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After a denial last month, a federal court in the Northern District of California has authorized the Internal Revenue Service (IRS) to serve an information request to Kraken. The IRS will serve the crypto exchange with a John Doe summons, which requests user information to identify crypto holding taxpayers.

The Department of Justice announced the authorization today. The request will seek information about U.S. taxpayers who conducted at least $20,000 in crypto transactions from 2016 to 2020. The IRS is seeking the information to root out those who aren’t reporting their crypto holdings.

“There is no excuse for taxpayers continuing to fail to report the income earned and taxes due from virtual currency transactions,” said IRS Commissioner Chuck Rettig in the announcement. “This John Doe summons is part of our effort to uncover those who are trying to skirt reporting and avoid paying their fair share.”

Kraken is not accused of any wrongdoing. A John Doe Summons requires a judge’s approval because it allows the regulator to request non-public information about taxpayers who have yet to be identified.

The IRS didn’t get that approval at first. The tax agency first made the request in early April, but the court responded by saying the government’s request was “overbroad.” The court then mandated that the IRS refile with narrowed scope, with that new request being accepted by the court, thus allowing the IRS to move forward serving Kraken.

Coinbase fought a similar request from the IRS in 2016 when it contended the regulator’s request was overbroad. Kraken has not responded to requests for comment on how it plans to handle the coming summons.

© 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.

Traders on FTX have been longing logs. 

During the market debut of a new contract tied to lumber, the price of the new cash-settled contract surged above $800 from around $760 earlier in the trading session.

The launch comes as lumber demand surges. As noted by Fortune, the price of lumber has surged by more than 280% thanks to “pure panic” as builders “scramble for supply.”

On Wednesday, Lumber futures rallied above $1,500 for the first time ever, as reported by Bloomberg News. 

Since launching this morning, the market saw more than $4.6 million in trading volume, according to data reported by FTX. 

FTX is known for offering products in unique assets outside of the crypto market, including pre-IPO contracts in companies ahead of their market debut. The firm, for instance, offered contracts in Airbnb and Coinbase ahead of their respective market debuts. 

To be sure, $3 million in trading volumes is a tiny fraction of the turnover FTX sees in its crypto market. And therefore is a much smaller revenue opportunity for the firm. 

Still, the contract is only available in a select few regions for trading, including Australia and Russia. It is not available in the US or European Union. 

But FTX CEO Sam Bankman-Fried made it clear it’s available in one place with demand for lumber. 

© 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.

Square hauled in $3.51 billion in bitcoin revenue during 2021’s first quarter, according to Thursday’s earnings release.

That resulted in $75 million in gross profits during the same period. On a broader scale, Square said it made $964 million in gross profits for the period, meaning that the gross profits from its bitcoin offering contributed 7.7% to the total. The Q1 total exceeds Q4 2020’s total of $1.76 billion in bitcoin revenue. 

“Bitcoin revenue and gross profit benefited from a year-over-year increase in the price of bitcoin, bitcoin actives, and growth in customer demand. In future quarters, we recognize that bitcoin revenue may fluctuate as a result of changes in customer demand or the market price of bitcoin,” the firm said in materials published.

This story is developing and will be updated with additional information.

© 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.

Goldman Sachs has moved to offer derivatives products tied to the price of bitcoin to its clients, according to Bloomberg.

The derivatives in question are non-deliverable forwards, which are contracts between two parties that agree to settle at a certain date the difference between the spot price and the contracted price. In essence, these NDFs allow Goldman clients to speculate on the price of bitcoin.

The contracts pay in cash, and on Goldman’s side, the firm “protects itself from the digital currency’s famous volatility by buying Bitcoin futures in block trades on CME Group Inc. using Cumberland DRW as its trading partner,” per Bloomberg.

According to the report, Goldman quietly began offering these derivatives to its clients last month. In 2018, the New York Times reported that Goldman was planning to create non-deliverable forwards tied to bitcoin.

That Goldman has moved in this direction is unsurprising, given reports in late March that the Wall Street megabank was looking to offer bitcoin-centric investment vehicles to its wealth management clients. The scope of those offerings includes derivatives, as reported at the 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.

Goldman Sachs has moved to offer derivatives products tied to the price of bitcoin to its clients, according to Bloomberg.

The derivatives in question are non-deliverable forwards, which are contracts between two parties that agree to settle at a certain date the difference between the spot price and the contracted price. In essence, these NDFs allow Goldman clients to speculate on the price of bitcoin.

The contracts pay in cash, and on Goldman’s side, the firm “protects itself from the digital currency’s famous volatility by buying Bitcoin futures in block trades on CME Group Inc. using Cumberland DRW as its trading partner,” per Bloomberg.

According to the report, Goldman quietly began offering these derivatives to its clients last month. In 2018, the New York Times reported that Goldman was planning to create non-deliverable forwards tied to bitcoin.

That Goldman has moved in this direction is unsurprising, given reports in late March that the Wall Street megabank was looking to offer bitcoin-centric investment vehicles to its wealth management clients. The scope of those offerings includes derivatives, as reported at the time.

On Wednesday, Goldman Sachs 

© 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.

Sotheby’s is hosting its second non-fungible token (NFT) sale, the major luxury auction house announced Thursday. 

The curated NFT sale, titled “Natively Digital,” will feature work from several prominent artists, including the first-ever, minted NFT “Quantum” by Kevin McCoy, “Alien,” a CryptoPunk created by crypto studio Larva Labs, and “The Shell Record,” by generative artist Anna Ridler. 

The sale will take place from June 3-10. A portion of the proceeds from the sale will be donated to the Sevens Foundation, a non-profit that works with digital artists and younger artists to promote new art mediums like NFTs. Additionally, the artists highlighted will donate part of their profits to organizations focused on helping crypto artists, like the Mint Fund. Buyers will have the option of paying with fiat or cryptocurrency (both Bitcoin and Ethereum). 

“From the avant-garde crypto native creators to the generative, conceptual and the pop/futurist digital artists, the collection showcases some of the most brilliant creators to emerge from the crypto art space, as well as early pioneers of the digital art movement,” said Michael Bouhanna, a contemporary art specialist at Sotheby’s. 

According to the announcement, buyers will be able to view the pre-sale exhibition at Sotheby’s headquarters in London, New York, Hong Kong, and “across the metaverse.” Sotheby’s claims this is the largest multi-venue NFT exhibition thus far. 

The announcement of the sale comes less than a month after the auction house sold its first NFT, “The Fungible” by popular anonymous artist Pak for nearly $17 million. 

© 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.

Gary Gensler, the newly-named chairman of the Securities and Exchange Commission, is asking Congress to make some key decisions around crypto regulation. 

While testifying during a May 6 hearing of the House Financial Services Committee on market volatility surrounding GameStop and other meme-ified securities, Gensler fielded a question from Ranking Member Patrick McHenry about concrete steps “to further the crypto market.”

“This market, which is close to $2 trillion, [the] crypto-asset market, is one that could benefit from greater investor protection,” Gensler commented, remarking:

“I do think that working with Congress, and I think it’s only Congress that can really address it, it would be good to consider…whether to bring greater investor protection to the crypto exchanges. And I think if that were to be the case, because right now, the exchanges trading in these crypto-assets do not have a regulatory framework either at the SEC or at our site agency, the [CFTC], that could instill greater confidence.

“Right now, there’s not a market regulator around these crypto exchanges and thus there’s really not protection against fraud or manipulation,” Gensler went on to say.

The crypto community has been watching Gensler’s term at the SEC with great interest, largely because his resume includes more extensive crypto experience than his predecessors. 

Gensler is also laying the groundwork for new reports on manipulation of capital markets via social media, as well as the prospect of same-day (or T+0) settlement.

“It will take a lot of work by many parties, we now have the technology to further shorten the settlement cycles, not only to the settlement cycle we had a century ago, but even to same-day settlement,” said Gensler “I believe shortening the standard settlement cycle could reduce costs and risks in our markets. I’ve directed the SEC staff to put together a draft proposal for the Commission’s review on this topic.”

When it comes to T+0, Gensler finds himself on the same side as Robinhood CEO Vlad Tenev, who has consistently argued that a shortened settlement time could have averted the drama surrounding Robinhood earlier this year as GameStop and other meme-friendly stocks saw their values rise sharply.

Gensler further noted that the SEC was paying more attention to the interactions between social media and market behavior. Institutional tools measuring social media responses can create a dangerous feedback loop. As Gensler said:

“This practice, called sentiment analysis, has picked up steam in the last couple of years, and it has grown to include online communities. With that comes the risk that nefarious actors may try to send signals to manipulate the market. This is an area for which we will continue to deepen our understanding, resources, and capabilities.”

Among legislation on the table at Thursday’s hearing is one bill that would require the SEC to report on the role of “gamification” in investment. Gamification, the bill suggests, is a form of marketing that, when it touches on investments, may feature elements on investment advice.

© 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.

Bank of England governor Andrew Bailey has a blunt message for those investing in crypto: “Buy them only if you’re prepared to lose all your money.”

Speaking at a press conference on Thursday, Bailey said he sees no intrinsic value in crypto. “I’m afraid they have no intrinsic value,” he said. “And it doesn’t mean to say that people don’t put a value on them because they can have extrinsic value. But they have no intrinsic value.”

Bailey also doesn’t like the words crypto and currency together. He said he wants to use a “more neutral” phrase, “crypto assets.”

Bailey has since long been a crypto critic. Last year, he made similar remarks: “If you want to buy bitcoin, be prepared to lose all your money… [bitcoin] has no intrinsic value.” Earlier this year, he said crypto isn’t suitable for payments.

Meanwhile, The Bank of England is exploring its own digital currency. Last month, the central bank, together with HM Treasury, created a joint task force to assess the possibility of launching a digital pound. If approved and issued, the U.K.’s digital currency would exist alongside cash and bank deposits rather than replacing them.

© 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.

Public records indicate that the U.S. Office of Foreign Assets Control, which is part of the Treasury Department, is on the hunt for blockchain analytics capabilities. 

Details of OFAC’s interest in this area were revealed in a May 4 “sources sought” notice, which is used by federal agencies to garnered interest from would-be contractors. Per the notice, OFAC is looking for “one to two tools that provide access to five (5) users each, either as individual licenses or one concurrent license.”

As the notice outlines:

“The Department of the Treasury’s Office of Foreign Assets Control (OFAC) requires one or more commercial online blockchain tracing tools—depending on available funding. These tool(s) will be used to prepare investigators in OFAC’s Office of Global Targeting (OGT) group to analyze and track virtual currency transactions, e.g. Bitcoin, in order to gather attribution information on involved parties that OGT may put on the SDN List. These tools will be used specifically to support cyber sanctions implementation undertaken by OFAC. More than one tool is preferred, in order to corroborate attribution of cyber actors, sufficient to meet legal requirements for use as evidence in OFAC designations determinations.”

Additionally, the notice outlines specific features that it would need: “address clustering, transaction flow mapping and graphing, wallet explorer, analysis of user behavior, and exchange rate, trade, and market data.”

“All responsible sources may express their interest and provide capability statements in response to this notice. The deadline for submitting capability statements in response to the Sources Sought Notice is May 25, 2021, by 2:00pm EDT,” the notice concludes.

That OFAC would be on the lookout for blockchain analytics tools is perhaps unsurprising, given recent moves out of the office in recent months, including address-specific sanctions aimed at cyberattacks and election interference from Russian government-tied entities.

© 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.

Burnt Finance, a Solana-based non-fungible token (NFT) minting and auction protocol, has raised $3 million in a seed funding round.

The funding was secured via a private token sale round, Burnt Banksy, the pseudonymous founder of the project, told The Block. The round was led by Alameda Research, with participation from Multicoin Capital, Mechanism Capital, DeFiance Capital, Polygon COO Sandeep Nailwal, among others. Burnt Finance was incubated by Injective Protocol.

With fresh capital at hand, Burnt Finance plans to speed up the protocol development and launch new NFT collaborations “with a number of prominent artists,” Burnt Banksy told The Block.

Burnt Banksy is best known for burning and creating an NFT of an original Banksy piece, “Morons,” earlier this year and selling it for nearly $400,000 on the OpenSea platform. Banksy is a popular graffiti artist whose painting, “Love Is In The Air,” is going on an auction next week at Sotheby’s, and the auction house will accept bitcoin and ether for a physical artwork for the first time.

Besides NFTs, Burnt Finance plans to also support synthetic assets through its Solana-powered minting and auction protocol. The protocol is currently in the beta phase and is expected to launch in Q3 2021.

“We believe in the potential of the crypto auctions, and with Burnt Finance strive to address the needs of the market, launching the first fully decentralized auction protocol built on Solana,” said Burnt Banksy.

© 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.