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Author: Greg Lim
Investment brokerage Charles Schwab has launched its first crypto-related ETF, with trading set to begin on or around August 4.
The asset manager made the announcement on Friday, sharing that the fund will track the Schwab Crypto Thematic Index. This new fund will give investors exposure to companies that may benefit from the development or growing utilization of cryptocurrencies and digital assets.
Managing direct and head of equity product management and innovation at Schwab David Botset said the ETF seeks to “provide access to the growing global crypto ecosystem along with the benefits of transparency and low cost that investors and advisors expect from Schwab ETFs.”
The Schwab Crypto Thematic Index, which the ETF will track, was developed by the firm’s research team and uses a combination of human insight, artificial intelligence technology and systematic models to track companies based on their relevance to cryptocurrencies. This index does not directly track or invest in any cryptocurrencies.
According to the announcement the ETFs annual operating expense ratio will be just 0.30%, making it the lowest cost crypto-related ETF on the market. However, some issuers outside the US offer zero fees on products with direct exposure to cryptocurrencies.
The company previously filed an application with the SEC for a crypto economy ETF in March having changed its tune on crypto over the past few years. Despite previously saying the asset class was purely speculative it is now following other institutional heavy weights into the sector.
The firm’s CEO, Walt Bettinger, said in an interview with Bloomberg in January that crypto is “hard to ignore.”
According to Friday’s announcement, the firm managed over $570 billion on a discretionary basis – and $34.4 billion on a non-discretionary basis – as of the end of June.
© 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.
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Author: Adam Morgan McCarthy
© 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.
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Author: Lucy Harley-McKeown
New data from crypto-analytics firm Chainalysis show that Russian paramilitary groups in Ukraine have received $2.2 million in crypto donations during the ongoing war.
Various pro-Russia militia and volunteer groups have taken to social media to crowdfund for military purchases and spread disinformation related to the war. Chainalysis has identified 54 organizations that have collectively received the donations, primarily in bitcoin and ether donations.
The data show $1.45 million in BTC, more than $590,000 in ETH, 206,822.70 USDT-TRX, $21,174.51 LTC and $2,363.62 in DOGE have reached pro-Russia social media accounts since Russia invaded Ukraine in February. The social media activity related to these accounts shows the funds are being used to equip paramilitary groups and spread propaganda. Chainalysis reports the accounts related to the militias post images of purchased equipment and relay how future donations will be deployed.
Half the identified accounts have publicly solicited support for militias in the Donbas region of Ukraine — a contested area that has been the subject of significant sanctions from the Office of Foreign Asset Control (OFAC).
In addition to paramilitary groups, a number of sanctioned entities have promoted donating crypto to pro-Russian forces, Chainalysis noted. Alexander Zhuchkovsky, sanctioned for his affiliation with designated terror group the Russian Imperial Movement (RIM), has publicized the ability to donate to the RIM. He’s also posted about Project Terricon, which solicits crypto donation to support Donbas militia groups.
Terricon said it is using crypto in an attempt to avoid sanctions, and on-chain analytics show it is receiving 11% of its funds from mixers and sending 29% of its funds through a Moscow-based exchange known for crypto money laundering.
US officials have expressed significant concern over the ability of Russian groups to leverage crypto to evade sanctions. Although the $2.2 million figure is significant and can be used for considerable amounts of supplies given the ruble exchange rate, it’s still much smaller than the tens of millions donated to Ukraine. Additionally, Chainalysis highlighted that blockchain’s transparency has made it possible to track these funds and identify these groups, while dealing in cash or other modes of transfer would be more challenging to trace.
© 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.
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Author: Aislinn Keely
Arbitrum has begun testing its Nitro upgrade and, assuming the test goes well, will implement it within a few weeks. The upgrade is designed to increase the number of transactions the network can process while lowering costs.
Arbitrum is the most widely adopted scaling solution on Ethereum. It currently ranks first overall in Total Value Locked (TVL) — the measure of value held in a protocol’s smart contracts — for optimistic rollups and #7 across all blockchains.
The launch of Nitro will be a pivotal moment for Ethereum because it will make one of its major scaling solutions even more efficient. By supporting even faster and cheaper transactions, Abritrum will further help the network to be more scalable.
“Nitro will allow us to increase the demand significantly to many times Ethereum’s capacity. That will massively increase our ability to scale,” Arbitrum CEO Steven Goldfeder told The Block.
“Our mission is to provide the best scale to users and scale Ethereum using the best technology today, meaning scaling Ethereum’s security and scaling Ethereum’s decentralization,” he added.
Nitro implements a new prover using WebAssembly (WASM). This is the part that generates proofs of transactions in case they are disputed. The WASM implementation enables the writing and compiling of the L2 Arbitrum engine (the Arbitrum Virtual Machine) with standard tooling and languages — replacing the current custom-designed language and compiler.
“Onboarding for developers was already super easy as Arbitrum has always been fully EVM compatible. With Nitro, even the internals are the same. Imagine that Arbitrum and Ethereum are cars. With Arbitrum classic, we built a beautiful car that looks, feels, and drives just like the Ethereum car. But if you pick up the hood, it looks very different. In the hood of the Arbitrum car is the AVM (Arbitrum Virtual Machine). With Nitro, even the internals are the same,” explained Steven.
Geth, the most popular Ethereum Client, will be directly compiled into Arbitrum, mitigating the need for developers to optimize transaction fee pricing, making developer onboarding even more seamless than before.
Nitro is the latest development emerging out of the Ethereum rollup space as the entire industry prepares for The Merge in Q4 of this year.
After the Nitro upgrade, Arbitrum will roll out Anytrust Chains, which are intended to help applications with specific needs (such as gaming) to maintain the same level of security as Ethereum’s main blockchain while lowering costs and throughput for their applications.
© 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.
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Author: Mike Truppa
Babel Finance, the troubled Asian crypto lender that abruptly halted client withdrawals last month, suffered heavy losses due to proprietary trading with customer funds, according to its restructuring proposal deck obtained by The Block.
The deck, dated July 2022, reveals that Babel Finance lost more than $280 million in bitcoin (BTC) and ether (ETH) due to its proprietary trading failure. Specifically, it lost around 8,000 BTC and 56,000 ETH in June after facing liquidation due to a significant market downturn.
“In that volatile week of June when BTC fell precipitously from 30k to 20k, unhedged positions in [proprietary trading] accounts chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts and wiped out ~8,000 BTC and ~56,000 ETH,” reads the deck.
Due to these massive losses, Babel’s lending and trading departments were unable to meet margin calls from counterparties.
“Conclusion: Single point of failure – The Proprietary Trading team’s failed operation falls outside of the company’s normal business which has otherwise been running smoothly with proper management and control,” according to the deck.
Babel Finance describes its proprietary trading business as a “risky” business yet it failed to hedge its positions.
“A Proprietary Trading team operates several Trading Accounts not controlled or monitored by Trading Department; no trading mandate or risk controls were implemented for these accounts; no PnL [profit and loss] was reported,” per the deck.
Orders from Babel’s proprietary trading team were “not supported by any term sheets and thus were not recorded in system.” Plus, the firm’s wallet management team “released uncapped amount of funds” to trading accounts operated by its proprietary trading team.
This is not the first time Babel Finance has reportedly played with customers’ funds. In October 2020, leaked recordings suggested that the firm leveraged some user funds to boost a bitcoin trade and faced potential default risks during that year’s Black Thursday market crash.
At the time, Tether reportedly stepped in to save Babel Finance, per the recordings. The stablecoin issuer was said to have extended margin call deadlines for Babel to a month so that the firm would have more time to bolster its collateral.
A Babel Finance spokesperson declined to comment to The Block on specific questions related to the deck, but they said that the firm is “working closely with clients, investors and other stakeholders and external advisors during this very difficult time in the industry as we believe that is the best path for a full recovery and value maximization for all the parties.”
As part of its rescue plan, Babel now seeks to raise hundreds of millions of dollars in debt and equity investments.
First, it seeks to convert $150 million of the biggest creditors’ debt to convertible bonds, per the deck.
Additionally, it looks to raise $250 million to $300 million in convertible bonds and then secure a revolving credit of $200 million from creditors “for business restoration.”
The plan, if successful, would turn Babel’s largest creditors into shareholders.
It remains to be seen whether Babel — which is backed by high-profile investors including Sequoia Capital China, Dan Tapiero’s 10T Holdings, Dragonfly Capital and Circle Ventures — will be able to raise fresh capital.
Just days before its financial woes, Babel had raised $80 million at a $2 billion valuation.
© 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.
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Author: Yogita Khatri
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Author: Kevin Peng
Miami Mayor Francis Suarez the city will partner with Time, Mastercard and Salesforce to roll out a new non-fungible token (NFT) initiative.
The mayor announced today that the Miami plans to offer 5,000 NFTs designed by 56 local artists to represent the 56 square mile area of the city. Those holding the tokens will receive access to Mastercard’s Priceless Miami program, offering experiences, private tours and activities within the city. The city plans to launch the project in December of this year on the Ethereum blockchain after the chain moves to proof-of-stake.
Time will act as a strategist for the program, since the firm itself has taken recent strides into the NFT space. Time President Keith Grossman said the project represents a new venture for Time, which plans to bring other brands and organizations into web3.
Software company Salesforce will handle the minting and selling of the NFTs through its new product, NFT Cloud, which is currently in a closed pilot stage.
Suarez has sought to make Miami a leader in crypto, exploring various ways to include the technology in the city’s planning, from suggesting to allocate some of the city’s treasury reserves to bitcoin to promoting the CityCoins protocol.
Since his initial interest in the technology, the onset of a crypto winter has overtaken some firms and caused the price of various cryptocurrencies to plummet. Though Suarez did not comment on the change in market conditions in his statement, he said Miami plans to be part of the shift to web3.
“The City of Miami has been on the vanguard of the web3 revolution and we will continue to employ these new technologies to support our existing businesses while attracting new ones, raise capital and provide experiences for our citizens and those visiting this great city,” he said in a statement.
© 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.
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Author: Aislinn Keely
The US Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) issued a joint cease-and-desist letter to crypto firm Voyager Digital over past claims regarding depository insurance.
The two said in their letter:
“Voyager has made various representations online, including its website, mobile app, and social media accounts, stating or suggesting that: (1) Voyager itself is FDIC-insured; (2) customers who invested with the Voyager cryptocurrency platform would receive FDIC insurance coverage for all funds provided to, held by, on, or with Voyager; and (3) the FDIC would insure customers against the failure of Voyager itself. These representations are false and misleading and, based on the information we have to date, it appears that the representations likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”
The firm’s claims regarding FDIC insurance had come under scrutiny in the past. Its banking partner, Metropolitan Bank, issued a statement contradicting Voyager’s past statements regarding such insurance, as previously reported. Voyager declared bankruptcy on July 6.
In its letter, the Fed and FDIC echoed Metropolitan’s statement from that time.
“Voyager maintains a deposit account for the benefit of its customers at Metropolitan Commercial Bank, which is supervised by the Board. Voyager is not itself insured by the FDIC, though, and so customers who invested through its cryptocurrency platform would not receive insurance coverage in the event of Voyager’s failure.”
The letter demanded that Voyager cease the alleged misrepresentations.
An emailed request for comment sent to Voyager’s press inbox was not returned by press time.
© 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.
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Author: Michael McSweeney
Bitcoin mining stocks were up in the market on Thursday as bitcoin’s value reached $24,000.
The coin was trading at around $23,900 at market close, according to TradingView.
Mawson Infrastructure Group was up by 12.85%, followed by Northern Data (+8.64%), Hut 8 (+7.96% on Nasdaq) and Core Scientific (+7.50%).
Bitfarms announced Thursday that it completed phase 2 of its expansion of The Bunker site, in Québec, Canada, adding 18 megawatts of capacity.
Here’s how crypto mining companies performed on Thursday, July 28:
© 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.
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Author: Catarina Moura
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