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Compute North, a bitcoin mining infrastructure firm that provides equipment hosting services within its data centers, has raised $385 million in equity and debt funding.

The equity part of the funding, worth $85 million, was co-led by Mercuria, a global energy and commodities trading company, and Generate Capital, an infrastructure investment firm. Other investors, including National Grid Partners, the venture arm of National Grid — one of the largest energy companies in the world — also joined the equity funding.

The debt portion of the funding, some $300 million, was also provided by Generate Capital. Compute North calls the equity part of the funding its Series C round and the overall funding as a growth capital round.

With fresh capital in hand, Minnesota-based Compute North plans to open new hosting facilities in the US, including in Nebraska, North Carolina, and Texas. Dave Perrill, founder and CEO of Compute North, declined to share how many new facilities the firm plans to open and what would be their total capacity but said there are several facilities at various stages of development.

“We plan to share more information about each facility as it becomes operational,” he added.

Last July, Perrill told The Block that Compute North has five facilities under construction that are planned to be operational by the end of the second quarter of 2022. As for the firm’s capacity expansion plans, Perrill at the time said Compute North plans to increase its capacity by 1.2 gigawatts.

The firm’s total capacity at the time was over 100 megawatts. Its current capacity remains unknown, but Compute North claims that its mining facilities are more energy-efficient, meaning it leverages sustainable power resources such as wind and solar.

Compute North’s funding comes amid the US’s rising share in the bitcoin mining market. The country is now the largest contributor to the Bitcoin hash rate after China’s mining crackdown last year, with a 35% share.

Perrill said there is “unprecedented demand” for computing infrastructure with a focus on sustainability, and Compute North wants to be at the forefront of leading that transition. “This new round of funding will enable us to execute on that plan and innovate through 2022 and beyond,” he added.

Compute North’s total funding to date is unknown. Last year around this time, the firm raised $25 million in equity and debt financing. 

© 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.

Authorities in Russia are set to recognize digital assets as a form of currency, according to local news reports.

Russian newspaper Kommersant reported this morning, and later tweeted, that the government and the Bank of Russia have reached an agreement on how to regulate cryptocurrencies. They are now preparing a draft law, expected by February 18, which will define crypto as an “analogue of currencies” rather than as digital financial assets.

The report further stated that it will only be possible to use crypto “in the legal sector” with full identification, through the banking system, or via licensed intermediaries.

The news comes just weeks after the Bank of Russia pushed for a blanket ban on crypto in a report issued in January, arguing that the speculative nature of the industry posed a significant threat to the financial stability of citizens. As part of that proposal, the central bank also said that financial institutions should be stopped from facilitating crypto transactions.

Separate reports suggest that President Putin is backing plans for regulating the country’s crypto mining industry.

Further details from today’s Kommersant report suggest that crypto transactions of over 600,000 rubles (roughly $8,000) will have to be declared or will constitute a criminal offence. Fines will also be levied on those who illegally accept crypto as a means of payment.

© 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 newly-launched crypto venture firm KRH Partners has found a new partner in Polychain Capital and Coinbase alum Sam Rosenblum.

Kathryn Haun formed KRH Partners at the start of this year after departing a16z where she worked as a partner for its crypto investing unit. The fund secured a16z as a limited partner, and the two firms will likely continue to collaborate, a source told The Block last month. 

Rosenblum announced his move to KRH Partners today on Twitter. Rosenblum was previously a general partner at Polychain Capital, and before that worked as Coinbase’s director of business development. He joins as a partner and deal-team lead. 

“We want to get crypto into the hands of one billion users by 2025, and to get there, we’re investing at each layer of the crypto/web3 tech stack and backing companies, DAOs, and protocols across the early and acceleration stages,” he said in a tweet. 

The firm plans to manage two funds, a $300 million effort focused on early-stage investments and an additional $600 million fund to focus on larger companies and token projects. The firm has already made an investment in non-fungible token platform OpenSea’s $300 million Series C round. 

To get to that one-billion number, the firm plans to take a closer look at projects focused on infrastructure for scaling and addressing new markets that could be points of entry for crypto, according to Rosenblum. 

© 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.

Web traffic to cryptocurrency exchanges decreased for the third month in a row as of January, according to data collected by The Block Research. 

Web traffic hits for crypto exchanges reached 427.6 million in January, 8.3% lower than December’s web traffic, which itself was 14.7% lower than in November. 

As further data from The Block Research shows, Binance comprised most of January’s web traffic volume at 33.2%. Coinbase and Bybit followed up with 18.1% and 6.6%, respectively. 

© 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.

El Salvador’s state-provided bitcoin wallet has had a rough early going.

But since then, the government has hired some new US companies to take on the task of improving the app. 

Chivo, which now counts more than 4 million users, is a wallet that supports both Bitcoin and US dollars. The app has been experiencing issues over the past few months ranging from identity theft, blocked accounts and failed transactions. 

Several crypto firms have contributed to the project since its launch in September. While we know some basic details about their contributions to the app,  it hasn’t always been exactly clear how they have fit together or who else might be involved. Also, the companies involved in the initial stages of the project have said little — or in some cases, nothing — about the specific problems that many Chivo users have reported.

Now, El Salvador has added two more companies to the roster: New York-based software company AlphaPoint and Los Angeles-based digital identity provider Netki.

Here’s how those two firms say they intend to improve the app.

AlphaPoint: Front-end and back-end support for Chivo

According to a press release, AlphaPoint now “supports the front-end and back-end infrastructure that powers the wallet and integrates the entire ecosystem including the mobile application, mobile point-of-sale processing, merchant website portal, call-center support software, and administrative console.”

“Our actual application went into production in mid-December,” AlphaPoint CEO Igor Telyatnikov told The Block. He noted that the company was also “involved in the early discussions” with the El Salvador government, and first built a prototype last summer after El Salvador’s president Nayib Bukele first announced a plan to make Bitcoin legal tender last June. 

AlphaPoint has operated in the crypto space since June 2013, and has worked with more than 150 crypto exchanges, brokerages and wallets in more than 35 countries. Chivo marks the company’s first government contract. 

“Technology-wise, AlphaPoint technology at its core is a centralized system with a database, but it interoperates with bitcoin and Lightning [Network] and the banking system,” Telyatnikov said. For Chivo, “there’s an upgraded Lightning integration.”

Previously, a firm called Athena Bitcoin, known for its Bitcoin ATMs, confirmed it was responsible for developing Chivo. “The Chivo app was developed by Athena,” CEO Eric Gravengaard told The Block in November, without giving many more details.

At the time Gravengaard acknowledged the early bugs with Chivo, saying: “There were some issues and our team has been hard at work on those.” But in January, Athena directed questions about more recent issues with Chivo to the company it said in charge of the wallet’s “usage, technical direction, and management,” Chivo S.A.

It’s also unclear to what extent Athena is still working on the project — and to what extent AlphaPoint has taken over for Athena, if at all. While the 200 Chivo ATMs that Athena owns and operates are still functioning around the country, the company did not respond to follow-up questions on January 26 confirming its current role in Chivo. 

Netki: Customer verification and fraud protection

One of the biggest complaints about Chivo has been identity theft, and there have been many reports of people creating unauthorized accounts by fraudulently using identification numbers to claim the $30 bonus for creating an account. At least hundreds of people have reported identity theft related to the app.

In October, reports surfaced on social media claiming that people were apparently bypassing Chivo’s verification process, using methods like showing a photocopy of an ID instead of a real one or taking a selfie of a movie poster character instead of a real face. 

Presumably, that is why Chivo has brought in a new contributor that specializes in fraud prevention. On January 18, Los Angeles-based digital identity expert Netki announced that it had joined the Chivo project and is providing its know-your-customer/anti-money-laundering (KYC/AML) product OnboardID to verify users and protect the app against fraud. 

“Netki confirmed over 4 million authentic accounts, and we have successfully identified and blocked attempted fraud,” Netki founder and COO Dawn Newton told The Block. 

Newton said Netki joined the Chivo project “recently” after its initial launch, but did not clarify the specific date. She did not confirm what the current verification process for Chivo looks like, but said the company’s technology uses “biometrics, liveness, computer vision document analysis, and data validation” to verify the documents and individuals. 

“We then perform sanctions, watchlist, and adverse media screening. These technologies are combined with traditional internet security, bot, and other fraud detection techniques to take a more complete view of the onboarding process than simply analyzing a static image.”

According to Newton, Netki was aware of the fraud reports before the company’s software was fully deployed in Chivo.

“When faced with the challenge of onboarding the better part of a country’s population — as Chivo was — attempted fraud is a real and serious possibility,” said Newton. “The key for onboarding is to prevent fraud in a manner that is as efficient as possible while preserving the financial rights of legitimate users as much as possible.”

Not all issues appear to be resolved 

While Chivo users should see a marked improvement in the app with AlphaPoint and Netki’s technology going forward, some people who have reported problems in the past few months appear to still be waiting for their issues to be resolved. 

For example, two people recently told The Block that they still do not have access to their Chivo accounts, for unknown reasons.

According to AlphaPoint’s Igor Telyatnikov, the majority of the issues were reported before AlphaPoint’s system went live, and any prior cases would need to be resolved through a queue. This is not unusual for financial apps.

“There’s two types of issues that could happen: There could be bugs and more technical issues that, if they’re reported to us, we’re definitely on it,” AlphaPoint’s Board Chairman (and Igor’s brother) Vadim Telyatnikov said, noting that AlphaPoint has a team in El Salvador to help with these issues.

He added: “As far as account-related issues, if an account is locked or something else happens, that’s an operational thing managed by the government.” 

In other words, AlphaPoint will help provide tools to navigate account-related problems but will have no control over blocked accounts. A representative from Netki also confirmed to The Block that it did not control blocking users’ wallets, and said that any questions regarding this should be directed to Chivo. 

One issue that should be improved in the app is the Lightning Network transactions, Igor Telyatnikov said. AlphaPoint has provided a new Lightning Network integration with a new node. “If there were issues with Lightning, they should not be happening,” he said. 

However, it’s unclear how many people continue to have issues with the app, how long that backlog could take to clear and what specific tools are in place to resolve these previous issues.

When The Block asked what people with prior issues could expect in terms of getting them resolved, AlphaPoint’s Board Chairman Vadim Telyatnikov said: “We’re working on things that are reported to us, it is possible if something was stuck before the transition and we don’t have any way to kind of research or identify it, it’s possible we might not be able to fix it.” 

But then, Igor Telyatnikov jumped in to clarify: “Users’ transaction history and data is all there, so I think if somebody has a legitimate issue, it will get resolved, it’s a matter of time,” he said. “That’s really the case, and I think that part of what AlphaPoint brings is the tools to resolve these kinds of issues faster.” 

Want to read more long-form articles from The Block? For access to more daily in-depth news features such as this one, sign up for The Block’s News Plus membership.

© 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 US Treasury Department’s proposal for new stablecoin law is dead in the water if today’s hearing before Congress is any indication.

On February 8, the House Financial Services Committee hosted Nellie Liang, the Treasury’s undersecretary for domestic finance and the driving force behind a November report on stablecoins from the President’s Working Group on Financial Markets.

The Block previously noted Liang’s unique role and expected pitch to limit stablecoin issuance to insured depository institutions, or IDIs.

IDIs are institutions that possess FDIC insurance, which for the most part encompasses banks. Given its origins with the financial collapse and bank runs that heralded the Great Depression, FDIC insurance comes with a whole host of capital and liquidity requirements, as well as federal supervision.

The distinction, many point out, is that banks make their money by lending out client deposits. Consequently, stablecoin reserve compositions have become a major sticking point in the conversation.

As Warren Davidson (R-OH) told The Block of takeaways from the hearing: “The biggest thing I hope is that a stablecoin really depends on what’s behind a stablecoin.”

Industry players generally seek lighter-touch regulations, and this case is no exception. But alongside the industry, today’s hearing illustrated that this skepticism has become a new touchstone of bipartisanship in the House.

Zeroing in on banks

While there was broad consensus that stablecoins need to make disclosures and face audits, the committee broadly rejected the idea that every stablecoin issuer needs the same kind of regulation as banks. Chairwoman Maxine Waters (D-CA) even interjected between the questions of two other representatives to enjoin committee members: “Do not minimize a permissible reserve.”

Notably, Democratic briefing materials reviewed by The Block highlighted “Republicans and industry perspective,” observing that “[t]here has been a lot of bipartisanship and areas where our views will overlap.”

Central to this bipartisanship are issues of equity and, moreover, shared hostility towards the major banks that already operate as insured depository institutions.

“It occurs to me that limiting stablecoin issuance to IDIs, which have a high barrier of entry, could limit competition,” said Gregory Meeks (D-NY). “Such recommendations could have a racial equity impact.”

Jim Himes (D-CT) commented: “There is a radical difference between a stablecoin backed fully dollar-to-dollar […] and what Mr. Green memorably called investing in nothing.” He went on to ask if Liang would “agree that full IDI, bank charter regulation may not be necessary in that case.”

Himes has recently worked with Coin Center to strike new Treasury surveillance authorities from anti-money laundering provisions in the COMPETES Act.

In response, Liang said that stablecoin issuers would not need the same sorts of oversight, but maintained the need for IDI insurance. Effectively, her broad argument was to leave that discretion with banking regulators. The committee didn’t seem to buy it.

Patrick McHenry (R-NC), the committee’s top-ranking Republican, considered the current risk of stablecoins less than if Congress legislated them into the IDI framework. “How do they mitigate this alleged risk? They make them all banks and they give them a federal backstop. Which is completely the opposite approach.”

Ritchie Torres (D-NY), proposed that stablecoins are best regulated “not by the blunt instrument of banking regulation,” but by common-sense rules. He particularly criticized the IDI proposal on the ground that Circle, which issues USDC, was stuck in its bank charter application.

Torres, a freshman representative from the Bronx, has previously spoken approvingly of the role stablecoins can play in remittances for the many members of his constituency looking to send money to family abroad.

Perhaps most broadly, the hearing today illustrated that Democrats have become more receptive to crypto’s potential impact on the unbanked, minority communities, and cross-border transfers. That is partially thanks to the interests of a freshman class of representatives, but it is also the product of the cryptocurrency industry’s increasing engagement in Washington, DC, including presentation of the industry’s work on social justice and donation to Democratic campaigns and causes.

Liang will testify before the Senate Banking Committee on the same report next week. But the House has a much easier time getting legislation through than the dead-locked Senate, and any legislation implementing the IDI requirement will have to originate in one of these two committees. Moreover, November midterms loom, threatening the pace of any legislation amid a more partisan environment. 

© 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.

Tuesday’s announcement from the Department of Justice — that it had seized some $3.6 billion previously stolen from crypto exchange Bitfinex back in 2016 — created an inevitable wellspring of interest around the two individuals accused of laundering those funds in the wake of the theft.

Ilya Lichtenstein and Heather Morgan were arrested in Manhattan earlier today, and face up to 25 years in prison if convicted on the twin charges of conspiracy to commit money laundering and conspiracy to defraud the United States.

As might be expected, reporters and commentators dug into the social media footprints of the two accused, with some highlighting the intersections between their public activities and the crypto sector. 

What emerges is a portrait of two technology entrepreneurs — and, in the case of Morgan, an erstwhile rap career — that almost belies the DOJ’s allegations of a years-long effort to launder tens of thousands of bitcoins stolen from Bitfinex.

Morgan’s LinkedIn account identifies her as a columnist for both Inc. and Forbes, the latter of which has published an array of articles, with the most recent coming out in September. Of particular note, as highlighted by commentators on social media, is a piece entitled “Experts Share Tips To Protect Your Business From Cybercriminals.” Included in the piece were comments from executives of crypto firms BitFlyer and BitGo, the latter of which provided Bitfinex with multi-signature security tools at the time of the hack. 

Much of the content appears geared toward advice and tips for millennial entrepreneurs. Earlier Tuesday, Gauntlet founder Tarun Chitra shared on Twitter that Morgan gave a talk in 2019 on “How to Social Engineer Your Way Into Anything.” 

Morgan’s LinkedIn account identifies her as CEO of a professional email copywriting service called SalesFolk since 2009 and an investor at a firm called Demandpath since June 2018. She received degrees from the University of California, Davis and the American University of Cairo.

Lichtenstein’s own LinkedIn account names him as a partner at Demandpath since June 2018 and advisor to SalesFolk since February 2014. Demandpath is described as “a boutique micro-fund investing in the next generation of promising technologies” on its website. Per LinkedIn, he received a degree in psychology from the University of Wisconsin-Madison. 

According to a Facebook post penned by Lichtenstein, the two were engaged in June 2019. The two later held a wedding this past fall which Morgan described on Instagram as “surrealist.”

What the DOJ observed

Per the DOJ’s allegations in a court-filed statement of facts, occurring in the background of these activities was a years-long effort to cash out some of the stolen funds, efforts that appear to have been stymied at times by know-your-customer controls at some of the unidentified crypto exchanges and financial institutions with which they interacted.

Still, per the DOJ, “[r]ecords obtained from other VCEs and traditional financial institutions revealed that MORGAN and LICHTENSTEIN made similar deceptive statements to other financial institutions over the course of their conspiracy.”

The DOJ alleged that the couple did manage to cash out some of the funds, with expenditures on gold and non-fungible tokens (NFTs). According to the court documents, funds were also spent on a Wal-Mart gift card as well as payments to Uber and Hotels.com. 

As noted by crypto analytics firm Elliptic, it was the post-hack decision to later route those funds through the now-defunct dark market AlphaBay — later seized by federal investigators — that provided the link between the funds and an account in Lichtenstein’s name. 

© 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 centuries-old English art auction house Sotheby’s announced Tuesday that it will auction off 104 CryptoPunks, one of the oldest and most popular non-fungible token (NFT) collections to date. 

The CryptoPunks sale will occur in New York on February 23, 2022 at 7:00 PM EST, marking the auction house’s first dedicated live evening auction for NFTs, according to Sotheby’s. Attendees will also receive a VIP Punk Dinner and live party with a DJ named SeedPhrase. 

This isn’t the first time Sotheby’s sold a collection of high-profile NFTs. In September of 2021, Sotheby’s auctioned off 104 Bored Ape Yacht Club (BAYC) NFTs for $19 million — which had surpassed Sotheby’s expected sale range of $12 million to $18 million with three days to go. 

According to Sotheby’s tweet, the auction will be a part of Sotheby’s Metaverse, the auction house’s dedicated NFT platform that launched in October of last year.

© 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

• Apart from the multi-billion-dollar miner investments, Bitcoin mining companies have initiated a massive build-out for new power capacities. 
• A significant portion of the known infrastructure in the pipelines is taking place in the U.S, particularly in the state of Texas.
• In this piece, we take a further look at the construction under development of major mining companies and how they strategize the future growth across the Americas.

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

The Senate Banking Committee has released details ahead of its upcoming hearing on stablecoins, confirming the Treasury’s Under Secretary for Domestic Finance Nellie Liang as its sole witness.

The Senate will meet at 10 AM EST on February 15 for a hybrid hearing entitled “Examining the President’s Working Group on Financial Markets Report on Stablecoins.” As the title promises, legislators will take a closer look at the November stablecoin report out of the Presidents Working Group (PWG), which urged Congress to limit stablecoin issuance to insured depository institutions.

Nellie Liang is slated to testify, confirming a previous report by The Block. Liang has spearheaded much of the Treasury’s recent work on stablecoins, including the PWG report.

Liang is also testifying at Monday’s stablecoin hearing in the House, entitled, “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins.”

© 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.