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In February, inflation in the U.S. rose by 0.4% month-on-month and 6% year-on-year.

Today’s data aligned with Dow Jones and Nomura estimates. Bitcoin soared on the news, hurtling past $25,400 before dipping again. 

BTCUSD chart by TradingView

February’s inflation figure is only the second to be calculated under the BLS’s new weighting system. The Consumer Price Index (CPI) will be based on a single calendar year of data, using consumer expenditure data from 2021. Previously the data was calculated using two years of expenditure data.

The U.S. Federal Reserve is set to give its latest interest rate decision next week, on March 22. The central bank had been expected to increase rates. Chair Jerome Powell wouldn’t rule out an increase in the pace of rates last week, although three U.S. banks have failed since — giving some hope that the Fed might ease up on its aggressive hikes. 

Grayscale analysts wrote, “it seems unlikely that the Fed will continue an aggressive rate-raising regime.” Nomura analysts expect the Fed to cut rates 25 basis points due to “looming financial stability risk.” 

© 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.

Orbs, a developer of crypto infrastructure, is set to raise up to $10 million from DWF Labs.

DWF Labs will purchase Orbs tokens worth up to $10 million, the web3 investment firm said Tuesday. The first tranche of the total investment settled today, Orbs CEO Nadav Shemesh told The Block. He added that the rest of the investment will be “made over time to average price.”

Founded in 2017, Israel-based Orbs offers a blockchain network that works as a “separate execution layer between Layer 1/ Layer 2 solutions and the application layer, as part of a tiered blockchain stack, enhancing the capabilities of smart contracts,” according to Shemesh.

With DWF’s investment, Orbs plans to continue developing its infrastructure to grow adoption, both on Ethereum Virtual Machine (EVM) chains and on The Open Network (TON), Shemesh said. Orbs recently started building on TON as the first non-EVM Layer 1.

TON was originally introduced by the Telegram team. It has been running as an open-source community project since 2020.

“Orbs is a highly promising project within the TON ecosystem, and we are pleased to invest in their vision for the future of decentralized finance,” Andrei Grachev, managing partner at DWF Labs, said.

DWF Labs recently partnered with the TON Foundation and committed $10 million to support the TON ecosystem. DWF also said it would invest in 50 seed-stage startups over the next 12 months to grow the ecosystem.

Orbs previously raised $118 million in 2018. The Orbs token is trading around 10% up at the time of writing at $0.033, according to CoinGecko.

Update: Headline and article updated for clarity.

© 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.

Smart contracts are one step closer to falling under European Union-wide regulation within a broader strategy on data markets, an issue that continues to raise concerns within the crypto industry.

The European Parliament adopted legislation under the Data Act on Tuesday, with 500 votes in favor and 23 against.

The legislation, and its provisions on smart contracts, is not explicitly aimed at the crypto industry, but focuses on data from connected devices, or the Internet of Things. Yet some in the industry worry the Data Act may have far-reaching effects on crypto if the scope isn’t clearly defined, especially as smart contracts — automated executions written into software — underpin the infrastructure of DeFi. 

The greatest potential of the legislation, according to Pilar del Castillo Vera, a centrist-right MEP and rapporteur on the Data Act, is to “contribute to optimizing existing business models and processes, boost the development of new ones, and by doing so creating new values and jobs,” she said, opening Tuesday’s plenary in the European Parliament in Strasbourg. 

‘Rigorous access control mechanisms’

Smart contracts fall under Article 30 of the Data Act, on “essential requirements regarding smart contracts for data sharing.”

Provisions include “rigorous access control mechanisms” and protection of trade secrets integrated into the design of smart contracts. There would need to be a possibility to terminate or interrupt transaction mechanisms, and lawmakers will need to decide which conditions would make that permissible.

On top of that, smart contracts will be expected to face the same “level of protection and legal certainty as any other contracts generated through different means.” according to drafts previously seen by The Block.

For smart contract developers, these provisions would require additional processes to ensure compliance to the regulation, like issuing an EU declaration of conformity. While these more stringent compliance assessments were removed in previous drafts seen by The Block, they have been reintroduced into the final Parliament text.

Potential spillover to DLT from IOT

For Natalie Linart, legal counsel at blockchain software firm ConsenSys, the smart contract provisions don’t seem to be too overbearing for the industry. “We see Article 30 as a marginal provision applicable to smart contracts facilitating data transfers involving IoT products — not those deployed in DeFi applications.”

But the coast is not yet clear. Linhart hopes to ensure “standards aren’t extended to other smart contracts in future legislative proposals touching crypto,” she told The Block in an email. “Setting substantive requirements for blockchain development would restrict innovation and make the EU an unwelcome place for software developers.”

For the European Crypto Initiative advocacy group, the Data Act has been a focus of their attention over the past months.

“It would be really hard, almost impossible, for most smart contracts that we have today to be compliant with this article,” Marina Markezic, head of EUCI, told The Block on a call. 

The rules proposed don’t align to the smart contracts that we know today, Markezic said, and may spur the development of a different technology to fit the mold. “It’s saying you will need to use a fruit that is called ‘strawberry’ and it needs to be blue. And basically you need to come up with a strawberry that is blue because all the ones we have are red.”

© 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.

Cathie Wood’s Ark Invest added 92,165 Block shares to three funds on Monday. The purchases were estimated at around $6.4 million. 

Ark Invest added 77,991 Block shares to its Ark Innovation ETF, 13,170 shares to Ark Next Generation Internet and 1,004 shares to the Ark Fintech Innovation ETF, according to its latest trade filing. Shares in Block closed down about 2.2% to $69.46 on Monday. Based on the price at the close, Ark’s most recent buys cost around $6.4 million.

SQ chart by TradingView

Jack Dorsey’s Block recently asked for developer feedback for what it calls a bitcoin “mining development kit.” The company says it could unleash further innovation in the Bitcoin mining space , increase innovation and reduce energy consumption.

Last week, Wood’s fund continued to purchase shares in crypto exchange Coinbase, bringing its total to nearly $30 million this month. The asset manager earmarked bitcoin, digital wallets, public blockchains and smart contract networks as four of the 14 “big ideas” for 2023 in a report in January. 

© 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.

Worldcoin, the project intent on scanning people’s eyeballs to prove they are indeed people, unveiled its World ID protocol and software development kit today.

Both Worldcoin and its lead software contributor, Tools For Humanity, were co-created by Sam Altman — who is also CEO of ChatGPT creator OpenAI, the smash-hit generative chatbot. The proliferation of AI and generative software have, according to Worldcoin, rendered the issue of online identity that much thornier. 

Described in today’s announcement as the “underlying identity protocol” to Worldcoin and powered by zero-knowledge cryptography, the newly launched World ID is a mobile tool that people can use to prove they’re real without sacrificing anonymity. Worldcoin’s Orb — a controversial, iris-scanning bit of hardware — is the main method of getting verified for users. Still, they can also use tools such as phone number verification, albeit with less accuracy.

“This is a decentralized and privacy-first protocol,” Tiago Sada, Head of Product, Engineering and Design at Tools For Humanity, told The Block in an interview. “What that means is that just like people can have self-custodial wallets, with this, people can have self-custodial IDs, where any information is on-device, and how you use it is through zero-knowledge-proofs to make attestations about yourself.”

Rise of the Orbs

Users can get a World ID on any compatible mobile wallet. One option is the World App, which is still in beta.

Orb verification is primarily limited to Argentina, Chile, India, Kenya, Portugal and Spain, though a broader rollout of these devices will happen later this year. Mobile verification, meanwhile, is available in most countries.

The Orb has proven divisive. Its unveiling in June 2021 drew sharp backlash from leading privacy advocates, including Edward Snowden, who warned, “Don’t catalogue eyeballs.” Worldcoin later sought to assuage those concerns by removing links between the biometric registration stage and the wallet with the help of zero-knowledge-proof technology. Sada thinks concerns about the project persist, however.

“There’s also a lot of misconceptions out there,” he said. “A lot of people don’t know that your biometric data gets destroyed at the Orb.” That is, unless you opt-in to having your biometric data stored, which, though not incentivized by Worldcoin, helps improve the protocol.

“The iris code is the only thing that leaves the device,” Sada continued. “As counterintuitive as this sounds, World ID is… the most private identity. I would argue that it’s also the most inclusive and scalable in many ways.”

His argument hinges on the idea that traditional Know Your Customer checks (KYC) involve giving up a great deal more personal information in the form of ID scans — while many people don’t have an ID to give up in the first place.

Sada also said that if there was a better tool for proving a person’s uniqueness, Worldcoin would readily abandon the Orb, given the constraints of manufacturing hardware. Indeed, Tools for Humanity has a team actively searching for such a solution.

Use cases

For now, though, the Orb rollout continues. Worldcoin is ramping up Orb distribution through an operator program that compensates businesses for getting people scanned. It currently has 1.3 million sign-ups, according to today’s announcement.

Worldcoin singled out sign-on as the simplest use case for World ID. Other potential use cases for its technology include bot protection and moderation in social networks; voting in DAOs; supporting uncollateralized lending; loyalty programs and coupons; reviews on marketplaces; and welfare distribution. Its first showcase for the tech will focus on verification for Discord, a social network popular with crypto projects.

“It probably takes the imagination of a lot more people to think of what you could do with this. When the iPhone was introduced, you wouldn’t have imagined Uber,” Sada said. “It’s a fundamental primitive. It will exist. And Worldcoin is about making sure that it exists in a decentralized and privacy-serving way.”

As for the SDK, developers have been invited to register for a waitlist to get early access to a beta version of the product, which is open to anyone and includes a web widget, developer portal, development simulator, examples and guides.

Worldcoin is valued at $3 billion after reportedly raising $100 million from Khosla Ventures and a16z in March 2022. The Block revealed in February that the company is seeking another round of funding at the same valuation. The company has earmarked the first half of this year for the launch of its token.

© 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.

The high-profile failures of Silicon Valley Bank, Silvergate and Signature Bank have left something of a void for crypto firms needing banking partners — but certain banks remain open for business.

Santander, HSBC, Deutsche Bank, BankProv, Bridge Bank, Mercury, Multis and Series Financial are among the banks still reportedly willing to work with crypto firms.

The list is based on messages — obtained by CoinDesk — exchanged between staff at the outlet’s parent company Digital Currency Group, who had been discussing the pursuit of new banking partners for portfolio companies.

DCG also contacted BlackRock, JPMorgan and Bank of America — as well as international banks Revolut, United Overseas Bank and Bank Leumi — according to CoinDesk.

Even if some tradfi banks are still willing to play ball with crypto firms in the U.S., however, services may be restricted based on crypto exposure.

© 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.

Crypto prices soared throughout the day as the turmoil in U.S. regional banking continued and interest rate hike expectations were recalibrated. 

The target rate probability of no increase next week has increased from 0% on Sunday to 32% as of 7 p.m. EST, according to the CME’s FedWatch tool. The tool analyzes the probabilities of changes to the Fed rate, as implied by 30-Day Fed Funds futures pricing data.

FedWatch Target Rate Probabilities for Mar. 22

“Given recent market events, it seems unlikely that the Fed will continue an aggressive rate-raising regime. The market is mostly pricing in a 25 bps hike, but if banking issues persist, the Fed may decide to ease off entirely and halt rate increases this month,” wrote Matt Maximo and Michael Zhao in a Grayscale market update.

The recent collapse of two U.S. banks has “reminded us of the risks of fractional reserve banking and could potentially drive further adoption of self-sovereign, decentralized digital assets, like Bitcoin and Ethereum,” the pair said. 

The New York Department of Financial Services seized crypto-friendly Signature Bank on Sunday night in a move the state regulator said was “to protect depositors.” In a separate statement, U.S. federal bank regulators guaranteed full return of Silicon Valley and Signature Bank customer deposits. 

Possible cut

Maximo and Zhao aren’t alone in their thinking. Nomura analysts agreed and even went a step further to suggest the Fed will cut rates.

“In reaction to looming financial stability risks, we now expect the Fed to cut rates in 25 basis point increments in the March FOMC meeting in comparison to where we had previously expected a 50bp rate hike since 24 February,” said analysts at the investment bank. 

While a 25-basis point rate cut might not seem like a panacea for financial institutions if the central bank includes continued rate cuts in the dot plot, “markets could quickly price in further rate cuts,” which could “somewhat reduce the risk of further bank runs, as well as reduce unrealized capital losses,” Nomura’s note read. 

Nomura also expects the Fed to stop quantitative tightening.

“Although the choice of deposits vs. non-deposit investment vehicles such as Money Market Funds (MMF) matters for banks, ending QT should help keep the number of reserves more ample than they would be otherwise,” the analysts said.

Prices trade higher ahead of inflation data

Bitcoin traded higher throughout the day. The leading cryptocurrency by market cap jumped about 11%, hurtling back above $24,000. Ether was also higher, adding 6% as it traded within a range of $1,700 — it briefly passed this level for the first time since mid-February earlier in the day. 

BTCUSD chart by TradingView

The actions taken by U.S. authorities over the weekend appear to have been well received, with solid momentum in crypto throughout the day, François Cluzeau, head of trading at Flowdesk, told The Block. Cluzeau said that liquidity had been impacted over the past few weeks.

“In a low-liquidity environment, price swings can be much bigger than in high-liquidity periods,” he said.

Despite the moves to stem the risks posed by Signature bank and the promise to protect deposits, it was a mixed day for publicly-traded banks.

JPMorgan traded down by 1.8%; it then added 0.3% after hours. Bank of America dipped 5.8% during the day’s session but gained 1.4% after hours. First Republic, the most extreme case, plunged 61% before adding 16% after hours. 

FRC chart by TradingView

© 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.

The Justice Department is investigating the collapse of the TerraUSD stablecoin, The Wall Street Journal reported, citing sources.

Terraform Labs and its CEO Do Hyeong Kwon are already facing civil charges brought by the Securities and Exchange Commission last month. If charges are ultimately brought by the Justice Department, those would be criminal and could carry a  prison sentence.  

The Justice Department’s investigation covers similar areas as the SEC suit, the Journal reported, citing people familiar with the matter. The Federal Bureau of Investigation and the Southern District of New York questioned former Terraform Lab team members in recent weeks, according the Journal.  

The Journal also reported that investigators were asking about the relationship between Chai, a Korean payments company, and the blockchain that Terraform created to power TerraUSD. To build excitement in the power of the Terraform blockchain, Kwon and his team claimed that Chai was using it to settle millions of transactions, which was a complete fabrication, the SEC alleged in February.  

U.S. prosecutors are also looking into chat-group conversations among trading firms including Jump Trading Group, Alameda Research and Jane Street Group about a potential bailout of TerraUSD that never ended up happening, Bloomberg News reported separately on Monday.

© 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.

Paysafe decided to stop offering Binance customers its embedded wallet solution in the UK in a move it blamed on complex regulation. As a result, Binance will suspend GBP deposits and withdrawals for new users starting March 13 and all users on May 22.

“We have concluded that the UK regulatory environment in relation to crypto is too challenging to offer this service at this time and so this is a prudent decision on our part taken in an abundance of caution,” a Paysafe spokesperson said in an email to The Block.

The UK unveiled in February a plan to regulate crypto trading and lending, with stricter rules and a broader reach. Paysafe will continue working with Binance in Europe and Latin America, as it expands in those areas.

“While we recognize this is disappointing, the UK portion of our business with Binance is small,” the company said.

Binance estimated this will affect less than 1% of its users but said in an email that it is “working hard to find an alternative solution for them.”

© 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.

Meta is ditching its pursuit of NFTs as the company looks to prioritize, according to Stephane Kasriel, head of commerce and financial technologies at Meta. 

“Some product news: across the company, we’re looking closely at what we prioritize to increase our focus. We’re winding down digital collectibles (NFTs) for now to focus on other ways to support creators, people, and businesses,” Kasriel wrote in a Twitter thread. 

Meta previously said NFTs could help expand the creator economy.

“It’s still early for the NFT market compared to where we think it’s going,” Kasriel said in a blog post in November. “By making NFTs easier to use natively on Instagram, we’re opening up new ways for the billions of people who use our apps to connect with and support their favorite creators — which, in turn, unlocks more economic opportunity.”

While creating opportunities for creators and businesses to connect with and monetize user bases remains a priority, the company is going to focus on areas where it can make an impact at scale. Kasriel earmarked product lines like “messaging and monetization opportunities for Reels.”

“We’re streamlining payments with Meta Pay, making checkout & payouts easier, and investing in messaging payments across Meta,” he concluded.

© 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.