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Clients of El Salvador’s largest bank, Bancoagrícola, will now be able to pay down their loans and credit card bills in bitcoin. They can also now use the cryptocurrency to purchase goods and services from merchants connected to the bank’s payment gateway.

Bancoagrícola, founded in 1955 and now owned by Grupo Bancolombia, has tapped New York-based payment network Flexa to enable the payments in bitcoin via its mobile app. 

According to an announcement from Flexa, the bank’s customers will be able to pay U.S. dollar-denominated loans and credit card balances with bitcoin at “the exact fair market rate, without any additional fee or spread.” The option is designed to work with any wallet compatible with the Lightning Network, including El Salvador’s official wallet Chivo.

Merchants in El Salvador that are set up to accept payments using the Bancolombia Group’s Wompi gateway can accept bitcoin through Flexa as well. Those payments are largely online, for now, Flexa CEO and co-founder Tyler Spalding told The Block. However, the company is also planning to announce compatibility with other payment gateways, Spalding said. Flexa is also looking to use its technology to streamline the process of accepting bitcoin-based payments at brick-and-mortar stores.

“The whole concept with Flexa is we want to make it just as easy, if not easier, than any other payments you’re already used to,” Spalding said.

Bancoagrícola is just one of the many companies in El Salvador that has had to tailor its payment methods to include bitcoin, as required under a landmark law regarding the cryptocurrency that went into effect on Sept. 7. Businesses operating in El Salvador, including multinational chains like Starbucks and McDonalds, are now required to accept bitcoin as a form of payment if they have the technology to do so. Consumers, on the other hand, have the option of whether they want to pay in bitcoin or stick with the local U.S. dollar currency.

© 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 Treasury and Internal Revenue Service (IRS) have reiterated their intention to tax issue guidance on cryptocurrencies.

The agencies released their Priority Guidance Plan for the 2021-2022 fiscal year on Thursday, and designing brokerage rules for crypto still makes the list. The Tax Administration portion of the document details: “Regulations regarding information reporting on virtual currency under §6045,” as one such priority.

The previous year’s guidance plan also listed “Proposed regulations regarding information reporting on virtual currency under §6045,” as a priority under the Tax Administration section. 

Rule §6045 contains guidance on brokerage reporting. As of now, there is no unified regulation for exchanges related to virtual currency tax reporting. Though the reporting burden ultimately falls on the individual, traditional exchanges must send forms to users and the IRS delineating the year’s trading activity, making it easier for the consumer to report their trading activity to the tax watchdog. This is not yet the case for crypto, though some exchanges do send 1099 forms when possible.

The IRS has been steadily beefing up its tools surrounding crypto, requesting an additional $32 million to boost its crypto and cyber operations in its recent budget report for the fiscal year 2022. IRS chief Charles Rettig has indicated that quelling crypto misreporting could be helpful in closing the tax gap, or the unreported sums of taxable funds. 

The tax agency has continuously said additional clarity surrounding crypto broker reporting is coming, although it remains unclear when this guidance will be released. Many are expecting the IRS to mandate exchanges to report using Form 1099B, since unlike other types of 1099 forms, it tracks cost basis of the assets — a key to calculating capital gains and losses for crypto. However, this guidance has yet to materialize, and the agency is now rolling over the priority to this year’s list.

The recent infrastructure bill out of the U.S. Senate further clouds who qualifies as a “broker” in the crypto context. This could make tax codes even more opaque for those looking to report their digital assets without added clarity from the IRS. As the IRS drafts guidance under rule §6045, it will have to nail down who qualifies as a broker. As of now, Bloomberg has reported that the Treasury claims the definition will only apply to trading platforms in the coming guidance. 

© 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

• MicroStrategy has invested nearly $3 billion in bitcoin.
• The bet is largely backed by loans worth over $2 billion.
• What happens if bitcoin (BTC) crashes?

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Traders almost expect it at this point — when cryptocurrency prices gyrate, exchanges buckle as users flood their systems.

It’s not a new issue; rather, it’s one that has plagued exchange venues from BitMEX to Coinbase for years. 

IamNomad, an outspoken voice on Crypto Twitter, outlined some of the specific issues that kept traders from accessing crypto exchanges during Tuesday’s rocky session, which included laggy market data to orders being rejected. Some platforms, such as BlockFi, were down completely. 

In fact, these outages ultimately play a role in bringing the market down further, according to Aya Kantorovich, an executive at FalconX, who said that traders can’t access their spot accounts to top-up on their positions on derivatives exchanges to avoid being liquidation. 

“That aggravates the liquidation cascade,” according to Kantorovich. 

Broader scope

To be sure, crypto is not unique in experience downtime when markets see significant fluctuations. Brokers ranging from Robinhood to TDAmeritrade have experienced issues keep their platforms up and running during bouts of volatility in the pandemic era.

Still, it is rare for venues like New York Stock Exchange or Nasdaq to experience such issues. 

A source at Coinbase, who spoke on the condition of anonymity, told The Block that the exchange has expanded its capacity by more than 10x and is able to handle volumes in the tens of billions per day versus volumes in the billions. Over the next few months, the exchange will continue to make improvements. The source said that the model of exchanges in crypto is also part of the problem.

“I think the move to the brokerage model that’s client-focused and liquidity-agnostic moves us away from the problem,” the person said. 

That opens up firms like Coinbase to more sources of liquidity. Aggregators such as CoinRoutes and FalconX, which relay external sources of liquidity, reported no down time. 

“CoinRoutes had no outages today and our clients were able to trade by virtue of having multiple venues available,” CEO Dave Weisberger told The Block.

Coinbase is not the only venue that’s been making improvements. BitMEX, formerly the largest futures platform in the crypto market that has seen its market share shrink since the beginning of the year, told The Block that it experienced “zero overloads” on Tuesday. A spokesman said that the exchange has increased throughput and made improvements to the system that distributes market data. 

“Clients receive market data updates as quickly as possible without it lagging behind the increased order processing rate upstream,” the spokesman said. “In the next few weeks, we will be delivering further performance improvements to this part of the stack, giving clients even lower latency market data updates.”

It’s worth noting that the 24-hour nature of crypto makes it more difficult to address technology problems versus equities where brokers and exchanges can address such issues during off-market hours, FTX.US CEO Brett Harrison told The Block.

“Between 4 p.m. and 930 a.m., you can roll out new changes,” he said, referring to the equity world.

Regulatory implications

Despite the efforts to improve, recent issues could be a reason for regulators to further scrutinize crypto platforms, according to Hunter Merghart, a former exec at exchanges Bitstamp and Coinbase. 

“This is a very easy avenue for regulators to go after all day long and now that eyes are even more on the space this is a bad look for the industry,” he told The Block. 

Tyler Gellasch, a former lawyer at the Securities and Exchange Commission, agrees. Gellasch told The Block in a phone interview that there is “no question federal regulators are going to be concerned about financial harm.”

An examination into crypto exchange infrastructure has historical parallels, Gellash said. In the mid-2000s, following a series of exchange and trading firm glitches, the SEC implemented Regulation SCI, aimed at beefing up trading infrastructure through regulatory mandate. 

“The SEC took the approach of ‘we can’t have technology glitches bringing down our markets, we need our markets to have integrity and stability,” he said. “Investors need to be able to trade, especially in times of volatility. Ensuring the market infrastructure doesn’t buckle and hurt investors is a regulatory top priority in securities and derivatives markets.”

© 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.

In what is becoming a seasonal tradition, the U.S. Securities and Exchange Commission (SEC) is using any legal and technical recourse to punt yet again on approving U.S.-based crypto exchange-traded funds (ETFs). Even with these challenges, several firms haven’t been deterred from attempting to become the first U.S operator in a global ETF market representing $6 trillion in assets under management (AUM).

We should not be that surprised by the SEC’s foot-dragging, considering the long and tortured financial history that got us to ETFs in the first place. It took around 450 years from the establishment of the first stock exchange in 16th century Antwerp until the first U.S. ETF was launched in 1993. It wasn’t until 1987′s Black Monday crash that the financial community faced a problem (see below) for which ETFs presented a sort of solution. Ever since, the instrument has often acted as a safe harbor in stormy financial climes, from the Great Recession of the late 2000s to pandemic-weary markets in the 2020s.

Jaime Rogozinski is the founder of WallStreetBets – a large online community that yields a commanding presence in the world of finance. Over the past 16 years, he has started multiple successful companies, mainly in tech and finance fields, that he has helped build from the ground up. His experience ranges from bootstrapped startups to multilateral banking.

Like the race to bring the first crypto ETF to the U.S., the first ETF itself was not created overnight. It took several attempts to craft those early ETFs, mainly due to prevailing securities, tax and corporate law regarding structured products, managed investment schemes, mutual funds and derivatives. Crypto ETFs don’t have nearly the same universal buy-in across the financial community, so it is no surprise this has been marked with even more false starts and stumbles. It is enough to make one wonder whether crypto ETFs will ever be universally accepted: They may be too risky for the old guard and too centralized for the new one.

Crypto ETFs: An old dog forced into new tricks

ETFs were created because investors wanted to achieve the same sort of return as a market index without having to hold the constituent assets of that index directly, essentially reproducing portfolio diversification, but at lower cost and with less effort. For its time, the ETF was a radical financial innovation that, at its heart, solved a most elementary problem for investors.

Now, in the nearly 30 years since the launch of that first ETF, there are over 150 ETF providers, a list that reads like a roll call of major institutional finance: Vanguard, BlackRock, State Street, Invesco and VanEck.

For all of the benefits that traditional ETFs offer, like portfolio diversification and market performance, they do have some drawbacks, including the need for brokerage access that creates a whole litany of fees, illiquidity, trading delays tied to “market hours” and extra costs from the need for providers to maintain custody of the ETF’s underlying assets.

Now, 30 years after that first ETF, blockchain technology has literally rewritten the whole scene. Blockchain, cryptography and tokenization have made programmable finance accessible to all at the speed of the internet, creating whole currencies, derivatives and new financial industries out of decentralized consensus.

Now, what if you could take what was so attractive about ETFs 30 years ago and reconstruct that type of appeal for an entirely new world of financial options that we couldn’t even conceive of as little as 15 years ago?

It turns out we can.

Why ETF when you can ETP?

The powerful combination of decentralized finance (DeFi) protocols, on-chain asset management and smart contract technology is heralding the arrival of the decentralized version of ETFs, tokenized and fully collateralized baskets of digital assets called ETPs (exchange-traded portfolios).

These “baskets” are fully collateralized by the pooled assets that are held within the relevant smart contract. These “smart pools” can then be tokenized so investors can deposit funds into the smart contract, receiving a corresponding number of tokens that represent a given share in the underlying assets.

In addition, ETPs are non-custodial, meaning the investor remains in control of their deposited assets, and can withdraw them at any time by redeeming the corresponding tokens. Goodbye, brokerage fees and market hours.

Read more: Goldman Sachs Applies for DeFi ETF

As layer 2 blockchain protocols help reduce what have been the traditional gas fees associated with the deposit and withdrawal of smart contract funds, ETPs begin to look like very attractive products from a cost perspective. Even better, ETPs offer larger financial incentives: macro-hedges against inflation, participation in top crypto assets, pooled DeFi assets, baskets of traditional tech stocks, index-based portfolios and yield-bearing stablecoins.

ETFs have come a long way in the last 30 years, but trying to use that framework for crypto is a bit of a non-starter, even as tantalizing as it might be to some in the industry. With the advent of products that concentrate both investment and investment tools in crypto innovation – products like ETPs – investors will be able to participate in more opportunities offering better liquidity and less friction than ever.

For the old guard, it will require even more trust in a new paradigm that discards old inefficiencies. For the new guard, it will require even more imagination to not dress up tomorrow’s solutions in those same inefficiencies.

Aave co-founder Stani Kulechov has sold an NFT called “Yield” for 350 ETH, worth $1.15 million, to an anonymous bidder.

But it’s not just a short video. It’s also a social experiment.

According to the artwork information, the buyer of the NFT faces a dilemma. Either they hold onto the NFT, perhaps wait to see if it rises in value, and then consider selling it to another buyer. Or, they are allowed to return it to Kulechov by October 31, and receive all of their funds back — along with 10% of the value of the NFT or 10 ETH ($33,000), whichever is cheaper.

Since the artwork sold for so much, the buyer would receive the 10 ETH back rather than the 10% of the sale price. But the question is: will they hold onto it, or take the $33,000?

“The idea was to experiment whether the winner of the auction will go long on the artwork itself and not return it and value the artwork more than actually the transaction,” Kulechov told The Block. “It’s very fascinating”

The artwork itself

The NFT is a video clip showing balloon-like letters of the word “YIELD” that expand, filling the screen, and then contract. In the background are silver versions of Kulechov himself. The artwork and social experiment are themed around yield, something that is earned via lending protocols, such as Aave.

The artwork was created by Sven Eberwein, an NFT artist with 48 artworks on SuperRare. The bidding lasted one day and included bids from NFT artist pplpleasr, who designed Fortune’s crypto cover, which was sold as NFTs for $1.3 million last month.

Kulechov said that he’s excited to see whether people will trade it on secondary markets and how it will be priced there. He added, “Essentially, it’s an NFT, it’s an art piece and it’s just an interesting experiment.”

© 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 fight that crypto exchange Coinbase took to the U.S. Securities and Exchange Commission this week highlighted that the federal government’s approach to regulation is broken.

This episode is sponsored by Quantstamp and Insider Protocol.

What can be done to improve the relationship between the crypto community and the powers in Washington, D.C.? Is a more comprehensive legislative approach to regulating the industry viable, one that properly protects consumers but also embraces the positive aspects of blockchain technology to encourage innovation that serves the public good?

For this week’s episode, “Money Reimagined” co-hosts Michael Casey and Sheila Warren talked to Rep. Tom Emmer (R-Minn.) about the crypto industry’s standing in Washington and what needs to be done to foster a more constructive relationship with policymakers.

Emmer has become one of the most vocal supporters of the industry in Congress. He is the co-chair, along with Rep. Bill Foster (D-Ill.), of the Congressional Blockchain Caucus.

In this episode Emmer talked about the bipartisan nature of the small but growing community of crypto supporters on Capitol Hill and why the technology encourages people to cross party lines. He also discussed what needs to be done to build on that collaborative base to get meaningful reform, and what’s at stake in terms of U.S. global leadership in technology and finance if it doesn’t happen.

It has been a wild summer for blockchain project Solana. 

From the meteoric rise in the price of its native token to technical problems facing NFTs launched on the blockchain, the project has entered the forefront. On this episode of The Scoop, Anatoly Yakovenko Founder & CEO of Solana Labs joins host Frank Chaparro for a deep dive into Solana, which some believe can compete with Ethereum despite being less decentralized. 

As for price specifically, Yakovenko admitted it doesn’t always make sense. 

“This is just mind-boggling that if the price of Solana doesn’t make any sense, then I have no clue why Ethereum has anything in terms of its value,” he said, adding:

“I don’t pay attention to the price so much because I have no control over it and I’m an engineer. So, like, if I can change it, then it’s just like one of these variables.”

Solana Labs completed a $314.2 million fundraise back in June 2021 (that amount raised is a play on the number Pi). Investors included Andreessen Horowitz, Polychain Capital, FTX via Alameda Research and CoinShares. But as of yet, Yakovenko said much of their capital raise has not been deployed. It is also known for powering Serum, the decentralized exchange launched by Sam Bankman-Fried of FTX. Solana recently launched its Metaplex NFT marketplace, which Yakovenko acknowledged experienced server issues.

Still, DeFi still comes to the top of Yakovenko’s mind as a core use case.

“I’ve really felt that finance was a place where blockchain makes sense,” he said.

In Yakovenko’s view, users could even one day use their own hardware to tap into the network in order to access financial market data as quickly as professional trading firms with access to exchange data.

“The network guarantees as close as possible to an impossible problem, which is that information propagates equally to everybody at the same speed,” 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.

The majority of top NFT collectibles have seen a considerable decrease in sales volume over the last week.

According to data from CryptoSlam, four out of the top five NFT collectibles by trading volume — namely Loot, CryptoPunks, Bored Ape Yacht Club and Art Blocks — saw declines ranging from 44% to 82%. Axie Infinity, a project that uses NFTs for gaming, countered the trend with a 7% increase in trading volume.

It appears that each of these projects — bar Loot, which took off at the start of this month — peaked toward the end of August, with both CryptoPunks and Bored Ape Yacht Club seeing massive peaks in trading volumes on August 28. Bored Ape Yach Club saw $55.7 million in sales volume that day while CryptoPunks hit $143 million.

According to The Block’s Data Dashboard, weekly sales for top NFT collectibles have fallen over the last couple of weeks from highs of $882 million to last week’s total of $129 million.

Average sales have also been on the decline since the start of this month. Bored Ape Yacht Club NFTs, which were selling for around $200,000 on average are now going for around $133,000. CryptoPunks, which were selling for around $400,000 on average, have dropped toward $330,000.

Other top projects seeing falling sales volume include Mutant Ape Yacht Club, Pudgy Penguins, Creature World NFT, Cool Cats and Meebits.

Some projects are defying the trend, such as Monkey Bet DAO, which has seen a 225% increase in trading volume over the last week.

© 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.

SIX, the Switzerland-based exchange operator, has scored a key approval in its bid to run a marketplace for digital securities.

The approval came from the Swiss Financial Market Supervisory Authority, according to a Friday announcement, greenlighting the advance of the firm’s digital bourse, dubbed SDX.

“This authorization enables SDX to go live with a fully regulated, integrated trading, settlement, and custody infrastructure based on distributed ledger technology for digital securities. With these licenses, SDX can now offer the highest Swiss standards of oversight and regulation,” the firm said.

SIX has been pursuing the project since 2018, seeking to carve out a place in the nascent market for tokenized securities trading. 

“This is an important milestone in bringing the digitalization of capital markets into the mainstream, but it is only the beginning. We will continue to work with our clients, regulators, and other stakeholders to shape the markets of the future,” Thomas Zeeb, SIX’s global head of exchanges and a member of the firm’s executive board, said in a statement. 

In a statement, FINMA said that it “issued two approvals to operate financial market infrastructures based on so-called Distributed Ledger Technology (DLT). Specifically, FINMA has authorized SIX Digital Exchange AG to act as a central securities depository and the associated company SDX Trading AG to act as a stock exchange.”

“This is the first time that a licence has been issued in the Swiss financial centre for infrastructures that facilitate the trading of digital securities in the form of tokens and their integrated settlement,” the regulator 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.