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Quick Take

• ‘Fiat Freeway’ is a weekly column providing the latest updates on central bank digital currencies (CBDCs) and stablecoins. 
• This week’s column examines Paxos’ $142M Series C fundraising and FinCEN’s newly proposed KYC rules for digital wallets.

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Quick Take

• Compound’s decentralization started with v2.2 by adding Timelock and continued with the distribution of COMP tokens to users.
• Compound autonomous proposals have not yet become a popular solution for submitting proposals by minority COMP holders.
• The COMP whales can independently determine the Compound’s future, as retail token holders use the delegation function to a limited extent.
• Governor Alpha smart contract facilitated the launch of many DeFi projects and resulted in a loss of user funds if misused, such as in YAM v1.

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Hong Kong-based licensed crypto exchange OSL has suspended all XRP trading and payment services until further notice.

OSL announced the news on Wednesday, saying that it has taken the decision in light of the U.S. Securities & Exchange Commission’s (SEC’s) enforcement action against Ripple and two of its executives — CEO Brad Garlinghouse and co-founder Chris Larsen.

The SEC yesterday filed a complaint and alleged that Ripple and the executives have raised more than $1.3 billion via ongoing, unregistered securities XRP sales. The regulator deems XRP as a security.

It said in the complaint: “Ripple engaged in this illegal securities offering from 2013 to the present, even though Ripple received legal advice as early as 2012 that under certain circumstances XRP could be considered an ‘investment contract’ and therefore a security under the federal securities laws.”

Ripple plans to fight the case. The company has said that the SEC’s theory that XRP is a security is “wrong on the facts, the law and the equities.”

Two more crypto exchanges, CrossTower and Beaxy, have suspended XRP trading. CrossTower said it has delisted XRP only on its U.S. trading platform, and Beaxy said it has halted XRP trading, but withdrawals are enabled until further notice.

© 2020 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.

Switzerland-based crypto bank SEBA has closed a Series B funding round.

The round is worth 20 million Swiss francs (~$22.5 million), SEBA’s chief marketing officer, Sandra Frank Dudler, told The Block.

The bank hasn’t disclosed any investors of the round, but Dudler said “all existing key shareholders and new shareholders” from Switzerland, Europe, and Asia participated.

The Swiss banking regulator FINMA was recently said to be uneasy about SEBA’s heavy backing from Asian investors, Finews reported in September, citing “two sources.” The regulator reportedly wanted SEBA to ensure it gets as much as half of an upcoming funding round from Switzerland investors.

It is not clear how the bank’s Series B panned out, Dudler said it is the bank’s policy not to share investor details.

Some of SEBA’s existing investors include Swiss-based BlackRiver Asset Management and Hong Kong-based Summer Capital. It is unclear whether they participated in the bank’s Series B. They both had backed SEBA’s 100 million Swiss francs ($103 million at the time) round in September 2018.

It should be noted that SEBA was looking to raise another 100 million Swiss francs in January of this year, but ended up raising only 20 million Swiss francs. When asked why the cut, Dudler said: “We raise just as much as we require to fuel the accelerating growth in 2021.”

As for its growth plans, SEBA is looking to expand domestically and internationally, as well as increase its lending capacity and bring new products and services to the market.

SEBA said it will also tokenize its shares of the Series B “soon after” Switzerland’s blockchain law comes into force on February 1, 2021.

The bank has seen a couple of key exists in recent months. Chairman Andreas Amschwand left SEBA abruptly in July, and board member Goh Jin Hian, the son of former Prime Minister of Singapore Goh Chok Tong, left quietly in October.

© 2020 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 bitcoin fund founded by Anthony Scaramucci’s SkyBridge Capital has invested some $25 million ahead of a planned public opening sometime next year.

In comments to CNBC, Scaramucci outlined the contours of the Bitcoin fund — the existence of which The Block reported Monday — and its potential appeal to would-be investors. 

“It became clear that we needed to create a client-friendly product, something with a $50,000 minimum, that the mass affluent could access, or RIAs that were close to it can access,” Scaramucci told the outlet.

With more institutional interest in Bitcoin in global central banks, Scaramucci says the cryptocurrency will be a “very strong asset class over the next decade.” 

The filing for the new fund follows the week in which Bitcoin broke above $20,000 for the first time. As of press time, the cryptocurrency is trading at roughly $23,450 on Coinbase.

Scaramucci was asked if he thought it was “too late” to invest in Bitcoin given its recent price ramp.

“For us, I don’t think it’s late. If anything, it’s the first inning. You’re about to see that wave of early adoption by the institutional community. I’d like to get our investors involved before that goes into full throttle,” Scaramucci said.

© 2020 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 Securities and Exchange Commission has filed a lawsuit against Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen for conducting what the regulator alleged to be a $1.3 billion unregistered securities sale. 

The complaint “alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide. Ripple also allegedly distributed billions of XRP in exchange for non-cash consideration, such as labor and market-making services,” per a statement, which adds:

“According to the complaint, in addition to structuring and promoting the XRP sales used to finance the company’s business, Larsen and Garlinghouse also effected personal unregistered sales of XRP totaling approximately $600 million. The complaint alleges that the defendants failed to register their offers and sales of XRP or satisfy any exemption from registration, in violation of the registration provisions of the federal securities laws.”

“We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system,” Stephanie Avakian, Director of the SEC’s Enforcement Division, said in a statement.

Garlinghouse said Ripple plans to fight the case in a series of Twitter comments yesterday. He previously expressed discontent with current U.S. regulations, alleging in a November interview with The Block that there isn’t a level playing field for digital assets, especially Ripple. In his tweets he reiterated this position, saying SEC Chairman Jay Clayton is “picking winners” with this action.

Of particular note in the complaint is the alleged production of two warning letters from lawyers in 2012 which indicated that XRP could be considered an investment contract.

As the complaint explains:

“The law firm provided two memos—one on February 8, 2012 and another on October 19, 2012 (the “Legal Memos”)—that analyzed these risks. The first memo was addressed to the Co-Founder and another individual, and the second to Larsen, the Co-Founder, and Ripple… The Legal Memos warned that there was some risk that XRP would be considered an “investment contract” (and thus a security) under the federal securities laws depending on various factors. These included, among other things, how Ripple promoted and marketed XRP to potential purchasers, the motivation of such purchasers, and Ripple’s other activities with respect to XRP. If individuals purchased XRP “to engage in speculative investment trading” or if Ripple employees promoted XRP as potentially increasing in price, the Legal Memos warned that Ripple would face an increased risk that XRP units would be considered investment contracts (and thus securities).”

The SEC complaint can be found below:

comp-pr2020-338 by MichaelPatrickMcSweeney on Scribd

© 2020 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 Securities and Exchange Commission (SEC) has filed for penalties and a cease-and-desist order as part of a proposed settlement to an allegedly unregistered initial coin offering (ICO) by ShipChain.

ShipChain — an Ethereum-based shipping tracker that raised funds selling its SHIP token in 2017 and 2018 — intends to settle with the SEC, per the documents.

ShipChain received another cease-and-desist order back in 2018, when the South Carolina Attorney General alleged the firm violated state securities laws. Now, the SEC is ordering ShipChain to transfer all SHIP tokens to the SEC and have the asset delisted on exchanges in the next ten days. It’ll also have to pay a $2,050,000 penalty to the regulator. 

As part of the proposed settlement, ShipChain will pay just over $2 million in a civil monetary penalty, per the documentation.

While the SHIP token was once worth around $0.20 in 2018, it has since been priced at less than a penny until April of this year, when it climbed back to ranges less than a nickel. It’s seen a steep drop from $0.008 to less than $0.002 since the action became public, according to CoinMarketCap. 

© 2020 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 privacy pool value on Tornado Cash appears to be spiking, according to data compiled by The Block.

In just three days, the pool grew from $15.54 million on December 17th to $23.89 million on the 20th — a 54% increase. 

A possible explanation for the increase is that Tornado Cash launched its governance token, TORN, on December 18th. TORN holders can collectively change the protocol of Tornado Cash, allowing the mixer “to evolve under the stewardship of its community,” according to a post from its developers.

Tornado Cash is an Ethereum-based mixer, which obscures the on-chain tie between transaction recipient and sender. Tornado Cash launched in 2019 and supports ETH, DAI, cDAI, and USDC through four mixer contracts. 

© 2020 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 Swiss National Bank and the operator of the Swiss stock exchange are looking to test a wholesale CBDC with commercial banks.
• Swiss central banker Thomas Moser said SDX will initially go live with a stablecoin backed by its own reserves.

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The number of tweets containing the keyword “Bitcoin” surged 43% in the span of a week, according to data collected by The Block Research.

The volume of tweets with the word “Bitcoin” in them registered at 242,180 on December 13th and grew to 428,280 on December 20th. 

Daily posts containing the word “Ethereum” also jumped 18% this week, though it wasn’t enough to break the keyword’s peak on September 6th.

Notable levels of the term “Bitcoin” on Twitter took place the same week it broke $20,000 for the first time. 

To find more data pertaining to Bitcoin and other digital assets, check out The Block Data.

© 2020 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.