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Securities and Exchange Commission chairman Gary Gensler indicated Tuesday that crypto lending and staking platforms that hold custody of user funds could fall under U.S. securities laws and, as a result, his agency’s oversight.

Following a hearing before the Senate Banking Committee, Gensler told The Block that Congress in its 1933 Securities Act and 1934 Securities Exchange Act “painted with a broad brush as to what’s a security.”

This question of what is and is not a security has been a defining characteristic of the crypto industry and its relationship with the SEC and other regulators for years. In conversation, Gensler offered a broad view of this dynamic. 

“If you are offering a lending product, it is quite likely that that lending product itself is under the securities laws,” Gensler said. 

A recent SEC spat with Coinbase over its Lend product suggested to many that crypto lending platforms would need to register with the SEC sooner rather than later. 

Using a “not your keys, not your coins” argument, Gensler further pulled staking platforms into his consideration, telling The Block:

“I would note to your readers that if you’re investing on a centralized exchange or a centralized lending platform, you no longer own your token. You’ve transferred ownership to the platform. All you have is a counterparty risk. And that platform might be saying, as many of them do, we’ll give you a four percent or seven percent return if you stake your coins with us or you actually transfer ownership and we the platform will stake your tokens. That takes on all the indicia of what Congress is trying to protect under the securities laws.”

During the hearing itself, Gensler found many in the Senate Banking Committee receptive to his broad view of what qualifies as a security and requires corresponding registration and regulation.

Senator Elizabeth Warren, for one, shared Gensler’s concerns over exchanges like Coinbase — a political push that the two have been working together on for months. 

“Many have been enticed by dramatic jumps in the value of new digital assets,” said Committee Chairman Sherrod Brown of the past year of market volatility. “Some professional investors and celebrities make earning millions look easy. But, as we are reminded time and again, it’s never that simple – and too often, someone’s quick profit comes at the expense of workers and entire communities.”

Meanwhile, Ranking Member Pat Toomey criticized the SEC’s lack of clarity over what is and is not a security, saying:

“I understand that SEC staff will privately provide feedback and analysis on whether a cryptocurrency is a security. Why keep this analysis private? Why not publicly announce what characteristics make a cryptocurrency a security or not a security? Why wait to make the SEC’s views known only when it swoops in with an enforcement action, in some cases years after the product was launched? This regulation by enforcement is extremely objectionable and will kill domestic innovation.”

In his questioning, Toomey asked for more specifics as to which cryptocurrencies are securities. Gensler answered broadly.

Toomey brought up stablecoins in particular, to which Gensler replied“I think they may well be securities.”

Toomey, in turn, disputed that there was an expectation of profit with stablecoins, a critical prong of the SEC’s determination of whether an investment is an investment contract and, thus, a security.

“If it doesn’t meet the Howey test it doesn’t look to me like a security,” said Toomey. “And we certainly shouldn’t be taking enforcement action against somebody without first having provided that clarity.”

© 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 of Brazil’s most important fintechs are joining forces to improve access to digital lending options. Nubank will now offer its Brazilian customers access to secured loans, thanks to a partnership with Creditas.

Nubank customers should be able to access Creditas’ loan products through its app by the end of the year, the Latin American neobank said in a Sept. 13 announcement previously reported by Reuters.

That partnership has the potential to deepen, as Nubank said in two years it could make the decision to hold up to 7.7% of Creditas’ shares. 

Creditas’ valuation rose to $1.75 billion in December 2020, following a $255 million Series E funding round led by LGT Lightstone. That followed a $231 million round led by Japan’s SoftBank Group Corp. in 2019.

Creditas’ secured loans allow its customers to use real estate, cars or even their salaries as collateral in the lending process, which aims to help them unlock lower interest rates. The company was founded by Sergio Furio in 2012 as an answer to Brazil’s traditionally-high lending rates.

Nubank already offers personal loans for its Brazilian customers who have a digital account and credit card with the company, with varying interest rates depending on the month and number of installments. The neobank estimates that more than 2.5 million people have used these loans, according to its website.

Nubank, which is also developing services in Argentina, Colombia and Mexico, has been in growth mode over the past few years to broaden its financial offerings. Most recently, it purchased the merchant-focused, instant payment platform Spin Pay.

© 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.

Last week’s crypto price plunge and subsequent crypto exchange failures illustrate need for SEC to regulate crypto exchanges, says Senator Elizabeth Warren.

Gary Gensler, chairman of the Securities and Exchange Commission, appeared before the Senate Banking Committee on Tuesday morning to give testimony on the SEC’s work. Cryptocurrency was a leading subject, which Gensler anticipated with a wry “And now for the crypto” in his opening remarks.

In one particularly focused exchange, Senator Warren criticized crypto’s claims to financial inclusion. “We hear a lot about how crypto is all about financial inclusion,” she said. “I want to test out with you if crypto is an improvement over the financial system.”

Referring to last week’s crash, Warren said: “In a matter of hours, $400 billion in market value just disappeared.” She brought up a hypothetical retail investor who lost all his money after investing on Monday night. Needing to withdraw, that investor would find crypto exchanges like Coinbase temporarily down.

That investor, Warren and Gensler agreed, would have no recourse, as there is no federal regulatory regime for crypto exchanges. They specifically singled out Coinbase, with Gensler decrying that they didn’t have to register as a securities exchange “even though they have dozens of tokens that might be securities.”

Then, referring to avenues like “DeFi exchanges” (quotes Warren’s), she said “the fee to swap between two tokens on the Ethereum network last Tuesday was more than $500.”

Gensler has been centering the conversation on registering cryptocurrency exchanges with the Securities and Exchange Commission. Meanwhile, Coinbase has already reported major conflict with the SEC over its Lend platform, which the SEC has threatened to sue as another species of unregulated security. 

© 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.

A failed attack on the Ethereum blockchain that occurred Tuesday managed to trick a few nodes but was unable to hoodwink the rest of the network.

According to Ethereum developer Marius Van Der Wijden, the attacker published a chain of roughly 550 blocks, which had invalid proofs of work. This means that, instead of mining the blocks correctly according to the network’s rules, the blocks were created at will and broadcast to the network.

The majority of Ethereum nodes rejected the blocks, seeing that the proofs of work were invalid. But a small percentage of nodes running Nethermind — an Ethereum client — switched to the fake version of the blockchain.

The main blockchain has now overtaken the length of the alternative blockchain version with the fake blocks. As a result, all affected nodes have now moved back onto the main blockchain.

“Another great demonstration of how client diversity makes ethereum stronger,” said Van Der Wijden, adding that there’s “no immediate attention required from node operators.”

© 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 Australian startup Immutable, creator of the NFT-focused Ethereum Layer 2 protocol Immutable X, has raised $60 million in a new funding round — bringing its total raised to $77.5 million. 

BITKRAFT Ventures and King River Capital co-led the round, according to a press release. Other participants included Prosus Ventures, Galaxy Interactive, Fabric Ventures, Alameda Research, AirTree Ventures, Reinventure, Apex Capital, and VaynerFund.

Immutable X tackles the high cost of minting NFTs on Ethereum due to high transaction fees. ETH transaction costs are around $40 per The Block’s Data Dashboard — roughly double the fees of early April when Immutable first launched Immutable X.

By using zero-knowledge proofs to validate transactions off-chain, Immutable X removes gas fees for minting NFTs, according to the startup’s website. Immutable also claims Immutable X is carbon neutral through the purchasing of carbon credits.

“NFT trading is a terrible mainstream user experience right now. It’s expensive, illiquid, and the only existing scaling solutions compromise on the most important thing — the security and user-base of Ethereum,” Robbie Ferguson, co-founder at Immutable, said in a press statement. “We want businesses to create their game, marketplace, or NFT application within hours via APIs, with a mainstream user experience. No blockchain programming required.”

Immutable intends to use its Series B funding to grow its engineering and sales team, bolster collaborations with gaming firms, and continue building its NFT-based games Gods Unchained and Guild of Guardians. 

© 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.

Transaction blocks appear to be not processing on the Solana blockchain, according to available data and complaints from the network’s users.

Data published by block explorers SolScan and Solana Beach indicate that the last transaction block occurred roughly two hours ago.

“Solana mainnet-beta is experiencing intermittent instability,” a message from a Twitter account run by the Solana Foundation reads, posted at 8:38 a.m. ET. “This began approximately 45 minutes ago, and engineers are investigating the issue.”

Phantom, a wallet service built on Solana, said in a tweet at 9:57 a.m. ET that “[t]he Solana network seems to be experiencing intermittent instability right now. Phantom and other applications are having trouble connecting. We will keep you updated on the status of the situation.”

At the same time, Solana CEO Anatoly Yakovenko called for network validators to join the project’s Discord. “its beta time,” he wrote.

This is a developing story and will be updated as more information becomes available.

© 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.

Jump Trading was once called one of Wall Street’s most secretive high-speed trading firms. 

But now, Jump is going fully public with its crypto operation and wants the community to know it is keen on being a vocal and transparent contributor to the space. The firm, which has billions of dollars put to work in the crypto market, announced Tuesday that it has launched Jump Crypto, cementing the role of its long-standing digital asset and blockchain business. 

“We’ve been in crypto for six years now in various capacities,” said Kanav Kariya, the recently appointed president of Jump Crypto. “That span a lot more than trading. Helping build out a lot of protocols, being involved in protocol governance, and extending into areas we have expertise in.”

Jump’s crypto operation has served as the backbone of Robinhood Crypto, providing liquidity for its cryptocurrency trading. It has also invested in the market through its affiliate venture firm, Jump Capital.

The firm is also active in the Solana ecosystem. It is a liquidity provider for FTX’s decentralized exchange Serum and the founder of Pyth, a decentralized data project built on the Solana blockchain. 

Founded in 1999, Jump has said little about what it does publicly and its founders, two former CME Group pit traders, have effectively zero public profile. Such a disposition might not work in crypto in the same way that it does for quant trading in stocks. 

“Jump Crypto is a recognition basically of the fact that in a community-driven space, we need to have a voice and be more reachable and share what we are doing more broadly,” said Kariya, who added:

“It is a commitment to the way we intend to operate to position our firm itself as a meaningful contributor participant.”

Protocol participation

In a broader sense, Jump Trading wants to be known as more than just a trading firm.

The company is looking to expand its efforts in venture capital investments, decentralized finance, and on-chain governance. 

Jump announced in August the acquisition of Certus One, a blockchain engineering firm, as part of its expansion into crypto. 

“We want to be someone that thinks deeply about security all the way through the stack with deep knowledge,” Kariya told The Block. “The Certus acquisition and team has helped us to think about that and start to deliver solutions.”

To be sure, engaging with protocols on governance — weighing in on decisions that steer the open-source network of a given blockchain — could give Jump a leg-up when investing in the space’s companies and tokens. 

Jump Capital said on Tuesday it closed a new $350 million fund — its seventh since inception. The fund will have a significant focus on crypto and will invest in dozens of companies. It has already invested in several companies, including BitGo, which is set to be acquired by Galaxy Digital, and Curv, which PayPal acquired this 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.

Amberdata, a crypto-focused data startup, has raised a $15 million Series A funding round led by Citi.

Other participants in the funding round include Franklin Templeton, Rovida Kruptos Assets and Galaxy Digital. The firm said that GoldenTree Asset Management executives, as well as existing investor HWVP, also led the round.

Amberdata said it would use the money to double its research and development staff and grow its market presence.

“Data and insights will continue to play a pivotal role in creating transparency and strengthening risk management frameworks for digital assets. We are excited to be leading their Series A and supporting the team on their next phase of growth,” Siris Singh, the Americas head of markets strategic investments for Citi, said in a statement. 

Amberdata’s raise represents the latest example of data companies in the crypto space attracting venture funding, and Citi’s lead involvement again highlights the banking world’s interest in such companies. In May, Goldman Sachs led a $15 million Series B round for Coin Metrics. 

In August, Dune Analytics raised an $8 million funding round while Kaiko, a market data provider for the crypto market, raised $24 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.

A generative artist whose work depicts flowers within a “potentially infinite field of foliage” has made 1,623 ether (around $5.38 million) through a sale on Art Blocks, the non-fungible token (NFT) platform.

Monica Rizzolli’s ‘Fragments of an Infinite Field’ collection, comprised of 1,024 pieces, was sold through a Dutch auction on Art Blocks Curated on September 13 – with prices starting at 10 ether. The entire set sold out in under an hour.

Transaction data on Etherscan shows Rizzolli netting 1,623 in ether across three transactions in the hours after the sale. 

Since the initial mint, individual pieces from the collection have changed hands on the NFT marketplace OpenSea for as much as 69 ether (around $229,000). The so-called ‘floor price’ – determined by the lowest priced pieces in the set – currently stands at roughly 13.4 ether (around $44,500).

Certain well-followed NFT collectors such as the pseudonymous Cozomo de’ Medici and JDH stumped up hundreds of thousands of dollars to snap up individual pieces in the set.

One Twitter user pointed out, citing Dune Analytics data, that Art Blocks notched its best single day for secondary market sales in September yesterday, the bulk of which was down to trading in Rizzolli’s work.

In season

Generative artists write code that creates art in a certain style and within certain parameters, but at random such that the artists themselves cannot predict exactly what their work will look like.

The genre has boomed in popularity over the summer – primarily due to surging investment in the NFT space. Art Blocks has capitalized on these market conditions so effectively that it recently had to introduce Dutch auctions – in which bidding starts high and gradually falls until everything is sold – to slow the pace at which new work is hoovered up off the platform.

In a blurb describing the project, Rizzolli said “the main environmental parameter of the composition is the determination of a season of the year.”

“The season determines the landscape’s colors and defines specific phenomena for each of them, such as rain in summer, snow in winter, petals falling in autumn, and pollen in spring. The flower has several possible variables, which can be macro aspects, affecting the entire population of the species, or micro, affecting each individual of the species differently,” she added.

© 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.

Argo Blockchain, the London Stock Exchange-listed crypto mining company, has launched an Initial Public Offering in the United States.

The crypto firm has floated 7,500,000 American Depositary Shares (ADSs), equal to 75,000,000 ordinary shares, on the Nasdaq Global Market under the symbol ARBK, according to an announcement.

With a last closing price for Argo’s ordinary shares of £1.334, a successful IPO could raise as much as £100 million.

The company, which currently boasts a market capitalization of £537 million (around $745 million), has been exploring the possibility of a U.S. listing since July.

Argo is currently building out a mining facility in Texas, U.S. with a power capacity of 200 megawatts (MW).

On September 10, the firm announced that it had entered an £18.05 million (around $25 million) loan agreement with Galaxy Digital – using some of the bitcoin it has mined as collateral – to build out the West Texas facility. The new loan was rolled into an existing £14 million (or $20 million) facility – bringing Argo’s outstanding principal to $45 million.

In August, a report from The Boatman Capital Research raised questions about whether Argo had overpaid for the land it acquired for the Texas facility by up to 100 times. But Argo’s CEO Peter Wall defended the transaction in a video posted on Twitter. “We feel like it was a good deal for the project in Texas, because it wasn’t just a land acquisition, it was a project acquisition,” he said.

© 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.