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On February 3, Suzan Delbene (D-WA) and David Schweikert (R-AZ) re-introduced the Virtual Currency Tax Fairness Act. 

The bill would free cryptocurrency users of the need to report capital gains accrued on crypto that the user spends in a personal transaction as long as those gains would not exceed $200.

Currently, users of cryptocurrencies may need to report capital gains based on the value of a crypto token that they were using as a means of exchange rather than an investment. The IRS has not generally been pursuing cryptocurrency users for failure to report small transactions, but the overall lack of clarity surrounding tax reporting duties is a major issue facing crypto users, holders and traders. 

Co-sponsoring the bill were Schweikert’s co-chairs of the Blockchain Caucus, Darren Soto (D-FL) and Tom Emmer (R-MN). In a statement on the bill’s reintroduction, Emmer said “This common-sense bill will finally allow Americans to use their digital wallet as seamlessly as cash.”

The bill is identical to an earlier version that hit the congressional docket in January of 2020, but did not make it out of the House Ways and Means Committee during that Congress. Interestingly, Bill Foster (D-IL), the fourth co-chair of the Blockchain Caucus did not co-sponsor this more recent incarnation, despite putting his name on the 2020 version. 

Legislation relating to cryptocurrency has been slow to pick up steam in Congress, with almost nothing passing through the Senate. In the absence of statute, many crypto industry stakeholders say that regulatory agencies are overstepping their bounds. 

© 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.

Miami has received a $5.25 million disbursement from the CityCoins project, a crypto protocol that has residents generate revenue for their city by mining their city’s tokens, according to a tweet from Miami Mayor Francis Suarez.

CityCoins is a smart contract that exists on the Stacks network, allowing users to mine their city’s coin by sending STX to the dedicated contract. A portion of the mining funds are sent to a city wallet, which the city can use as it sees fit, pending legalities. The rest is distributed among city token holders who choose to “stack” or lock their tokens. 

CityCoins announced mining would begin for MiamiCoin in August of 2021, marking the first of the city-based tokens to launch. It has generated more than $22 million for the city of Miami, although that price regularly fluctuates with the price of BTC, since the wallet is denominated in STX. With the recent $5.25 million disbursement, the wallet is now sitting at $15,732,488.75. 

There is no formal partnership between the protocol and the city. Rather, the payment was made as part of a gift agreement between the city and the CityCoins protocol. The city of Miami is not able to custody the wallet itself due to Floridian laws that bar cities from holding crypto on their balance sheets. The payout was delivered to the city in USD. 

Michael Sarasti, Miami’s Chief Innovation Officer, told The Block in a recent interview, that additional distributions will follow two to four times a year.

It’s also yet to be determined what the funds will be used for. Now that the funds are in the city’s hands, they will have to be apportioned by the Commission, the city’s legislative body. Sarasti previously said the Commission was considering a number of options for the disbursement, including putting it towards affordable housing and investing in clean and climate technology.

For his part, Suarez has touted the potential of the protocol, as an alternative revenue stream to taxation, which he reiterated in his announcement tweet.

“This is a historic moment for our city to collaborate with an innovative project that creates resources for our city through innovation not taxation,” he said. 

He’s also pushing to create a “bitcoin dividend” by distributing the yield generated by stacking the STX in the city’s wallet to residents. This present an opportunity to connect residents with crypto resources and outfit them with wallets in addition connecting them with funds. However, it is not yet clear how this vision will come to fruition or who has the authority to discern how the wallet’s funds should be used while they are still in their crypto form. 

© 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.

Katie Haun’s new chief strategy officer Chris Lehane says the next wave of web3 and crypto-focused companies will need authorities to consider a “new” New Deal.

Among the biggest headwinds he anticipates for founders navigating the space are the conversations new protocols and firms will have with regulators and those in the upper echelons of power. 

Lehane thinks a “new” New Deal could be the answer – not as novel as the one implemented for the Agricultural Age, but one that also questions how business and government can work together amid rapid change.

“There are signals that this government is beginning to imagine what this shift could represent and how it could potentially work,” he says. 

Haun, who joined a16z as a partner for its crypto investing unit in 2018, left the firm at the end of last year, as reported by Axios at the time. Her new venture firm — dubbed KRH — is in the process of raising money across different venture funds. The total haul is expected to be nearly $900 million.

And with the potentially thorny political and regulatory backdrop of legitimizing crypto in law, Lehane has the credentials for the challenge. The spin doctor has masterminded many campaigns and legal offensives for US political royalty — not least as the political director for the 1992 Clinton-Gore presidential campaign in Maine. 

He also worked as part of a unit as an in-house lawyer in the White House during years of political scandal in the ‘90s, tackling issues such as Whitewater and the Monica Lewinsky affair. His nickname — “the master of disaster” — precedes him. 

A new VC phase

As the fund gears up for business, Haun has secured a16z as a limited partner. The two firms are expected to have an informal relationship and collaborate together, a source told The Block last month. 

KRH joins an increasingly crowded market of venture capitalists seeking crypto fortunes. Paradigm and a16z are among the firms that last year announced multi-billion dollar venture funds. Elsewhere, traditional venture capitalists such as Sequoia and hedge funds like Point72 are pressing to increase their presence in the market via their respective venture arms.

Lehane says the fund plans to stand out from the crowd by pitching itself as a kind of “VC 3.0” or evolution from the first, post-war phase of venture investing, which concluded with the creation of the World Wide Web. According to Lehane, it would represent a step on from a so-called VC 2.0, which he says was characterized by the deployment of capital, and founders emerging through incubators, accelerators, and different types of sourcing pipelines. 

KRH plans to marry the capital piece with services support. This is a promise many VCs try to make to founders and is perhaps complicated in this instance by the fact that working with DeFi is highly challenging from a technical standpoint. Nevertheless, the fund has been built from the ground up with these things in mind. 

“What we’re really bringing to it that I think is fundamentally different, is the ability to help support what I would broadly call system change. To help support these founders, in terms of their ability to drive that system change that they’re ultimately going to need, for their ideas to succeed, and succeed at the level that it could,” he says, adding:

“For me, that relates back to what I did with Airbnb, that legitimization process and the mainstreaming process.”’

© 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.

San Francisco-based Tribal has raised $60 million in an oversubscribed Series B funding round led by the SoftBank Latin America Fund, and plans to use the funds to expand in the Latin America region. 

Tribal’s core product is a payment and financing platform that helps small and mid-size businesses (SMBs) in emerging markets gain access to financial services. For example, it recently unveiled a cross-border payment system with Bitso and the Stellar Development Foundation, which focuses on converting Mexican pesos to the dollar-pegged stablecoin USDC.

The startup has customers in more than 22 countries, but cites Latin America as a key market. In fact, Tribal previously raised $34.3 million last April to focus on its growth in Mexico.

With the most recent raise, the company is looking to replicate its growth in Mexico and expand its presence in other countries in the Latin America region where it has existing customers, Tribal CEO Amr Shady told The Block. 

“Moving forward with this raise, we’re really taking that success that we had in Mexico and just replicating this in other [Latin America] markets,” Shady said. “What the raise means is that we’re going to be providing even more support, even more localized services in these markets, with a focus on Brazil, Colombia, Chile and Peru.”

Shady says that the company plans to hire about 300 more people, many of which would be located in the Latin America region. The company has already hired close to 250 people for its operations in Mexico, he said.

Coinbase Ventures joined the funding round, and existing investors ECO Capital, QED Investors, and Rising Tide participated as well. The company said it also tapped secondary shares to include Circle Ventures, AGE Fund, Third Prime, Canas Capital, and Acuity Ventures. 

Just last month, Tribal also announced a $40 million debt round via financing from Partners for Growth and Stellar Development Foundation. That debt round was unique because it included both fiat currency and 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.

Quick Take

• Bitcoin mining’s financing ecosystem has become much more diverse since the last halving in May 2020 and has grown exponentially in 2021.
• A large part of the money Bitcoin mining firms raised from external investors last year came in the fourth quarter and debt financing saw a notable increase during the period.
• In this piece, we take a look at the current state of Bitcoin mining’s financing.

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

Wormhole, a cross-chain protocol that suffered a $325 million exploit on Wednesday, has replenished its reserves. 

“ETH contract has been filled and all wETH are backed 1:1,” Wormhole tweeted Thursday. “The Portal (token bridge) is back up.” Wormhole said it is working on a detailed incident report and will share it soon.

Wormhole lost 120,000 ether (ETH) in crypto’s fourth-largest and DeFi’s largest heist of all time. Wormhole’s failure to validate “guardian” accounts allowed the attacker to mint around $325 million worth of ETH out of thin air, according to blockchain analytics firm Elliptic.

“Wormhole didn’t properly validate all input accounts, which allowed the attacker to spoof guardian signatures and mint 120,000 ETH on Solana, of which they bridged 93,750 back to Ethereum,” Samczsun, a noted white-hat hacker, explained in a tweet. 

It is unclear at present how Wormhole restocked its ETH contract since the attacker hasn’t returned funds to the protocol. Wormhole offered the attacker a $10 million bounty to return the funds.

Some have speculated that Wormhole, developed by Certus One, may have received assistance from Jump, a trading firm that last August acquired the blockchain infrastructure firm for an undisclosed amount. Wormhole was also mentioned in Jump’s announcement of Jump Crypto, a dedicated crypto-focused team. 

The Block reached out to Jump for comment 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.

1inch, a decentralized exchange (DEX) aggregator, has announced the launch of a new investment tool called Earn.

According to an announcement shared with The Block, Earn is a collection of liquidity pools optimized for stablecoin swaps. A liquidity pool is a set of cryptocurrencies like ether (ETH) and stablecoins like tether (USDT) locked in a smart contract operated by protocols known as automated market makers (AMM).

1inch stated that Earn offers significantly better capital efficiency for LPs by utilizing concentrated liquidity distribution. This means that LPs provide liquidity to the pool within tight finite price intervals rather than distributing same across a broader price range.

Concentrated liquidity is especially advantageous for stablecoin swaps since they tend to have tighter spreads (the difference between the bid and ask price of the stablecoin). Stablecoins are by definition supposed to maintain their price peg which means a trading pair like USDT/USDC should maintain almost a 1-to-1 price relationship.

This approach differs significantly from the liquidity distribution mechanism on standard pools where liquidity often exists across a larger price range that can theoretically stretch from zero to infinity.

By opting for a tighter liquidity distribution, 1inch says traders can enjoy deeper liquidity across probable price ranges for stablecoin swaps without compromising on earnings from fees for liquidity providers.

1inch Earn liquidity providers (LPs) — people who contribute crypto trading pairs to the liquidity pool — stand to earn between annual percentage yields (APY) of between 5-10%. These earnings will come from transaction fees levied on swaps in the pool.

The 1inch Earn product will launch with the USDC/USDT trading pair on the Ethereum network. There are also plans to introduce more pools including the ones featuring tokens other than stablecoins.

1inch closed a $175 million Series B funding round in December and announced plans to begin offering institutional-grade services.

© 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 International Olympic Committee is collaborating with game developer nWay to launch Olympic Games Jam: Beijing 2022, a play-to-earn multiplayer game.

Players can download the game on their phones and compete in a series of winter sports to earn Olympic NFT digital pins, which can be used to gain exclusive access to higher tiers of play and character skins. Once the game is live, in-game utility of the NFT digital Pins will extend to extra superpowers for the characters like greater speed and tighter control.

“The Olympic Games are the world’s largest sport celebration. We can’t think of a better genre than party games to get everyone across different gaming skills involved for this global celebration in a massive way,” said Taehoon Kim, CEO of nWay, in a statement. nWay is a subsidiary of Animoca Brands.

Kim added that the new game would “let gamers and NFT collectors alike to not only engage with the Olympic Games, but also own a piece of Olympic history.”

No crypto wallet is required to play, and the game is free. It launches the day before the Olympic Winter Games Beijing 2022 opening ceremony. 

© 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

• The inherently volatile nature of cryptocurrency in relation to price adjustments and order spikes can often result in exchange outages 
• Whilst some proponents of cryptocurrency propose outages as a fundamental limitation of centralised exchanges, LMAX Group demonstrates otherwise
• The Group’s low latency, high throughput institutional grade infrastructure successfully manages higher order rate spikes, with zero outages
• Cultivating understanding within the institutional community that robust, reliable institutional grade exchange technology is critical to the Group’s industry vision

 Cryptocurrencies are a volatile asset, arguably more so than many other asset classes. Due to the sentiment driven nature of crypto, they are prone to large price adjustments and consequent spikes on volumes through the exchanges.

As an exchange operator, LMAX Group has built both its institutional FX and cryptocurrency execution venues on the same low latency, high throughput institutional grade infrastructure to manage this kind of intense volatility. LMAX Digital, the Group’s spot cryptocurrency exchange, frequently experiences and manages high-order rate spikes. Additionally, in the equally fast-moving FX market, it is not uncommon to see several hundred price updates per millisecond in major currency pairs, meaning its technology has to size accordingly for these peaks.

 Due to these order rate spikes, crypto exchanges, including those catering to retail investors, tend to suffer during these. One problem is that whilst their infrastructure is effective on human time scales of seconds to minutes, dealing with an order spike of 10-100 millisecond duration is often too short for the scaling systems to react.

Challenging perceptions

With these drawbacks and exchange outages an all-too-common occurrence, the solution may lie in learning a thing or two from traditional market infrastructure.

Cryptocurrency evangelists point to outages as being a fundamental limitation of centralised exchanges, although LMAX Group would argue strongly against this. There are plenty of central financial exchanges quietly powering the global economy with latencies a thousand times better than the ‘crypto household names’ and with throughputs far more efficient.  

LMAX Group has long been providing institutional grade infrastructure to its clients, with 100% uptime and zero outages. Critically, it also displays real time operational service status (including the uptime) for all its exchanges in the public domain.

During the most recent spike in volatility, whereby many exchanges crashed, LMAX Digital continued to operate. Its order latency did not change from a reliable base line of just less than 200µs, even while processing 6,000 orders/second, whilst the Group’s institutional FX exchange was also processing 60,000 orders/second on what was an unexceptional trading day.

Traditional infrastructure is the foundation to understanding the next iteration of exchanges 

As each generation invents the world anew, sometimes the same hard lessons must be relearnt. There is often an assumption touted from the cryptocurrency evangelists that there is nothing to learn from traditional finance infrastructure and blockchain technology will sweep away all that came before. 

As large institutions enter and increasingly explore the crypto market, their expectations for robustness shouldn’t change from what they expect in trading matured asset classes, such as FX.

The problem also is not ‘centralised exchanges’, it is that many nascent crypto exchanges have not learnt the hard lessons of scalability, performance and reliability, central to other asset classes.

LMAX Group therefore believes in cultivating understanding within the institutional community that robust, reliable institutional grade exchange technology exists for trading this nascent asset class. 

There are more mainframes now in the world than there were in the 1970’s. In truth, new technologies often co-exist and depend on pre-existing technologies. Crypto will supplement and enhance traditional finance, and maybe, learn from it too.

Keep up to date with LMAX Digital, sign-up for the LMAX Digital News Bulletin

© 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.

Video game retailing giant GameStop has partnered with Ethereum Layer 2 network developer Immutable X to launch its own NFT marketplace.

Announcing the news on Thursday, GameStop said the Immutable X-powered NFT marketplace will launch later this year. The two companies have also set up a $100 million grant fund to support developers who will launch their gaming NFT projects on the marketplace.

The grant fund is denominated in Immutable X’s IMX tokens, precisely 56,209,850 tokens (worth over $200 million at current prices since the IMX’s price has shot up over the last few days). But the fund is capped at $100 million.

Immutable X will also provide up to $150 million in IMX tokens to GameStop upon the achievement of certain milestones. These milestones include the NFT marketplace launch, reaching $1.5 billion in sales volume and $3 billion in sales volume on Immutable X within a certain period.

Immutable X is an Ethereum Layer 2 network specifically for NFTs. It is built using StarkWare’s ZK-rollup technology and promises “instant trade confirmation, massive scalability, and zero gas fees.”

© 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.