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Author: Thomas Bialek
Four Princeton alumni have pooled $20 million to fund a new research project on blockchain and the decentralization of power.
The group includes big names in the crypto and finance spaces. They are principal and co-chief executive officer of Fortress Investment Group Peter Briger Jr., co-founder of Ethereum and CEO of ConsenSys Joseph Lubin, founder and CEO of Pantera Capital Daniel Morehead and CEO of Galaxy Investment Partners Michael Novogratz.
The project will investigate potential uses for blockchain in finance, economics, voting, news and other areas. It will also look into the societal impacts of these technologies, according to a statement from Princeton.
A university spokesperson confirmed the total amount of the donation when reached.
“The technology is moving fast, so bringing a wide variety of experts together with the engineers who are building these platforms is critically important for students and for society,” said the dean of the School of Engineering and Applied Science Andrea Goldsmith.
© 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
LinksDAO, a decentralized autonomous organization aspiring to reimagine the idea of the golf country club through global membership, illustrates the complexity that can underpin the red-hot acronym.
While holding a LinksDAO NFT gives users membership rights, there has been some confusion amongst holders as to the extent of what those rights entail. Mike Dudas, co-founder of LinksDAO and 6th Man Ventures, recently discussed the current landscape in an interview on The Scoop.
As Dudas explained during the interview:
“Today we’re in this in-between world where many things that call themselves DAOs are really corporations but have a participatory governance mechanism. So it looks different than a corporation, but it’s not truly decentralized and autonomous in the spirit of what I believe these organizations can become over the coming decade.”
Indeed, LinksDAO perhaps illustrates the diversity among DAOs today.
Dudas cited ConstitutionDAO as an example of a “legitimate DAO” since fundraising was both decentralized and anonymous. While ConstitutionDAO was formed to raise funds for a specific auction, not all DAOs’ missions are as straightforward.
In the case of LinksDAO, a corporation named LinksDAO Inc. is responsible for fundraising and business development.
While owners of LinksDAO NFTs are given membership rights to LinksDAO, they do not receive ownership rights to LinksDAO Inc.
“The community is more of an advisory board, so we wouldn’t be definitionally a DAO. We would be like a group of members who act as an advisory board to a C-corp.” This division is a necessary reality because, as Dudas puts it, “in America in 2022 you can’t sell an NFT to the public using Ethereum self-custody wallets without KYC that gives somebody ownership of an asset.”
Still, regardless of the structure of a DAO, projects are cropping up to serve them with tools, Dudas noted.
“Right now there are a number of what are called ‘point solutions.’ Early on in the evolution of any ecosystem, what happens is you have solutions that service the most important and critical functions for a DAO.”
Funds like Bain Capital Crypto are eyeing this opportunity, with DAO service providers being one of the focus points of their recently announced $560 million fund.
During this episode, Chaparro and Dudas also discuss:
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© 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: Frank Chaparro and Davis Quinton
The Bank of England, HM Treasury and the Financial Conduct Authority issued a joint statement on sanctions and crypto assets amid Russia’s invasion of Ukraine.
The statement is the first of its kind from UK’s financial regulators, and joins the growing body of public issuances on the topic since the invasion began last month. The statement — a reiteration of commitments to monitor for potential crypto use by sanctioned bodies as well as a reminder on the commitments of regulated firms — is unsurprising, given the stated posture of Western governments in recent weeks, including in the US.
“The UK financial regulatory authorities reiterate that all UK financial services firms, including the cryptoasset sector, are expected to play their part in ensuring that sanctions are complied with,” the statement reads. “We are working closely with partners in government and law enforcement both here and abroad, including regulatory authorities, to share intelligence and act to prevent sanctions evasion, including through cryptoassets. We also remain ready to act in the event of sanctions breaches.”
In its statement, the BoE and the FCA said that “financial sanctions regulations do not differentiate between cryptoassets and other forms of assets.”
“The use of cryptoassets to circumvent economic sanctions is a criminal offence under the Money Laundering Regulations 2017 and regulations made under the Sanctions and Anti-Money Laundering Act 2018,” they continued.
The UK was among a number of governments to issue sanctions against Russian banks and wealthy citizens of that country in the aftermath of the invasion, which continues to escalate.
© 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
The Senate is exploring crypto’s use in sanctions evasion next week.
The Senate Banking Committee announced the hearing, entitled “Understanding the Role of Digital Assets in Illicit Finance” on March 11. It will take place on March 17 and feature testimony from Chainalysis CSO Jonathan Levin.
Levin remains the sole confirmed witness. Committee staff had not responded to The Block’s request for comment on more witnesses as of publication time.
Information on the hearing remains limited, but Banking Committee members have been heavily involved in recent moves on cryptocurrency. Chairman Sherrod Brown said of Biden’s March 9 executive order:“It’s imperative we strengthen our financial resilience and national security right now. That includes protecting Americans from the risks of crypto to our economy and ensuring crypto can’t be used to skirt the law.”
Elizabeth Warren, who also sits on the committee, is said to be working on legislation to block crypto exchanges from serving Russian users.
The hearing’s announcement follows on this news, as well as widespread speculation on Russia’s potential use of crypto to evade sanctions following the invasion of Ukraine.
Chainalysis is, meanwhile, the most prominent firm blockchain analytics firm operating today, and has a number of contracts with government agencies. Just yesterday, the firm announced that it was making some of its tools for identifying sanctioned crypto wallets free to the public.
© 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: Kollen Post
Ukraine’s minister of digital transformation has asked Tether to stop doing business with Russian citizens in a Twitter post aimed at the stablecoin operator’s high-profile CTO, Paolo Ardoino.
Today, the entire democratic world has united against Russia to punish the bloody invaders economically. I call on @tether_to @paoloardoino to stop any transactions with the Russians! For peace!
— Mykhailo Fedorov (@FedorovMykhailo) March 11, 2022
It’s not clear how Tether would in practice stop Russians from using its stablecoin. Ardoino didn’t immediately respond to a message from The Block seeking comment.
Since Russia’s invasion last month, Ukraine’s government has been ramping up pressure on businesses to cease operations in Russia. Companies from PayPal to Goldman Sachs have taken steps to quit the country, although the response from most crypto-related companies has been more reticent.
© 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: Andrew Rummer and Yogita Khatri
Ethereum scaling project Polygon’s blockchain network was down for roughly eight hours last night due to a technical upgrade that went wrong.
The network has now been restored with a “temporary hotfix,” according to a tweet from the company.
Polygon co-founder Mihailo Bjelic told The Block that the project’s proof-of-stake blockchain network has two layers: Heimdall (the consensus layer, based on Cosmos SDK/Tendermint) and Bor (the block production layer, based on Geth). A “small upgrade” on the Bor layer led the Heimdall layer to get stuck and the network stopped producing blocks, said Bjelic.
The upgrade was not supposed to impact the consensus layer “in any way,” according to Bjelic. But since it did, the network stopped working from 5:50 PM UTC Thursday to around 1:50 AM UTC Friday.
Bjelic did not detail the temporary fix but said it was introduced “as soon as possible” to get the blockchain up and running again. “No user funds were at risk at any moment,” he said. A permanent fix, which requires wider action from validators and is basically a network upgrade, is expected today or tomorrow.
Polygon is one of the biggest blockchain ecosystems, with over 7,000 decentralized applications built or building on the network. The outage comes a few months after Polygon was at risk of losing nearly all of its MATIC tokens, worth $24 billion, in December.
At the time, Polygon’s proof-of-stake genesis contract contained a critical bug that could have allowed attackers to arbitrarily mint all of Polygon’s more than 9.2 billion MATIC tokens from its MRC20 contract. The project undertook a hard fork to fix the bug at the time, but before it deployed the fix, a malicious actor stole 801,601 MATIC tokens, worth over $2 million at the time.
Bjelic at the time said Polygon is “investing much more in security,” but issues keep cropping up for the network.
© 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
In a March 11 fact sheet on sanctions on Russia, the White House is once again spotlighting crypto as an area of concern.
The fact sheet spotlights coming “New guidance by the Department of Treasury to Thwart Sanctions Evasion, including through Virtual Currency.”
“Treasury is closely monitoring any efforts to circumvent or violate Russia-related sanctions, including through the use of virtual currency,” the announcement reads. It is but the latest in a series of warning shots against crypto’s potential use.
Earlier this week, the Treasury’s anti-money laundering watchdog put out an alert for a similar issue. But as The Block, as well as a number of officials at the Treasury itself, has noted, there is still no real evidence to indicate use of crypto in Russia’s sanctions evasion.
There has, however, been a great deal of scrutiny on crypto exchanges that have not geo-blocked Russian users, despite no sanctions regime yet requiring them to do so. Despite no formal regime, a number of companies, both in finance and consumer goods, have cut off sales within Russia.
At the same time, sanctions violations incur much more forceful penalties than failure to perform due diligence on AML controls. A firm that does business in the US can, if it services a sanctioned entity even unknowingly, be liable for criminal charges.
© 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: Kollen Post
New York-based hedge fund Fir Tree Capital Management has reportedly placed a short bet on tether, citing question marks over the level of reserves backing the popular stablecoin.
The rationale for Fir Tree’s trade centers around the commercial paper owned by Tether Holdings, the organization behind the tether stablecoin, Bloomberg reported on Friday, citing unidentified investors in the fund.
Tether’s most recent attestation report showed the company’s holdings of commercial paper, a form of short-term debt issued by corporations, reduced from $30.5 billion to $24 billion in the fourth quarter of 2021. The stablecoin issuer is required to publish public attestations about its reserves as part of a settlement with New York regulators.
Fir Tree’s short bet thesis is reportedly based on the expectation that Tether’s commercial paper holdings will suffer a significant decline in value thanks to China’s ongoing real estate crisis. As such, the $4 billion hedge fund expects the bet could pay off within the next 12 months.
The hedge fund is hardly the first to consider shorting tether. In response to Bloomberg’s report, Jeff Dorman, chief investment officer at crypto asset manager Arca, tweeted a link to a research report from July 2021 where he concluded that, “While everyone wants to play George Soros and break the Bank of England, actually making money doing this is nearly impossible and highly unlikely.”
Tether’s reserve backing continues to be a subject of much speculation in the crypto space with US Congressman Warren Davidson recently calling the situation “a time bomb.” Tether currently commands 45% of the total stablecoin market supply, according to The Block’s Data Dashboard.
Fir Tree didn’t immediately respond to an email from The Block seeking comment.
© 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: Osato Avan-Nomayo
Crypto startups are giving up hope of continuing to do business in the UK under pressure from the Financial Conduct Authority (FCA).
The finance watchdog has notified at least half a dozen crypto firms listed on a temporary version of its anti-money laundering register that they are likely to be rejected, according to people with knowledge of the situation.
With less than three weeks to go until the March 31 deadline for operators to win FCA approval, the regulator has given these companies a stark choice: either withdraw their applications and wind down any UK crypto operations or see the process through and risk outright rejection.
For some firms, the pressure has already told. SBI-owned B2C2 Ltd., one of the crypto sector’s largest market makers, has withdrawn from the temporary register — effectively ending its application.
From March 21, all of the company’s spot trading activities will be handled by B2C2 USA, the group’s US arm. Its derivatives trading business won’t be affected and will continue to be overseen by an FCA-authorised entity named B2C2 OTC Ltd.
“We are committed to ensuring this move causes as little disruption as possible and are working closely with our clients to ensure they continue to have a seamless trading experience with us,” said a spokesperson for the company. “Delivering on this objective includes meaningful dialogue with regulators and strict compliance with the regulatory framework in the jurisdictions where we operate.”
Sources suggest B2C2 is far from the only crypto firm packing up its UK business, but as yet The Block hasn’t been able to confirm which other companies are following suit.
One such firm on the temporary register, which a source described but refused to name, is also said to have been left with “no choice but to withdraw” and look for alternative locations for its crypto activities.
A spokesperson for the FCA said: “We have set a high, but achievable, standard required to be registered with us for AML purposes. Our focus is on ensuring firms are not a conduit for money laundering and they have the systems to properly manage financial crime risks.”
Household names such as $33 billion neobank Revolut and crypto custodian Copper are among the dozens of companies still languishing on the temporary register, a stopgap measure the FCA created after missing an earlier deadline to register firms. Their fate remains uncertain, but without full registration they will in theory be forced to stop all crypto-related activities in the UK at the end of March.
The Block earlier reported that, as of February 10, 96 UK crypto firms had applications awaiting a decision from the regulator. There are currently 21 firms on the temporary register.
Alex Wilkinson, a capital markets advisor, said the FCA’s reticence to process applications is driving businesses away from the UK.
“The consequences of their actions will have a significant detrimental effect on UK tax revenues and the FCA’s position as a premier regulator will continue to be eroded by more progressive regulatory regimes such as Singapore, Switzerland and Germany,” he added.
© 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: Ryan Weeks
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