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The United States Congress turned its attention to stablecoins this month, with senior Treasury official Nellie Liang fielding a range of questions during twin hearings in the House of Representatives and the Senate.

The hearings centered on a recent report on stablecoins penned by members of the President’s Working Group, which Liang oversaw. That report urged Congress to create “rules of the road” for stablecoin issuers, mainly by restricting stablecoin issuance to insured depository institutions (IDIs). 

The Treasury has already designated stablecoins a “systemic risk” for the Financial Stability Oversight Council, meaning that if Congress fails to act, the council can step in. Liang told the House and the Senate that she believes in flexibility for any charter standards related to stablecoin issuers. In the meantime, proposals are beginning to float around the Hill. 

During this week’s Policy Scoop, The Block’s Aislinn Keely sits down with The Block’s senior policy reporter, Kollen Post. Post was in attendance for both hearings and has been on the ground tracking the stablecoin regulation landscape from report to proposals.

Keely and Post also discuss:

• Why stablecoins are top of mind for Congress and the Treasury
• The key proposals in the President’s Working Group report on stablecoins
• What transpired at both the House and Senate hearings
• The proposals taking shape around stablecoin issuance

© 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.

On February 22, Rep. Madison Cawthorn (R-NC) introduced a resolution before the House of Representatives, which he has called his “New Contract with America.”

The resolution centers on the goal of “Recognizing the duty of the Federal Government to preserve liberty.” Building out of wide-ranging principles including “the United States is the greatest, most benevolent, most prosperous, and most successful country in the history of human civilization,” the resolution puts forward a laundry list of political goals.

Alongside long-standing conservative pet rocks like a balanced budget amendment and abolition of income tax, the resolution pushes to “deregulate cryptocurrencies and incentivize blockchain innovation.” The specifics of this proposition are absent, but details are overall not part of this resolution. 

Cawthorn first released his “New Contract” to Fox News with the stated aim of establishing a central set of goals for Republicans, who anticipate retaking one or both of the chambers of Congress come midterm elections in fall.

This is the 28th bill or resolution on which Cawthorn, who began his term in 2021, is the primary sponsor. None has thus far made it out of committee. Moreover, this latest resolution has been referred to the 14 different committees whose jurisdictions are implicated. It is, therefore, implausible as an actual policy aiming to pass the House. 

The resolution is, however, more revealing as to how cryptocurrency has become a lightning rod for partisan declarations in Congress. While very little in the way of crypto legislation has gotten anywhere in Congress, progressives like Senator Elizabeth Warren (D-MA) have gotten a great deal of publicity by making bombastic statements about the crypto industry. 

© 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.

The European Union reportedly plans to gives its new anti-money laundering (AML) agency oversight of crypto companies amid concern digital assets could be used to circumvent current controls.

The new regulator will likely begin operations in the next two years, Bloomberg reported on Tuesday, citing people familiar with the plans. Officials from Germany are reportedly at the forefront of setting up the agency, with support from counterparts in Italy, Luxembourg, Austria, Spain and The Netherlands.

The push to add crypto AML monitoring to the proposed agency’s oversight remit is being linked to fears that crypto opens up new ways of funneling dirty money.

If the agency does come online, it could change the current landscape of crypto AML policing in Europe, which is currently the exclusive reserve of national bodies. According to proponents of the yet-to-be-created agency, an EU-wide approach to cryptocurrency AML oversight could help to eliminate regulatory arbitrage.

In its 2021 crypto crime report, blockchain intelligence outfit Chainalysis stated that cryptocurrency-linked money laundering grew by 30% last year. The decentralized finance space also saw a 20-fold increase in money laundering-related cases. The report also highlighted, however, that legitimate transactions far exceeded criminal payments.

© 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.

Ethereum scaling solution StarkNet is now raring to go, having slowly rolled out over the last few months. 

StarkNet is a permissionless version of the StarkEx platform that currently supports crypto projects DeversiFi, Immutable and dYdX. As a result, anyone can build on StarkNet, which will eventually be run by its community. Both platforms are currently being built by StarkWare.

StarkNet first went live on mainnet on November 29 with limited functionality. Over the last few months, more features have been added. With today’s launch of Alpha 5, the latest version of the software, it’s now ready to be used for making transactions and building applications. 

Over the next few months, the focus will be on scaling out StarkNet, making it support a higher number of transactions per second (TPS). While it will be cheap to use, the network will be a little slow to start with. At present, its speed is similar to Ethereum’s 7 TPS or so – but the plan is to reach 70 or even 700 TPS eventually.

In the second half of the year, the project aims to decentralize itself and hand over governance to its community. Typically projects that have done this have issued tokens (usually airdropped to their early supporters) that are used for voting on upgrades — as the Ethereum Name Service did in November. When asked if the project will issue a token, StarkWare declined to comment.

How does StarkNet work?

StarkNet uses ZK-rollups to support a large number of transactions at low cost. 

On Ethereum, you have to pay more depending on how complex a transaction is. Making a lot of transactions requires a lot of processing and is very expensive. ZK-rollups do a lot of this computational work off-chain and then submit smaller transactions that effectively summarize them (and prove that they all happened). 

An entity on the network – known as the sequencer – batches up a large number of transactions. Then the so-called prover generates a cryptographic proof of these transactions. This proof is then relayed to the network and submitted to the Ethereum blockchain.

As a result, fees are much lower and they’re shared among the thousands of transactions being processed each time. This reduces the cost by an order of magnitude.

© 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.

Tendermint, a core contributor to the Cosmos project, is rebranding to “Ignite” as its current name is being used for a new project by one of its founders.

Tendermint was set up in 2014 by its then-founder and CEO Jae Kwon. But relations soured over the years and he left the company in early 2020 to work on a new project called Virgo, which was supposed to help the world collaborate on big challenges like climate change.

Now it appears Kwon is taking back ownership of the Tendermint brand in order to launch a new project. Ignite CEO Peng Zhong, who replaced Kwon, told The Block that Kwon plans to launch a new initiative under the Tendermint name. Kwon confirmed to The Block that he’s launching a new platform but wouldn’t provide any further details.

With Kwon using the Tendermint name, Zhong started looking for a new identity – wanting something that made it clearer what his Cosmos-focused project actual does. 

“As far as Ignite goes, it’s much more core to what Cosmos is. It’s about the big bang. An explosion of new products on Cosmos technology,” Zhong said. 

As for the Cosmos ecosystem, it’s continuing to grow, with 38 blockchains now connected through IBC, its standard for making cross-chain transactions. Zhong predicts there will be 200 chains connected through IBC by the end of the year. Yet this technology is still struggling with scaling as IBC transfers remain free, keeping the burden on validators that are processing them. 

© 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.

Amidst yesterday’s report by crypto journalist Laura Shin that claims to identify who hacked The DAO in 2016, there was a small detail crucial to the findings but with other implications.

It was the claim, by blockchain analytics firm Chainalysis, that it was able to unmask the path of transactions through a popular bitcoin mixing service called CoinJoin — something that would defeat its entire raison d’etre.

CoinJoin is a crypto mixing tool by privacy-focused Wasabi Wallet. It helps users obscure their transaction history by mixing their funds with those of other users. It’s much harder to follow the movement of money across a string of blockchain transactions when they go through CoinJoin.

Shin’s report that claims to have found the hacker of The DAO — a crowdfunding platform set up on the Ethereum blockchain that fell foul to its own code in 2016 — cashed out some funds, mixed them, and sent them to several exchanges. It was the cashing out at the exchange point that supposedly identified the alleged perpetrator. But this is all based on Chainalysis successfully following the money through CoinJoin.

When we reached out to Chainalysis, it refused to provide more details about its abilities with regard to CoinJoin. “We helped trace funds despite the attacker’s attempts to cover his tracks [with] mixers,” said Chainalysis. “This is yet another example of evidence preserved on the blockchain forever.”

“We aren’t providing further comment, but we can confirm (as we did here) that Laura’s report about our role in her investigation is accurate.”

Now there are two possible options here. Either the blockchain analytics firm is able to unmask each and every transaction through CoinJoin — the worst-case scenario for privacy proponents — or it’s able to do so under certain circumstances, such as sloppy privacy practices.

When asked whether all CoinJoin transactions could be traced, Wasabi Wallet founder Adam Fiscor told The Block, “Unfortunately we have no more information on this than you do. I think it’s unlikely, but I’d love to learn more, too.”

A view from Elliptic

Tom Robinson, co-founder and chief scientist at blockchain analytics firm Elliptic, said that it’s not possible to demix all CoinJoin transactions. But he acknowledged that some transactions can be traced.

“Yes, Elliptic can also demix Wasabi transactions in some circumstances. However, this does not mean that all Wasabi transactions can be demixed. This is typically possible in situations where the Wasabi user has made a mistake,” said Robinson.

He clarified that it’s possible to track funds through Wasabi due to bad practices by a user — specifically, address re-use.

But what about other crypto mixers such as Ethereum’s Tornado Cash?

“No one can demix all crypto mixer transactions,” said Robinson. “Some mixer transactions can be demixed, for most mixers.”

Elliptic said that it isn’t trying to trace all mixer transactions. “There are completely legitimate reasons to use mixers, and our aim is not to violate peoples’ financial privacy without cause,” said Robinson. “However, we do try to trace specific funds, known to have originated from illicit activity, through mixers.”

Elliptic also doesn’t plan to do its own analysis on Shin’s claims, said Robinson.

© 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.

The Advertising Standards Council of India (ASCI), the country’s self-regulatory organization of the advertising industry, has issued guidelines for crypto ads following a spate of such ads in recent months.

Effective April 1, these guidelines require crypto companies to include this disclaimer in all of their ads: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”

The disclaimer should be “prominent and unmissable” by an average consumer, according to the ASCI. For instance, in a print ad, the disclaimer should occupy at least 1/5th of the ad space at the bottom and be written in an easy-to-read font against a plain background.

In a video ad, the disclaimer should be placed at the end of the ad against a plain background. A voiceover must also accompany the disclaimer in text, and the voiceover should be at a normal speaking pace and must not be hurried.

According to the guidelines, the words “currency,” “securities,” “custodian,” and “depositories” may not be used in crypto ads as consumers associate these terms with regulated products.

The guidelines also require that crypto “returns for periods of less than 12 months shall not be included” in ads.

“We had several rounds of discussion with the government, finance sector regulators, and industry stakeholders before framing these guidelines,” said Subhash Kamath, chairman of ASCI. “Advertising of virtual digital assets and services needs specific guidance, considering that this is a new and as yet an emerging way of investing. Hence, there is a need to make consumers aware of the risks and ask them to proceed with caution.”

The guidelines come two months after India’s Prime Minister Narendra Modi held a crypto meeting that reportedly reached a consensus to “stop attempts to mislead the youth through over-promising and non-transparent advertising.”

But the ASCI guidelines do not mean crypto is now legal in India. The country is yet to announce its regulatory stance. A crypto bill is in the making, which should clarify the country’s position on the emerging sector.

In recent months, however, India has taken steps that point toward cautious optimism about crypto rather than an outright ban as previously feared. Earlier this month, the government of India levied a 30% tax on any income generated from crypto transactions. India’s political leaders have also shared commentary suggesting that they are warming up to crypto.

© 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 settlement startup Zebec announced Tuesday that it raised $15 million in a Series A funding round.

Zebec, which developed a Solana-based protocol for continuous, real-time settlement of financial transactions, raised the funds in a round led by Solana Ventures and Distributed Global. Other participants in the round included Alameda Research, Circle, Coinbase Ventures, Lightspeed Venture Partners and DST Global, among others. 

The new funding will be used to continue scaling Zebec’s protocol, according to a statement from the company.

The idea behind the Zebec protocol is to make it easier for users to send and receive payments on an ongoing basis. Zebec launched last November on the Solana mainnet, buoyed by a $6 million funding round, along with a payroll-focused app. That round was led by Breyer Capital, Republic Capital and Shima Capital.

“Despite all of the promise of decentralized finance and Web3, most organizations are still relying on Web2-style payments or, at best, one time wallet transfers,” said Sam Thapaliya, founder of Zebec, said in a statement Tuesday. “We’ve built a DeFi native solution for instant, seamless and continuous money streams and we think Zebec will be the future model for on-chain payments.”

© 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.

Chinese blockchain company OK Group led a $21 million Series A funding round for Brazilian exchange Foxbit, according to reports from Bloomberg Línea and others. 

According to the news reports, Foxbit will use the funds for hiring, technology and possible acquisitions. 

Sao Paulo-based Foxbit was founded in 2014 by João Canhada and Luís Augusto Schiavon, according to its webite. Felipe Trovão was the company’s first investment partner. The exchange has close to 1 million registered users.

In 2020, Foxbit saw transactions of more than 3 billion Brazilian reais ($593 million), and said in December that it has transacted more than 9 billion reais in its history (nearly $1.8 billion). The company’s workforce grew by 40% in 2021, according to a company blog.

Foxbit supports a wide range of assets, including cryptocurrencies like Bitcoin and Ethereum as well as stablecoins and utility tokens. On February 16 added five new crypto assets: Shiba Inu (SHIB), Gala (GALA), Fantom (FTM), LooksRare (LOOKS) and Illuvium (ILV). It also offers the bitcoin payment platform Foxbit Pay, crypto-as-a-service product Compra Fácil Cripto and asset tokenization service Foxbit 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.

Christine Moy, a veteran of JPMorgan’s blockchain and crypto operations, is leaving the firm.

Moy, who wore many hats within the Wall Street megabank, co-led the 2020 launch of blockchain unit Onyx, which operates a payments network named Liink as well as JPM Coin. She recently gained the title of global head of metaverse within the Onyx team. She has been with the firm for more than 18 years, according to her LinkedIn profile. 

Prior to her promotion to global head of blockchain and crypto in 2016, she held roles within the corporate and investment bank spanning syndicated loan trading and global commodities sales and marketing. 

“After almost two decades, I am leaving JPM to pursue a new opportunity,” she wrote on LinkedIn. 

She added:

“Thank you to the leadership at J.P. Morgan for the opportunities I have had to grow and learn. I appreciate that Umar Farooq, Takis Georgakopoulos and others have empowered me to take risks, experiment, take long shots, and build an authentic team culture. I appreciate the leaders who have mentored, sponsored me, and guided me through even the most challenging times (you know who you are).”

Moy—who is among the most prominent crypto Wall Streeters—played a role in bridging the gap between the Wild West world of cryptocurrencies and financial services, advocating for JPMorgan to bank crypto firms like Coinbase and Gemini, according her LinkedIn post. 

As The Block reported earlier this month, Moy helped develop the bank’s presence in the metaverse, setting up a lounge in Decentraland. 

“Our mission has been ‘to make the Impossible possible,'” she added. “I drive a team culture that is centered on being bold & resilient, challenging the status quo, and acting with urgency.”

Bloomberg, which first reported the upcoming exit, said Moy’s exit was announced internally by Umar Farooq, head of Onyx.

“Christine has been instrumental in building and leading JPMorgan’s blockchain program, dating back to 2015 when the blockchain team consisted of fewer than five people,” Farooq said in the memo reviewed by Bloomberg. “Fortunately, we have a very strong bench of exceptional leaders and experts in distributed ledger technology that will enable us to lead and innovate in this space in the future.” 

© 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.