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In disclosure forms for Q1 of 2021 filed on April 20, Facebook’s massive lobbying program has continued its enigmatic work in the area of blockchain policy. The Diem Association, meanwhile, has seemingly ended its lobbying efforts in the U.S. capital. 

The Switzerland-registered Diem (formerly known as Libra) Association had filed regular disclosures of a lobbying contract with law firm Skadden, Arps, Slate, Meagher & Flom — disclosures which are typically complicated for firms based outside of the U.S.

Yet the Diem Association terminated those lobbying activities at the end of 2020 and no new ones have appeared — meaning the organization should not be spending more than $10,000 a quarter on lobbying.

This is despite the fact that Diem,  which Facebook bootstrapped and unveiled in 2019, has garnered a significant degree of regulatory scrutiny. Indeed, Diem’s hiring in the past year and a half has poached talent from U.S. regulators with a particular eye to addressing perceived issues around anti-money laundering and KYC.

At the end of 2020, Diem’s team was still hoping to launch as soon as January. That has not happened, and the project has remained quiet. The Diem Association did not respond to The Block’s request for comment as of publication time. 

John Mannion, who was the point person on the Diem Association’s old lobbying contract with Skadden, Arps, Slate, Meagher & Flom, told The Block he could not confirm “who was, is, or will be a client” despite the fact that the function of lobbying disclosures is to make exactly that kind of information public.

Facebook’s involvement with Diem has been a controversial subject since the beginning of the project. Already facing broad criticism for its approaches to customer data, Facebook’s attempted entry into financial services seemed to many in Congress as a bridge too far. Consequently, Facebook played down its role within the Libra Association, even as the original vision of a 100-member council — an effort to democratize power away from the social media giant — soon splintered.

At the same time, Facebook’s lobbying continues. This is no surprise: the firm is one of the largest spenders on lobbying in the U.S. Particularly noteworthy, however, is Facebook’s contract with FS Vector, a fintech-focused lobbying firm.

At $200,000 per year, the FS Vector contract with Facebook is one of the more lucrative in the blockchain world. Despite that, it provides almost no details, identifying the focus as: “Issues related to blockchain policy.”

Unclear is what those activities are in specific practice or whether there is any tangible overlap between Facebook’s efforts and those previously undertaken by the Diem Association. 

The contract goes through Peter Freeman, a principal at FS Vector who also handled lobbying for Ripple and still works with Square. Neither Freeman nor FS Vector had responded to The Block’s requests for comment as of publication 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.

Bitcoin’s hash rate is on track to regain recent loss as miners in China’s Xinjiang province are gradually plugging in machines again.

Several local bitcoin mining farm operators shared with The Block that some – but not all – of their facilities in parts of Xinjiang have begun to regain power starting today. This development comes as a recent security inspection concludes region by region.

But since Xinjiang is a vast territory, the power resumption process will happen gradually before it can fully reach the level seen prior to the recent coal mine accidents.

Thomas Heller, a former director at Chinese mining pool F2Pool and now heads the business development at Compass Mining also shared on Twitter that “mining farms in Xinjiang are gradually turning power and machines back on from today. It has already started.”

Real-time hash rate data from mining pool APIs analyzed by The Block on a daily basis shows the network’s computing power has climbed up over the past 24 hours with a caveat that luck plays a bigger role in a relatively shorter timeframe.

For instance, the average hash rate decline among most bitcoin mining pools as of now is at 13% compared to the level before April 16. But the decline was around 20% as of Wednesday.

On the other hand, the overall hash rate percentage decline among Chinese mining pools was good news, at least for the past days, for overseas competitors like Slushpool or Foundry USA, both of which gained some market share this week.

China dominance fading

The Block reported on April 16 that following serious coal mine accidents in China’s Xinjiang, Shanxi and Guizhou provinces, the Chinese government directed local coal-based power stations to conduct inspections of security measures.

As a result, although the data centers in Xinjiang, including bitcoin mining farms, didn’t have security issues themselves, they had to shut down due to the power cut. Local farm operators said last week that they expected the inspection process to be completed in about a week.

China is currently in what’s called the dry season, which spans from October to May. During this period, there is limited hydro-power resources in the southwestern region of the country so a majority of the bitcoin miners would migrate to coal-based provinces such as Xinjiang.

As a result, bitcoin’s three-day moving hash rate after April 16 declined by 16%, data seen on April 18 showed. The seven-day moving average over the past week further extended the drop to around 20%.

Mustafa Yilham, who heads the overseas business at Bixin, one of the longest-running bitcoin wallet and miner firms in China, said this data also sheds light on how the hash rate dominance inside China has declined significantly compared to previous years.

“Right now in China, it’s still [the] dry season, so the majority of the mining operations (>80%) are still taking place in Xinjiang region,” Yilham said on Twitter. “So if estimated 80% of the mining in China was located in Xinjiang as of last week, and 80% of them were shut down and it only affected 20-25% of the network, that means hashrate in China is currently around 32-40% at most.”

That also means the power cut collectively caused Xinjiang miners a significant opportunity cost. With 20% of the global bitcoin computing power, for each of the days they had to shut down operations, they could have mined – in theory – one-fifth of bitcoin’s 900 BTC daily block subsidies excluding transaction fees.

© 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.

Ethereum’s price has hit new all-time-highs over $2,550 on Coinbase Pro.

The price of the second-largest cryptocurrency by market capitalization jumped above the $2,500 level for the first time around 10:30 UTC on Thursday.

The price growth continued and is changing hands around $2,560 as of press time, which represents a 13% increase over the past 24 hours. 

Data from CoinGecko shows that Ethereum’s market capitalization is around $297 billion, nearing the $300 billion threshold.

© 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.

Customers of a Turkish crypto exchange named Thodex have filed a complaint against the company alleging fraud.

According to a Bloomberg report, a lawyer representing the customers – who had earlier complained about being unable to access their funds – alleges that Thodex’s founder and CEO Faruk Fatih Ozer has fled the country and that hundreds of millions of dollars may have been stolen.

The lawyer, Oguz Evren Kilic, told Bloomberg he had filed a legal complaint on April 21.

Thodex, which launched in 2017, abruptly halted trading yesterday, leaving its 390,000 active users stranded. According to reports, a statement on its website said the exchange had temporary closed to allow outside investment to “serve clients better,” and that it would remain closed for five working days. Exact details of the investment were not specified, however, and the Thodex website is currently inactive.

As to the whereabouts of Ozer, Demiroren News Agency has claimed in a report that he flew to Tirana, Albania, on April 20.

© 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.

Indian crypto exchange CoinSwitch Kuber has raised $25 million in a Series B funding round.

The round was backed by a single investor — Tiger Global Management — marking its first investment in an Indian crypto firm. Tiger invested at a valuation of over $500 million, said CoinSwitch.

CoinSwitch’s Series B comes just three months after it raised $15 million in Series A led by Ribbit Capital and Paradigm. When asked why raised again so soon, Sharan Nair, the chief business officer of CoinSwitch, told The Block that the exchange is witnessing a “hyper-growth” stage and needed funds to “quickly scale and attain greater growth and reach to the likes of Coinbase.”

It is worth noting that Tiger Global is an investor in Coinbase who poured in $500 million in the U.S. crypto exchange operator in October 2018. Nair told The Block that Tiger would provide its expertise to CoinSwitch as it did to Coinbase on its growth plans.

With fresh capital at hand, CoinSwitch looks to scale its platform from technology and security viewpoints, grow its team and its user base.

CoinSwitch claims to have 4.5 million users currently and aims to onboard 10 million more users by the end of this year. As for growing its team, the exchange looks to more than double its headcount from current around 135 to around 300 in the near future, Nair told The Block.

“We are hiring in tech and product functions mostly,” he said.

CoinSwitch also plans to set aside a “substantial sum” towards brand building and increasing awareness around cryptocurrencies. Further, the exchange looks to offer trading in other asset classes. When asked if equity is on the list, Nair told The Block that “most common asset classes” are under consideration, but the plan is still “very early in the evaluation stage.”

“We would explore more asset classes so users can diversify their investments in the right balance,” he said.

The Series B brings CoinSwitch’s total funding to date to over $40 million and its post-money valuation to $525 million, Nair told The Block.

CoinSwitch’s raise comes at a time when India is reportedly looking to ban cryptocurrency usage. Nair recently told The Block that CoinSwitch is hoping the Indian government won’t take such a move, but it is “preparing for the worst.”

If a ban is enacted, “the only option we would have left is to move our base and serve a different country altogether,” he told The Block last 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.

Quick Take

• Founded in 2015, Digital Finance Group (DFG) is a blockchain and digital asset investment firm that operates out of San Francisco, California
• The firm currently manages investments over $550M AUM across three funds: a token fund, an equity fund, and a fund dedicated to the Polkadot ecosystem
• In total, the firm’s portfolio consists of at least 70 startups and protocols across thirteen verticals, which The Block has mapped out. 

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.

Crypto exchange Binance is reportedly under the lens of European regulators for its stock token offering that was launched last week.

The Financial Times reported the news on Thursday, saying that European regulators, including the U.K.’s Financial Conduct Authority (FCA), are examining whether Binance complied with security rules before launching trading in stock tokens.

The FCA told the FT that it is working with Binance to understand the offering, the regulations that may apply to it, and how it is marketed. The regulator further said that “firms and their senior management teams are responsible for determining whether their products and services fall within the remit of the FCA.”

Germany’s financial regulator BaFin declined to comment on any potential examination but told the FT that if tokens are transferable, can be traded on a crypto exchange, provide dividends, and are cash-settled, they represent securities. And firms offering them are required to publish a prospectus.

Binance offers trading in stock tokens via German financial services firm CM-Equity, which is a regulated entity. CM-Equity told the FT that the product is compliant and works as a certificate for a total return swap.

The firm further said that a prospectus was not required because tokens are not transferable to other customers and are settled in Binance’s own stablecoin, BUSD, rather than cash.

Binance, on the other hand, said stock tokens do not give the same voting rights that equity shareholders get. And as traders can buy and sell stock tokens from and to CM-Equity, it does not require a prospectus, said Binance.

Binance rivals FTX and Bittrex Global also offer trading in stock tokens via CM-Equity. It is not clear whether the two crypto exchanges are also under examination of European regulators. The Block has reached out to FTX and Bittrex Global and will update this story should we hear back.

Binance could also come under scrutiny by Hong Kong regulators, suggests another report. The South China Morning Post reported Wednesday that Binance is marketing its stock token product in Hong Kong, and the campaign could be deemed a regulated activity that requires a license in Hong Kong. Binance does not have any such license in the city, according to regulatory records, per the report.

© 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.

Once the poster child for the Wild West of bitcoin derivatives trading, BitMEX announced Wednesday night its intensions to gate-crash a wide range of new businesses under a regulatory compliant mission.

In a blog post shared with The Block, the Seychelles-registered futures trading venue said it would expand beyond its bread and butter derivatives business, adding spot, brokerage, custody and information services to its product offering. The announcement comes after the exchange rolled out a user verification program to KYC all of the users on its platform. 

The exchange underwent a leadership change last year after several of its executives—including its previous CEO Arthur Hayes—were charged with violating the Bank Secrecy Act. 

Under the leadership of CEO Alexander Höptner, a veteran of the European stock exchange world, the firm fast-tracked user verification and is now moving into these new businesses. In an interview with The Block, Höptner declined to give a specific timeline for each new offering but said the overarching goal is to be “the largest, regulated crypto derivatives exchange.” A blog post said those new businesses could arrive over “the coming months and years.” Höptner said the firm will also expand its derivatives business and will launch new products, including options. 

In a sense, the company is following the lead of US-based crypto exchanges. Coinbase, for instance, offers products across custody, brokerage, and spot. Gemini, another US exchange, offers settlement, custody, and retail brokerage services. 

As for BitMEX, the firm’s plan could help breathe new life into its once dominant business. Since the last bull market, BitMEX’s market share has dwindled despite being the pioneer of the popular perpetual swap and high product leverage. Still, the firm’s volumes have steadily grown over the past two quarters, as shown by The Block’s data. 

Höptner said the firm can continue to grow its business by serving as a center of information for regulators and clients alike through a new academy service. The project—which doesn’t have a set launch date—will provide educational content on crypto trading and derivatives. 

“We need to bring more transparency to regulators,” Höptner said. “The way crypto exchanges work with their margin systems is different from the traditional world. The risk is not comparable. Ultimately it is up to us, and this is why we want to have an academy, to explain it.”

Still, it is not clear which agency will be the firm’s primary regulator will be. “At this point, I can not share more on that,” Höptner said. 

Höptner does expect the firm to expand its headcount over the next year and said he’s not ruling out a wide-range of capital raising measures. 

“We are very interested in monitoring the IPO side, SPAC side, and tokenization,” he said. “You have to evaluate everything.”

© 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.

Apex Clearing facilitates more than 1.7 million trades a day as the clearing and custody firm behind hundreds of fintech trading platforms.

The firm, which entered the crypto market in 2019, provides more than 200 companies, including the likes of Stash, Public.com, and WeBull, with the technology to clear stock trades. At one point Apex also powered Robinhood’s platform before the California-based firm launched its own clearing solution.

On the crypto side, Apex Crypto helps brokers create their own crypto trading products. That business touches more than 1 million retail clients today.

This past weekend, Apex began supporting Dogecoin, unleashing the meme-coin on more than 13 million end-clients. It was good timing considering the price of the coin has whipsawed as retail traders turned their attention toward that particular cryptocurrency market. 

In this episode of The Scoop, Apex Clearing CEO Bill Capuzzi talks about the growth of its crypto business, what drew it to the dogecoin market, and why stockbrokers will ultimately break into the non-fungible token (NFT) space. 

“We opened close to 150,000 accounts since we announced and launched Dogecoin from Saturday until today,” Capuzzi said, adding:

“They’re hearing it from their end customers. Right. So the end customers are raising their hands and saying, hey, we’d like access to Dogecoin through WeBull, and WeBull is leveraging Apex on the backend.”

© 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.

Forget about the ASICs or GPUs: Chinese crypto miners are now aiming their speculative forces at hard drives.

Multiple hardware news outlets have reported recently that the rise of investment by Chinese users into the Chia network mining has led to a price surge of hard drives, especially ones that are enterprise-grade with large storage volume.

Data from Manmanbuy.com, a Chinese mobile app that tracks historical prices of goods sold on e-commerce sites such as Taobao or JD.com, shows that the prices of various models of hard drives have been flipped by as much as 100% since early this month.

For instance, the screenshot below shows how the price for Western Digital’s 12 terabyte (TB) hard drive has gone up from 2,499 yuan ($372) to 3,599 yuan ($537) on JD.com in the past few days. The same model (WD120EFAX) on Amazon.com, is still at $347.

Meanwhile, enterprise-grade hard drives with 12 terabyte storage made by Seagate, another major manufacturer, are being quoted at $835 on JD.com, which has almost doubled within just days.

Other electronic device dealers are also showing “sold out” for the same Western Digital model on their JD.com online shops. But according to reports by Chinese crypto media BlockBeats and business publication Time Finance, it appears that there are plenty of hard drives on the market but dealers are just hoarding the stocks in order to flip the prices.

In a sign of the times, “hard drive price surge” has already become a topical search item on Chinese social media Weibo. Based on Weibo user comments seen by The Block, non-crypto users are complaining that crypto miners already drove up the prices of GPUs — and are now moving into the hard drive market.

Plotting and farming

Chia is a decentralized storage network founded in 2017 by Bram Cohen, who’s also behind the peer-to-peer BitTorrent protocol. The network launched the mainnet for mining on March 19 but on-chain transactions won’t be enabled until May 3, the project’s website shows. 

As such, there’s no liquidity of XCH, Chia’s native cryptocurrency, on centralized exchanges but that hasn’t stopped miners from changing hands through over-the-counter desks in China. Bids and asks seen by The Block on chat groups show XCH’s OTC price has gone up to around $200.

The idea behind Chia is similar to that of Filecoin, which uses the so-called proof-of-space and proof-of-time to replace the proof-of-work consensus that‘s under bitcoin so that mining on Chia or Filecoin is not energy-intensive.

Similar to sealing data on Filecoin, Chia mining also has two steps: plotting and farming. It works like this: investors need to plot a minimal file size of 101 gigabyte (GB) by using a hard drive, ideally a solid-state drive (SSD), to read and write about 2 terabyte of data and then save the file’s final directory at a normal hard disk drive (HDD); after that, a plot is created and can then be used to farm XCH. 

It may vary for different models, but SSDs typically have a so-called wear life in that they can only perform a limited number of erase cycles before becoming unreliable. That means they can only perform the plotting process for certain times since it involves rewriting data for new plots.

And since it takes at least hours to plot a plot, the early-mover advantage becomes obvious, which led to participants to buy more hard drives sooner than later.

Indeed, Chia blockchain explorer shows that since the mining mainnet launched in March, the space allocated to the network has more than four-folded to over 450 pebibyte (PiB) as of writing. Due to the increasing level of competition, the theoretical farming rewards per day for 1 tebibyte of plots have dropped from 0.03 earlier this month to now 0.019 XCH.

© 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.