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Quick Take

• NFTs are being used as collateral for high-risk, high-reward loans of all sizes.
• The founders of two NFT lending marketplaces shed light on this rapidly growing market.
• This is the first article in a three-part series focused on the financial applications of NFTs.

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Canaan, one of the largest bitcoin mining hardware makers, announced a stock buyback program of up to $100 million.

The company said in a statement that stock performance had been impacted by “international frictions,” quarantine measures due to the COVID-19 pandemic, and “macro factors across the capital market.”

“Given the strong fundamentals and cash position of the Company, we would like to allocate additional capital to drive value for our shareholders,” said chairman and CEO Nangeng Zhang.

After the announcement on Tuesday morning, Canaan stocks soared over 30% on the NASDAQ from the market open, according to Bloomberg market data. CAN’s stock is currently trading hands at $4.67.

As per Canaan, the company may buy American depositary shares, each representing 15 Class A ordinary shares, and Class A ordinary shares over the next 24 months, starting from March 16. The company had announced a previous buyback program in September 2021.

In a separate statement, Canaan said that first-quarter revenues might be impacted by logistics delays stemming from COVID-19 quarantine measures in China. On Monday, a five-day lockdown was announced in the city where the company’s operations are based. 

© 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.

Eight members of Congress have written to Gary Gensler, chairman of the Securities and Exchange Commission, about the SEC’s treatment of crypto firms. Particularly, the congresspeople imply that the SEC is misusing its investigative divisions. 

The eight members of the Congressional Blockchain Caucus sent the letter on March 16. Congressman Tom Emmer (R-MN) spearheaded the initiative, which finds fault with the SEC’s scrutiny of the crypto industry.

“My office has received numerous tips from crypto and blockchain firms that SEC Chair @GaryGensler’s information reporting ‘requests’ to the crypto community are overburdensome, don’t feel particularly… voluntary… and are stifling innovation,” Emmer tweeted.

The letter reads:

“It appears there has been a recent trend towards employing the Enforcement Division’s investigative functions to gather information from unregulated cryptocurrency and blockchain industry participants in a manner inconsistent with the Commission’s standards for initiating investigations.”

Emmer’s office would not identify the firms that have been receiving these inquiries when reached.

Gensler has taken on a prominent role as a nemesis for many in the crypto industry since being confirmed early last year. He has recently privately pitched Democrats in the House of Representatives on his view that most crypto tokens are securities and already fall into the SEC’s remit, along with the exchanges that list them.

Emmer wrote to him in November to denounce the SEC’s repeated rejections of an exchange-traded fund based on Bitcoin spot markets. 

© 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 series, we dive into the mechanics and developments behind emerging decentralized governance tools that are reducing coordination costs for DAOs
• Here, we look at Gauntlet for risk management and Coordinape for work and people management

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members of The Block Research.
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this Research content on The Block Research.

DeFi lending platform Aave has announced the launch of the third version of its protocol, promising more security, decentralization, and capital efficiency for users.

Aave’s third version, stylized as Aave V3, will be available across six networks: Polygon, Fantom, Avalanche, Arbitrum, Optimism, and Harmony. Aave V3 will also soon be deployed on the Ethereum mainnet, the company told The Block.

Many crypto projects will add support for V3, including aggregators like ParaSwap and 1inch, as well as portfolio trackers and wallet providers Instadapp, Debank, DeFi Saver, Zapper and Zerion.

According to the announcement, Aave V3 comes with a few enhancements including cross-chain asset flow compatibility and gas optimization. This will make it easier for Aave users to move their assets between different blockchains and will make transactions cheaper where possible.

As for security, the new version will come with an “isolation mode,” which aims to reduce risk for newly listed tokens. This will let users limit their exposure to such potentially high-risk tokens by only being able to borrow specific amounts.

In the DeFi space, newly listed tokens can carry reentrancy risks in their smart contract codes that can open the door for malicious flash loan attacks. The recent attack on Agave (an Aave fork) and Hundred Finance on the Gnosis chain is an example of such a situation. According to the announcement, capping the borrowing threshold for newly listed assets will allow Aave to increase the variety of tokens that can be listed, without posing a material risk to 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.

Binance said on Wednesday that it had become the latest firm to be granted a virtual asset license in Dubai. 

In a release, Binance said that this means it will be permitted to extend limited exchange products and services to pre-qualified investors and professional financial service providers.

The license, issued under the Virtual Asset Regulatory Authority (VARA) initial regulatory phase, allows it to operate within Dubai’s ‘test-adapt-scale’ virtual asset market model as a base for expansion into the region. 

In addition to growing its exchange operations, Binance will anchor a blockchain technology hub in the Dubai World Trade Centre to seed new talent, it said. 

The move comes as no surprise. In December, the firm said it had signed a memorandum of understanding with the Dubai World Trade Centre authority to help it establish a crypto regulatory framework. Earlier this week, it was also granted regulatory approval in Bahrain. 

Last week, Dubai unveiled its new agency, VARA, tasked with virtual asset regulation as its leadership looks to solidify the city’s position in the emerging global digital economy.

Binance’s approval follows hot on the heels of FTX. The exchange operator said on Monday it would plan its regional headquarters in the Emirati city after being granted a license. 

© 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.

VC firm Hashed was founded in 2017 when a group of founders and engineers from South Korea pooled $700,000.

Fast-forward five years and more than 500 investments later, and Hashed’s treasury now totals over $4 billion and it is still 100% owned by the firm.

Crypto gaming is one of the main pillars of Hashed’s investment thesis, serving as the focal point of a $200 million fund announced in December. While Hashed is actively investing in the emerging Web3 gaming ecosystem, their ambitions don’t stop there.

In this episode of The Scoop, Baek Kim, general partner at Hashed, joins host Frank Chaparro to explain how Hashed has taken additional steps to help shape the future of crypto gaming.

As Kim explained during the interview:

“We realized that there are so many gaps in the industry where we don’t want to be just waiting, as investors, for founders to show up to solve those problems, but we want to do more and be hands-on in a product building manner.”

According to Kim, one of the main problems currently facing crypto gaming is sustainability. Indeed, existing crypto gaming projects are fading in popularity, according to data collected by The Block Research.

While projects such as Axie Infinity have tried to poach outside talent to reverse shrinking user bases, Hashed has created its own “metaverse ventures studio” with a team of over 80 people in order to help talented game developers incubate more sustainable Web3 games.

According to Kim, the sustainability of a Web3 game comes down to content:

“I think crypto and the Web3 space at the current moment of growth, is a very unique opportunity for our generation. It’s a unique opportunity to create original IP success. When we look at the history of the number one success stories, it is always original content.”

While existing crypto games largely rely on financial incentives instead of sustainable content to retain their users, Kim notes that games like Axie Infinity are “fun enough to hang out in the Discord channel.”

In fact, Kim suggests that interacting with crypto gaming communities outside of the game can be even more fun than actually “playing games.” This is a phenomenon that Kim believes is “quite unique about crypto gaming.”

During this episode, Chaparro and Kim also discuss:

• How VC firms can create positive feedback loops
• The problem of identity in Web3
• Web3 friction points

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Chainalysis
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Chainalysis
Chainalysis is the blockchain data platform. We provide data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries. Our data powers investigation, compliance, and market intelligence software that has been used to solve some of the world’s most high-profile criminal cases and grow consumer access to cryptocurrency safely. Backed by Accel, Addition, Benchmark, Coatue, Paradigm, Ribbit, and other leading firms in venture capital, Chainalysis builds trust in blockchains to promote more financial freedom with less risk. For more information, visit www.chainalysis.com.

© 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 exchange giant FTX has partnered with AZA Finance, the payments firm formerly known as BitPesa, to grow the web3 economy on the African continent.

The partnership will explore five key areas for web3 development in Africa, including offering support for deposits and withdrawals using African fiat currencies on the global FTX platform, according to a statement on Wednesday.

It will also work to improve Africa’s web3 infrastructure while creating useful learning and networking resources for participants in the region. FTX and AZA Finance also plan to launch African digital currency trading pairs.

The fifth area of the collaboration involves non-fungible tokens (NFTs), with FTX planning to onboard African NFT artists to its marketplace.

Established back in 2013 as BitPesa, AZA Finance is the latest African crypto and payments company to attract interest from FTX in the latter’s push to establish a footprint on the continent. In November 2021, FTX led a $150 million Series C extension for African remittance unicorn Chipper Cash.

Given the emerging nature of the web3 space, regulatory clarity is still lacking in many jurisdictions in Africa. Commenting on the problems posed by this situation, Elizabeth Rossiello, founder and CEO of AZA Finance, told The Block that her company continues to work closely with state agencies on the continent.

“We have stringent controls and are licensed now by central banks and Financial Conduct Authorities on three continents. We are looking forward to partnering with FTX to further expand its presence in Africa. Our strategy is to work closely with all regulators to ensure that any work in the African market in this regard is fully compliant and in the best interest of African users,” Rossiello added in a statement to The Block.

© 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.

HSBC is the latest corporate giant to enter the metaverse through a partnership with The Sandbox.

According to a blog post published by The Sandbox on Wednesday, the British bank has acquired a plot of land in the metaverse startup’s virtual world — space that will be developed to entertain sports, e-sports, gaming and finance professionals.

Details about the exact nature of the initiative were scant, but HSBC’s Suresh Balaji, chief marketing officer for the Asia-Pacific region, said in the statement that the metaverse “is how people will experience web3, the next generation of the internet.”

“At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and for the communities we serve,” he continued.

An image attached to the blog post depicts a pixelated plot of land, complete with an HSBC-branded rugby stadium. 

The Sandbox is a subsidiary of Animoca Brands, the Hong Kong gaming company. The firm raised $93 million in a round led by SoftBank Vision Fund 2 in November last year.

Alongside HSBC, companies such as Gucci, Warner Music Group and Ubisoft have flocked to The Sandbox’s metaverse.

Its co-founder and COO Sebastien Borget said the interest of companies like HSBC in the metaverse signals “the beginning of a broader adoption of web3 and the metaverse by institutions driving brand experiences and engagement within this new ecosystem.”

© 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.

Hex Trust, an institutional crypto custodian based in Hong Kong, has raised $88 million in a Series B funding round.

Animoca Brands and Liberty City Ventures co-led the round, with Ripple, Terra, BlockFi, CoinList, Wintermute, Morgan Creek, Sino Global Capital, Primavera Venture Partners and others participating.

Several prior backers, including Kenetic Capital, HashKey Capital and Fenbushi Capital, also joined the round.

This was a “very oversubscribed” funding round, Hex Trust’s co-founder and CEO Alessio Quaglini told The Block in an interview. The company was initially looking to raise $30 million, but ended up increasing the size of the round given investor interest, said Quaglini.

The round includes both primary capital ($61 million) and secondary investment ($27 million), meaning some early investors sold their shares in this round, according to Quaglini.

Global expansion

Founded in 2018, Hex Trust offers crypto custody, staking, brokerage and financing services to institutional clients with its licenses in Hong Kong and Singapore. The firm says it has a capital markets services license from the Monetary Authority of Singapore and is registered as a trust company in Hong Kong.

With fresh capital in hand, Hex Trust now looks to expand in the Middle East and Europe.

Quaglini said the firm will open an office in Dubai in April and a local CEO has already been appointed. As for European expansion, Quaglini said there are a couple of options on the table, including the UK and Switzerland.

In line with its global expansion plans, Hex Trust is also looking to scale its current team of 100 people to around 160 by the end of this year, according to Quaglini. 

Hex Trust’s primary business is B2B, but it is now looking to also serve retail blockchain gamers. It recently formed a joint venture with Animoca Brands to provide custody and other services to gamers and NFT owners. The joint venture will go live next month, said Quaglini.

Animoca Brands was also a lead investor in Hex Trust’s Series A round worth $10 million in October. Now, as part of the Series B round, Animoca’s co-founder and executive chairman Yat Siu has joined Hex Trust’s board of directors.

The Series B round brings Hex Trust’s total funding to date to over $100 million. Quaglini declined to provide Hex Trust’s specific valuation with this round but said it is “10 times more” than the valuation at the time of its Series A round, which was $30 million. That translates to at least a $300 million valuation currently. 

Hex Trust will be looking to raise another significant funding round later this year. Quaglini said the firm is already in discussions with investors to raise “at least double the size” of the Series B round.

Several crypto custodians have raised mega-funding rounds recently, including Fireblocks ($550 million Series E at an $8 billion valuation) and Anchorage ($350 million Series D at a $3 billion valuation). Thus far this year, crypto funding has broken all its previous records in terms of monthly investments.

© 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.