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Securities and Exchange Commission (SEC) chair Gary Gensler thinks crypto is slipping through certain gaps in the current regulatory system, and exchange regulation is the way to address them. 

During a Wednesday hearing before the Financial Services and General Government subcommittee of the House of Representatives, Congressman Mike Quigley (IL) questioned Gensler on the possibility of a new regulatory category for cryptocurrency.

Gensler said the breadth of the space has made it challenging to create sufficient consumer protections, noting that despite thousands of token projects, the SEC has only brought 75 actions. The best point to put consumer protections in place, according to Gensler, is at the trading venues. 

“I would think if we could work with Congress to try to bring investor protection where these — sometimes commodities, sometimes securities — are trading on the platforms,” said Gensler.

Without “rules of the road,” Gensler said he’s worried market participants will front-run traders’ orders. He said he hopes to bring similar protections placed on venues like the New York Stock Exchange (NYSE) and Nasdaq to crypto platforms.

But in order to create and enforce those rules of the road, Gensler said more funding might be in order. Right now, the agency spends about 16% of its budget on new technology, while the firms it regulates have considerably greater resources. Those resources have also shrunk about 4%, according to Gensler. He said crypto, among other advances, poses new risks that require greater resources.

This isn’t the first time Gensler has pointed to crypto exchanges as the biggest consumer protection gap. In a May 6 hearing before the House Financial Services Committee, Gensler said the lack of a dedicated market regulator for crypto exchanges meant there wasn’t enough protection against fraud or manipulation. 

© 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 August 2020, the Fidelity-backed Wise Origin Bitcoin Index Fund I went public, providing a means for the Boston-based asset management giant’s clientele to gain exposure to bitcoin.

Roughly nine months later, the passively-managed fund has raised approximately $102 million from investors, a filing with the Securities and Exchange Commission published Wednesday shows. Per the document, the first sale in connection with the fund took place on August 31, 2020. Since then, 83 investors have bought into the fund, per the filing.

Fidelity is one of a number of U.S. firms seeking to bring a bitcoin exchange-traded fund to market, as previously reported. Fidelity’s similarly-named Wise Origin Bitcoin ETF was detailed in a March 24 regulatory filing. 

Last month, Fidelity unveiled a digital asset data and analytics tool aimed at institutional investors.

© 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.

Representative Darren Soto (D-FL) is busy setting the agenda for blockchain legislation in the new Congress. 

A co-chair on the Congressional Blockchain Caucus, Soto will be familiar to The Block’s readers for his work on industry-relevant legislation.

On Tuesday, Soto re-introduced the Blockchain Technology Coordination Act before the Committee on Energy and Commerce. The bill aims to establish a new office within the Department of Commerce that manages the use of blockchain in the federal government, outside of the military.

In a statement on the BTCA’s re-introduction, Soto said:

“In order to ensure that the U.S. does not fall behind on research and development, we must embrace blockchain technology and explore all of the ways in which it can help our nation grow.”

The bill’s earlier incarnation hit the floor of the House on New Year’s Eve of last year, as Congress was preparing for a changeover. After a turbulent first few months of 2021, and Soto’s re-election, this may signal a thaw in legislation aiming to push crypto forward. 

The new BTCA is the first of many bills that Soto has lined up for re-introduction. Members of Soto’s team tell The Block that the Florida congressman plans to re-introduce the Digital Taxonomy Act and the Blockchain Innovation Act later this week, pending finalized drafts. 

Further down the agenda, the team is preparing the U.S. Virtual Currency Market and Regulatory Competitiveness Act and Virtual Currency Consumer Protection Act for re-introduction.

These bills were introduced in 2019 and 2020. Some died in subcommittee, some passed in the House, but none made it to law. The coronavirus pandemic and chaos surrounding the election cycle pushed all other concerns off of the legislative calendar.

Having won re-election and facing a relative easing of crisis mode, Soto as well as other members of the Blockchain Caucus may see cause for optimism in getting such legislation through, especially given a general uptick in regulatory interest in cryptocurrencies and blockchain.

“We have seen the industry boom so much in the past year and there is a lot more engagement in this space,” Soto said in a statement to The Block, referencing Senate initiatives and the passage of the Blockchain Innovation Act and the Digital Taxonomy Act in the House. He added “It is also important to note that the BTCA is a marker for a larger initiative that we are actively working on with stakeholders.”

© 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 PayPal executive said Wednesday that the payments giant is working to allow its customers to withdraw their cryptocurrency holdings.

Speaking at CoinDesk’s Consensus 2021 virtual conference, Jose Fernandez da Ponte — a PayPal vice president and general manager for blockchain, crypto and digital currencies — said during an interview:

“We want to make it as open as possible, and we want to give choice to our consumers, something that will let them pay in any way they want to pay. They want to bring their crypto to us so they can use it in commerce, and we want them to be able to take the crypto they acquired with us and take it to the destination of their choice.”

The timing of any withdrawal feature launch is unclear at this juncture.

PayPal partnered with crypto startup Paxos last year to enable crypto purchases for its customers on PayPal and Venmo, and in late March began to allow customers to spend their crypto. 

As The Block previously reported, PayPal has held exploratory talks around a potential stablecoin, according to industry sources. According to CoinDesk, da Ponte said: “This is way too early.”

© 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

• New interest in cryptocurrencies and blockchain from U.S. regulators and legislators have opened up the doors to a great deal of new hiring between industry and government.
• The crypto industry has generally greeted these new hires as a sign of acceptance, which it is, but it also sets new ethical expectations on an industry that hasn’t had much time to get used to them. 

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Two years ago, Apple Pay vice president Jennifer Bailey said that there was a “long-term potential” for cryptocurrency.

A new job posting indicates that the technology giant remains interested in cryptocurrencies — at least, in the border context of alternative payment methods. 

Apple is currently seeking an individual with over five years of experience working with alternative payments, such as digital wallets and cryptocurrency, to become a Business Development Manager leading the company’s Alternative Payments Partnerships, according to a job post published on Tuesday. CoinDesk first reported the job post. 

“We are looking for a proven professional in global alternative and emerging payment solutions. We need your help forming partnership framework and commercial models, defining implementation paradigms, identifying key players and managing relationships with strategic alternative payment partners. This position will be responsible for the end to end business development, including screening partners, negotiating and closing commercial agreements and launching new programs,” the post explains.

In addition to crypto experience, the candidate must have more than ten years of professional experience and more than six years in the business development field in order to work for Apple’s Wallet, Payment, and Commerce team.

Apple isn’t the only name-brand company eyeing cryptocurrency experts or opportunities. The toy firm Hasbro mentioned that it is “actively developing” non-fungible token (NFT) opportunities for its digital gaming sphere, and eBay officially allowed NFTs to be sold on its platform earlier this month. 

© 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.

Startup accelerator DeFi Alliance, which has notable mentors including Coinbase, has backed the first Solana-based project — Mercurial Finance.

DeFi Alliance has invested $100,000 in Mercurial and would help bootstrap liquidity of the protocol, Mercurial co-lead Ming Ng told The Block.

Founded earlier this year, Mercurial is building a protocol for stablecoin trading on the Solana blockchain. Mercurial can be seen as similar to Curve Finance on Ethereum.

But according to Ng, Mercurial’s competitive edge is dynamic fees and dynamic allocation with low slippage. Slippage refers to the difference between the expected price of a trade and the price at which the trade is executed.

As for dynamic fees, Ng said Mercurial’s trading fees would adjust according to market volatility. During high volatility, fees would increase to compensate liquidity providers and vice versa.

When asked about the choice of dynamic fees, Ng told The Block that in traditional market making, market makers charge more spread in volatile markets because there is more demand and risk, and lower spread in less volatile markets to attract more volume. “So we are looking to model those dynamic fees in our market-making vaults,” said Ng.

For the dynamic allocation feature, Ng said Mercurial would look to dynamically allocate capital versus sitting in and not being used. “On Solana, we will be able to perform complex transactions, like lend all the capital out, and when needed, withdraw it back for the swap in the same transaction,” explained Ng.

Mercurial’s other backers include Alameda Research, Solana Ecosystem Fund, Huobi, OKEx, founders of CoinGecko, Blockfolio, Nansen, and others, said Ng. The project has raised a total of $10.3 million in funding to date via a Simple Agreement for Future Tokens (SAFT) sale, said Ng.

The Mercurial protocol is expected to launch next month, Ng told The Block, adding that details on what stablecoins will be supported will be announced later.

“In order for DeFi to thrive on Solana, deep stablecoin liquidity must be available,” Imran Khan, lead at DeFi Alliance and general partner at Volt Capital, told The Block. “What Mercurial solves is the liquidity issue + opportunity cost by intelligently providing liquidity on pairs while yield farming + minting stablecoins.”

Earlier this month, DeFi Alliance added Solana to its ecosystem partnership program, and Solana co-founder Anatoly Yakovenko is now one of the mentors at the organization.

Khan said the organization is currently working with over 20 projects and, to date, it has invested “millions” into blockchain projects, without providing a specific figure.

© 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 Nebraska bill that gives companies two paths to compliantly dealing in digital assets has been signed into law.

Governor Pete Ricketts signed the Financial Innovation Act around 5 P.M. last night, according to its sponsor Sen. Michael Flood. The bill passed the state’s unicameral chamber last week in a 46–2 vote. 

The Financial Innovation Act allows state-chartered banks to create a digital asset division. More importantly, it allows digital asset firms to seek a newly created charter to become a bank that specifically deals in digital assets. Both charters would allow firms to custody digital assets, but the digital asset de novo charter prohibits the firms from taking or lending cash deposits. 

These digital asset-focused entities will be permitted to call themselves banks in Nebraska, and they’ll be empowered with similar privileges. They can request Fed System access from the Federal Reserve — a privilege that the central bank is currently debating for digital asset businesses. Further, they can obtain federal deposit insurance if available.

But they’ll still be somewhat set apart from traditional state banks. Those obtaining the new charters will have to make clear that they only deal in digital assets, and cannot intake cash deposits. They also won’t be insured by the Federal Deposit Insurance Corporation (FDIC) since the agency doesn’t insure digital assets — and the institutions will be tasked with making that clear to customers.

These entities will be regulated by the state’s Department of Banking and Finance, similar to the framework already established in Wyoming. But Flood argues Nebraska’s framework goes even further by mandating any fiat held as reserve for digital assets must be held in custody at an FDIC insured entity. Firms like Avanti and Kraken Bank have set up shop in Wyoming, but Flood is hoping the slightly higher standards in Nebraska will afford greater legitimacy, attracting crypto firms to the state.

“We have what I think will be the model legislation for the nation,” 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.

Canadian cryptocurrency lender Ledn has raised $30 million in a Series A funding round.

The round was led by London-based investment firm Kingsway Capital, with participation from new investors like British billionaire hedge fund manager Alan Howard, Reddit co-founder Alexis Ohanian, Susquehanna Private Equity Investments, ParaFi Capital, and others. All existing investors of Ledn’s seed extension round, worth $2.7 million, also participated in the Series A round.

As part of the deal, Manuel Stotz, founder of Kingsway Capital, joined Ledn’s board of directors.

With fresh capital at hand, Ledn is looking to grow its team and footprint. The firm’s current headcount is 40 and it plans to expand to 100 employees by the end of this year, Ledn co-founder Mauricio Di Bartolomeo told The Block. The Series A round brings Ledn’s total funding to date to $35 million and its valuation to $230 million, said Bartolomeo.

As for its expansion plans, Ledn aims to offer its products and services in markets including Africa, Europe, and Asia.

Founded in 2018, Ledn provides three key products: Bitcoin-backed loans, bitcoin, and USDC savings accounts, and trading between bitcoin via USDC via Ledn Trade.

Ledn said its assets, i.e., balances in its bitcoin and USDC savings accounts, and collateral placed for its bitcoin-backed loans, have exceeded $1 billion.

In Q1 2021, Ledn originated over $120 million in bitcoin-backed loans, said Bartolomeo. When asked what has been the trading volume of Ledn Trade, Bartolomeo declined to provide details as the feature is available in select markets. “We want to accelerate the broad roll-out of our Trade feature,” he said.

Ledn says its competitive edge is transparency and accountability standards. Bartolomeo said Ledn is the only crypto lending company that undergoes a formal proof-of-reserves attestation by Armanino LLP, a public accounting and consulting firm. All client assets and lending operations are reviewed on an ongoing basis, said Bartolomeo.

“Growing up in Venezuela, I saw first hand how an unregulated system with little to no transparency can impact its people, and that’s why it’s such a core component of how we manage the funds our clients entrust to us,” said Bartolomeo.

© 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.

Buyers of WAX (WAXP) tokens through the crypto payments app MoonPay have finally seen their funds come through, after several days of not knowing what had happened to their money.

From May 22, customers who had tried to purchase WAX through the MoonPay app had been experiencing delays receiving their tokens. This led to a spate of negative reviews on Trustpilot for the otherwise well-rated MoonPay, with customers complaining about “waiting for days” for their crypto to come through.

During that time, the price of the cryptocurrency fell from around $0.18 to around $0.11, before recovering to its current level of $0.15, according to CoinMarketCap. WAX is the native currency of the non-fungible token (NFT) marketplace Worldwide Asset eXchange. It has a market capitalization of roughly $238 million.

A spokesperson for MoonPay told The Block on May 25 that the delay was the result of a liquidity partner suspending WAX withdrawals. At that time, the spokesperson said that it had been in contact with all those impacted and, while the issues were ongoing, the company would be refunding customers out of its own pocket. Since the issues have been resolved, users are finding that their purchase orders have now been fulfilled.

Bittrex Global resumes WAX trading

People familiar with the matter told The Block that the liquidity provider in question is Bittrex Global, an offshoot of the Seattle-based Bittrex, with offices in Liechtenstein and Bermuda. The two Bittrex exchanges are separate and serve different customers, but share owners and are built on similar technology.

“Bittrex Global supports over 250 digital assets with varying code structures. At times, there can be technical issues which may lead to certain wallets being disabled as we assess network stability and prioritize the safety of our users’ funds,” said Stephen Stonberg, CEO of Bittrex Global, in an emailed statement.

Stonberg explained that the Bittrex Global team worked with Worldwide Asset eXchange to work out a solution. He said the issue has now been resolved and the wallet has been re-enabled.

What is MoonPay?

Launched in 2019, MoonPay is an app that helps customers buy and sell more than 80 different cryptocurrencies in over 160 countries. In March, the company hired former Coinbase UK CEO Zeeshan Feroz as its chief growth officer.

MoonPay’s focus is building on-and-off-ramps for converting fiat currencies into crypto and vice versa. The company has raised no external investment to date, but announced in March that it had increased its revenues by 3,000% in the 12 months up to that date (without disclosing an exact figure).

© 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.