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Billionaire investor George Soros’ family office, Soros Fund Management, has invested in bitcoin, according to Soros Fund CEO/CIO Dawn Fitzpatrick.

Fitzpatrick told Bloomberg in an interview on Tuesday that, “From our perspective again, we own some coins, not a lot, and the coins themselves are less interesting than the use use cases of DeFi and things like that.”

Fitzpatrick’s comments confirm previous reports from earlier this year that said Soros Fund has started trading bitcoin, on the basis of anonymous sources. Soros Fund is also an investor in crypto firms such as NYDIG and Lukka, but this appears to be the firm’s first public revelation of having investments in cryptocurrency directly.

“I’m not sure bitcoin is only viewed as an inflation hedge. Here I think it’s crossed the chasm to mainstream. Cryptocurrencies now have a market cap of over $2 trillion. There’s 200 million users around the world, so I think this has gone mainstream,” Fitzpatrick added.

CBDCs are incoming

In March, Fitzpatrick also shared her views on central bank digital currencies (CBDCs), saying that CBDCs “are going to be here I think quicker than people expect.” 

At the time, she gave an example of China’s CBDC trials and said that the country’s digital yuan would be a “potential threat to other bitcoin and other cryptocurrencies.” But she added that it will be temporary, saying, “I don’t think they’ll be successful in permanently destabilizing bitcoin.”

Family offices and hedge fund giants have been wading deeper into crypto. Steve Cohen’s Point72 Asset Management, for instance, recently started investing in crypto startups such as Messari and Zero Hash. Billionaire investor Dan Loeb’s Third Point fund also reportedly holds cryptocurrency.

© 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.

“We are heavily moving into DeFi.” 

Pantera Capital, the longest operating US-based bitcoin investment firm, now manages $5 billion worth of assets. But when it comes to decentralized finance, Pantera’s Franklin Bi still sees the space as undervalued.

“As long as we’re still looking at the fundamentals and drawing out what the multiples are there, we’re still not at the point where you know, you’re really starting to see the speculative mania.”

On this episode of The Scoop, Bi, who is Pantera’s director of portfolio development joined host Frank Chaparro to discuss the current state of venture capital investment in crypto and how he’s finding value in an increasingly crowding ecosystem.

“There’s the crypto native side, which I think a lot of new investors coming into the space don’t recognize yet. Things like staking, participating in the network, focusing on decentralized governance and how we play a role there. That’s all stuff that looks super different from, you know, just showing up at a board meeting once a quarter to review the financials.”

Pantera has been investing heavily into DeFi since 2017, and is now ramping that up as more investors have started searching for sustainable yield instead of simply investing based on an interest in novel technologies. Bi has observed this shift in investor sentiment as traditional investors are slowly beginning to comprehend the margins of DeFi products. He argued that certain digital assets companies are still relatively undervalued when compared to public market counterparts.

“They’re getting valued like traditional financial institutions, which to me, sounds like they’re undervalued because the rate at which a DeFi project can grow is on a totally different scale. The profitability margin’s totally different scale.” Bi went on to add, “It tells me that they’re actually undervalued rather than overvalued.”

© 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.

Indian cryptocurrency exchange CoinSwitch Kuber has raised $260 million in a Series C funding round and is now a unicorn valued at $1.9 billion.

New investors Andreessen Horowitz (a16z) and Coinbase Ventures backed the round, along with existing investors Paradigm, Ribbit Capital, Sequoia Capital India, and Tiger Global. This is a16z’s “first general investment” in India, not just first crypto investment, CoinSwitch’s chief business officer Sharan Nair told The Block.

“We are incredibly excited about the crypto market opportunity in India, and with its breakout growth, CoinSwitch has emerged as the leading retail platform in the country,” said David George, general partner at Andreessen Horowitz.

With the fresh capital injection, CoinSwitch aims to onboard 50 million users to its platform and launch new products such as lending and staking. The exchange also plans to expand its team across engineering, product, data, and growth functions.

CoinSwitch currently claims to have over 10 million users with a monthly active user base of over 7 million. While the exchange is now a retail-focused platform, it also plans to onboard institutional clients, it said. As for team expansion plans, Nair said CoinSwitch currently employs 350 people and plans to hire another 250 people.

CoinSwitch was founded in 2017 as a global aggregator of crypto exchanges. It launched its India operations through CoinSwitch Kuber in June 2020. CoinSwitch is the second Indian crypto exchange to reach unicorn status. In August, CoinDCX raised $90 million in a Series C funding round at a post-money valuation of $1.1 billion.

Venture capital firms continue to pour millions of dollars into India’s crypto sector despite an uncertain regulatory environment in the country. Crypto is currently neither legal nor illegal in India. The country’s government is working on presenting a bill whose contents are yet to be known. Venture firms’ bets apparently show that they are hopeful Indian regulators will warm up to the sector.

CoinSwitch Kuber’s Series C comes just six months after its $25 million Series B. The latest round brings the exchange’s total funding to date over $300 million, said Nair. 

© 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.

Congress has punted on two pieces of legislation that will likely be the central legacy of the Biden administration.

Linked together into a package that until recently seemed set to allocate $5 trillion in the coming decade, the Build Back Better Act and the Infrastructure and Jobs Act are facing delays. While the infrastructure bill already has the support necessary to pass into law, Congressional leadership is stalling votes on that bill to put pressure on the passage of the Build Back Better Act.

Moderate Democratic senators Joe Manchin and Kyrsten Sinema have been pushing to scale down the more controversial Build Back Better Act from an earlier $3.5 trillion to closer to $2 trillion in spending. However, the White House itself stepped forward to squash an effort to get a vote on the infrastructure bill last week — which had been House Speaker Nancy Pelosi’s promise to placate a group of House moderates who threatened the whole operation earlier in September.

On Friday night, Congress passed HR 5434, a stopgap measure to fund existing infrastructure outlays through October. Saturday, upon signing HR 5434 into law, President Biden told reporters: “There is no reason why both these bills couldn’t pass independently except that there are not the votes to do it that way. It’s a simple proposition.”

Biden ended his remarks by spotlighting the need for two more votes, which is almost certainly an allusion to Manchin and Sinema, who have been the target of ire from both their fellow Democrats and phone camera-wielding constituents.

Meanwhile, brinkmanship is taking hold of Congress as the U.S. faces default on its debts by October 18. Senate Republicans are threatening to filibuster any legislation to increase the debt ceiling, which has become a complicating factor in the arguments over Biden’s spending plans.

But what does this have to do with crypto?

The Block has reported extensively on the crypto taxation provisions embedded in both the Infrastructure Investment and Jobs Act and the Build Back Better Act.

Democrats in Congress are readying to pare down their spending wishlist — and the White House has quietly assented to somewhere between $1.9 and $2.3 trillion for Build Back Better. There is, however, little discussion of reducing the taxation components of these bills.

However, additional time is critical, especially given how rushed the original proceedings for these two bills were. Alterations to the Infrastructure Act’s highly contested definitions for a “broker” in the context of cryptocurrency networks would be especially welcome among industry participants.

Once the infrastructure bill passed the Senate and headed to a House that was on a September 27 deadline, it was tough to envision an opportunity to amend it again. However, nobody accurately predicted the process that the two bills have subsequently faced. 

That said, the Infrastructure Bill as written remains much less politically controversial than the Build Back Better Act, which is on track to go through major cuts to its spending provisions in order to coax support from more conservative-leaning Democrats. Expansion of restrictions on tax-loss harvesting to crypto trades within that bill initially provoked a limited response, but subsequently concerns emerged that constructive sale rules could effectively provoke taxation of unrealized crypto gains.

© 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.

Venezuela’s Central Bank has updated its currency to have six fewer zeroes and issued new paper bills to reflect the change, aiming to make it easier for residents to keep up with the country’s rapid inflation. But while the change should make paper currency transactions easier in theory, Venezuelans will likely still turn to digital alternatives — including stablecoins — to protect their savings.

The new so-called Bolívar Digital, which went into effect on Oct. 1, changes the way Venezuela’s Bolívar currency is expressed but not the actual value. So, an item worth 10 million Bolívars is now displayed with a price of 10 Bolívars. 

To help people wrap their head around how this works, Venezuela’s central bank has added an overlay on its website that pops up to show the old bills versus the new ones. On the left-hand side, the image shows five, individual bills for one million Bolívars (together worth about $1.20 under the previous version of the currency, VES).  Now, those five bills are represented by a single, five Bolívar bill. Under the new currency, bills will have denominations of 5, 10, 20, 50 and 100 Bolívars.

This is not the first time in recent years that Venezuela has reconverted its currency. The country stamped out five zeroes from the Bolívar in 2018 after taking away three in 2008, Reuters pointed out. Industry experts cited by ABC News and others estimate that more than 60% of transactions in the country are in dollars. 

So, why is Venezuela chopping off the zeroes? Well, as prices go up, sometimes it can be hard to put them into context. Right before the reconversion, the Bolívar was worth about 10 times less than it was a year earlier, said Nevin Freeman, CEO of Reserve. The company has a wallet app popular with Venezuelans, who use it to save in dollars via the Reserve stablecoin (RSV), make deposits or withdrawals in other currencies and send remittances. 

“At some point, the numbers get so big that they start to feel meaningless,” Freeman said. “The hope is that by removing the zeros, consumers will be able to add up how much a basket of groceries costs in Bolívars again.”

But Freeman told The Block that the ongoing inflation in Venezuela is driving an uptick in transactions involving U.S. dollars, including stablecoins pegged to the currency. 

“Many transactions today happen in cash USD, electronic USD bank transfer systems like Zelle, and increasingly more are happening with USD stablecoin platforms like Reserve,” Freeman said.  

In addition to dollars providing a more stable way to save than inflation-prone currencies, Freeman pointed out that Bolívar-based transaction methods can pose issues when transaction limits aren’t updated in time to reflect the currency’s loss of value. When this happens, it can be difficult to make everyday purchases with a single payment method. The latest Bolívar reconversion should help that for now, he added, but could happen again if the currency continues to lose value.

The reconversion was a “scary moment,” Freeman said, noting that the Bolívar’s value dropped more than 25% against the dollar in the two days prior before regaining 20% of its value since.

Reserve decided to keep its app running despite the volatility, with Freeman noting in a video on Twitter that the company’s liquidity providers were losing money by keeping the market open right before the change.

© 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

• During Q3, the industry received nearly $8 billion in private investment across 423 total deals
• In aggregate, venture capital firms have injected roughly $17.8 billion into crypto firms from the beginning of the year through the end of Q3, which equates to more capital than the previous six years combined
• A significant trend in Q3 was that the valuations of mid-sized companies conducting a Series B round in the crypto sector increased substantially
• The NFTs/Gaming vertical surpassed DeFi during Q3 to be the most popular deal type amongst investors
• Twelve of the fifteenth largest deals to ever happen in the industry, or 80%, have occurred this year. 

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U.S. Bank is now offering crypto custody services to its institutional clientele in the U.S. or Cayman Islands.

Private funds can currently keep their bitcoin with the bank, according to today’s announcement. Support for more coins will be added in the future. 

NYDIG is the first sub-custodian partnership the bank has announced, though it’s building a network of providers. NYDIG topped the list due to its history navigating compliance and regulatory standards in the space, according to the announcement.

Gunjan Kedia, vice chair of U.S. Bank Wealth Management and Investment Services, said investor demand for crypto offerings has exploded in recent years.

“Our fund and institutional custody clients have accelerated their plans to offer cryptocurrency and, in response, we made it a priority to accelerate our ability to offer custody services,” she said in today’s announcement. 

Within its custody offerings, the bank will enable private key storage for bitcoin, bitcoin cash and litecoin, according to a report from CNBC. 

U.S. Bank’s decision to custody follows a number of other banks getting in on crypto. State Street is building out a new crypto unit, while Bank of New York Mellon is set to launch custody services this year. 

U.S. Bank first announced it would roll out bitcoin custody services in April of this year. At the time, the bank referenced the clarity that then-Comptroller Brian Brooks had provided, authorizing national banks to custody crypto. 

© 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.

The blockchain analysis firm Chainalysis announced Tuesday that it acquired Excygent, a cybercrime forensics company.

Exycgent is a highly specialized technology firm that services both public and private clients, even assisting U.S. governmental agencies with cybercrime investigations. 

In a blog post, Chainalysis CEO Michael Gronager wrote that Chainalysis and Excygent had collaborated in past projects involving terrorism financing campaigns, the seizure of cryptocurrencies used in darknet marketplaces, and other illicit activity. The terms of the deal were not disclosed.

“Through that work, I’ve seen first hand that the Excygent team brings deep expertise in cryptocurrency and cybercrime investigations. I am thrilled to welcome them to our growing Investigations and Special Programs team, which provides lead generation, blockchain data analysis, and investigative support to government agencies,” wrote Gronager in the post. 

Chainalysis intends to use its acquisition of Excygent to further reduce cybercrime — especially ransomware — and to promote “greater financial freedom with less risk,” the CEO said in a statement. 

This year, Chainalysis reached a $4.2 billion valuation with its most recent funding round, bringing in $100 million in June.

© 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.

Arca, the cryptocurrency investment firm, announced Tuesday the close of a new venture fund, making it the latest entrant to an ever-growing corner of the market.

Dubbed Endeavor, the fund will back companies in the non-fungible token market as well as companies operating in blockchain-based gaming and Web 3.0. According to Arca’s David Nage, the firm was able to raise capital for the fund in a matter of weeks and it is oversubscribed above its cap of $30 million. Nage, who is a member of Arca’s founding team, will serve as the portfolio manager for the new fund. 

Galaxy Digital’s Vision Hill unit is backing the fund as an anchor investor. The new fund joins Arca’s flagship hedge fund, Digital Assets Fund and Digital Yield Fund. The firm manages more than $500 million. 

A number of new funds targeting early-stage crypto companies have come online in recent months. As The Block previously reported, former ConsenSys executive Kativa Gupta launched a fund aimed at the NFT market and decentralized finance. 

In total, venture capital firms have poured around $17 billion into crypto firms from the beginning of the year through the end of Q3, as tracked by The Block Research. As The Block Research’s John Dantoni has noted, the crypto funding market’s hot streak continued into the summer, a typically quieter period for dealmaking.

The blockchain sector received nearly $2.1 billion in private investments during August.

© 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.

SEC commissioner Hester Peirce’s safe harbor for digital tokens now has some legislative backing. 

On October 5, Patrick McHenry, the ranking member of the House Financial Services Committee, introduced the Clarity for Digital Tokens Act of 2021. 

The bill would adapt the Securities Act of 1933 to establish a three-year safe harbor for token development teams to offer those tokens for sale without full registration as a securities offering on the condition that the network decentralizes over the course of those three years. 

Under the terms of the bill, token issuers would have to make disclosure requirements specific to the industry. These include source code, development plans, and “information explaining the launch and supply process, including the number of tokens to be issued in an initial allocation, the total number of tokens to be created, the release schedule for the tokens, and the total number of tokens outstanding.”

Development teams looking to use the safe harbor would also have to file exit reports demonstrating sufficient decentralization. 

The safe harbor is the statutory version of a longstanding proposal from the Securities and Exchange Commission’s Hester Peirce. Following the initial coin offering boom of 2017-2018, the SEC stepped up its scrutiny of token issuance, establishing an expectation that issuers register their offerings with the commission.

Based on comments from SEC leadership, especially Bill Hinman, many crypto development teams still saw a route to turn centralized offerings of tokens into decentralized networks that no longer need to register with the SEC, either as an issuer or under an exemption. 

While Peirce’s framework has not picked up steam within the SEC, law passing in Congress can change all of that. The leadership of leading industry advocates the Blockchain Association, Coin Center and the Association for Digital Asset Markets noted their support for McHenry’s bill.

The bill comes just half an hour before the Financial Services Committee’s hearing with SEC Chairman Gary Gensler. Also this morning, Representative McHenry released a letter to Gensler, which said “You have made a series of concerning and apparently self-contradicting public statements regarding crypto assets and other innovative technologies.”

In the letter, McHenry requested answers to a series of questions on the SEC’s work with crypto, particularly its expectations for cryptocurrency exchanges and stablecoins. In opening remarks released in advance of today’s hearing, Gensler repeated a sentiment that has become his Free Bird: 

“Many platforms have dozens or hundreds of tokens on them. While each token’s legal status depends on its own facts and circumstances, the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities. Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption.”

While the House Financial Services Committee is full of crypto advocates, Patrick McHenry’s role as leader of the committee’s republicans indicates greater momentum behind such legislation. While many bills looking to clarify cryptocurrency regulation have been introduced — in the Financial Services Committee and elsewhere — most have languished. 

© 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.