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Quick Take

• Founded in 2018, Delphi Digital produces analysis and research on the digital asset markets, provides consulting to token projects, and operates a podcast and an investment venture arm
• Themes/verticals within the sector that the firm has been most focused on have been decentralized finance (DeFi) and productive non-fungible tokens (NFTs)/Gaming
• In total, the firm’s active portfolio consists of at least 34 startups and protocols across six verticals, which The Block has mapped out

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Crypto firm Ripple has agreed to acquire a 40% stake in Asian payments specialist Tranglo. The transaction is subject to regulatory approvals is expected to occur sometime this year.

The planned investment is aimed at expanding the reach of Ripple’s On-Demand Liquidity (ODL) service in Asia, which uses XRP for cross-border transactions.

Ripple said Tranglo would play a “critical” role in supporting its existing ODL corridors, such as the Philippines, and introducing new ODL corridors in the Southeast Asian region.

“Southeast Asia’s payments landscape is highly fragmented. Each country comes with its own unique process and payments infrastructure — the lack of a standard integration for regional cross-border payments currently requires expensive workarounds,” said Ripple. “This partnership will see both companies combine their in-depth local expertise to address the challenges associated with cross-border payments.”

The news comes about a week after Brooks Entwistle, a former executive at Goldman Sachs and Uber, joined Ripple as its managing director of Southeast Asia.

Tranglo is based in Malaysia and has processed over 20 million transactions totaling $4 billion in value since its inception, according to its website. The firm has offices in Kuala Lumpur, Singapore, London, Jakarta, and the UAE.

Ripple continues to focus on its business outside the U.S. since the company and two of its executives have been sued by the U.S. Securities and Exchange Commission for allegedly selling XRP without registering it as a security with the agency.

© 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 U.S. Securities and Exchange Commission has filed a lawsuit against New Hampshire-based crypto startup LBRY Inc., accusing the company of selling unregistered securities in the form of its token.

LBRY operates a decentralized content publishing platform. According to the company, the firm’s in-house tokens, dubbed LBRY Credits, are used as part of the platform to publish and buy content. 

The SEC’s lawsuit contends that LBRY Credits are securities and that the firm’s sale of these credits constituted an unregistered offering to investors. 

“According to the SEC’s complaint, from at least July 2016 to February 2021, LBRY, which offers a video sharing application, sold digital asset securities called “LBRY Credits” to numerous investors, including investors based in the US,” the SEC said in a statement published Monday. “The complaint alleges that LBRY did not file a registration statement for the offering, and that the offering failed to satisfy any exemption from registration.”

The SEC further said that the firm “received more than $11 million in U.S. dollars, Bitcoin, and services from purchasers who participated in its offering.” A copy of the complaint can be found here.

LBRY framed the lawsuit as a broader attack on the U.S. crypto industry, an approach that mirrors those taken by messenger app Kik and, more recently, distributed ledger firm Ripple.

“The Securities and Exchange Commission has filed a complaint against LBRY Inc alleging that all distributions of LBRY Credits by LBRY Inc are unregistered securities offerings,” LBRY wrote in the FAQ section of a website it launched in the wake of the lawsuit’s filing. “This claim is a tremendous threat to the entire cryptocurrency industry.”

In the FAQ, LBRY indicated that it had been the subject of an SEC inquiry for three years.

“LBRY Inc has been preparing to fight this case for three full years, which is how long the SEC has been investigating this matter. We wanted to tell you sooner, but transparency in ongoing investigations is not welcomed by the SEC,” the firm wrote.

© 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

• The Internal Revenue Service (IRS) has made it clear it’s looking to crack down on crypto with a number of actions aimed at tracking taxable crypto activity in the U.S.
• The lack of standards on which forms exchanges need to send to the IRS has created additional headaches as the IRS takes a closer look at crypto-using tax payers.
• Tax professionals say Form 1099-B has emerged as the best option for crypto reporting.

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On March 29, decentralized lending startup Liquity announced the completion of a $6 million Series A investment round.

In a blog post on the funding round, founder Robert Lauko wrote that “[t]his investment round will allow us to continue pursuing Liquity’s mission of improving access to on-chain borrowing, removing interest rates, and minimizing governance in DeFi.” 

As to the specific plans for the latest funding, Lauko told The Block that “we’re committed to keep improving our UI launch kit (that we are providing to third parties) by making it more user-friendly and accessible to a broader public.” 

Investment firm Pantera Capital led the round, with participation from Nima Capital, Alameda Research and others.

Similar to MakerDAO, Liquity’s LUSD stablecoin depends upon crypto deposited as collateral in order to distribute a token pegged to the US dollar. The protocol first gained prominence last spring, around the same time that a sudden plunge in ETH’s price resulted in mass liquidations on MakerDAO’s platform.

The problem? According to the people behind Liquity, over-collateralization. The platform boasts a collateralization ratio of 110%, as compared to Maker’s 150%. Liquity’s founders also claim its use of a separate LQTY token to stabilize the riskiest loans on the protocol gives it an edge.

LUSD is scheduled to launch on April 5, according to the team. The current funding round focused on the sale of LQTY, the total supply of which is capped at 100 million,  Lauko said. Including the current funding round, Liquity has allocated 33,902,679 LQTY to investors.

Monday’s announcement follows a $2.4 million seed round in September. 

Disclosure: Pantera Capital is an investor in The Block.

© 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 Oakland Athletics baseball team typically rents out its full-season luxury viewing suites for $64,800. But until April 1, the suites will be available for the price of one BTC. 

“We heard from our fans that they’re interested in paying in crypto,” Dave Kaval, president of the team, told Bloomberg on Monday. “So we said, ‘Hey, let’s take one of our products — our suites, put it on sale for one Bitcoin, and see if we get any takers.’” 

Kaval says that while the team had over 100 inquiries regarding the luxury suites and COVID-10 safety procedures, no one has offered to pay in bitcoin. “We have till next Thursday to get people on board,” he said. “I’m hopeful we get two or three.”

The team plans to hold on to any BTC earned rather than sell it upon receipt. “We’re gonna hold it,” Kaval said. “We’re believers in it.” 

If there is enough interest in paying for the suites with Bitcoin, the team plans to add other forms of crypto as payment options down the line. Kaval said the Oakland A’s are also in support of making NFTs of their players, specific plays, and other aspects related to the team. 

“We’re looking to break some new ground in baseball and sports,” Kaval said. “And that’s really been a great area for us to try new things in Oakland.”

© 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.

Montana’s securities regulator ordered the operator of Forsage, an investment scheme built on Ethereum and widely viewed as a pyramid scam, to stop its work within the state. 

The developments signify the first such action in the U.S. against Forsage, a so-called “online marketing matrix program.” Participants make money depending on how many successful referrals they make — a strategy that echoes a Ponzi scheme, by which earlier investors are paid out with the proceeds taken from newer ones.

Forsage apparently attracted the attention of the Securities and Insurance Office of the Montana State Auditor, with Commissioner Troy Downing ordering a cease-and-desist on March 22.

“Forsage does not try to hide the fact they are a pyramid scheme. Members must pay with Ethereum cryptocurrency to the person above them to buy a position on the pyramid. The currency used to buy the position goes directly to the participant above,” the agency said.

A request for comment sent to the Montana regulator was not returned by press time, including specifics on the scale of Forsage’s operations in the U.S. state. 

In September, Forsage was subject to a similar cease-and-desist order from government officials in the Philippines, the scheme’s country of operations. At the time, the Philippines’ Securities and Exchange Commission similarly identified Forsage as a classic pyramid scheme posing as a crowdfunding platform. Since that heightened scrutiny began, Forsage has seen its volumes collapse, according to information published by DappRadar.

But even before authorities got involved, the crypto world identified malicious projects including Forsage as problem points amid spiking gas fees on the Ethereum network last spring.

© 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.

An array of regulators from the United States and the European Union met to discuss financial innovations, including green finance and the ever-pressing topic of stablecoins.

In a March 29 announcement, the U.S. Treasury said that a virtual forum last week hosted all of the heavy hitters of the EU and U.S. financial apparatus, including their respective central banks, securities regulators and banking authorities.

The agenda for the meetings skewed heavily towards the latest technological developments in finance. The Biden administration’s interest in centering climate change as a financial risk played heavily in the Treasury’s description of the event. The impact of the COVID-19 pandemic on finance also loomed large. 

While climate change and the pandemic have been critical areas for global cooperation for a long time, the agencies also seem to have elevated digital asset regulation to a global priority. The Treasury wrote: “Participants also exchanged views on recent developments and regulatory proposals involving new forms of digital payments, including crypto-assets, so-called stablecoins, and central bank digital currencies.”

Interest in streamlining payments using blockchain has picked up in the international financial world in recent years. But the technology’s use in criminal circles continues to color the conversation around regulation in the U.S. This was on display earlier this year when Treasury Secretary Janet Yellen went on the record with concerns that Bitcoin is used “mainly for illicit finance” during her nomination hearings.

Since Yellen’s confirmation, the Treasury has also moved forward with a Mnuchin-era proposal to require crypto exchanges to have to identify information on external wallets they transact with above certain thresholds. Last week’s forum similarly included talk of new anti-money laundering proposals at the Financial Action Task Force, the G7’s illicit finance watchdog that is reportedly considering guidance on self-hosted wallets patterned on the U.S. Treasury’s. 

The Treasury had not responded to The Block’s request 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.

The crypto-friendly bank Silvergate announced Fidelity Digital Assets as a custodian for its collateralized lending service, SEN Leverage.

The bank has been looking to further build out the service, which utilizes its payments platform to deliver U.S. dollar loans collateralized by bitcoin. 

During the Q4 2020 earnings call, Silvergate CEO Alan Lane said the bank was looking to further monetize its Silvergate Exchange Network (SEN) platform, the bank’s payment network, through digital asset lending and custodial services.

Since a pilot last year, Lane said the SEN Leverage offering has become a “core product,” and he expects increased demand over this year. The underlying SEN Network has seen increasing transfer volumes each quarter.

Silvergate uses SEN to fund the loans, and partnered custodians hold the bitcoin collateral in a separate cold storage account. Adding Fidelity Digital Assets as one of those partners means the institutional investors who already custody their bitcoin with the asset management giant’s crypto arm have more seamless access to SEN Leverage. 

“Investors looking to maintain their long bitcoin positions, for example, can use their bitcoin as collateral without the need to change custody providers or alter their position,” Silvergate said in its announcement. 

The move might also indicate more partnerships to come for Fidelity Digital Assets, according to a statement from its head of sales and marketing Christine Sandler.

“Like Silvergate, we recognize the opportunity to create a more seamless investor experience by helping institutions maximize capital efficiency, as well as the opportunity to strengthen the digital assets ecosystem through greater integration and collaborations like this.”

Silvergate announced Coinbase Custody as a bitcoin custodian for SEN Leverage last week.

© 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 newly established digital asset arm of hedge fund One River Financial is adding three Washington veterans as regulatory advisors, including Jay Clayton, the former head of the Securities and Exchange Commission (SEC).

One River first took steps into crypto last year, when it bought $600 million in crypto and partnered with Brevan Howard Asset Management founder Alan Howard. That led to the establishment of One River’s crypto-focused subsidiary, One River Digital Asset Management. CEO Eric Peters said at the time the firm was committed to holding about $1 billion in bitcoin and ether by early 2021.

Part of that pivot involved establishing a regulatory-focused council that now includes the former SEC chair. 

Clayton stepped down as SEC chair in November of last year, staying on as a commissioner until his final departure December. His term was set to expire in June of this year.

At the time of his departure, Clayton cited the transition of power as his main impetus for leaving. At the time, he did not indicate what his next moves would be. Now, he has rejoined law firm Sullivan & Cromwell as a senior policy advisor and has resumed teaching at the University of Pennsylvania Carey Law School as an adjunct professor. 

Clayton is joined by Kevin Hassett, a former senior advisor to President Donald Trump and Chairman of the Trump’s White House Council of Economic Advisers. John Orsazag, a policy advisor to President Bill Clinton’s National Economic Council, rounds out the third seat of the advisory group. Together, the three said in a statement that they were impressed by One River’s “willingness to hear our varying views on the digitization of our monetary, banking and capital markets ecosystem and One River’s commitment to transparency.”

The advisory group will help One River navigate existing policy issues, according to a statement from Peters, although it’s unclear if that means they’ll directly interface with current regulators.

“The One River Academic and Regulatory Advisory Council will help us consider how these new digital systems and the investment opportunities they present will best fit within existing policy, while also helping us think through how to advance these frameworks in ways that ensure the US continues to lead the world in financial innovation and asset management.”

© 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.