evaluation of the upgraded network.

Over the past few months, the core team already performed the merge on two other testnets: Sepolia and Ropsten. These test merge events have served as practice sessions to check whether client software used to run Ethereum nodes — like Nethermind, Besu, Geth, and Erigon — ran normally and without bugs. 

With the Goerli test merge complete, the team has now finished all of their test merge dress rehearsals. According to the official schedule decided by the Ethereum’s developer team, the next step will be to perform the full merge on the Ethereum mainnet. This final upgrade is expected to happen in September.

© 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 US Commodity Futures Trading Commission (CFTC) has voted to propose a joint rule with the Securities and Exchange Commission (SEC) that would require hedge funds to report cryptocurrency exposure.

News of the proposal broke earlier today when the SEC voted in favor of supporting the proposal. The CFTC has now voted to do the same.

The rule, which would have hedge funds report crypto exposure through a confidential filing, is in part an attempt to enhance the Financial Stability Oversight Council’s ability to monitor systemic risk and bolster wider regulatory oversight. Hedge funds with more than $500 million of net assets would report their crypto exposure on Form PF,  a confidential filing created in the wake of the 2008 financial crisis. Funds would also report information related to concentrations and borrowing. 

The financial crisis illustrated the risk of contagion from private-fund activity, and the proposal is an attempt to increase transparency into private fund activity, CFTC Commissioner Christy Goldsmith Romero said in a statement.

“Our objective is to increase the usefulness of the data collected; to ensure that it is actually used as Congress intended to bring transparency to risk previously hidden,” she said. “I look forward to reviewing public comment on whether the proposal would meet our objective.”

SEC Chair Gary Gensler similarly noted that the private fund space has grown significantly in recent years without significant the transparency mechanisms in place.

However, some commissioners are concerned that the proposed requirements could have unintended consequences on innovation. 

“The proposed joint amendments, an action of the CFTC as well as the SEC, seem to impose overly broad obligations that would be unnecessarily burdensome and would present potentially significant operational challenges and costs without a persuasive cost-benefit analysis under the Commodity Exchange Act (CEA),” CFTC Commissioner Caroline Pham said in a dissenting statement today.

CFTC Commissioner Summer K. Mersinger likewise voted against introducing the proposal. Though she said she supports evaluating possible amendments, she is concerned that today’s proposal does not sufficiently address the input of PF reporting companies. 

“Data and information that federal regulators request from market participants should be narrowly tailored to the purpose intended under our governing statutes, and unfortunately, that does not appear to be the overall approach in this proposal,” she said in a statement.

The agency will now accept public comments on the proposed changes to Form PF.

© 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 stocks showed significant recoveries Wednesday following a more negative day.

Bitcoin prices shot up past $24,000, after data released by the U.S. Bureau of Labor Statistics showed inflation in the US was 8.5% in July compared with last year, indicating inflation might be slowing down.

By market close, bitcoin was trading at around $32,600, according to data from TradingView.

CleanSpark was up by 27.78% since market close Tuesday, when it released its second-quarter earnings report. The company posted $29.3 million in net losses and announced that it is exiting the energy business.

Marathon (which released earnings on Monday) saw its stock rise by 15.95%, followed by Core Scientific (14.84%) and Bit Digital (13.42%).

Here’s how crypto mining companies performed on Wednesday, August 10:

© 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.

Blockchain infrastructure platform Paxos is partnering with Brazilian fintech app PicPay to launch its new cryptocurrency trading feature, Paxos said on Wednesday.

PicPay first said it would start supporting crypto payments on July 11, in addition to launching a cryptocurrency exchange and Brazilian real-pegged stablecoin. It would initially support bitcoin, ether and Paxos’s Pax Dollar (USDP) stablecoin, PicPay said.

PicPay users can now buy, sell and hold those three currencies, Paxos’ Head of Revenue Michael Coscetta wrote in an August 10 blog post. PicPay also is “working” on the crypto payments feature, he noted in the blog. This will be available “later this year,” a Paxos spokesperson said in an email to The Block. 

Although sources told Brazilian news site Portal do Bitcoin in July that Paxos would be PicPay’s crypto partner, this appears to be the first time Paxos has publicly announced its involvement in the project.  

“PicPay is one of the most disruptive players in payments in Brazil and our goal is to lead the growth of the crypto market, by eliminating the complexity that is still associated with it and expanding information on the technology, so that everyone can take advantage of this asset class and technology,” PicPay’s Head of Crypto Bruno Gregory said in a statement featured in Paxos’ blog post. 

Paxos also is working with at least two other high-profile fintechs in Brazil that have decided to offer cryptocurrencies in recent months. The company announced a crypto-focused deal in May with fintech unicorn Nubank.  Nubank reported in late July that it its crypto platform Nucripto had already attracted 1 million users.

Paxos also powers the crypto wallet for Mercado Libre’s financial app Mercado Pago, which launched in December 2021. That new offering gained 1 million users in 60 days according to Guilherme Cohn, Mercado Libre’s senior manager corporate development. 

© 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.

HitPiece, the music non-fungible token (NFT) platform perhaps best known for the controversy it generated when it launched in beta back in February, is now officially live. And according to co-founder Rory Felton, the updated version will aim to avoid the same copyright issues that the beta version faced.

HitPiece’s beta launch caused a stir among musical recording artists who claimed that their work appeared on the platform without their knowledge or permission. HitPiece eventually decided to take down its beta web page.

Felton told The Block that it learned from the community feedback and made improvements to the platform, which the firm wants to become the go-to place for music NFTs. 

Emphasizing ownership rights

According to Felton, there was no music on the HitPiece beta platform at all, and that the startup would never sell music without the proper commercial rights. It was intended to be a private experience built on a private blockchain, he said. Nothing was decentralized or could be sold on a third-party marketplace. 

Nonetheless, artists saw their work on HitPiece and claimed it had been minted as NFTs without their permission. The Recording Industry Association of America even sent a demand letter insisting HitPiece cease and desists its NFT sales. 

“Clearly, based on the feedback that we got in early February, we realized we made some errors.” Felton said. “We failed to put the proper guardrails in place around the product to ensure that only artists and rights owners could mint create entities containing their creative assets. So we took that beta down and rebuilt a product that we think makes sense for the marketplace and for artists.” 

Five months later, as it launches to the general public, HitPiece is prioritizing ownership rights and benefiting the artists who use the platform.

Felton said the partnership with Audible Magic, which the firm announced on Wednesday, reflects that emphasis. “We partnered with [Audible Magic] because we think it’s important that only owners and rights holders mint NFT containing that music.” 

Audible Magic contains over 100 million songs from over 400,000 record labels, as of 2021. Artists and rights holders will need to register on HitPiece, verify their identity and then have their uploaded content checked against Audible Magic’s database to ensure that no copyright rules will be broken by minting an NFT.

HitPiece will also cover the transaction fees and minting costs for artists who use the platform. The platform might night cover gas and mint fees forever, however, according to Felton.

Felton, a longtime music lover, co-founded HitPiece in 2020 with Jeff Birmingham, an early investor in Spotify. “It became clear to me that there were opportunities for music artists who take advantage of the space to generate new revenue streams and connect with their fans in new ways in the metaverse,” said Felton.

“In music, Web3 has significant potential to be a catalyst for increasing artistic integrity, control and engagement for any musician, no matter their reach,” musician ATL Jacob in a statement associated with the platform’s launch. ATL Jacob, who has reached first place on Billboard’s Hot 100 Producers chart, is one of the “dozens” of artists already using the platform, according to HitPiece.

“My dream is that every music artist onboards into web3 at some point,” Felton said. “I think some will be faster and some will be slower into this space, but I think it’s here and I think that kind of like an ostrich putting their head in the sand to ignore it.” 

© 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.

A group of Democratic senators is trying to disengage banks from crypto activities. 

In an August 10 letter, Senators Elizabeth Warren (Mass.), Dick Durbin (Ill.), Sheldon Whitehouse (R.I.) and Bernie Sanders (Vt.) asked Acting Comptroller of the Currency Michael Hsu to cancel a series of interpretive guidance that the new administration has held over from the previous leadership.

The Office of the Comptroller of the Currency (OCC) regulates national banks. In his last year in office, President Donald Trump appointed Brian Brooks to lead the OCC. Brooks had previously served as lead council for Coinbase and would go on to be CEO of Binance.US and then Bitfury. Under Brooks, the OCC issued a series of interpretations that the Senators today wrote “essentially granted banks unfettered opportunity to engage in certain crypto activities and remain problematic.

The four authors are some of the most vocal progressives in the Senate. The lack of centrist or bipartisan presence suggests limited interest in undoing Brooks’ policies. So does the OCC’s standing willingness to continue them, even as it did call into question crypto bank Anchorage’s conditional charter in April.

Hsu has, in the past, urged caution around cryptocurrency regulation, noting the resilience of the banking system even amid crypto market turmoil. Today’s letter argued that, despite limited contagion up to this point, “it is clear that stronger protections are necessary to mitigate crypto’s risks to the financial system and consumers.”

The Senate Banking Committee, on which Warren holds a seat, came to loggerheads earlier this year over President Joe Biden’s nomination of Saule Omarova to head the OCC. Omarova ultimately withdrew her nomination. Hsu retained his job. 

© 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.