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The government of the Chinese province of Yunnan has a new plan to support local blockchain development, including a move that could bolster crypto mining infrastructure in the region.

The provincial government published the plan on Friday. It outlines 10 areas that it intends to support relating to blockchain development — for instance by providing state subsidies to startups in the space for rent and talent recruitment.

One notable component of the plan is to “support blockchain new infrastructure construction,” which means accelerating the development of “base-layer blockchain service platforms” as well as “blockchain computing platforms.”

Yunnan, like the adjacent Sichuan province, has abundant hydropower resources that currently power a significant portion of bitcoin’s hash rate — albeit a much smaller portion than produced by the miners housed in Sichuan.

Data from the Cambridge Center for Alternative Finance shows that mining facilities in Yunnan accounted for 5.4% of the global bitcoin computing power as of April 2020.

Though the government’s plan doesn’t explicitly mention bitcoin or crypto mining, its release follows visits by government officials to various bitcoin mining farms in Yunnan, where they studied the farms’ interactions with the local economy, local farm managers told The Block.

The plan could be the Yunnan government’s first step towards building something similar to the state-sanctioned crypto-mining parks like those recently developed in Sichuan.

As The Block reported last year, bitcoin mining farms in China’s Southwestern Yunnan and Sichuan provinces have traditionally sourced electricity directly from hydropower plants. But the governments in Sichuan and Yunnan had been cracking down on that approach.

Still, since bitcoin mining helps consume excessive hydropower during the summer rainy season, the Sichuan government did not want to completely phase out local bitcoin mining farms, which are estimated to account for 50% of the network’s total computing power. So it established “Hydro-electricity Consumption Industrial Demonstration Zones” that are open to companies in select energy-intensive industries including bitcoin mining.

Bitcoin mining farm operators in Sichuan now have an option to reside legally in a government-approved industrial park where they can access a reliable supply of electricity. In return, The State Grid and the local government are able to generate revenue from mining farms by charging them fees for using the electricity.

© 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.

Crypto hardware wallet provider Ledger has hired a former Apple Music executive to head its non-fungible token (NFT) division.

Parker Todd Brooks, former head of dance and electronic artist relations at Apple Music, will oversee and expand Ledger’s storage offerings for NFTs.

NFTs are digital certificates tied to unique art pieces. They have grown significantly in popularity in recent months.

Specifically, Brooks will focus on bridging Ledger with the artist and NFT communities and developing NFT management products.

“You can already store your NFTs on your Ledger,” Ledger’s chief experience officer Ian Rogers, also an Apple Music alum, told The Block. “And with the rising popularity of NFTs, we have an increasing demand from people to improve the NFT experience in Ledger Live.”

Rogers did not comment on how specifically Ledger will improve the NFT experience for users, but Brooks told The Block that the firm will create “useful yet simple and beautiful products.”

“I’ve spent my career serving the artist community,” said Brooks. “And with NFTs, there is an opportunity to reimagine how art and music are created, sampled, and managed while simultaneously addressing the security issues in storing NFTs on internet-connected devices.”

Rogers said NFTs are here to stay.

“As we are living more and more of our lives at a distance, living off of Postmates, Netflix, Zoom, and Amazon Prime, is it any wonder we are turning into digital collectors?” he said. “NFTs tap into innate human traits: collecting, patronage, and sharing.”

© 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.

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© 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 Bank of Thailand will begin testing retail digital currency in the second quarter of next year, assistant governor Vachira Arromdee has said. 

Arromdee further said that the retail digital currency could be fully implemented over the next 3-5 years, Reuters reported Friday. “It will not affect the Thai financial system,” she added.

The Bank of Thailand is seeking public feedback by June 15 on the development and issuance of retail central bank digital currency (CBDC). To that end, the central bank has published a 59-page  paper laying out its approach in considering issuing a retail CBDC.

“We believe that a retail CBDC would provide a valuable option for citizens to benefit from a digital currency that is accessible, reliable and safe,” said the central bank. “It would also lay the groundwork for a safe payment infrastructure, building the foundation for interoperability and collaboration with the private sector to drive financial innovation.”

But the planned effort won’t be without its risks and challenges. Hence, the exploration of retail CBDC “must take into account policy implications, design decisions and risk mitigation measures,” said the central bank.

The Bank of Thailand has also been engaged in work on wholesale digital currency through Project Inthanon, which focuses only on interbank payments. The project has been going on since 2018 and is still in a proof-of-concept stage, as The Block’s CBDC report noted recently. The technical, regulatory, operational, and legal considerations of wholesale CBDC are yet to be explored by the project.

In the meanwhile, the Bank of Thailand has expanded its attention to a retail CBDC for the general public in anticipation that “digital currencies will play a greater role in Thailand’s s future financial landscape.”

“A retail CBDC could serve as a trusted and safe means of payment accessible by Thai households and business alike, existing alongside cash and other payment instruments,” said the central bank. “As a reliable payment infrastructure, it could help safeguard the stability of the Thai financial and monetary system in the new financial landscape.”

© 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.

Decentralized finance lending protocol Greenwood has raised $2 million in a seed round led by Polychain Capital in its bid of optimize the interest rates for borrowers.

The firm announced in a post shared with The Block that other participating investors include Blockchain Capital, Robot Ventures and Divergence Ventures.

Greenwood has also got individual contributions from Ricky Li, co-founder of crypto trading firm Altonomy and DeFi lending protocol Aave’s founder and CEO Stani Kulechov. 

Greenwood’s phase 1 of its V2 protocol, which is currently live but not yet audited, touts a set of smart contracts on Ethereum to borrow from Aave or Compound, based on whichever protocol has the lowest instantaneous annual percentage rate.

The goal is let users and dApps borrow crypto assets through DeFi at the lowest interest rate without doing the calculation of interest rates themselves.

Nathaniel Mendoza, CEO of Greenwood, said with the newly raised capital, the firm also plans to hire additional staff to help build out the next three phases of its V2 protocol. 

“Some phases will port traditional financial tools to Ethereum, while others will introduce novel functionality that is only possible on-chain,” the firm said in the announcement.

© 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 mining difficulty has posted a moderately large increase to set a new high after months of relatively slower growth.

Data shows the network’s mining difficulty adjusted to 23.14 Trillion on 2:00 UTC time Friday, constituting a 5.82% jump compared to the record on March 20. The latest adjustment is the biggest in percentage terms since January 9, which signals a more considerable amount of bitcoin mining hardware has recently hit the market and subsequently plugged in.

Indeed, the 14-day average hash rate on the bitcoin network has increased from 156 exahashes second (EH/s) on March 20 to what is now 165 EH/s. This means all the miners securing the bitcoin network are doing on average 165 million trillion times of hashes per one second to calculate the right answer for mining a new block. 

The newly-added 9 EH/s of computing power over the past two weeks is equivalent to what roughly 90,000 units of the latest generation of bitcoin mining equipment, such as Bitmain’s AntMiner S19 Pro, can deliver in total.

The spot prices of the latest batch of mining hardware have hit as much as a five-fold premium compared to their preorder prices in November due to both an increased level of demand and an ongoing global chip shortage. Subsequently, a brand new unit of the AntMiner S19 can change hands for as much as $10,000. 

In February, The Block reported that existing miners might be enjoying the slow growth of bitcoin’s mining difficulty, which significantly lagged behind bitcoin’s surging prices because small amounts of hardware were delivered to the market.

But industry players estimated at the time that the overall hash rate would see a sizable increase around Q2 as more of the preorders placed in late 2020 start to arrive.

© 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

• Retail activity in the crypto space appears to be spiking and the latest round of stimulus checks may be an important reason for that.

• The Block reached out to several crypto firms including Bitstamp, Kraken, Falcon X, and Voyager — all of which reported seeing an increase in retail investments. 

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The Internal Revenue Service (IRS) is seeking customer records from crypto firm Circle to check U.S. residents are meeting their tax obligations.

According to a Thursday statement from the Department of Justice, the tax watchdog plans to serve a John Doe summons to circle and its affiliates. The statement explicitly named Poloniex, which Circle acquired in 2018 and spun out the following year. 

Per the statement, the IRS is “seeking information about U.S. taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency during the years 2016 to 2020. The IRS is seeking the records of Americans who engaged in business with or through Circle, a digital currency exchanger headquartered in Boston.”

A John Doe summons doesn’t list the name of those being investigated and empowers the IRS to request information about taxpayers it hasn’t yet identified. It allows the IRS to obtain the names and information of taxpayers who fall in a certain group, like a list of investors, that could potentially be in violation of tax law. It requires a federal judge to sign off.

In this case, U.S. Judge Richard G. Stearns gave the green light. He found “there is a reasonable basis for believing that cryptocurrency users may have failed to comply with federal tax laws,” according to the DOJ statement.

To be clear, the IRS is not accusing Circle of any wrongdoing. The action is specifically aimed at identifying U.S. residents who are failing to fulfill tax obligations related to cryptocurency, according to the IRS and DOJ.

“The John Doe summons is a step to enable the IRS to uncover those who are failing to properly report their virtual currency transactions. We will enforce the law where we find systemic noncompliance or fraud,” said IRS Commissioner Chuck Rettig in a statement.

The IRS summons asks Circle and affiliated firms, including Poloniex, to provide information in relation to an investigation of those who “may have to comply with any provision of any internal revenue laws.” This includes records identifying U.S. taxpayers and information about their crypto transactions. 

The IRS took similar action against Coinbase in 2016, which led to a year-long court fight before the exchange finally produced thousands of customer records. 

The tax regulator has further shown its commitment to cracking down on crypto evasion in the past year, asking taxpayers if they’ve engaged in any taxable crypto transactions at the top of the 1040 form. In 2020, it sent multiple rounds of letters to crypto holders reminding them to report their taxable transactions.

© 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 securities regulators are clarifying existing regulations for crypto firms.

In a new notice published March 29, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) explored how existing regulation can be “tailored” to crypto innovation, including interim approaches for crypto marketplaces and dealers.

The lead-up

The notice comes as a collaboration between the CSA, the council of securities regulators across provinces, and the IIROC, a self-regulatory organization overseeing investment dealers. The two first published a consultation paper proposing a framework for crypto platforms in 2019. It received 52 comment letters at the time.

Canada recently approved a wave of bitcoin exchange-traded funds (ETFs), and though bitcoin is not considered a security within the framework, the CSA acknowledged that growing interest in bitcoin has driven the adoption of a variety of digital assets.

The CSA did not comment in time for publication on whether the rise of the Canadian bitcoin ETF affected the release of this guidance.

A commitment to flexibility

Within the new guidance, regulators showed commitment to flexibility with investor protections by including interim approaches for dealer and marketplace platforms. In both cases, the venues would seek registration as a “restricted” form granted they are not offering leverage or margin. In both cases, the interim approach would be time-limited with the expectation that the venue intends to transition to a long-term solution. 

If marketplace platforms perform exchange functions, they wouldn’t qualify for the interim approach. Instead, the applicable securities regulators would consider “whether recognition as an exchange or an exemption is needed
in the interim.”

It’s not yet clear how the CSA will treat clearing and settlement processes, but the agency said it anticipates imposing some terms and conditions on registrants.

“In order to provide flexibility in these cases, we will look at the specific risks presented by the clearing functions in order to determine whether a [crypto asset trading platforms] will be required to be recognized as a clearing agency or exempted from the requirement to be recognized and what terms and conditions should apply,” the notice explained.

The same rules apply

While the guidance shows commitment to fostering innovation, it reminds venues that they’re still beholden to existing regulation. It provides a framework for managing risks related to digital assets, including transparency, price discovery, insurance and custody standards. Any interim measures would only be applicable if risks and requirements are properly addressed, according to the CSA. 

The guidance didn’t reference how over-the-counter firms should interpret the notice, but the CSA said it plans on providing more clarity for those venues.

“In the future, the CSA plans to examine the regulatory framework that applies to dealers and marketplaces that trade over-the-counter derivatives more generally.”

Crypto in the room

It’s also looking to give crypto a seat at the table by including some “novel businesses” as members of IIROC. 

“IIROC recognizes the need to be flexible and foster innovation and has therefore established a path to membership for businesses or entities with novel business models, including Marketplace or Dealer Platforms that do not necessarily fit in the existing IIROC membership structure,” it said.

It acknowledged that it needs a different review process for crypto, and expects so-called “novel business models” to be granted membership with conditions and exemptions so they can get their business models up and running. This differs from how it currently admits dealers.

© 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.