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Quick Take

• The crypto industry went on another big hiring spree in February.
• Top candidates were poached from other crypto businesses, traditional finance companies and VC firms.

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Quick Take

• Our analysis of 11 mining companies’ income statements shows their realistic costs for mining 1 bitcoin range between $4.2k to $14.2k.
• Factoring in other cash-based operating expenses, we get a further cost range between $8.2k to nearly $30k.
• That suggests energy costs no longer necessarily make up the largest part of a Bitcoin mining business as the industry grows industrialized. 
• Meanwhile, stock-based payments have become a popular method for mining firms to cover parts of their operating expenses.

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Users of MetaMask based in Venezuela say they can no longer access the popular digital asset wallet. 

Messages about the issue began to crop up on social media on Wednesday, with numerous examples spreading as of late Thursday morning. The suspected culprit is the API for Infura, a blockchain node infrastructure network.  

A MetaMask support page, updated an hour before press time, states that “MetaMask and Infura are unavailable in certain jurisdictions due to legal compliance.”

The page features a screenshot of an error message akin to the type being spread on social media. 

Que demonios es este error en mi meta…mask desde esta tarde? y como se arregla? en ETH pic.twitter.com/BU5NC4od5w

— Antonio Di Caprio (@ajdicaprio) March 3, 2022

@MetaMask Do not tell me that you became Centralized, I have this problem and many people in Venezuela have the same 🆘🇻🇪 pic.twitter.com/lENciOPysp

— L.A.R.V. (@goluis1_) March 3, 2022

Word of the blockages also prompted commentary on the use of VPNs to circumvent the issue. 

Dear friends in #Venezuela wanting to use #Crypto:

1. Get a VPN like @NordVPN or similar
2. Use Metamask or any competitor like @iSafePal or @coin98_wallet

Stay safe and good luck out there. https://t.co/4Ur7dFRg2K

— EnigmaFunge (@EnigmaFund) March 3, 2022

Unclear at present is the extent to which the reported blockages represent at tightening of rules with respect to other countries sanctioned by the US and other governments. Users from Iran and Lebanon appear to have been affected, though many of the recent messages pertain to Venezuelan access. 

The Block contacted representatives for ConsenSys, which develops Infura, and will update this report should we hear back. 

© 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.

Three people associated with a now-closed company called The Geek Group were sentenced to prison after authorities discovered they traded bitcoins and laundered money via an unlicensed money transmitting business.

Together they sold over $740,000 in bitcoin, according to a statement from the US Attorney’s Office on February 28. Their alleged scheme involved buying bitcoin from registered exchanges, often laundering it, and then selling it to customers, including drug dealers.

The president of the company, Christopher Allan Boden, 46, from Michigan, told prospective customers that “people buy from” him because he sold “clean” bitcoin, not “dirty” bitcoin that could be traced, according to prosecutors

He also allegedly solicited an undercover agent to collect on a bitcoin debt totaling $500,000 by using violence if necessary.

“If all I wanted to do was f*** him up, his head in burlap is easy to do. I want my money. I don’t give a f*** about him,” Boden told the agent, according to the U.S. Attorney. “What happens to him, I don’t give a sh** . . . [Y]ou kill him, he ain’t gonna pay me.”

Boden acknowledged in court that they “mixed” bitcoin to avoid anti-money-laundering controls put in place by licensed cryptocurrency exchanges. He pled guilty to operating an unlicensed money transmitting business, money laundering and structuring deposits to evade financial institution reporting requirements. He was sentenced to 30 months in prison and ordered to pay $75,000 and forfeit bitcoin, among other penalties.

The two other people associated with the business, Daniel Reynold DeJager, from Washington, and Leesa Beth Vogt, from Michigan, pleaded guilty to different charges and were sentenced to 10 months in prison and four years of probation, respectively.

Last November, a Califonia man was sentenced to three years in prison after pleading guilty to felony charges of money laundering and operating a crypto exchange without proper licensure.

© 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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The UK’s top finance watchdog said Thursday that 50 crypto firms are under active investigation.

The figure was included in a statement issued by the Financial Conduct Authority (FCA), which as previously reported has developed and slowly built out a registry of crypto firms under its auspices. That registry has been notably slow to add new firms, creating potential headaches for firms operating in the country as the registration deadline approaches. 

Per the FCA’s Thursday statement, officials there have opened hundreds of investigations into businesses suspected of noncompliance.

“The FCA has also revealed that over six months, it opened over 300 cases relating to possible cryptoasset businesses not registered with the FCA, many of which may be scams, and that it has 50 live investigations, including criminal probes, into unauthorised businesses,” the watchdog said.

Earlier this year, the FCA issued draft regulations meant to tighten the rules around crypto product promotions. 

© 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.

© 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.

An Internal Revenue Service (IR) official said Wednesday to “expect more” in the way of broad information requests to crypto exchanges, similar to past efforts involving Coinbase, Kraken and Circle. 

The comments were made by Carolyn Schenck, national fraud counsel and assistant division counsel at the IRS. They came during a panel event hosted by Tax Issues on March 2 that was focused on cryptocurrency regulation.

During her initial remarks, Schenk offered a broad overview of the IRS landscape as it relates to cryptocurrency, noting that “[w]e have cases in every stage of the pipeline, from letter treatment to examination to appeals to criminal refers to active criminal prosecution.”

Schenck touched on a few publicly known areas of IRS action, including the issuance of letters to taxpayers suspected of not correctly reporting their crypto-related tax obligations. Such letters were issued in 2019 and 2020, respectively, and Schenck noted that the IRS “may continue to use those in the future.”

Perhaps most notably, Schenck remarked that the IRS may utilize so-called John Doe letters in order to seek information from crypto exchanges. Such requests have been made to Coinbase as well as Kraken and Circle; in such cases, the exchanges themselves aren’t accused of wrongdoing, but rather the IRS is looking for potential tax cheats.

“Expect more from the IRS with respect to John Doe summonses in this area,” said Schenck.

Schenck also indicated that crypto tax compliance is being centered within the IRS’s processes:

“The question of whether a taxpayer engages in digital asset transactions is being built into every examination and every collection matter.”

Last year, the IRS sought additional funding to build out its crypto-related capabilities, including for internal training and hiring purposes. Pandemic-related staff shortages have resulted in an enormous backlog of tax returns,  potentially impacting those who have submitted returns involving crypto data, as The Block reported. 

© 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.

Sherlock, a startup that promises to protect crypto projects from smart contract hacks, is looking to raise $100 million in a public funding round next week. 

The project will open its six-day fundraising window on March 7 at 4 pm UTC, according to an announcement. This follows a previous $30 million guarded launch through a whitelisted round.

Sherlock is a security solution for protocols. It connects crypto projects with external audit firms and Sherlock’s own security teams, nicknamed Watsons — along with providing tools for smart contract coverage for exploits and bounties on bugs.

Sherlock’s token round will operate on a first-come, first-served basis. It will see the total USDC be split between the Sherlock staking pool and the Sherlock treasury, with 90% going to the former. After six months, funds in the staking pool will be rewarded with 1 SHER token for every 10 USDC staked. The remaining 10% in USDC is locked in Sherlock’s treasury and cannot be returned to investors. 

The protocol says that this token-based round will allow not only venture capitalists and angel investors to participate in the governance of the Sherlock system but also theoretically allow anybody to invest in Sherlock. As long as a user has a WalletConnect-compatible Wallet and at least $250 in ETH as a reserve, they can participate in the round. The specific individuals and investment firms who might invest in the round, however, are yet to be announced. 

The fundraising follows a spree of similar token-based rounds. The non-profit Luna Foundation Guard, for example, raised $1 billion last month through a sale of its native token LUNA in a round led by Jump Crypto and Three Arrows Capital. 

Sherlock didn’t immediately reply to a request from The Block for further details on the fundraising. 

© 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 weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• L1 teams continue to adapt to evolving user needs as crypto becomes more mainstream than ever before
• In order to coordinate capital and behavior between the varied participants in crypto, protocols are developing novel ways to better align incentives
• This week, we look at Fantom, Avalanche, Terra, and Osmosis

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