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Quick Take

• This weekly series explores the most interesting insights in NFTs, blockchain gaming, and virtual worlds
• The NFT market has been swept by a wave of blockchain games expanding their scope to the creation of universal NFT infrastructure, thereby sowing the seeds for accelerated innovation in the future
• Driven by a rise in emerging projects, the Avalanche NFT ecosystem seems to have reached its critical mass

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The United States Department of Treasury released a report describing how the non-fungible tokens (NFT) art market fits into money laundering schemes. 

The Treasury writes that while NFTs offer “new opportunities for exploration of creative media” and take up only $1.5 billion of the US’s $20 billion share in the total art market, criminals may use NFTs in financial crime by using funds from illegal activities to make seemingly legitimate digital art purchases. 

“The ability to transfer some NFTs via the internet without concern for geographic distance and across borders nearly instantaneously makes digital art susceptible to exploitation by those seeking to launder illicit proceeds of crime, because the movement of value can be accomplished without incurring potential financial, regulatory, or investigative costs of physical shipment,” the Treasury wrote in a 35-page report published Friday.

While NFTs may be used in financial crimes, the blockchain analysis firm Chainalysis reports that the amount of illicit funds laundered through NFTs remains relatively small compared to total crypto-based financial crime. Illicit wallet addresses sent about $1.4 million to NFT marketplaces in the fourth quarter of 2021 (the largest amount of all quarters in 2021) whereas an estimated $8.6 billion of cryptocurrency was used to launder funds in all of 2021. 

To be sure, money laundering remains a small part of total art sales. The United Nations Office on Drugs and Crime has estimated in 2018 that money laundering comprised some $3 billion of an estimated $6 billion in underground art activity. 

Criminals are far more likely to experience more profitable wash trading — the act of individuals trading amongst themselves to artificially drive up price — through NFTs than money laundering, Chainalysis reports, as 110 wallet addresses profited by nearly $8.9 million through wash trading in 2021.

© 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 Securities and Exchange Commission (SEC) said Friday that it would again delay a determination on Grayscale’s proposed bitcoin exchange-traded fund (ETF).

As previously reported, Grayscale is seeking to convert its Grayscale Bitcoin Trust (GBTC) into a full-fledged ETF. The SEC previously delayed a decision on the matter in December. 

Bloomberg Intelligence’s James Seyffart noted in a tweet that Friday’s punt means that a final decision on Grayscale’s push will come in early July. 

As has been seen in past instances — with the SEC ultimately rejecting efforts to create spot bitcoin ETFs — the SEC is seeking a fresh round of comments on the matter.

Last year, the SEC cleared the way for the first bitcoin futures-linked ETFs. 

© 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 Senate Agriculture Committee is holding a hearing on digital assets a week from today, and it’s calling the head of the Commodity Futures Trading Commission (CFTC) in to testify. 

The committee will convene a number of experts for a session on digital assets, entitled “Examining Digital Assets: Risks, Regulation, and Innovation.” The February 9 hearing will see CFTC Chair Rostin Benham testify first, with a second panel to follow. The second panel includes CEO of the Chamber of Digital Commerce Perianne Boring, CEO of FTX Sam Bankman-Fried, CEO of Global Blockchain Business Council Sandra Ro and Wharton Professor Kevin Werbach. 

Because most of the original commodities markets were for agricultural products like wheat and cattle, the CFTC remains under the purview of the Agriculture Committees of the House and Senate, while most financial regulation falls to the House Financial Services Committee and the Senate Banking Committee.

The Agriculture Committee will hold its hearing the week before the Senate Banking Committee turns its attentions to stablecoins in a February 15 hearing. The House Financial Services Committee will also hold its own stablecoin hearing on February 8. 

Though no witness lists have been published for the stablecoin hearings, the Treasury’s undersecretary for domestic finance, Nellie Liang, is expected to be the sole witness at both the House and Senate’s sessions. Though, sources told The Block that the Senate witness list is more likely to be augmented. Liang has spearheaded the Tresasury’s recent work 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.

Disney — one of the largest media companies in the world — is looking to hire a business development manager experienced with non-fungible tokens (NFTs). 

Specifically, the potential candidate must have “knowledge of and passion for Digital and NFT categories,” according to the listing. The “passion” may suggest that Disney is bullish on NFTs and might incorporate such digital assets into its business model in the near future. 

Disney owns major media brands such as Marvel, Lifetime, National Geographic, 21st Century Fox and a majority stake in the streaming service Hulu. In all, Disney reported that it earned over $67 billion in revenue by October of 2021 last year. 

Should Disney seek to augment its revenue through digital assets, however, the firm may face backlash from its wide-reaching audience — especially as other media companies rolled back their decisions to implement NFTs after fan outrage.

Despite general fan disapproval, Disney joins other major media firms such as Square Enix and Ubisoft entering the NFT space.

© 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 group of traders from the crypto market-maker Radkl have left the firm to launch their own digital asset-focused quant investment fund.

Dubbed F9 Research, the new fund — led by Jim Greco, Jason Bell, and Allan Erskine — will trade across decentralized and centralized crypto markets, according to a source. Greco will serve as CEO of the new fund. 

“My partners and I left Radkl to found our own cryptocurrency trading business,” Greco confirmed to The Block. A source told The Block that F9 Research has lined up more than 30 investors, including several large institutions. Greco declined to comment on the firm’s assets under management. 

The new fund’s reveal comes amid the launch of a number of new crypto venture investment funds over the course of the last year, with Paradigm and FTX launching their own multi-billion venture funds. 

Crypto hedge funds, which tend to focus more on liquid bets rather than longer-term private bets in startups, posted strong returns in 2021 compared to their counterparts in traditional markets. 

As reported by The Block, data provided by Hedge Fund Research suggests crypto hedge funds returned 214% in 2021. Bitcoin returned 48.5% over the course of 2021. The Bloomberg Galaxy Crypto Index, meanwhile, posted a return of 153.39%. TCAP — a cryptocurrency that leverages oracles to track the entire market — gained 185% in 2021.

© 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.

One senator is calling on US President Joe Biden’s cabinet to watch out for China’s digital yuan, which is seeing its first international usage during the Winter Olympics in Beijing. 

In a February 3 letter, Senator Pat Toomey (R-PN) asked Treasury Secretary Janet Yellen and Secretary of State Anthony Blinken to “closely examine Beijing’s CBDC rollout during the Olympic Games.”

A CBDC is a central bank digital currency, and China’s CBDC is the largest of its kind to launch. Though its digital wallet just hit the app stores of Android and Apple in January, some form of digital yuan has been circulating for much longer, with over 10% of China’s population having downloaded a wallet as of November. However, it has been mostly unavailable to foreign users until now. 

“While the United States is still evaluating the concept of a digital dollar, China is using the Beijing Winter Olympics as an international test for the digital yuan,” Toomey explained. 

In addition to asking for an assessment of China’s strategies for getting foreign entities to use its digital currency, Toomey enjoins Yellen and Blinken to learn how China is handling transaction data and to what degree it is using its blockchain networks as a tool of censorship. He specifically accuses China’s Blockchain-based Services Network of incorporating “severely modified and controlled versions of blockchains like Ethereum and Solana.”

US observers, including lawmakers, have looked askance at China’s plans for a CBDC since they were originally announced. Particularly in light of media crackdowns, social scoring and human rights abuses within China, a digital yuan strikes many as a tool of control. 

© 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.

GameStop has sold almost 15 million IMX tokens currently worth $42 million shortly after receiving a $100 million grant from Immutable X.

This action has coincided with a significant dip in the price of IMX, with the token sliding as much as 30% from a two-week high of $4.13 to a low of $2.80. Per CoinGecko, the token is trading hands at $2.97 as of press time. 

GameStop recently received a $100 million grant from the Ethereum Layer 2 network as part of a partnership to build an NFT marketplace. This grant, denominated in IMX to the tune of 56,209,850 IMX tokens was to be delivered across five installments.

According to Etherscan data, GameStop has received the first two milestone payments of 28,104,925 and 9,368,608 IMX tokens respectively. The video game retailer has, however, liquidated a total of 14,989,293 IMX tokens currently worth approximately $42 million.

A look at GameStop’s wallet on Etherscan shows three transactions where IMX tokens moved from the company’s contract address to wallets associated with Binance, OKex, and Huobi, all of which are crypto exchanges.

This is not the first case of a crypto-related grant being spent immediately dumped. A similar situation happened with Uniswap’s DeFi education fund in July 2021 when Harvard Law’s Blockchain and Fintech Initiative sold half of the $20 million grant it received.

According to the milestone schedule stated in the grant document, GameStop will receive 18,736,671 IMX tokens in three future installments.

Neither GameStop nor Immutable X has responded to The Block’s request for comments as of the time of writing.

Hat tip Polarply/Twitter

© 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.

Bitcoin’s price rose above $40,000 for the first time since January 20.

As of press time, bitcoin is trading hands at $40,365 on Coinbase, an increase of about 10% in the past 24 hours.

Friday’s price action appears to be building on positive gains reported earlier this week, which followed a period of turbulence in both the crypto market as well as the broader equities market worldwide. 

Bitcoin is down more than 40% from its all-time high of roughly $69,000 in November. 

© 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

• Prime Trust is a digital asset infrastructure firm providing custody, payment rails, APIs and more

• +500 integrated platforms, +300m API calls / month and $3.5bn Settled Transactions / Month

• +2,000% increase in new accounts for 2021 driven by Prime Trust API Platform

• $64mm Series A in July 2021 led by Mercato Partners

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