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French Bank BNP Paribas is partnering with crypto infrastructure firm Metaco to custody crypto, CoinDesk reported today, citing three people with knowledge of the deal.

BNP Paribas Securities Services, the custodian subsidiary of the bank, holds over $12 trillion under custody. In recent months, the Swiss solutions providers has inked deals with multiple banks to develop digital asset custody platforms.

Citigroup partnered with Metaco to pilot and develop its digital asset custody platform last month. That deal has the bank exploring custody capabilities for tokenized securities, like blockchain-based stocks and bonds. More recently, French lender Societe Generale partnered with Metaco to work on its digital asset subsidiary, which will also primarily focus on security tokens.

© 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

• Milady Maker NFT is a collection of 10,000 generatively made cutesy Japanese-inspired avatars.
• The Milady community celebrates chaotic and even nonsensical online posting. 
• But things got complicated when it was revealed that Milady’s founder was a genuine online bully.

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The Securities and Exchange Commission’s enforcement work faces grilling before Congress, and one congressman is pushing for more legal actions against crypto exchanges.

A Congressional subcommittee held an oversight hearing on Tuesday focused on the SEC’s enforcement division, featuring testimony from division director Gurbir Grewal. Central to the representatives’ questions was the role of the SEC in crypto markets. 

“The division faces new challenges in the form of cryptocurrencies and other digital assets,” said subcommittee chair Brad Sherman, D-California. He noted with approval the commission’s case against Ripple over the XRP token, but pushed Grewal as to why it had not pursued the exchanges that had been trading in XRP.

“The division has determined that XRP is a security and is going after XRP but, for reasons that I’ll bring up in questions, has not gone after the exchanges where tens of thousands of illegal securities transactions were occurring,” said Sherman. 

“You know it’s a security. That means they were illegally operating a securities exchange,” he continued in his questioning. “If they know it’s illegal and you know it’s illegal and I know it’s illegal, I hope you focus on that.”

The SEC began its case against Ripple at the end of 2020. That matter is still before the court, where there has been monthslong back-and-forth over internal SEC communication that occurred before the agency decided that certain other tokens, most critically Ether, were not also securities. 

SEC Chair Gary Gensler has himself made the argument that crypto exchanges should register as securities exchanges with the commission, but it has picked up limited traction. 

© 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

• The Block Research analyzed a total of 694 blockchain-related investment deals in Q2’22 to identify which crypto funds have been the most active
• Seven of the funds from the last analysis remained on the list with a16z, Big Brain Holdings and Dragonfly Capital relatively stepping up their activity
• Approximately 70% of the deals among the most active investors were concentrated in NFTs/Gaming and DeFi verticals

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Senate lawmakers were “alarmed” by this summer’s crypto market crash, and are becoming more interested in a bill to regulate digital assets and bolster consumer protections, Sen. Kirsten Gillibrand said on Tuesday.

“There’s more urgency now, and also more of a sense that this is something we need to do,” Gillibrand said. The New York Democrat made the comments at Bloomberg’s 2022 Crypto Summit on Tuesday morning. Gillibrand and Sen. Cynthia Lummis joined the panel via video. 

Gillibrand released a wide-ranging crypto regulation bill with Lummis in June. The legislation lays out which aspects of the crypto landscape should be regulated by the US Commodity Futures Trading Commission or the Securities and Exchange Commission, among other issues.

“Most of my colleagues were fairly alarmed with the different market impacts over the last couple of months, and the number one question is: does this regulation either prevent that or improve transparency and accountability? Does it improve safety and soundness? Does it improve consumer protections? And obviously the answer is yes, that’s why we wrote the bill,” Gillibrand said. “There’s additional interest now because they’ve seen that this is something that’s important to do, that consumers are not being protected today. There’s no oversight and accountability, and there are no rules of the road.”

Crypto legislation has been a relatively niche issue, but Washington lawmakers are looking more closely at regulation amid chaos in the crypto market, Gillibrand and Lummis said. Crypto lender Celsius declared bankruptcy earlier this month, and the TerraUSD stablecoin and Terra-based asset luna collapsed in May.

“People can see that if our bill were in effect today, there would be a way to address some of the problems that were created and that failed to protect consumers,” Lummis said. “This market is running without a statutory framework or regulation.”

The landmark bill is unlikely to pass before the end of the year, according to Lummis, because it’s a “big topic.” 

“It is still new to many US Senators. It’s a lot for them to digest with the few remaining weeks we have in this calendar year to digest such an enormous topic,” Lummis 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.

Lido Finance has started discussions on a governance proposal to sell 20 million Lido DAO (LDO) tokens and diversify its treasury into stablecoins to pay for its operational needs. 

The proposal was submitted by Jacob Blish, head of business development at Lido Finance, on Monday. Per the proposal, the DAO should sell 20 million LDO tokens, or 2% of the total LDO token supply, to private investors. This, according to Blish, will secure about two years of operating runway for the Lido DAO. 

The Lido DAO currently holds $230 million in total within its treasury. This includes 157 million Lido DAO (LDO) tokens ($241 million), 20,940 ETH ($32 million) and 4930 staked ETH ($7 million). The DAO only owns about $366 in stablecoins.

As per the terms of the proposed token sale, venture firm Dragonfly Capital will be the lead investor. Dragonfly will buy half of the tokens — some 10 million — whereas the remaining 10 million of LDO will be acquired by “other strategic participants,” which the proposal did not name.

“We believe Dragonfly and other strategic partners will be valuable to the future decentralization and growth of Lido’s ecosystem,” the proposal read.

It’s not clear yet whether this proposal will be put to an on-chain vote or whether it will receive approval in the end. Last month, a Lido developer proposed selling half of Lido’s ether holdings, which did not make it to an official DAO vote.

If the deal gets approved, the Lido treasury will receive $29 million in the DAI stablecoin from investors at $1.452153 per token.  This price is based on LDO token’s most recent 7-day TWAP (time weighted average price) and additional 50% premium on the TWAP.

Lido Finance is one of the largest liquid staking providers for proof-of-stake blockchains, including Ethereum’s Beacon Chain, Solana, Polkadot and Cosmos. Liquid staking unlocks the value of staked crypto via staking derivative tokens that stakers can deploy on other DeFi protocols.

Lido offers liquid synthetic tokens called stAssets, backed one-to-one with the native token of a proof-of-stake blockchain. The project is governed by Lido DAO (LDO) token holders.

© 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.

Issuer Valkyrie is raising for an upcoming venture capital fund focused on early stage “web 2.5” firms.

 It’s brought a number of financial products to market in recent months, but now it’s working on a different kind of fund. Valkyrie Ventures is the firm’s first foray into venture capital. It brought in Lluis Pedragosa to head the venture. Pedragosa comes to Valkyrie from VC firm Team8, which focused on enterprise technologies, artificial intelligence and fintech.

The firm will geographically focus on startups in the US and Israel, both areas of expertise for Pedragosa. The plan is to invest in startups seeking to bridge the gap to web 3 for the average user, a sector Pedragosa and Valkyrie have dubbed “web 2.5.” Filling in the gap between the familiar web 2 user experience and connection to web 3 assets is the path to the next billion users of blockchain, according to Pedragosa.

“I’m looking for companies that provide a web 2.0 user experience with an underlying crypto native infrastructure of web 3 so people can use the assets without even knowing they’re using blockchain,” he said. “The point is the user doesn’t need to know that all this stuff is web 3 or blockchain, people generally don’t want to know.”

In addition to firms creating that user experience, the fund also plans to invest in “middleware” startups – those dealing with “the picks and shovels of blockchain,” as Pedragosa put it. Essentially, firms building secure blockchain infrastructure. Most firms have to retain full-stack developers in order to build crypto products. Pedragosa says he’s looking for startups that lower that barrier.

“There’s a lot to be done in security authentication, compliance, data management, governance payments and transactions,” he said.

The fund will look to raise somewhere between $30 million and $50 million. The announcement comes amid a significant downturn for the industry, one in which a number of firms are slashing their valuations, declaring bankruptcy or even closing up shop. But that’s not a huge concern, according to Pedragosa. He said winters have historically been a time for building in the industry, and past seasons have cleaned out those that built for the wrong incentives.

Though Valkyrie Ventures was conceived before the downturn, Pedragosa said the thesis hasn’t had to change much.

“The types of companies we’re looking for, it’s for the long term of blockchain, so ones that bring users to blockchain, the infrastructure, all of that is more for the long term,” he said. “I think that doesn’t change over 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.

DeFi services firm XLD Finance has raised $13 million during a pre-Series A funding round led by Dragonfly Capital and Infinity Ventures Crypto, the company announced on Tuesday.

Advance AI, Circle, Digital Currency Group, IDG Capital, Insignia Venture Partners, Integra Partners, Morningstar Ventures, Openspace Ventures, Sfermion, Shima Capital, Transcend Fund, TrustToken, UOB Venture Management, Woo Network, Yield Guild Games, YOLO Ventures, Emfarsis and 20 other investors also participated in the round.

The company said the funds will be used to scale its product and engineering teams, as well as to expand its networks of licensed partner financial institutions, merchants and billers.

Co-founders Ian Estrada and Herbie Fu launched XLD Finance in June last year. The company released its first ecosystem project, xSpend, which allows users to pay utility bills and top up their mobile phone using gaming tokens and stablecoins, in January.

Estrada told The Block that the most popular token people are using on xSpend is Axie Infinity’s Smooth Love Potion (SLP), which players can win through in-game battles. 

xSpend is currently available in the Philippines, Indonesia, Malaysia, Vietnam, India and Bangladesh — but that doesn’t mean that utility companies there are accepting crypto payments just yet. Instead, the app acts as a “crypto-to-fiat off-ramp” and pays merchants in fiat through partners in the different countries.

“The way we do it is they basically initiate the transaction on chain and send us the [for example] SLP. But across the markets that we operate in we actually have a fiat liquidity pool that’s based in that country. We use that to settle with the merchant network,” Estrada told The Block.

Beyond retail, XLD Finance said it is also working on products for protocols and exchanges, and this month will also launch OmniX, a streamlined system for guilds and projects to pay staff and contributors. 

© 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

• Filed for Chapter 11 bankruptcy protection on July 13, 2022, in the Southern District of New York
• Engaged with investment bank Centerview Partners (CVP), law firm Kirkland & Ellis (K&E), restructuring consultants Alvarez & Marsal (A&M) and Stretto mid-June 2022
• July 7, 2022, KeyFi complaint in New York State Supreme Court against CNL and Celsius KeyFi LLC for breach of contract, negligent misrepresentation and fraud claims
• Celsius currently employs 670 employees with 1.7mm users across  +100 countries and 300K daily active users with +$100 in balances on platform

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Skybridge Capital, Anthony Scaramucci’s investment firm, has halted withdrawals from a fund amid declines in the value of stocks and cryptocurrencies, according to a report by Bloomberg. 

Redemptions from the fund — named the Legion Strategies fund — are normally made through a tender offer by Skybridge, Bloomberg said. Cryptocurrency exchange FTX is one of the private companies in which the fund has invested. It also has exposure to cryptocurrencies through funds managed by the investment firm as of February 28, including bitcoin, ethereum and algorand.  

According to people familiar with the matter cited by Bloomberg, the Legion Strategies Fund suspended redemptions because illiquid private companies make up 20% of its portfolio. 

This heavy exposure to crypto has likely hurt the performance of this fund. Recent market turbulence has seen bitcoin drop below $20,000 from a high of more than $60,000 in November. 

The Block contacted Skybridge Capital for comment but did not hear back by the time of publication. 

Previously, the investment firm has made big pushes into crypto. It submitted a proposal to the Securities and Exchange Commission to seek approval for a spot bitcoin exchange traded fund in March 2021 — although this was ultimately rejected.

In an interview with The Block in May this year, Scaramucci said that the firm began investing in bitcoin at the end of 2020. The Block reported at this time that it had invested $182 million in the cryptocurrency, according to an investor deck. 

© 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.