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A new paper published by the Federal Reserve on Wednesday lays out some of the preconditions by which the U.S. central bank might consider launching a digitized version of the dollar.

The listed preconditions are perhaps unsurprising;  the paper’s authors Jess Cheng, Angela Lawson, and Paul Wong highlighted “clear policy objectives, broad stakeholder support, strong legal framework, robust technology, and market readiness” as “high-level environmental preconditions that support a general-purpose CBDC in the United States.”

The trio stressed that “[t]hese areas and elements are not exhaustive because many systems, tools, processes, and structures will need to be in place for a CBDC.” However, they offer a window into where the Fed’s internal lines of inquiry are pointing on the question of a digital dollar — all the more relevant given that, per Fed chair Jerome Powell, the Fed to “engage with the public pretty actively” on the subject of a central bank digital currency (CBDC).

Indeed, the paper is positioned as a jumping-off point for further discussion rather than a definitive bellwether for future Fed action.

“For example, engaging with a broad array of stakeholders and monitoring market readiness could inform clear policy objectives and vice versa. This paper does not attempt to prescribe how to address these preconditions; it aims to spark further inquiry,” the authors note.

Among other areas, the paper echoes a comment from Powell about whether the legal framework by which the Federal Reserve operates may need to be altered to account for the creation of a CBDC.

As authors write: “Consideration would need to be given as to whether additional amendments to the [Federal Reserve Act] would be required related to the issuance of a general-purpose CBDC.”

The section on stakeholder support is also notable for its breadth, with the paper highlighting how a broad range of public and private-sector participants would be impacted — and how a successful CBDC might require a degree of buy-in. That said, recent comments from payments firms like PayPal and Mastercard suggest that the positioning for a Fed-backed CBDC may already be happening in the private sector.

Ultimately, the authors conclude that a significant amount of work remains before the Fed decides whether — and how — it might move forward on a CBDC.

“Issuing a CBDC in the United States would not be an easy task. A number of foundational elements would be required,” the authors write.

Read the full Fed paper here.

© 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 exchanges (DEXs) are set to finish February with the highest monthly volume on record, according to data collected by The Block.

With several days remaining in the month, February’s monthly volume figure is currently $64.83 billion — just edging out January’s $61.16 billion, as shown in the graph below:

Uniswap continues to be the market leader in the DEX space, posting a monthly volume above $30 billion for the second month in a row.

February has also seen the highest-ever level of monthly revenue for Ethereum miners, as The Block previously reported. Roughly half of that revenue has come in the form of transaction fees, a reflection of the elevated cost of transacting on the network today. The revenue figure also reflects the price of ETH, which briefly surpassed the $2,000 mark this 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.

Optimism, a startup focused on the scalability of the Ethereum blockchain network, has raised a $25 million Series A funding round led by Andreessen Horowitz.

A16z said in a blog post published Wednesday that its investment followed a period of “looking at various approaches and teams building Layer 2s.”

“Optimism is currently in the midst of a phased rollout, and will be ready for large-scale production later this year. We are thrilled to partner with Optimism, and to help support the Ethereum ecosystem as it continues its rapid growth,” Chris Dixon and Arianna Simpson wrote in the post.

The latest funding round comes more than a year after the startup’s founders raised $3.5 million to create Optimism, as The Block previously reported. The startup grew out of a non-profit research organization known as Plasma Group. 

Optimism is developing Optimistic Rollup with the aim of boosting the scalability of Ethereum. Optimistic Rollup is a scaling solution that aggregates transactions onto a Layer 2 protocol. The startup’s work is perhaps particularly relevant today given the high cost of transacting n Ethereum. 

Optimism. rolled out its preliminary mainnet last month after going live with a limited test network in September.

© 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 outage at the Federal Reserve is creating settlement issues for many financial institutions and exchanges. The Fed’s service status page shows that most of its services are currently down, including its settlement network.

The central bank itself and its messaging system, FedMail, are both still available, according to the outage page. The Fed’s Automated Clearing House (ACH) payment system and FedWire Funds, the real-time settlement network that connects U.S. banks, are down among other key services.

This is creating problems for a number of crypto exchanges. Gemini, Kraken and Coinbase are all experiencing ACH and FedWire delays. 

A status list on the Fed’s website shows most offerings listed as experiencing “service disruptions.”

via frbservices.org

© 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 (DeFi) protocols have already earned over $20 million more this month than in January, making February the biggest month ever for DeFi revenue generation.

According to data compiled by The Block, in February, DeFi protocols have generated $171.5 million in DeFi revenue — a 14.4% increase compared with January’s $149.9 million. At the time of writing, Uniswap accounted for 43.6% of that revenue, while 20.9% went to SushiSwap and 15.9% to Compound. 

The Block Research found that all DeFi protocols except Balancer had record monthly revenues. Most of the revenue went to lenders, liquidity providers, or others on the supply side. The next largest portion went to protocol owners, including developers and others who hold tokens.

Finally, participants in protocol referral programs also received a small slice of the total DeFi revenue. Currently, only a few protocols — including Kyber Network, Aave and the DEX aggregator 1inc — have referral programs. But more protocols are expected to add referral programs in the future

© 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.

CoinShares, Europe’s largest crypto-focused asset manager, has quietly kicked off a share issue ahead of a planned public offering on the Nasdaq First North Growth Market in Stockholm, Sweden.

CoinShares International Limited has made 3,364,403 shares available for investment by individual and institutional investors in Sweden and abroad. This equates to an offering of roughly 151 million Swedish Krona (approximately $18 million). 

But in a press release announcing the move, CoinShares said some 125 million Swedish Krona, or 83% of the offering, had already been subscribed for by members of its board of directors, management team, existing shareholders and through external investment.

The offering will take place at a fixed price of 44.90 Swedish Krona per share, giving the company a valuation of around 2.84 billion Swedish Krona ($341 million) prior to the offering.

The subscription period will remain open until March 2, and CoinShares will begin trading on the Nasdaq First North Growth Market on March 11 under the ticker “COIN”.

The press release said the firm’s board believes going public will boost the company’s balance sheet to help execute strategic initiatives; increase transparency; increase the level of regulatory scrutiny it is subject to; improve brand recognition; and bring liquidity to existing shareholders.

Jean-Marie Mognetti, CEO of CoinShares, said in a statement that the listing gives the firm “an opportunity to offer an even greater degree of visibility around its operations and to increase its credibility, trust, and transparency” in the digital assets sector.

“I am grateful to the dedication of my colleagues who shared our vision and joined us to build this fantastic company and of course to Nasdaq Stockholm who have been our trusted partner since 2015 in respect of our exchange traded products and now, today, our listing,” he added.

Launched in 2013, CoinShares is best known for running a range of cryptocurrency focused exchange-traded products (ETPs). It has amassed roughly $4.5 billion in assets under 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.

The Federal Reserve will be engaging with the public on the question of a digital dollar, according to Chair Jerome Powell.

Powell made his comments during Wednesday’s House Financial Services Committee hearing in response to questions on the digital dollar concept from Representative Patrick McHenry (R-NC).

“This is going to be an important year,” he said. “This is going to be the year in which we engage with the public pretty actively.”

This engagement will come in the form of public events, according to Powell. He did not elaborate further but said the central bank is working on the rollout of these events.

Still, the Fed isn’t planning on presenting a formal plan to the public. Policy and technical questions surrounding a central bank digital currency (CBDC) remain, according to Powell. The Fed will be looking to the public for feedback on problems it’s identified, rather than comments on a solidified idea. 

In the meantime, he said the central bank is working on solutions to the technical challenges it’s identified related to a digital dollar. It’s also in talks with other central banks that are exploring or issuing CBDCs. 

Ultimately, the development of a digital dollar could require legislative authorization down the line, according to Powell. However, the Fed doesn’t know when or how that will happen because as Powell said, “that isn’t clear until we see which way we’re going.” This means Congress may hear more from the central bank as it fleshes out its plan.

“We will be engaging significantly with you and your colleagues on Capitol Hill,” Powell said.

During Tuesday’s Senate hearing, Senators Cynthia Lummis (R-WY) and Bill Hagerty (R-TN) also pressed the chairman on the Fed’s CBDC progress. During that testimony, he called the digital dollar a “high priority project.”

Powell has previously said the Fed is increasing its work on a digital dollar and other digital asset-related interests. Last year he acknowledged that a CBDC could help the payment system in the U.S. 

© 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 derivatives exchange dYdX announced Wednesday that its perpetual contracts are now available for trading on Ethereum Layer-2 scaling solution StarkWare.

The Layer-2 solution is currently available in closed alpha with limited deposits. The full public launch is expected “in a few weeks,” said dYdX.

dYdX first partnered with StarkWare last August to bring Ethereum scaling for its flagship perpetual contracts offering. The goal was to increase transaction capacity, reduce trading fees for users, and improve other features.

Now that StarkWare’s ZK Rollups-based scaling solution is live on dYdx, the exchange said its users can trade perpetual contracts with zero gas costs and lower trading fees.

The fees are maximum up to 0.150% of trading volumes, according to new information available on dYdX’s website. These are in line with what centralized exchanges offer, said dYdX.

Besides lower fees, traders will also benefit from decreased minimum trade sizes, higher leverage of up to 25x, “instant” trade settlement, and faster price oracles, said dYdX. For the oracles part, dYdX has partnered with Chainlink.

Founded in 2017, a16z-backed dYdX is one of the largest decentralized exchanges in the market today. The exchange saw $932 million worth of volumes in January.

With the Layer-2 integration, dYdX has become the second major decentralized exchange to go live with an Ethereum scaling solution. Earlier this year, Synthetix went live on Optimism’s scaling solution that uses optimistic rollups.

ZK and optimistic rollups are both Ethereum scaling solutions and have their pros and cons. ZK-Rollups use a cryptography technique called zero-knowledge proofs that runs computation off-chain and submits a validity proof to Ethereum. So, when a transaction takes place using ZK-Rollups, it goes through. With Optimistic Rollups, on the other hand, a transaction can be challenged, but the implementation of these rollups does not require code changes.

dYdX said it chose ZK-Rollups because StarkWare’s solution was already in production when it partnered with the startup. Decentralized exchange DeversiFi, for instance, also uses StarkWare’s scaling solution.

© 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.

DFX Finance, a decentralized foreign exchange startup for stablecoins, announced a $5 million seed round on Tuesday.

Alongside the funding news was the launch of a dedicated governance token, with liquidity mining focus on three stablecoins: CADC, EURS, and XSGD.

DFX intends to build out its team and to pursue scalability initiatives that bring on more stablecoins over the coming year, co-founder of DFX Kevin Zhang told The Block.

Polychain Capital and True Ventures co-led the funding round. Additional investors include Boost VC, Hex Capital, Lemniscap, CMS Holdings, Castle Island Ventures, FBG Capital, DeFi Alliance, Divergence Ventures, and SRC Capital.

Polychain’s footprint in the DEX ecosystem grew with this latest round, having previously invested in the derivative-focused DeriviDEX and privacy DEX Manta Network. 

The newly launched DFX governance token will allow DFX token holders to suggest proposals and vote on protocol changes, Zhang said. The liquidity mining using CADC, EURS, and XSGD aims to stimulate the adoption of non-USD pegged stablecoins, he contended.

“We are on a mission to build the infrastructure to enable on-chain FX swaps that minimize slippage, optimize capital, and maximize utility. We are creating a new market for non-USD currencies and opening up DeFi applications to a global audience that use these currencies,” Zhang said. 

© 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

• Many DeFi protocols are generating revenue successfully.
• Most of the revenue still goes to the protocols’ supply-side, although with new initiatives such as liquidity mining, this share is starting to decline.
• All protocols except Balancer had record monthly revenues in the first two months of 2020.

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