FreeCryptoCurrency.Me

Gary Gensler, chairman of the Securities and Exchange Commission, is continuing to pitch lawmakers on his vision for crypto oversight out of the public eye.

Gensler addressed Democrats of the House Financial Services Committee on February 15. The call took place during an annual retreat for Democratic members and legislative staff. 

The Block obtained an agenda for the event as well as detailed notes from the discussion with Gensler that were prepared by an attendee. 

According to the notes, Gensler’s remarks focused heavily on crypto. He kicked off by comparing the spate of crypto advertisements during this month’s Super Bowl to the surge in subprime mortgages that led to the financial crisis of 2007-2008. 

That crisis represented a critical moment in Gensler’s career, as it opened the door for him to expand the authorities of the Commodity Futures Trading Commission, which he chaired from 2009 to 2014.

“Let’s not make arbitrary loopholes,” Gensler was quoted as saying in the notes, a continuation of his longstanding argument that the SEC’s existing authority covers digital assets. 

Central to this argument is Gensler’s skepticism when it comes to the novelty of cryptocurrency technology. Per the notes, Gensler appears to have spoken on the subject somewhat more frankly than in past public appearances. He told Congresspeople and legislative staff on the call that the ecosystem for digital assets is more centralized and less new than the industry acknowledges. 

“Most of these tokens are securities,” Gensler was quoted as saying. 

Neither Gensler’s staff nor the SEC press office would confirm or deny the presentation’s details when reached. Staffers for committee Democrats did not return requests for comment. 

The conversation was part of an annual and exclusive retreat by committee Democrats that took place virtually this year. Other speakers on the agenda were National Economic Council Director Bryan Deese, deputy director of the Federal Housing Finance Agency Sandra Thompson, and Consumer Financial Protection Bureau director Rohit Chopra.

Gensler has been pushing for greater SEC oversight of crypto since he took office. Most recently, his agency announced a major settlement BlockFi, a move that provided a greater degree of regulatory clarity around crypto lending products. Gensler has also sought to convince lawmakers and the general public that centralized crypto exchanges should be subject to closer SEC supervision.

The prevailing sentiment in DC, however, seems to be for the CFTC to take on more oversight authority over these spot markets, whereas currently, the commission can only prosecute cases of fraud or market manipulation. 

© 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.

Republicans on the Senate Banking Committee boycotted a vote on Tuesday for a batch of five nominees to the Federal Reserve and one to the Federal Housing Finance Agency, denying the committee the quorum necessary to send the nominations to the full Senate.

In prepared remarks at the executive session, committee chairman Sherrod Brown (D-OH) said: “Republicans have walked out on the American people.” Democrats in attendance were similarly scornful of their colleagues’ absence. 

Backed by a razor-thin majority in the Senate, the Biden administration has faced considerable obstacles in filling the ranks of its regulators. But even Kyrsten Sinema, a critical swing vote within that majority, said: “I’m hopeful we can cut through the partisan gridlock, stop the political bickering, and move these nominations forward.”

The planned walk-out attracted an unusual mob of reporters to the Banking Committee’s hearing on stablecoins earlier that day. 

The move followed a month of back-and-forth barbs over the nominees, particularly Sarah Bloom Raskin. Bloom Raskin served as a Fed governor before becoming the deputy secretary of the Treasury during the Obama administration. Her nomination on January 14 initially drew fire from Republicans who suspected she would cut off politically controversial businesses, especially energy companies, from Fed crisis aid.

Subsequently, Bloom Raskin’s tenure at fintech firm Reserve Trust Company drew scrutiny. For a timeline, that firm first registered in 2016, was rejected for a Fed master account in June 2017, added Bloom Raskin to its board upon her departure from Treasury in 2017, and then received access to a Federal Reserve master account in 2018. 

A master account with the Fed is effectively the most direct access to the US’s money supply and interchange systems that a financial institution can have. Without it, fintechs are generally dependent on partner banks. For crypto firms, this has sometimes ended poorly, with some major firms getting cut off from fiat systems when their banks decide to stop banking them. 

Toomey and Cynthia Lummis (R-WY) discovered a phone call that Bloom Raskin made to the Kansas City Fed in August 201 — a call that Bloom Raskin has by turns denied memory of or avoided questions on. In a statement on Bloom Raskin’s role at Reserve Trust, Lummis noted: “Two Wyoming-chartered banks have been trying to obtain Fed master accounts for over a year.”

Those two entities in limbo are Kraken and Avanti, crypto-native firms that, unlike Reserve Trust, possess banking charters. The question is also pressing for federally chartered crypto banks, as Brian Brooks, who helped pave the way for those charters while leading the Office of the Comptroller of the Currency, asked on Twitter last August: 

Raising the obvious question: what about *federally* chartered crypto banks such as @Anchorage , @PaxosGlobal , and Protego? https://t.co/K5kxT14Sjw

— Brian Brooks (@BrianBrooksUS) August 28, 2021

Brooks joined the board of Protego on February 15. The firm tells The Block that “he did not work on the application” for a national charter. 

A Fed master account is an incredibly valuable asset, without which financial operators are dependent on partner banks. That master account is, consequently, the first thing that Reserve Trust advertises on its website, saying: “Move beyond the bank. Reserve Trust is the first fintech trust company with a Federal Reserve master account.”

The application process for a master account was in the spotlight last summer, as the Fed solicited comments on new guidance for the application process in light of “a recent uptick in novel charter types being authorized or considered across the country.” Kraken, in its response to this comment, criticized the new proposal for privileging federal charters over those from state authorities. 

While the Fed seems to be working on facilitating master accounts for “novel charter types,” they have seemingly authorized none. Except to Reserve Trust. 

According to Lummis and Toomey, Bloom Raskin sold her equity in Reserve Trust for $1.4 million in 2020. Republicans on the Banking Committee say their questions on the matter remain unanswered. 

Speaking to press on February 15, Senator Brown said Toomey “sent almost 200 questions for her to respond to over a 48 hour period, which she did. Other letters then came in later. She responded to those. They don’t much like the answers.” 

The Fed’s board has several vacancies at the moment, while inflation has become a political hot potato. Consequently, both parties are keen to blame the other for obstructing the process of filling these positions. 

“As far as Republicans on the committee are concerned, we are perfectly ready to proceed with votes on five of the six nominees,” Toomey said on the Senate floor later that evening. “Rather than advance five through the committee, Chairman Brown decided zero.”

At the same time, Republicans in the Senate have delayed the confirmation process for a number of other appointed positions. At least in part, this is because they anticipate a win in midterms that will flip the Senate in their favor. One notable example of a time-intensive nomination was Saule Omarova, Biden’s pick to lead the Office of the Comptroller of the Currency, who withdrew under heavy pressure from Banking Committee Republicans. 

© 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.

Universal Music Group (UMG) is working with Curio, an NFT platform for entertainment brands, to launch NFT projects from UMG’s record labels, operating companies and recording artists. 

The collaboration will also allow UMG to create and launch future NFT projects with its roster of artists and labels, providing greater “scalability and flexibility to issue authentic fan-oriented collectibles, carefully curated for each project,” according to a statement from the company. 

“UMG and our labels are focused on developing NFT projects that authentically engage and speak to our artists’ fanbases and new audiences,” said Michael Nash, Universal Music Group’s Executive Vice President, Digital Strategy, in a statement. “With Curio, our labels will have a secure and dedicated platform to host these premium projects and provide new opportunities for collectors and fans from around the world to acquire unique pieces, inspired by their favorite artists and labels. UMG is focused on developing new opportunities in this space that place our artists and labels at the forefront, working to ensure that the evolution of Web3 provides exciting new avenues for their creativity.”

Since its launch in 2020, Curio dropped its first NFTs in February of last year. To date, the company has released over 75,000 NFTs with entertainment brands. Co-CEO and co-founder Ben Arnon previously worked at UMG. 

“Curio is thrilled to be partnered with UMG in the NFT and Web3 space. UMG has a huge catalog with unlimited opportunity to deliver value to fans across the globe,” Arnon said in a statement. “And the digital innovation and Web3 expertise amongst their executives is unparalleled.”

The companies are working together to launch its first issue in March with Capitol Music Group artist Calum Scott. 

© 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.

A crypto-focused “enforcement team” founded last October by the US Department of Justice has a new director. 

According to Thursday’s announcement, Eun Young Choi is now leading the National Cryptocurrency Enforcement Team. Previously, Choi served as senior counsel to deputy attorney general Lisa Monaco, who has served as a public-facing official for the DOJ’s crypto efforts. 

“The NCET will play a pivotal role in ensuring that as the technology surrounding digital assets grows and evolves, the department in turn accelerates and expands its efforts to combat their illicit abuse by criminals of all kinds. I am excited to lead the NCET’s incredible and talented team of attorneys, and to get to work on this important priority for the department. I would like to thank Assistant Attorney General Polite and the Criminal Division’s leadership for this opportunity,” Choi said in a statement. 

Monaco announced the move during a speech Thursday; according to a report from Cyberscoop, Monaco said the team is comprised of a dozen prosecutors. She also revealed the formation of a so-called Virtual Asset Exploitation Unit. This unit will be focused on the seizure of crypto assets as well as analysis of blockchain transactions. 

According to Monaco, the NCET was involved with this month’s arrest of two New York residents in connection with the alleged laundering of billions of dollars in bitcoin stolen from crypto exchange Bitfinex. 

© 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

• Despite the recent market downturn, Bitcoin mining remains profitable thanks to the high efficiency of the newest generation of equipment.
• Meanwhile, the increase of Bitcoin miner and power capacity investments globally is set to affect the main variables of the profitability equation.
• In this piece, we take a scenario analysis of the various factors that could shape the mining production and profitability outlook in 2022.

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

Legislation moving through the Illinois General Assembly would, if approved, extend a data center tax incentive program to cryptocurrency miners. 

Illinois Senate Bill 3643 was first filed in mid-January by Republican State Sen. Sue Rezin and this week picked up a co-sponsorship from Sen. Julie Morrison, a Democrat, according to public records. 

The tax incentives program cited in the bill has existed since 2019. According to a report from mid-2020 prepared by the Illinois Department of Commerce, tax incentives worth more than $160 million have been extended to six data center operators. The report cites the creation of 120 jobs and $1.6 billion worth of investments. 

In order to qualify for the program, would-be applicants must invest at least $250 million, create at least 20 jobs and have achieved carbon-neutral status or green building certification, among other requirements. The program exists for both new entrants as well as existing operations in the state, provided they meet the qualifications. 

Per the text of SB 3643, this program would be extended to cryptocurrency miners. Reporting by the Chicago Tribune has highlighted existing mining operations in Illinois, including an operation in Hennepin at a former steel mill run by a company named Sangha Systems. 

As previously reported by The Block, states like Texas and Kentucky have sought to position themselves as hubs for cryptocurrency mining; the US has become the largest market for crypto mining since last year’s crackdown in China. 

© 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.

Sequoia Capital, one of the world’s oldest and most successful venture capital firms, is launching a new crypto-focused fund — its first-ever sector-specific fund since its founding in 1972.

The Sequoia Crypto Fund will primarily invest in “liquid tokens” — tokens that are already listed on crypto exchanges and those that are yet to be listed — Shaun Maguire, partner at Sequoia Capital, told The Block in an interview.

The fund’s size is $500-600 million, and it is part of the bigger Sequoia Capital Fund, which was formed last October as part of the VC firm’s restructuring. The Sequoia Capital Fund now holds all of the firm’s US and European investments, including stakes in publicly-traded companies.

In addition to the crypto sub-fund, Sequoia will also continue to invest in crypto startups out of its main seed, venture, growth, and expansion funds that have over $7.5 billion in total capital commitments.

Sequoia is becoming more active

Sequoia has been investing in crypto since 2015 in both equity and token deals. Last year, 20% of the firm’s new investments in the US and Europe were in crypto. Its portfolio companies include FTX, Fireblocks, StarkWare, and Filecoin. When asked why it was launching a crypto-dedicated fund now, Maguire said many founders have increasingly asked Sequoia to take a more active role in managing its tokens. “This new fund gives us the flexibility to engage even more deeply,” he said.

That means instead of just investing in and holding tokens, Sequoia will now start staking them, provide liquidity, participate in governance and trade them. “Our network of builders at Ethereum, Solana, major DeFi protocols, and beyond have urged us to do the same,” said Sequoia.

‘Day one for crypto’

Sequoia as a firm believes that crypto is more than a sector; it’s a fundamental shift that will impact all sectors over the long run.

Michelle Bailhe, another crypto-focused partner at Sequoia, told The Block in the interview that “it’s day one for crypto,” meaning crypto is still getting started and going to get only bigger from here.

Maguire concurred. He said, “we’re still in the absolute beginning. Crypto will be the biggest megatrend of the next 20 to 30 years.”

As for its crypto investment thesis, Sequoia is particularly interested in cross-chain interoperability and GameFi projects, said Maguire, adding that multi-chain is the future.

For interest in specific blockchain protocols, Bailhe said Sequoia is monitoring developer activity across networks, including Terra, Avalanche, NEAR, Polkadot and Cosmos, but there still isn’t a clear signal yet which network could witness success like Solana.

The Sequoia Crypto Fund will have the flexibility to invest in projects, but its check sizes could range in the $100,000 to $50 million range, said Maguire.

The fund looks to get fully deployed in under a year if the crypto market enters a bear phase and in more than a year if it enters a bull phase, said Maguire. “And it really just depends on the quality of investments,” he added.

The Sequoia Crypto Fund is the first sub-fund of the Sequoia Capital Fund. The firm plans to launch two more general funds — the expansion and ecosystem funds. Proceeds from these sub-funds then go back into the Sequoia Capital Fund. 

© 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.

Animoca Brands, the gaming and virtual worlds-focused company, said Thursday morning that it has acquired Grease Monkey Games, a development studio that has produced several mobile-focused titles.

“The current management of Grease Monkey Games will continue to operate the company after the acquisition, working closely with Animoca Brands to align efforts relating to blockchain integration, fungible tokens, non-fungible tokens (NFTs), play-to-earn capabilities, synergy opportunities, and product launches, particularly in connection to Animoca Brands’ REVV Motorsport ecosystem,” Animoca said in an emailed statement. The terms of the deal were not immediately available.

To date, the Australia-based Grease Monkey Games has focused on motorsports-centric games, 2015’s Torque Burnout and 2017’s Torque Drift. Both are free-to-play games that feature licensed versions of cars from popular automakers.

Earlier this year, Animoca garnered hundreds of millions of dollars in fresh funds to fuel its gaming and metaverse strategies. 

“Grease Monkey Games not only adds exciting titles to our catalog, but it also significantly enhances our development capabilities,” Yat Siu, co-founder and executive chairman of Animoca Brands, said of the deal. 

© 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.

Circle — the firm behind stablecoin USDC — announced on Thursday that it has scrapped its previous deal with special purpose acquisition company Concord Acquisition Corp in favor for a new deal with the firm as it charges forward with its plan to go public. 

In July 2021, Circle announced its plans to tap public markets via a SPAC through a deal with Concord, which is chaired by former Barclays chief executive Bob Diamond. The new deal values Circle at $9 billion — an increase from the first deal’s terms that valued it at $4.5 billion. 

The transaction is subject to shareholder and regulatory approvals. The deal could close by the end of 2022 after which the combined entity would trade on the New York Stock Exchange. 

“We continue to believe that Circle is one of the most interesting, innovative and exciting companies in the evolution of global finance and we believe it will have an historic impact on the global economic system,” commented Diamond in a press statement. Goldman Sachs is advising Concord in the deal. 

The supply of USDC has surged over the last year, according to data from The Block’s Data Dashboard.

The new deal’s announcement noted the new terms reflected “improvements in Circle’s” financial outlook. Upcoming rate hikes by the Federal Reserve could bump the interest Circle earns on the cash pile underpinning the dollar-backed coin.

In financial filings for the previous deal, Circle noted material weaknesses in its financial statements. The firm said that it overstated compensation expenses due to a payroll issue and over-estimated of convertible debt holdings. 

“We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to the material weakness in its internal control over financial reporting or that they will prevent or avoid any potential future material weakness,” the firm said in the December filing. 

© 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.

Yield Street — a platform that allows individual retail investors to access private markets — announced Thursday its entrance into the crypto market through a partnership with “OG” digital asset investment firm Pantera. 

Launched in 2015, Yield Street bills itself as a place where retail can invest “like the 1%,” investing in asset classes including commercial real estate, credit, and private equity. Those investments target double-digit returns over months and years. According to co-founder Michael Weisz, the firm is able to offer end-clients access to these investment opportunities by fractionalizing its own LP interest in these funds. 

Now, the firm’s clients will be able to add exposure to Pantera’s Early Stage Token Fund, which is expected to make new investments in crypto protocols. The fund has historically backed tokens like Polkadot and Aurora and has generated a life-long return of 1,400%. 

“We believe that more than 75% of investors want access to unique crypto investment strategies managed by premier crypto-specialists,” Weisz said in a press statement. “We intend to be the bridge from Wall Street to the crypto-verse.”

Yield Street plans to add further crypto funds to its platform in the future. 

Yield Street joins a long list of financial technology firms that have recently jumped on the crypto bandwagon, ranging from payment apps like Venmo to robo-advisory platform Betterment. 

In an interview with The Block, Weisz said that venture exposure provides investors with “convexity and growth” that may not exist with more liquid token exposure. 

“It is also less susceptible to the volatility,” he added. 

To be sure, while private markets may offer idiosyncratic returns in the long-term, in the short-term there can be risks including the risk of default.

Pantera, which manages more than $5 billion in assets, is led by Dan Morehead, a former macro trading executive at Tiger Management. 

© 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.