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Huobi Technology Holdings, a Hong Kong-listed firm owned by Huobi exchange’s CEO and chairman Li Lin, is set to launch three funds that are 100% invested in digital assets.

Huobi Tech said in an announcement shared with The Block on Thursday that its fully-owned subsidiary Huobi Asset Management has obtained additional regulatory clearing from the Hong Kong Securities and Futures Commission (SFC) to operate 100% digital asset funds.

With the regulatory approval, Huobi Asset Management plans to launch a BTC tracker fund, an ETH tracker fund and a multi-strategy digital asset fund that are all 100% invested in cryptocurrencies.

In addition, it’s rolling out a multi-asset fund that splits 10% in digital assets and 90% in equity and fixed income. Huobi Tech said the funds’ subscription accepts both fiat and cryptocurrencies.

The plan follows Huobi Tech’s announcement last August that it received a type 9 (asset management) license from the SFC. However, a type 9 license itself does not automatically give the green light to operate funds that are 100% in digital assets. An asset manager would need to obtain additional approval under a type 9 regime if they want to distribute a 100% crypto fund.

In a $77 million deal in 2018, Li purchased over 70% of the stakes of Pantonics, an electronic component manufacturer listed in Hong Kong. The firm was subsequently rebranded to Huobi Technology Holdings in 2019 but Li has not yet restructured Huobi’s exchange business into the Hong Kong shell. 

Huobi Tech has not disclosed its envisioned size of the planned funds. “The size of the funds is under discussion and depends on the development of distribution channels,” said Mandy Liu, vice president of Huobi Tech’s Investor Relations. “We aim to become the leading virtual asset management company in Asia in the near future.”

This is not the first time that a Hong Kong-regulated asset manager rolls out a pure crypto fund that offers a window to professional and institutional investors. 

Venture Smart Asia, a Hong Kong-based wealth manager, launched a BTC fund in Hong Kong in April last year via its blockchain investment arm Arrano Capital. The firm said at the time its target size in the first year was $100 million. 

Meanwhile, the Hong Kong government is set to introduce a new bill to the city’s legislative council this year that would put crypto exchanges in the jurisdiction under a new licensing regime.

The proposed license draft, which has completed a public consultation process, seeks to allow exchange to only target professional investors at initial stage. Industry experts told The Block previously that such an approach could hamper trading volume and drive away retail investors to unregulated trading venues.

It remains to be seen whether the content of the actual bill will be different to the proposed draft when it’s introduced.

© 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 new clarification from the Internal Revenue Service (IRS) indicates that buying and holding cryptocurrency with government-issued money does not need to be reported on the 1040 form.

Last December, the tax authority announced it would move its crypto question to the top of the 1040 form. Putting the question front and center means crypto holders are less likely to be unaware of their tax obligations. The question asks “At any time during 2020, did you receive, sell, or otherwise acquire any financial interest in any virtual currency?”

At the time, some tax professionals pointed out that the wording of the question required further clarification. Some said it was unclear if buying and holding qualified as “transacting” in crypto. Now, the IRS has clarified that it doesn’t qualify as such.

The IRS updated its frequently asked questions (FAQs) yesterday, addressing questions related to virtual currency reporting. Question five clarified those who only buy and hold:

Source: IRS

This suggests the IRS is only interested in using the question to call attention to crypto transactions that could constitute taxable events. Buying and holding does not, since selling, converting, or transferring are what trigger taxable events. 

The other FAQs expand on questions related to calculating gain and loss, hard forks and charitable donations in crypto.

© 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.

Blockchain project LazyLedger Labs has secured $1.5 million in a seed funding round.

The round was backed by Interchain Foundation, Binance Labs, Maven 11, KR1, Signature Ventures, P2P Capital, and several other participants.

With fresh capital at hand, LazyLedger aims to grow its engineering team (currently three members), co-founder Mustafa Al-Bassam told The Block. The hirings will help LazyLedger launch its testnet by the end of this year and mainnet by the end of 2022, said Al-Bassam.

LazyLedger is developing a “pluggable consensus layer” for decentralized projects that need their own blockchains but can’t deploy their own smart contracts due to limitations. Al-Bassam said LazyLedger would make it easy for projects to deploy their own blockchains “within seconds, with their own execution environments.”

“Similar to how cloud services like Amazon Web Services (AWS) made it possible to launch new virtual servers with their own operating systems within seconds by using the same physical server, LazyLedger is a decentralized project that aims to make it possible to launch decentralized chains quickly by using the same consensus layer,” said Al-Bassam.

Technically speaking, LazyLedger won’t perform any computation of data but only do core things a Layer-1 network needs to do in a scalable way, said Al-Bassam. That is, order transactions and publish any arbitrary data to it.

“Similar to how Ethereum is the go-to platform for computation,” LazyLedger will be “as the go-to platform for protocols that require a basic consensus layer,” according to Maven 11’s managing partner Balder Bomans.

As for its business model, LazyLedger plans to launch its own token in the future, said Al-Bassam.

The project has notable advisors on board, including Diem co-creator Morgan Beller and early Cosmos contributor Zaki Manian, among others.

© 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.

Arthur Hayes could surrender to U.S. authorities as soon as next month, prosecutors told a New York judge during a February hearing.

According to court documents obtained by The Block, Hayes — the co-founder and former CEO of the crypto derivatives exchange — is “currently residing abroad in Singapore” and in discussions with the U.S. government about surrendering and appearing in court in connection with the U.S. Department of Justice’s lawsuit filed last November.

Hayes and other BitMEX co-founders were accused of Bank Secrecy Act violations in an indictment that came alongside a parallel legal effort by the Commodity Futures Trading Commission.

The details were included in a transcript from a court hearing on February 9. Assistant U.S. Attorney Jessica Greenwood told the court according to the obtained transcript:

“We with respect to defendant Hayes have discussed a surrender date of April 6, 2021 in Hawaii, and then we will — I think the plan is to notify the Court in advance of that appearance and discuss logistics for having him surrender and presented in Hawaii and then to remotely appear before your Honor, and so we anticipate making a submission to you about that as we sort of near that date for him to arrive.”

She went on to elaborate:

“We have discussed with counsel how to arrange for a voluntary surrender, and he has proposed appearing within the United States in Hawaii and having his initial appearance there and then, subsequent to his presentment in Hawaii, to arrange for a virtual appearance before your Honor rather than appearing in the Southern District of New York physically, that he would appear before your Honor remotely, having surrendered within the United States to the marshals.”

Pavel Pogodin, who represents plaintiffs in civil proceedings against BitMEX and its founders, first tweeted about the transcript’s contents on Wednesday.

When asked whether Hayes would come to New York directly, Greenwood said that “the idea would be that he would appear initially in Hawaii, then appear before your Honor remotely, and then he would continue to reside abroad with travel to the United States for appearances as needed and, of course, if there is a trial, that he would appear within the United States for that trial in New York.”

Greenwood notably added that a bail package is under discussion, in the context of a question about Hayes remaining in Hawaii. Any bail package is subject to approval by the court.

“It would include [an] agreement by the government that he be permitted to continue to reside abroad and that he would be traveling to the United States, if necessary, for court appearances and meetings with counsel,” Greenwood said.

Per the transcript, the U.S. government has begun extradition proceedings against Greg Dwyer. Greenwood said that “[a]nd we anticipate — or we understand from counsel that those proceedings will be unopposed, but, like I said, we were not able to negotiate a voluntary surrender with him.”

The hearing also touched on Ben Delo, another co-founder, with Greenwood explaining that “[h]e is planning, or at least counsel has represented that he is planning to appear in New York.” 

“We are working with the FBI and Border Patrol to obtain immigration authorization for him to be permitted to come here,” Greenwood explained. “There are some complications with the UK travel ban and sort of immigration requirements for him, but we have an application pending through the FBI and the Border Patrol and we anticipate him having clearance to travel to appear in New York within the next 30 days, and so our understanding and representation from counsel is that once that approval is in hand, that he will appear in this district to surrender in this case.”

The full court transcript can be found below:

L29DREEC by MichaelPatrickMcSweeney on Scribd

© 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.

Here at CoinDesk, we use the term “crypto-adjacent” to categorize stories that aren’t about cryptocurrency or blockchains per se but illustrate the problems these technologies attempt to solve.

By covering these stories, we are not necessarily claiming Bitcoin, crypto or blockchain “fixes this” (it may well not, given scaling and other challenges). But they disprove the canard that decentralization is “a solution searching for a problem.” As I often say, blockchain may not always be the answer, but it asks the right questions.

In that spirit, I’d like to turn readers’ attention to two passages I consider crypto-adjacent in a recent essay by Scott Alexander, the polymath whose return to blogging is one of the highlights of 2021 so far. Inferior writers to whom I will not link have taken sadistic delight in referring to him by the government name he failed terribly at keeping a secret. But he will always be Scott Alexander to me.

Marc Hochstein is CoinDesk’s executive editor. The views expressed are his own, so please don’t blame his colleagues. This article is excerpted from The Node (formerly Blockchain Bites), CoinDesk’s daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here. 

For context, the essay‘s conceit is Alexander offering the U.S. Republican Party unsolicited advice: It should build on Donald Trump’s legacy by emphasizing the class differences between his blue-collar Middle American supporters, who now make up the GOP’s base, and the coastal elites who now define the reigning Democrats. One suspects that Alexander is trolling his fellow Biden voters more than the opposition party.

But the mire of object-level politics is not why his essay matters to us. For our purposes, it’s just the MacGuffin.

Free the prediction markets!

The first crypto-adjacent part comes when Alexander proposes a policy agenda that would undermine the power of bogus experts who use fancy university degrees as a justification to lord it over the masses. He writes:

Your solution will be prediction markets. Yes, really. Repeal all bans on prediction markets and give tax breaks for participating in them, until they have the same kind of liquidity as the S&P500. You’ll get a decentralized, populist, credentialism-free, market-based alternative to expertise.

Alexander goes on to make it clear that this part of the essay, at least, is not trolling:

I’m serious about this one. … Prediction markets – an un-biasable, decentralized form of aggregating expert and non-expert opinion correctly – are the only solution I can imagine working.

What makes this crypto-adjacent, you may ask? As CoinDesk’s Ben Powers and Brady Dale wrote last year, prediction markets “have much in common with those interested in cryptocurrencies and decentralized technology – a distrust of hierarchical systems, a penchant for iconoclastic thinking and the questioning of assumed authorities.” Plus, some fledgling PMs either run on blockchain systems (like Augur) or at crypto exchanges (like FTX).

As far as I can tell, there’s no Beltway think tank or trade group lobbying for prediction markets – so it wouldn’t be crazy for Coin Center or the Blockchain Association to diversify into this area. Alexander has already written the bare bones of a policy proposal for you!

A Louboutin, stamping on a human face forever

The other salient passage for CoinDesk’s audience comes when Alexander counsels Republicans to lean into their distrust of the mainstream media (which he impishly suggests they refer to as “upper-class media”). From there it’s a quick segue to egging on an ever-more-populist GOP against the big centralized internet platforms:

Insist that working-class people have the right to communicate with each other without interference from upper-class gatekeepers.

What a great line! It makes a delicious retort to the people who not only loathe and avoid forums like Gab or Parler (as is their right, and as Alexander almost certainly does) but go out of their way to prevent anyone else from using them. They do this by pressuring mobile app stores, payment processors or even web infrastructure providers to sever ties with the forums.

Granted, this is not violating anyone’s First Amendment constitutional rights. For all their outsized power, Twitter, Facebook, Google and their ilk have the right to freedom of association, even if they exercise it for the most spineless of reasons, and even if the modern-day Terri Rakoltas badgering them would not extend the same right to devout religious bakeries.

But as Alexander slyly suggests, much of the deplatforming that’s happened lately, viewed through the lens of America’s ongoing political realignment, is arguably a form of class warfare.

Protecting our democracy from misinformation and hate speech? Nah, dude, you’re preventing everyday people from communicating with each other.

Does crypto fix this? Well, platforms like Twetch are trying to use the technology to that end. We shall see. This much is clear: Bitcoin is the only way Gab gets paid, apart from old-fashioned checks.

If Bitcoin is there for Gab today, it’ll be there for Antifa or BLM or Planned Parenthood if any of them needs it the next time the pendulum swings.

The NBA unveiled its 2021 Rising Stars rosters on NFT marketplace NBA Top Shot on Wednesday. 

The Rising Stars Challenge is a basketball game that takes place at the annual All-Star Weekend when rookies and young players compete against each other. Because of the pandemic, the NBA isn’t doing the game this year but is still recognizing some of the league’s best players from the 2020-2021 season. 

According to a blog post published Wednesday, NBA Top Shot, along with the NBA and the National Basketball Players Association, have “hand-picked” 20 individual Moments from the 2020-2021 season to highlight each of the players chosen for the U.S. Team and the World Team. 

“These Moments, immortalized as digital collectibles on the blockchain, will be available in an unprecedented NBA Top Shot set this weekend,” the post explained. “Add your favorites to your collection when packs drop on March 7 or shortly thereafter on the peer-to-peer Marketplace.”

Named players include Zion Williamson and Ja Morant, whose highlights have already been sold for $100,000 apiece. 

NBA Top Shop did not immediately respond to The Block’s request for comment. 

Dapper Labs, the company behind NFT collectible project CryptoKitties, also runs NBA Top Shot. NBA Top Shot has drawn thousands of users to its “Legendary Drops.”

In mid-February,  the company was in the process of wrapping up a $250 million fundraising round at a valuation of approximately $2 billion. 

© 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.

Heath Tarbert is stepping down from the Commodities Futures Trading Commission (CFTC) on Friday. The former chairman thanked his colleagues for two years at the commission in a tweet published Wednesday.

In 2019, Tarbert said he saw ether as a commodity, drawing plaudits from the crypto industry. During his time as chairman, he established some regulatory guidance for cryptocurrency and allocated resources to some crypto-related enforcement. 

He announced his intention to step down as CFTC chair in January of this year, saying he’d stay on as a commissioner for an indefinite length of time. His term was previously set to expire in April 2024, but said he felt it was “important to clear the way for President Biden’s selection of a permanent chair.”

Now, he’s stepping down his commissioner role at the agency, a move that includes exiting the account with which he shared his departure news. 

“I’ll have more to share soon about my future plans, but they don’t include maintaining this account,” he said. 

Whoever Biden nominates as CFTC chair may also be crypto-friendly, as recent reporting suggests.

Reuters has reported that academic Chris Brummer is a front-runner for the post. Brummer edited a 2019 book on digital assets and regularly lectures on the subject at Georgetown Law. 

© 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

• Kraken recently doled out “retention incentives” to users who were affected by a dramatic fall in the trading venue’s price of ETH on Feb 22.
• So what exactly happened on Feb 22? 

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this Daily feature on The Block.

Crypto exchange Bitfinex has launched a new payments offering, geared toward merchants, dubbed Bitfinex Pay.

The service is aimed at helping online merchants receive crypto payments in bitcoin (BTC) and ether (ETH), as well as Tether (USDT) via the Ethereum and Tron blockchains. Bitfinex Pay also supports bitcoin payments via the Lightning Network.

Bitfinex said it wants to take on companies like PayPal with its new service. PayPal doesn’t yet support crypto payments, but the company previously announced plans to add crypto as a funding option as well as integrate it into the Venmo app.

“We’re aiming to take on established behemoths in the technology and payments fields, leveraging our knowledge of the tech to bring crypto payments into the mainstream,” said Bitfinex CTO Paolo Ardoino. “This is the age of digital money and with Bitfinex Pay we’ve created an intuitive and seamless way for online merchants to receive payments in crypto.”

Merchants willing to use Bitfinex Pay will have to open an account with the exchange, where their crypto payments will be directly deposited. Bitfinex said the maximum payment per client is capped at $1,000.

There are no processing fees for using the service, said Bitfinex, adding that any blockchain transaction fees will be borne by merchants and their customers.

© 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.

Drug traffickers increasingly relied on cryptocurrency-based transactions and technology in 2020 — due in part to the COVID-19 pandemic, according to a new report from the Drug Enforcement Administration’s Strategic Intelligence Section.

Per the agency’s findings in the 2020 National Drug Threat Assessment, published on March 2, the pandemic halted cross-border shipments, particularly between the U.S. and Mexico, which led to large amounts of money stuck in the U.S. that still needed to be given to international narcotics sellers. Crypto ATMs offered one way for money to move across borders without couriers having to physically transport it, according to the report. 

The DEA’s document offers no statistics or numbers on cryptocurrency-related crime for last year but said: “Increasingly, money laundering operations are using virtual currency automatic teller machines (ATMs) to aid in the movement of illicit bulk currency.”

As the report notes:

“Drug traffickers and money launderers are increasingly incorporating virtual currency into [trade-based money laundering (TBML)] activity as the use of these currencies becomes more widely adopted. DEA reporting has revealed instances in which bulk currency contracts were fulfilled through the use of virtual currency instead of cash, with this money subsequently being integrated into the TBML cycle.”

While crypto ATMs face the same anti-money laundering regulations as any money service business, DEA reporting found that “unscrupulous owners” may allow drug traffickers to deposit large amounts of cash into the virtual currency machines and hide the origins of the funds. 

“These combinations of virtual currency with already established forms of money laundering suggest an increased willingness by illicit actors to utilize this complex technology to further their money laundering endeavors,” the DEA said in 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.