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The Commodities Futures Trading Commission (CFTC) has filed and settled charges against Kraken for failing to register as a futures commission merchant and offering margin transactions in crypto. 

Kraken will pay a $1.25 million civil monetary penalty and refrain from further violations, according to a statement from the CFTC.

The agency claims the crypto exchange offered margin retail commodity transactions to U.S. customers without registering as a designated contract market (DCM). Kraken required users who purchased assets on margin to exit their positions and repay the assets within four weeks. If a user failed to meet requirements, Kraken could force liquidation. Because Kraken accepted orders, money and property to margin these transactions, the CFTC claims this also constituted illegal operation as a futures commission merchant (FCM).

Failing to obtain the FCM license and continuing to execute margin transactions from June 2020 to July 2021 was grounds for enforcement, according to the CFTC. Acting Director of Enforcement Vincent McGonagle said the settlement is part of a “broader effort to protect U.S. customers,” in a statement announcing the case.

In a separate statement, CFTC Commissioner Dawn Stump said this case outlined the need for further clarity of the Commission’s Final Interpretive Guidance on retail commodity transactions involving certain digital assets issued in 2020. 

“As the Guidance becomes increasingly relevant to the Commission’s enforcement program, I believe it is incumbent upon the Commission to undertake a rulemaking proceeding to supersede the Guidance by adopting binding and enforceable rules that will provide certainty to the marketplace and a shared understanding of the ‘rules of the road,'” she wrote.

The referenced guidance was adopted two and a half years after its initial proposal and more than two years after its public comment period. Because of the significant time lapse between its proposal and institution, Stump called on the Commission to replace the guidance with updated rules and input from market participants. 

Stump also pointed out that even if Kraken had registered as an FCM, it remains unclear what regulations it would have to abide by. The transactions the CFTC took umbrage with would still have been illegal with am FCM registration, according to Stump, since Kraken also operates as an exchange. To be in the clear, Kraken would have also had to register as a DCM, and an entity holding both registrations would be “unprecedented,” according to Stump. 

Though she agreed Kraken seems to act as an FCM, and therefore was in violation, applying these rules to exchanges that support retail commodity transactions is “uncharted territory,” according to Stump.

“I believe that if the Commission is going to hold an exchange liable for operating as an unregistered FCM with respect to retail commodity transactions, it is incumbent upon the Commission to explain in a transparent manner the relevant legal requirements for such an entity that seeks to register as an FCM and how the Commission will apply them in enabling the entity to conduct business with U.S. customers,” she wrote.

© 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 National Football League (NFL), NFL Players Association (NFLPA) and Dapper Labs, creators of the popular NFT projects like NBA TopShot and CryptoKitties, are reportedly planning to launch an American football-oriented NFT marketplace.

Sports Business Journal reported on the deal Tuesday, citing anonymous sources. The site reported that the NFL and NFLPA will acquire equity in Dapper Labs, and that the new American football NFT marketplace is predicted to arrive before the end of this year’s football season in early January of 2022. 

Much like with the popular NFT platform NBA TopShot, this new platform would allow users to buy and sell trading card-like NFTs of NFL sports highlights, per the report.

Dapper Labs secured $250 million in funding earlier this month, The Block previously reported, bringing the startup’s total valuation to $7.6 billion. Dapper Labs raised $305 million earlier this year. 

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© 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

• Arweave is a decentralized data storage platform founded in 2017 by Sam Williams and William Jones
• Arweave’s Profit Sharing Tokens (PSTs) allow app developers to sell tokens that capture part of the future profits generated by their app
• In total, The Block has identified 105 projects and companies across 20 different verticals currently expanding on Arweave’s ecosystem.

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Quick Take

• Last Friday, China’s government introduced new policies aimed at stamping out crypto trading and mining.
• The swift, drastic responses by companies in China over the past several days suggest the latest crackdown is the most severe one yet. 

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Global bank BNY Mellon has announced a trio of senior hires in its digital assets team. The three executives will fill newly created roles at the company as it looks to ramp up its crypto activities.

Hadley Stern, former head of Amazon Web Services’ Innovation Labs, joins BNY as global head of digital custody. He will oversee business and product development for the bank’s crypto custody tools.

Commerzbank’s former head of digital assets and custody Benjamin Duve has joined BNY as a director of digital assets and blockchain. He will work to advance the bank’s digital assets products, which will span crypto to tokenized assets.

David Schwed has been named BNY’s global head of digital asset technology, joining the bank from Galaxy Digital where he served as chief architect of information security. Schwed will be tasked with integrating the technology that underpins BNY’s digital assets products into the bank’s existing systems.

BNY has been developing crypto custody products since February this year. The platform is working with crypto security startup Fireblocks, which it has also invested in.

Roman Regelman, CEO of asset servicing and head of digital at BNY Mellon, said in a statement that the hires are “yet another example of our ongoing commitment to attract top talent in a very competitive market to support our clients’ evolving needs across the investment lifecycle.”

© 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.

Dan Berkovitz, a commissioner at the U.S. Commodity Futures Trading Commission and a noted public-sector critic of decentralized finance, will serve as general counsel of the U.S. Securities and Exchange Commission starting in November.

The appointment was announced Tuesday in an SEC press release, alongside news that the current general counsel, John Coates, will leave next month to take a position at Harvard. “Commissioner Dan Berkovitz has been named SEC General Counsel, effective Nov. 1,” the SEC said.

Berkovitz announced on September 9 that he would step down from the CFTC next month. His term was originally set to end in 2023.

“Having worked with the SEC in my roles at the CFTC, I’ve long admired the dedicated and talented staff of the agency from afar. I’m excited to work again with Chair Gensler on a regulatory agenda that will enhance investor protection, strengthen our capital markets, and facilitate capital formation,” Berkovitz said in a statement.

Earlier this year, Berkovitz remarked publicly that decentralized finance or DeFi markets are problematic because of a lack of intermediaries, stating that he didn’t “see how they are legal under the CEA,” referring to the Commodity Exchange Act.

The developments come as Gensler has issued a raft of public statements about his desire to tighten SEC oversight of the crypto space. Last week, he said during an interview with the Washington Post that he wants to bring crypto “into the public policy framework.”

© 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.

Federal Reserve chairman Jerome Powell said Tuesday that he believes the U.S. central bank should work with Congress to create a digital dollar.

Speaking before the Senate Banking Committee, Powell said that while existing laws governing the Fed’s activities could serve as a basis for issuing a digitized version of the U.S. dollar, he expressed a preference for working on a legislation-backed push instead. The subject of a central bank digital currency was raised during questioning from Senator Pat Toomey of Pennsylvania.

“I think this is such a fundamental issue, it would be ‘ideal’ if this were to be a product of broad consultation and ultimately authorizing legislation from Congress,” Powell remarked. 

Powell said earlier this year that he believed Congressional authorization could be required, but Tuesday’s remarks indicate that Powell would invite such involvement. In May, Vice Chairman for Supervision Randal Quarles told the same committee that he believed and future Fed work on a digital dollar would require a nod from Congress. 

What forms a Fed-led digital dollar, if it did come to fruition, could take remains to be seen, though the Boston Fed branch is currently working with the Massachusetts Institute of Technology on prototype digital dollar applications. Some of the results of that process are expected to be made public sometime before the end of the year. 

© 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.

Two U.S. senators want the Treasury Department to take a closer look at crypto mining across the world — and they want the office to share its findings with Congress.

Senators Maggie Hassan (D-NH) and Joni Ernst (R-IA) introduced a bill Monday that would require the Treasury to craft a crypto report for Congress in the two years after enactment. The focus would be on global mining operations and their impact on supply chains, especially for certain technological industries, like semiconductors.

The study would also assess the political frameworks mining-intensive countries use for the industry. To compare, the study would also assess the types and dollar values of cryptocurrency mined within American and Chinese borders from 2016 to 2022, as well as any other countries the Treasury finds relevant.

The goal is to increase the U.S.’s global competitiveness, and Hassan says crypto is critical to keeping the U.S. on the cutting edge.

“In order to strengthen U.S. competitiveness, our government must get a better handle on the role that cryptocurrency is playing in the global economy and how it is being leveraged by other countries,” said Hassan in an announcement today.

© 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.

Roll, a platform that allows users to create their own branded tokens, announced Tuesday that it raised $10 million in Series A funding.

The Hong Kong-based venture firm IOSG Ventures led the round. Other participants include Animoca Brands, Alchemy, Huobi Ventures, Weekend Fund, Audacity, and Mischief Fund. 

Roll allows people with a sizable following to create social tokens. These tokens can then be branded and disseminated as the creator sees fit. For example, a creator named Connie Digital offers his social token $HUE to followers who read his newsletter. Connie Digital’s fans can then spend $HUE on NFTs or to tip on Discord. 

“We’re not trying to be Web3 Twitter or Facebook,” Roll CEO Bradley Miles told The Block. “We want to be more of a Stripe for social tokens.”

Roll supports over 350 creators, $2 million daily trading volume, and a year-to-date trading volume of $680 million. With prior funding from Galaxy Interactive, Hustle Fund, Gary Vaynerchuk and other investors, Roll has raised $12.7 million since its 2019 inception.

© 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.

China-based Ethereum mining pool BeePool, currently the fourth-largest in terms of hashrate, announced Tuesday that it is shutting down on October 15.

The move is in “response to the latest regulatory policies,” said BeePool.

Last week, China’s central bank tightened its policy on crypto, declaring all crypto-related activities illegal. BeePool was founded four years ago and is based in China’s Hubei province.

Its announcement comes a day after Hangzhou-based Sparkpool, the second-largest Ethereum mining pool, said it is shutting down entirely by the end of this month.

China’s latest crackdown has not only affected mining pools, but also crypto exchanges. Binance and Huobi recently announced that they will no longer provide services to China-based users. 

© 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.