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Paradigm co-founder Matt Huang is curious about artificial intelligence. He also said the venture capital firm has “never been more dedicated to crypto.”

“We’ve never been more excited about crypto and we continue to invest across all stages,” he said Tuesday on Twitter. “We’re also a group of curious nerds and the developments in AI are too interesting to ignore.”

His comments came just over a month after The Block reported that the company was moving beyond a pure blockchain focus to work on a broader array of “frontier tech” that included artificial intelligence. The move was subtlety visible on the firm’s website, with the company calling itself a “research-driven technology investment firm” as opposed to one that specifically invested in “disruptive crypto/Web3 companies and protocols.”

“It seems trendy to frame crypto vs AI as a zero-sum competition. But we don’t buy it,” he said Tuesday. “Both are interesting and will have plenty of overlap. We’re excited to continue exploring.”

Crypto industry embraces AI

Indeed, many participants in the crypto space are already augmenting products with AI, including the natural language processor ChatGPT. The Ethereum blockchain explorer Etherscan rolled out an AI-based tool that scans smart contract codes to let users more deeply understand the code’s functionalities.

The Solana Foundation, the team building the Solana blockchain, has also implemented an AI chatbot that allows users to better understand Solana’s data, computing infrastructure, protocols and other technical aspects.

Outlier Venture founder and CEO Jamie Burke, meanwhile, said on The Scoop this month that “AI has always been integral to our vision for web3 since 2018.”

© 2023 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.

Sui Foundation, the organization building out the Sui crypto network, said Tuesday that it had not sold staking rewards on the Binance crypto exchange. 

“Sui Foundation has not sold staking rewards or any other tokens from locked and non-circulating staked SUI on Binance or otherwise,” the organization wrote on Twitter. “All insider token allocations remain subject to and compliant with their lock ups and other restrictions on transfer.” 

The foundation said that SUI token unlocks have “proceeded as planned.”

Sui aimed to release 61 million tokens worth $62 million on June 3 and double its token supply by November of this year, The Block previously reported. There is currently a circulating supply of over 604 million SUI tokens at a market capitalization of $435 million, with each single token worth around $0.72, according to Coinmarketcap.

Sui mainnet

The web3 infrastructure firm Mysten Labs launched the Sui mainnet on May 3. Sui competes with other Layer 1’s like Solana through increased block finality, and the blockchain can support up to 300,000 transactions per second with 100 testnet validators.

Mysten intended to sell the Layer 1’s native asset on Binance, in addition to other exchanges like OKX, Bybit and Kucoin. The U.S. Securities and Exchange Commission sued Binance on June 5 for alleged financial misconduct.

© 2023 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.

Quant has made the technology used in the Bank of England’s CBDC project available to businesses.

The company on Tuesday released its Overledger Platform that’s used in the Bank of England and Bank for International Settlements Project Rosalind retail CBDC project.

With the new technology, Quant is addressing blockchain interoperability challenges between central bank and institutional ledgers.

“It will allow for ledger interoperability and a unique and secure way to bridge assets between public or private blockchains,” company CEO Gilbert Verdian told The Block.

Tokenized money

Quant partnered with digital transformation company UST on the project.

“Today’s news that Quant is offering a native SaaS version comes as no surprise, it is a timely release and will be welcomed by the market,” global head of blockchain at UST Daniel Field told The Block.

With the increased interest from institutions in the areas of tokenized money and assets, Field added that the technology is well positioned to meet “a rapidly approaching tipping point where this switches from a marathon to a sprint.”

© 2023 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 price has surged this month, rising nearly 14% in the wake of BlackRock’s move to file for a spot bitcoin ETF that was quickly followed by other asset managers.

While most attention over the next few months will be on the U.S. Securities and Exchange Commission’s response, as the regulator has yet to approve a spot bitcoin fund, the filings pose a larger question of just how much the funds could start to affect the broader market, and price of bitcoin, should they ultimately get the green light.

The Block spoke with Sui Chung, the CEO of Kraken-subsidiary CF Benchmarks that provides the index set to be used by spot bitcoin ETFs being proposed by BlackRock, Valkyrie and WisdomTree.

Chung, who says he’s been intimately involved in the bitcoin ETF filing process over the years, spoke about what makes BlackRock’s recent filing different from previous efforts. He also spoke about the size of the potential market for the funds.

(The interview has been edited for length and clarity.) 

BlackRock’s Bitcoin ETF move

The Block: How was CF Benchmarks involved in BlackRock’s recent move to file for a spot bitcoin ETF?

Sui Chung: CFB is the provider of the index BRRNY, Bitcoin Reference Rate — New York Variant, that will be the NAV for the fund.

The Block: How is this latest filing ETF different from ones that have been tried in the past? Ones that didn’t receive approval?

Sui Chung: CF Benchmarks has been involved in more bitcoin ETF filings than any other company in the world. Of the 13 filings I think there have ever been, seven have used a CF Benchmarks index.

Once the S-1 is filed, what actually matters is the 19-b4 process, and in this case Nasdaq has to argue why the listing of this ETF will not compromise the exchange vis-à-vis the Securities and Exchange Act. So what’s different is something called SSA with bitcoin spot market, which you will find on page 36 of Nasdaq’s 19-b4. That has never featured in any previous 19-b4 by any national stock exchange in the U.S. attempting to rule change to allow a bitcoin ETF. So that is the thing that is different.

The Block: What does it do?

Sui Chung: It seeks to address the Commission’s concerns that it has previously stated in its disapprovals of other 19-b4 processes. Previously, disapprovals have been stated by the SEC because there are insufficient measures taken by the listing exchange to ensure that there are mechanisms in place to impede and detect manipulative trading, potential manipulation of the shares of the ETF. It’s the listing exchange that needs to have this in place.

Nasdaq moves to address concerns

The Block: So theoretically, Nasdaq has made changes to address these concerns?

Sui Chung: If you read the actual 19-b4, which is all public, this is something that Nasdaq proposes to put in place to to be able to fulfill that requirement that the SEC has.

The Block: How much has CF Benchmarks worked with some of these other parties to address these concerns?

Sui Chung: I think it’s fair to say that it’s a collective effort to understand, to interpret what that bar looks like. The SEC puts a bar there. So obviously, collectively, we analyze, ‘okay, how can that bar be met? What have people tried before, which obviously wasn’t enough, and so therefore where is that bar? What does reaching that bar look like? And what can we do to to meet that bar?’

The Block: So what’s changed?

Sui Chung: I’d point you to the Nasdaq’s words. They’re public. They’re in the filing. They call it the Spot BTC SSA. So this Spot BTC SSA is expected to have the hallmarks of a surveillance sharing agreement between two members of the ISG.

The Block: How long could this approval process last?

Sui Chung: There is a standard amount of time, and that standard amount of time is 45 days. However, the SEC has the ability to extend that by another 45 days. And then secondly, after that 90 days is up, they can also extend it. It’s not quite an extension…but it’s another way to delay it basically. So they can stretch it out, I think in total of 230 days, before they have to finally come up with either a disapproval or nothing. And it’s the nothing that means you can go. 

The billion-dollar bitcoin question

The Block: If a spot is eventually approved, how do you see that changing the broader bitcoin market? Who influences who here? Will the ETFs just follow the market, or will they start to influence it? 

Sui Chung: That’s the sort of multi-billion dollar question. If we think about ETFs as a class of instruments, I think in the U.S., something like 60% of the investing public holds at least one ETF. If you say that’s the potential audience for this product, that’s a big audience.

Now, how many of that audience who are already familiar with ETFs will want to invest in this one, or indeed any others? So how many of them will want to invest in any given bitcoin ETF? Well, there’s another stat which is that 20% of investing Americans already own cryptocurrency. And so you’re going to think that, at the very least, those that have held an ETF before and today own crypto will, through their long term savings plans like 401(k)s etc., if they have an option to allocate to a bitcoin ETF, you would think it would make sense that at least some part of their 401(k) will end up in a bitcoin ETF.

That’s quite a lot of capital. And of course, it’s an ETF, so therefore it’s effectively a long-only vehicle. So everyone that subscribes to shares in the ETF, because of the creation/redemption mechanism, you never have a shortage of shares of the ETF. Every time you create a share of ETF you go out and buy some bitcoin.

And so there’s only one way it can go. Once you have an ETF, it’s only going to have one type of effect. Now what is the magnitude of that effect? We can guess, we can guesstimate. How big is the investing public? How much money have they got to invest? How many of them might be interested in bitcoin? And when you do that math, the number is pretty big.

The size of the ETF market

The Block: There are tax benefits too…

Sui Chung: With ETFs, you don’t have unrealized gains and losses. There is no tax on the unrealized gains and losses. Now, obviously, your entry and exit will be taxed, depending how you enter an exit. But within a 401(k) wrapper, you’re not racking up taxes. Whereas if you sit there on Coinbase, you buy some bitcoin, then you decide to sell some bitcoin, move the dollars into Schwab to buy the S&P 500. There’s a taxable event, right? 

Even if you are someone who is familiar and comfortable with self custody, with using crypto exchanges, for most people there is a portion of their wealth sat inside a certain wrapper, in the U.S. a 401(k) being the most popular. You can only use that money to buy certain types of instruments. ETFs are one of them. It doesn’t say you can’t buy bitcoin ETFs. You can buy whatever ETF you want. 

It’s that part of people’s capital. It’s very easy, being inside the crypto sphere, to think in this binary matter of like ‘oh, you either use traditional financial instruments, or you self custody.’ Well, that’s not true. You can certainly do both. I mean, myself, I have an active stock trading account. I also have, you know, our UK version of a 401(k) that’s chock full of stocks that are managed by fund managers.

© 2023 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.