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The US House and Senate Agriculture Committees sent a letter to the chair of the Commodities Futures Trading Commission requesting more information on digital asset marketplaces. 

The Senate confirmed CFTC chair Rostin Benham on Dec. 15. Benham served as acting chair during the transition of the Biden administration and served as a commissioner since 2017. He replaced Heath Tarbert, who many in the crypto industry saw as an ally. 

Now, the agriculture committees are asking Benham to report on the growth of the crypto industry and determine how empowered the CFTC is to step in when that growth endangers consumers. The letter details the CFTC’s history with crypto, including its presumption that bitcoin and ether constitute commodities. It also reiterates that the CFTC is empowered to bring enforcement actions against digital asset marketplaces through the Commodity Exchange Act.

It details specific risks in the space, asserting that there has been an uptick in consumer reports of losses to crypto scams. The letter also points out that decentralized finance (DeFi) protocols present an opportunity for more frictionless services, but regulators have yet to fully address the risks DeFi presents. 

“However, there are still questions about who is responsible for monitoring DeFi markets for fraud and manipulation, safeguarding customer
funds, and ensuring parties meet their obligations to one another,” said the letter. “We also are concerned about any DeFi protocols offering derivatives contracts on unregistered exchanges—the subject of a recent CFTC enforcement action.”

To better understand how Congress can help address these concerns, the letter includes eight questions for the chair. Those questions ask the CFTC to estimate the size of the digital asset space as a whole and its US participants, as well as compare and contrast it to the traditional finance space. It also requests information on any collaboration the agency has with digital asset stakeholders and other agencies working to regulate the industry and questions whether the Commission’s current authorities are enough to protect consumers in the digital asset space.

“The CFTC has a critical role to play to ensure the integrity of digital asset markets,” said the letter. “While some of these technologies have the potential to modernize the financial system, it is imperative that customers are protected from fraud and abuse and that these markets are fair and transparent.”

© 2021 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.

Royal, a non-fungible token (NFT) platform from the American music producer 3LAU (pronounced “Blau”), crashed after its first mint drop. 

The mint was supposed to start on January 11 at 1:00 p.m ET and include music NFTs from the Grammy award-winning rap star Nas but crashed a minute into the drop due to heightened user demand on their servers, the platform explained on Twitter.

Royal has now delayed the mint to start on January 20 at 1:00 p.m. ET. A total of 760 tokens at three price tiers — Gold, Platinum and Diamond — will be offered at launch. 

For the Nas music NFT drop, Nas maintains 50% of the royalties for every NFT sale. Those who buy one of the 500 Gold tokens will receive 7% from royalties on every resale, with the 250 Platinum token holders and 10 Diamond holders each earning 21% from royalties. 

In November, Royal received $55 million in Series A funding led by the venture capital firm a16z. The platform aims to give music artists a way to maintain and share ownership over their work with fans through NFTs.

© 2021 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.

Coinbase is acquiring FairX, a CFTC-regulated derivatives exchange.

The exchange company announced the move on Wednesday, saying: “This is an important step toward Coinbase ultimately making the derivatives market accessible to our millions of customers through an industry-leading, simplified user experience.”

“Through this acquisition, we plan to bring regulated crypto derivatives to market, initially through FairX’s existing partner ecosystem,” Coinbase said. “Over time, we plan to leverage FairX’s infrastructure to offer crypto derivatives to all Coinbase customers in the US. We want to make the derivatives market more approachable for our millions of retail customers by delivering an easy-to-use user experience that Coinbase is known for.”

Per the blog post, the deal “is subject to customary closing conditions and reviews, and is expected to close in Coinbase’s first fiscal quarter.” 

FairX is the operating name of LMX Labs, LLC, which received its official status as a designated contract market (DCM) under the auspices of the CFTC in November 20202.

The move is the latest for the U.S. crypto exchange’s bid to offer derivatives, coming months after it applied for membership in the National Futures Association, a self-regulatory agency. Records indicate that Coinbase’s membership is still pending.

© 2021 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 banking firm Xapo is has given up its BitLicense, according to a notice from the New York Department of Financial Services (NYDFS).

Last year, Xapo announced its intention to discontinue its services to US customers by March of 2021. The handing over of its BitLicense indicates Xapo is ceasing operations in New York. The firm had held a BitLicense since 2018.

“Xapo has informed DFS of its business decision to conclude its virtual currency business in New York,” said the notice. 

The notice recommended New York customers with unclaimed funds in Xapo accounts should refer to the state comptroller’s unclaimed funds website.

The NYDFS issues the BitLicense as New York’s main financial regulator. The licensure allows virtual currency firms to transmit, custody, issue, or facilitate the exchange of crypto with the state. 

In 2019, Coinbase acquired Xapo’s institutional custody business for $55 million. It also acquired crypto prime broker Tagomi in 2020, which also went on to surrender its BitLicense. Xapo has not indicated why it’s chose to surrender its license. 

Formerly an exchange and custodian, Xapo pivoted towards providing crypto banking services in 2020. At the time of the announcement, the firm told CoinDesk that navigating US banking regulations would result in an inferior product compared to what it can offer internationally. 

© 2021 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.

Brazil-based 2TM Group is expanding into Europe with the acquisition of Lisbon-based exchange CriptoLoja, the company announced on Jan. 12.

The acquisition, pending regulatory approval from Portugal’s central bank, will give 2TM a controlling stake in CriptoLoja. 2TM is the parent company of Mercado Bitcoin, which bills itself as the largest crypto exchange in Latin America.

In June, CriptoLoja became the first crypto exchange to get a “virtual asset service provider” operating license from Portugal’s central bank, Banco de Portugal. Crypto ATM company Mind the Coin also received a license at that time.

According to a press release, 2TM will first operate over-the-counter (OTC) trading in Europe, and then “intends to take the entire MercadoBitcoin.com platform to retail and institutional investors.”

The move into Portugal comes shortly after 2TM raised $50.3 million in a second closing for its Series B funding round in November, which the company had said would focus on growing into more Latin America markets. The unicorn previously raised $200 million from the SoftBank Latin America Fund in July.

According to 2TM Group CEO Roberto Dagnoni, the company is building on the momentum from its Series A and B funding rounds to expand internationally. He sees Portugal as an advantageous market for reasons including its shared language with Brazil and regulated environment.

“In addition to an enhanced financial opportunity, the investment provides us with outstanding technology required to compete globally,”  Dagnoni said in a press release.“Portugal is a strategic market for us because it requires a specific license, is becoming an important hub for crypto in Europe and opens a gateway into the larger European market.”

© 2021 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

• Over-collateralized loans on platforms like Maker, Compound, and Aave have seen significant growth in recent years. 
• Undercollateralized lending improves capital efficiency and unlocks powerful financial mechanisms but remains largely unexplored in DeFi.
• Gearbox is a generalized leverage protocol that offers undercollateralized loans using a new DeFi primitive called credit accounts.

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

As the public awaits the Federal Reserve’s report on a potential central bank digital currency, one member of Congress aims to block such a CBDC from linking the public to the Fed directly.

On January 12, Representative Tom Emmer (R-MN) introduced a bill to prohibit the Fed from issuing a CBDC directly to individuals. The bill itself is quite brief, with its central text amending the Federal Reserve Act to include the following: 

“Except as specifically authorized under this Act, a Federal reserve bank may not offer products or services directly to an individual, maintain an account on behalf of an individual, or issue a central bank digital currency directly to an individual.’”

In a statement, Emmer said that “the Fed does not, and should not, have the authority to offer retail bank accounts.” Emmer specifically cited concerns over the security of customer data, as well as longstanding fears that the Fed would use such access to surveil US citizens and their transactions.

Such concerns cropped up yesterday, as Fed chair Jerome Powell testified before the Senate Banking Committee. 

Currently, banks can hold master accounts with the Fed. Commercial banks then act as intermediaries between such accounts and individual clients, in which capacity they are responsible for securing client data. Authorities typically need to get court orders to access client information. 

The prospect of a CBDC has opened up the possibility of individuals having accounts with the Fed. Indeed, such “FedAccounts” appeared briefly in the legislation behind the Covid-19 stimulus package in the spring of 2020, aiming to allow people to use post offices to make withdrawals and deposits. That proposal was later stripped out.

In addition to surveillance concerns, Republicans typically argue that the Fed simply cannot handle those sorts of demands on its systems, while private financial entities are already used to them. As Emmer said in a Twitter thread: “It is important that the United States lead with a posture that prioritizes innovation and does not aim to compete with the private sector.” Progressive Democrats, meanwhile, see this as protectiveness over commercial banks. 

A co-chair of the Blockchain Caucus, Emmer is a long-time advocate for crypto. He was one of the authors of a letter asking Powell to report on the Fed’s CBDC work back in September. According to Powell, that report is “ready to go.”

© 2021 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

• This piece looks into virtual real estate in The Sandbox metaverse.
• 86,722 LANDs have been sold to over 17,500 owners through 27 sales rounds between 2019 and 2021. 
• The growth of SAND token outperformed LAND in 2021.
• Despite on-chain data availability, the valuation of virtual real estate is not much easier than the physical real estate market.
• However, this will change as we are seeing signs of the emergence of third-party protocols such as land appraisers and land aggregators.

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

Fashion brand Gap has released its first collection of NFTs in collaboration with Brandon Sines, the artist behind Frank Ape.

Through the gamified digital experience, customers can unlock the opportunity to buy digital art by Sines and a limited edition, physical Gap hoodie.

“Gap has always been at the intersection of music, art and culture, so we are excited about this growth opportunity in the digital space with artists like Brandon Sines,” said Chris Goble, chief product
officer and general manager of Gap North America, in a statement.

The NFT collection was deployed on the proof-of-stake Tezos blockchain, which has recently been involved in collections from other consumer-facing brands, including Ubisoft, Pantone, and Red Bull. Gap’s collectible experience is built in partnership with InterPop, a production studio that uses Tezos.

The collection will feature four levels, available on a first-come, first-serve basis with limited editions at the Rare and Epic levels. Additional digital experiences are planned for the future.

With this new project, the company said it hopes to obtain insights into how customers want to engage in a digital world.

“As part of our mission to create enduring customer relationships, our teams are constantly innovating,” John Strain, Gap’s chief digital and technology officer, said in a statement. “We are excited about the possibilities that a more planet-friendly blockchain technology can unlock for us and all the new ways it will enable us to connect with our customers.” 

© 2021 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.

Payment processor Checkout.com said on Wednesday its valuation had hit $40 billion following the completion of a $1 billion Series D funding round. 

The raise secures its place as one of Europe’s most valuable start-ups and more than doubles its valuation since its Series C a year ago when it raised $450 million at a $15 billion valuation. 

The company said in a release that in that time, it has tripled the volume of transactions processed for the third year in a row. The company serves large-scale e-commerce and services merchants like Netflix, Farfetch, and Sony; fintech unicorns such as Klarna, Qonto, Revolut and WorldRemit; and many of the world’s largest crypto players, including Coinbase, Crypto.com, FTX, and MoonPay.

Primary investors included Altimeter, Dragoneer, Franklin Templeton, GIC, Insight Partners, the Qatar Investment Authority, Tiger Global, the Oxford Endowment Fund and another large west coast mutual fund manager. Checkout.com said several of the company’s other existing investors also participated.

The money will be used to further growth plans for the US market, where it expects its North American employee base to grow by 200% in 2022. 

It will also look to grow its proprietary technology platform and solutions, as well as development in web3, it said. It is already testing a service to settle transactions for merchants with digital currencies. 

© 2021 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.