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Bank of America, the second-largest bank in the U.S., has joined Paxos’s blockchain-based settlement network for equities.

Bloomberg reported the news on Monday, saying that the network would help Bank of America settle stock trades in minutes rather than days using blockchain technology.

Paxos’s solution is a private, permissioned blockchain network that allows two parties to settle securities trades with each other on the same day. Paxos launched the network in February 2020 after receiving a no-action relief from the U.S. Securities and Exchange Commission (SEC) in October 2019. Paxos also has plans to apply for a clearing agency registration with the SEC.

Once approved as a clearing agency, Paxos’s clients that have joined its network, such as Bank of America, Credit Suisse, and Nomura’s Instinet, won’t have restrictions on volume and number of trades they can settle through the network, a Paxos spokesperson told The Block on Monday.

As in how the Paxos Settlement Service differs from the Depository Trust & Clearing Corporation (DTCC) is that DTCC generally allows settlement of T+2, and T+0 or same day for only those trades that occur before 11 am ET.

Although DTCC aims to shorten the settlement cycle to T+1 by 2023, that won’t be close to what Paxos is offering under the no-action relief for a limited period of 24 months.

The T+0 settlement cycle offered by Paxos “can free up the collateral we’d have to post on an overnight basis,” Bank of America’s head of financing and clearing at Kevin McCarthy told Bloomberg. “The return-on-assets in this business would improve, which has been a challenge.”

© 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 Internal Revenue Service (IRS) has been asking questions about cryptocurrency — and now it’s formally employing the services of a crypto tax firm that’s gotten a nod from PayPal, Coinbase and other big players. 

One year ago, the tax regulator sent a statement of work to a number of crypto tax firms, seeking assistance from cryptocurrency-related tax firms. Now, the contract has been awarded to TaxBit’s parent company, Dynamic Pro, for $1.001 million, according to the IRS. The agreement is set to last one year, but TaxBit’s Director of Government Relations, Seth Wilks, says he expects the relationship to extend further. 

“I definitely foresee that this is going to be a longer-term relationship,” he said. “We’ve served the IRS in many capacities to date, helping when they have technical questions about types of transactions, whether it’s DeFi or some of the new things you find only in the crypto space.”

News of the contract followed the completion of TaxBit’s $100 million fundraise in a round backed by PayPal. In short, TaxBit is looking to be a Big Four grade firm for the crypto space.

Until now, TaxBit has served in something of a consultant capacity, as many firms in conversation with regulators do. But this contract formalizes that relationship. The IRS doesn’t have any tools at the moment to work crypto data, so TaxBit will aim to fill that gap.

“This contract is just another step forward showing that the IRS is really taking proactive measures to make sure that they are filling that knowledge gap and that they have the ability to know when they come across taxpayers with crypto that they can make good, informed analysis of that data,” said Wilks. 

And the IRS has been seeking more data. Examples include the launch Operation Hidden Treasure, a commitment to specifically find under-reported crypto, and the serving of John Doe requests to multiple crypto exchanges in order to obtain private data about potential tax avoidance. The agency has also moved its crypto question to the top of the 1040 form, where all taxpayers will see it, and it’s told Congress that a formalized crypto taxonomy for tax would help close the gap of those failing to pay up. 

But for now, TaxBit’s relationship with the IRS is more educational and resource-based. It’s not formally part of Operation Hidden Treasure and it’s unlikely it will touch any of the information from the John Doe requests, according to Wilks. TaxBit’s tools will mostly be used to audit high-volume traders and high-earning individuals. The IRS has the tools to audit a small-time crypto trader.

“If you’ve got a taxpayer with a few hundred transactions, that probably is a little bit more in the wheelhouse of one of their field agents, but when you’ve got hundreds of thousands across dozens of exchanges, that’s way outside of their internal knowledge, and so we’re hoping to fill that technical gap,” said Wilks.

Indeed, there remains a reporting problem across exchanges.

Since there’s no formalized way to report crypto income, the burden falls on the taxpayer to effectively over-report. Exchanges are migrating towards using Form 1099-B to report data, but there’s no mandate from a regulator, and without a formal standard, confusion has ensued.

While the TaxBit partnership doesn’t solve this problem, it provides the IRS an extra set of tools during audits to separate miscommunications from malfeasance. 

© 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.

Stablecoin issuer Tether is set to launch its USDT token on Avalanche, making it the ninth blockchain network it operates on.

USDT’s launch on the Avalanche network is expected in mid-June, Tether CTO Paolo Ardoino told The Block. Once launched, the stablecoin would work on nine blockchains: Algorand, Avalanche, Bitcoin Cash’s Simple Ledger Protocol, Ethereum, EOS, Liquid Network, Omni, Tron, and Solana.

Ethereum’s high gas fees have made USDT more popular on other chains, such as Tron. As The Block reported recently, USDT’s supply on Tron surpassed that of Ethereum. It is still the case as of writing. USDT’s supply on Tron stands at $31 billion, while on Ethereum, it is at around $27 billion, according to The Block’s Data Dashboard.

Ardoino told The Block that if Ethereum’s gas fees remain high on average, this trend may continue.

“Avalanche is surging in popularity,” Ardoino told The Block. “It has support for Ethereum Virtual Machine (EVM), allowing decentralized finance (DeFi) projects to migrate easily to it to enjoy lower fees, while making USDT deployment easy since we already have a battle-tested EVM compatible setup.”

When asked if Tether is looking to support more blockchain in the near future, Ardoino said there are no other blockchains in the pipeline for the time being.

© 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

• Based in Hong Kong, Genesis Block was founded in 2017 by Wincent Hung and Clement Lp.
• Aside from operating a proprietary trading desk and offering market making, the firm formed Genesis Block Ventures (GBV), a separate entity that provides investment to the digital assets sector
• In total, the GBV has deployed capital to at least 69 startups and protocols across twelve verticals, which The Block has mapped out

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this Genesis research on The Block.

The price of bitcoin has continued the drop over the weekend and reached a three-month low below $43,000 early Monday morning UTC time.

The price of the world’s largest cryptocurrency by market capitalization has plunged by over 10% in 24 hours to $43,000 as the slump continued since mid last week when Elon Musk said on Twitter that Tesla suspended accepting bitcoin as a payment method. 

Bitcoin is changing hands around $43,300 as of press time after reaching as low as $42,141 on Coinbase Pro, which is down more than 30% from its recent high of around $64,000. Data from CoinGecko shows it is right now the lowest point since early February.

The price drop since last week extended over the weekend when Elon Musk further hinted on Twitter that Tesla may sell the remaining portion of its bitcoin holdings even though he said last week that he and Tesla would hold on to their crypto holdings.

Musk’s latest twitter response also came after an increasing level of criticism by Crypto Twitter, especially by some bitcoiners, over his reversed attitude towards bitcoin, including Musk’s concern over bitcoin mining’s energy issue, which led to Tesla’s suspension of bitcoin as a payment. 

© 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.

Standard Custody received its license to operate as a New York state-chartered trust on May 4, and it’s already making a play to gate-crash the institutional custody space.

Just days after its licensing, the firm announced the close of a $53 million Series B round for its parent firm, PolySign.

Cowen Digital Asset Investment Company led the round with a $25 million strategic investment. The two will also partner, with PolySign providing digital asset custody solutions for Cowen clients through its newly licensed trust arm, Standard Custody. Blockchain.com and Race Capital also participated in the round.

Through Standard Custody, PolySign is looking to fill a gap in the custody space. While many crypto firms are attempting to build all-in-one services, with exchange, brokerage and custody housed under the same roof,  CEO Jack McDonald says Standard Custody plans to differentiate itself by focusing solely on custody-based services for institutions.

Though Standard Custody plans to expand its range of services, McDonald says it will stop short of being an exchange unlike others in the custody space.

“We think that ultimately the institutions that are wading into the space, more and more of the traditional institutional asset managers, are going to want to see a segregation of duties there between exchange activity and custody activity,” he said.

That could mean hedge funds, family offices, endowments and exchanges could make up its client base going forward, but not retail-facing activities. Others serving the retail market have expressed interest in Standard Custody’s services, mostly due to its recent licensure. It’s the first to get approval for a de novo trust application in New York, and that’s positioning it to emerge as a favorable partner for a variety of clients, according to McDonald. 

To build out custody and escrow services, Standard Custody needed to be a qualified custodian. There’s more than one way to gain the distinction, but some fit better than others. To be a qualified custodian, firms can either become a registered broker-dealer with the Financial Industry Regulatory Authority (FINRA), a futures commodities merchant regulated by the Commodities Futures Trading Commission (CFTC) or you can be a federally or state-licensed trust bank.

For firms mainly looking to custody, it makes the most sense to become a trust but it’s recently become unclear how far a trust license extends outside state borders. The Securities and Exchange Commission (SEC) is currently seeking comment on how it should view state-licensed qualified custodians in the wake of a letter from Wyoming’s regulators. On the national level, Congress is still debating how much power the Office of the Comptroller of the Currency (OCC) should have to designate digital asset firms as national trusts and therefore qualified custodians.

Still, a New York trust license from the New York Start Department of Financial Service is the gold standard of state licenses. It’s the highest barrier of the state licensure frameworks, and also has more reciprocity than other states, meaning some other states recognize the New York trust charter and don’t require an additional license. Standard Custody is the first to receive a de novo approval, meaning it’s operating a new business as opposed to converting a previous entity like Gemini and Coinbase. That’s made it more attractive to businesses looking to set up shop in the U.S. without going through onerous regulatory frameworks.

“We do have a lot of interest in our technology from some of the more retail-oriented strategics out there and specifically wanting to tap our capabilities to business in New York and more broadly in the U.S.,” said McDonald.

© 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 mid-year report from blockchain analytics firm Chainalysis published last year shows that thus far in 2021, addresses tied to ransomware attacks have hauled in as much as $81 million.

The firm stressed that the $81 million figure is “must be considered a floor for the time being, as the figure will almost certainly grow as we identify more ransomware addresses.” Per Chainlayis’s report, some $406 million in crypto payments were made to ransomware addresses in 2020, the highest figure on record.

Ransomware is malicious software that locks down a victim’s computer and files until they pay, typically in the form of cryptocurrency, for the system to then be unlocked. National headlines in the U.S. have honed in on ransomware in recent days because of the recent attack on Colonial Pipeline, a major energy transportation firm.

Colonial ultimately paid $5 million in bitcoin after its system was hit by ransomware, causing a shutdown of a pipeline system said to supply nearly half of the fuel on the East Coast U.S. Recent reports indicate that the group behind the attack, DarkSide, has since encountered problems of its own including the seizure of its servers. 

Data published last week by analysis firm Elliptic identified DarkSide’s bitcoin wallet, showing that the 75 BTC payment from Colonial was issued on May 8. That wallet also showed a $4.4 million payment made by Brenntag, a European chemical distributor, which was also affected by a DarkSide ransomware attack.

© 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.

Well-known personalities in the crypto space and hundreds of their followers have donated more than $800,000 in cryptocurrency to a child, known as J.O., who recently overcame leukemia. The donations were sent in a matter of hours this morning.

A day prior, the Twitter account “Dude’s Posting Their [Wins]” had posted a video of the child being applauded as he returned to school after beating leukemia. It went viral, gaining 50,000 retweets and nearly 500,000 likes.

Shortly afterward, a pseudonymous individual with the Twitter handle @Milkman2228 reached out to the child’s father and found out he was struggling with hospital bills. He helped the family set up an Ethereum wallet and shared the address to his Twitter following.

Crypto Twitter personality ‘Crypto Cobain’ soon encouraged his 347,000 followers to join in and send both ether and Ethereum-based tokens to J.O.’s address. (Recently, Cobain and his following have been descending on obscure Twitch streams and giving large amounts of money to the artists running them, sending $200,000 to one guitarist.)

Within a few hours, hundreds of people had joined in, sending everything from stablecoins to tokens for DeFi projects like Curve DAO and Ruler Protocol. Adam Cochran, partner at Cinneamhain Ventures, donated 25 ETH and FTX CEO Sam Bankman-Fried gave 12 ETH to the cause. In total, the account received $517,000 in ether and $292,000 in tokens.

After the donations came in, J.O.’s family set up a Twitter account, posting a picture of him holding a sign that reads, “Thank you Crypto Twitter.” The account then posted a video of him saying, “UpOnly and pump it loomdart.” These are references to Crypto Cobain’s UpOnly podcast and a saying commonly used on Crypto Twitter in relation to market movements.

Cryptocurrency is suitable for donating to charity because anyone who owns some can send it to any other address on the same blockchain. They can also do so without revealing their identity, enabling them to make donations privately. And since cryptocurrency is borderless, it lets anyone in the world take part. 

© 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 hybrid bitcoin miner and power plant Greenidge Generation Holdings says it will buy carbon offsets in an effort to become carbon neutral starting June 1.

The company also said it will redirect some of its profits into renewable energy initiatives, according to a release published Friday. 

The New York-based bitcoin mining firm has joined what appears to be a growing number of other crypto companies seeking to reduce their carbon footprint through carbon offsetting — funding ways to reabsorb excess CO2 from the atmosphere or reducing emissions, which have mixed results based on how actually effective they are in combatting climate change. 

The carbon offset projects for its 19 MW bitcoin mining capacity — from its 106 MW total — will be verified through the American Carbon Registry (ACR), the Climate Action Reserve (CAR), and the carbon emission reduction standardization company Verra. According to Greenidge’s press statement, these three carbon offset consulting agencies will help ensure the efficacy of Greenidge-funded carbon emission reduction and sequestration projects. 

Greenidge has a history of environmental action, as it has used carbon market allowances to neutralize its natural gas-powered plant emissions since 2017. However, in mid-April, Greenidge faced 150 protestors pushing back against the company’s influence on the ecology of Seneca Lake, and particularly the lake’s trout, though the NASDAQ-listed company denied any serious environmental impact. 

Greenidge did not respond to a request for comment by press time.

© 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

• Tokenized versions of shares in publicly listed companies have become popular products on a few crypto exchanges.
• How do they work? And why are regulators concerned about them?

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