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The U.S. Securities and Exchange Commission subpoenaed trading app and brokerage Robinhood over its cryptocurrency services, the company disclosed in an annual financial filing posted on Monday. 

The high-profile fintech company also acknowledged that SEC legal action could lead to it ceasing digital asset trades on its platform, as part of its required listing of risks to its business. 

“To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform),” Robinhood said.  

Robinhood said it received that subpoena shortly after crypto exchange FTX filed for bankruptcy in November. The subpoena is for information around topics such as “cryptocurrency listings, custody of cryptocurrencies and platform operations.” 

Robinhood facilitates customer trades for certain crypto that have been “analyzed under applicable internal policies and procedures and that we believe are not securities under U.S. federal and state securities laws,” the firm said later on in the filing.  

Growing business

Crypto trading on Robinhood has been a growing business line over the past 12 months, despite the market downturn. The investing platform launched its crypto wallet to 10,000 iOS users in September, which uses Circle’s USDC stablecoin as the primary fiat-representative token. 

The firm’s CEO, Vlad Tenev, noted in December the collapse of FTX led to Robinhood gain increased market share. Despite that, crypto trading revenue was down in the fourth quarter, dipping 24% – in line with most revenue lines. Crypto trading volumes on the platform recovered in January, jumping 95% as crypto prices rose across the board. 

If the SEC does take legal action with Robinhood, it would not be the first time the markets regulator has taken the company to court. The agency charged Robinhood in 2020 with misleading customers about revenue sources. Robinhood agreed to pay $65 million to settle those charges in December of 2020. Robinhood was also hit with a $30 million fine in August as part of a settlement with the New York Department of Financial Services for allegedly failing to comply with anti-money laundering and cybersecurity regulations. 

Robinhood declined to comment beyond what was in the filing.  

© 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.

Yuga Labs, the creator of the Bored Ape Yacht Club, announced the release of a new bitcoin-based NFT collection called TwelveFold.

The collection will consist of 300 generative art pieces inscribed onto satoshis on the Bitcoin blockchain.

Inscriptions, also known as digital artifacts, are created when a file, such as an art image like those created for TwelveFold, is written (or inscribed into) units of Bitcoin called satoshis, the smallest individually identifiable units of Bitcoin.

The process is made possible through the Ordinal Theory protocol, with such NFTs simply donning the name “ordinals.”

Ordinals have gained popularity as upgrades to the Bitcoin blockchain made it cheaper to store data in single transactions.

Empty address

In January, for example, someone minted a copy of the 100 Ether Rocks — one of the oldest Ethereum NFT projects — on Bitcoin for about $2 per rock.

Unlike Ethereum, where many NFTs can be minted in one go, each ordinal NFT has to be minted individually in its own transaction for its own fee. As a result, buyers of TwelveFold will need an empty Bitcoin address to receive the art.

“Wallets do not currently support the transfer of individual satoshis,” Yuga Labs told The Block, meaning that users risk transferring their inscribed satoshi’s if their digital artifacts are stored together with other bitcoin holdings.

Each of the art pieces, generated by Yuga Labs using 3D modeling technology among other techniques, will be available to purchase in an auction held later this week. 

All bids will be made in bitcoin.

© 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.

On-chain data shows that Voyager’s assets are on the move amid the company’s bankruptcy proceeding.

Around $154.4 million in USDC was transferred to the shuttered exchange’s “Voyager 1” Ethereum wallet from Coinbase this month, according to transaction records.

The selloff was noted by web3 analytics firm Arkham Intelligence, which confirmed in a tweet that Voyager has been selling off assets “at a rate of around $100M/week.” It added that the company had “$700M in two very large wallets.”

The Voyager wallets contain $268 million in ETH, $236 million USDC, and another $77 million in SHIB, according to Arkham.

While regulators have objected to to a revamped bid to buy Voyager by Binance.US and said plans by Voyager to sell its crypto may violate securities laws last week, the transfers may be in line with court stipulations. Voyager was previously allowed to liquidate cryptocurrency from customer accounts with a negative USD balances and sweep cash held in third-party exchanges in a court order dated Aug. 5, 2022.

Voyager did not immediately respond to a request for comment from The Block. 

© 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.

Professional gamer and Twitch streamer Kyle Jackson said he sold the digital “key” he won playing Yuga Labs’ video game Dookey Dash for a whopping 1,000 eth, which is about $1.6 million.

Jackson, more widely known by his gaming moniker Mongraal, won the digital key, which is an NFT, by nabbing the highest score on Dookey Dash, a promotional video game Yuga Labs created to both spur engagement among existing Bored Ape Yacht Club community members and newcomers. People who wanted to play Dookey Dash and be eligible for prizes had to acquire an NFT called a Sewer Pass.

Mongraal announced the sale on Twitter, saying he had agreed “to sell the key for 1000 eth to @AdamWeitsman.” “Super nice guy and thrilled the sale went through with him.”

The gamer’s original offer was 2,222 ETH ($3.6 million). Yuga Labs has yet to announce what the key will unlock for the person who holds it.

© 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.

Digital Currency Group said it lost $1.1 billion last year amid falling crypto prices and the restructuring of its Genesis lending platform, CoinDesk reported.  

“In addition to the negative impact of [bitcoin] and crypto asset price declines, last year’s results reflect the impact of the Three Arrows Capital (TAC) default upon Genesis,” DCG said in a Q4 report that was obtained by CoinDesk. DCG is also the parent company of CoinDesk.  

DCG saw revenue of $143 million in the fourth quarter, and a loss of $24 million. 

Q4 revenues were $143 million, with losses of $24 million. DCG said it “hit a milestone” regarding Genesis’ restructuring, according to CoinDesk. 

Genesis Global Holdco filed for Chapter 11 bankruptcy protection last month after taking a financial hit following the collapses of Three Arrows Capital and FTX exchange last year. Earlier this month, Genesis, Gemini and DCG reached an agreement in bankruptcy court, with part of that plan including DCG contributing its equity interest in Genesis Global trading to Genesis Global Holdco, bringing all Genesis entities under the same holding company.  

© 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 mining stocks tracked by The Block were mixed on Monday, with eight gaining and the other 11 declining.

Bitcoin fell 1.3% to $23,326 by market close.

© 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 lull in NFT activity is showing signs of subsiding with weekly trading level on Ethereum last week hitting its highest level since May, according to data from The Block.

The spike was driven by an increase of activity on NFT marketplace Blur, which has overtaken trading volumes on rival OpenSea, according to data from Dune.

The launch of Blur’s native token, coupled with continued token incentives, have created a “powerful cocktail” that has reinvigorated NFT trading activity, according to Thomas Bialek, an analyst at The Block Research.

Anticipation of upcoming airdrops may also be having an impact, as could an increase in overall market liquidity with crypto trading volumes increasing since the start of the year.

Last week, two NFT holders from trading firm Degenz Finance cashed out their collection of Bored Ape Yacht Club to the tune of more than 6,000 ETH ($10 million). They had been considering how they would be able to cash out without affecting the market, they explained, and saw the spike on Blur as an opportunity.

“The liquidity provided by Blur is insane at the moment,” they said on their website.

NFT’s were also up across a number of other categories, with Ethereum art and collectibles sales seeing the highest volume since August 2021. Still, while monthly transaction volume is up, the number of monthly trades is down, alongside the number of monthly traders. 

While transaction volumes are rising, it’s unclear if the spike is sustainable or merely connected to the short-term incentives offered by Blur. 

“It seems likely that this heated NFT marketplace war will continue to intensify in the near future,” Bialek said, “with Blur needing to demonstrate the longevity of its approach and OpenSea needing to come up with an effective response.”

© 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.

According to blockchain data examined by Forbes, over $1.8 billion in customer funds were disbursed, all of which consisted of USD stablecoin (USDC) tokens.

The vast majority of customer funds, or $1.1 billion, was transferred to Cumberland, the crypto trading arm of Don Wilson’s DRW, a Chicago-based high-frequency trading firm, that the report says, “may have assisted Binance in its efforts to transform the collateral into its own Binance USD (BUSD) stablecoin.”

Other recipients of the funds include Sam Bankman-Fried’s Alameda Research, as well as Amber Group, and Tron founder Justin Sun. 

Binance’s chief strategy officer, Patrick Hillman, told Forbes that moving money among multiple wallets was not a problem and a common practice at the firm. “There was no commingling,” Hillman said, because “there’s wallets and there is a ledger.”

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

© 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.

Scroll released a testnet version of its Ethereum Layer 2 network on the Goerli testnet, moving the zk-EVM from a pre-alpha to an alpha testing phase.

Until now, Scroll was available to try out on a testnet that was built on the project’s own clone of Ethereum. By moving from this to running on a public testnet, Scroll has taken a step forward in its path toward a full launch in the second half of this year.

“We’ve been testing with mock mainnet transactions on our pre-alpha testnet but by having a more public testnet you can have more time to battle test it and make sure that everything is working properly — because of the huge difficulty of building a system like this,” said a researcher known as Pseudotheos at Scroll, in an interview.

The testnet will be permissionless but it will remain largely centralized, particularly in terms of the computers that do the complex processing required for the network to operate. The code for the network will be open-source, meaning that the network can start building resiliency. Also, a bridge has been set up to transfer assets between the Goerli testnet and Scroll.

Scroll has been working on its network for two years and currently has 60 team members, alongside a wider network of external contributors.

What are zk-EVMs?

Zk-EVMs are Layer 2 networks built on Ethereum that use zero-knowledge proofs to achieve scalability. The EVM part refers to the Ethereum Virtual Machine (EVM), the bit that runs applications instead of simply processing them. By being EVM-compatible, these networks are able to support Ethereum applications while also running at scale.

There are two functions that make a zk-EVM work. First the sequencer batches up a lot of transactions. Then the prover does the complex zero-knowledge proof calculations to generate a proof that these transactions are all legitimate. This proof is then broadcast to the Ethereum network and the transactions get approved. 

Right now, Scroll is getting its network out in public so it can be battle tested but at the same time, it’s working on decentralizing the sequencer and the prover — a key requirement of making the network decentralized.

“We want to build the most robust and secure zk-EVM out there and that’s why we’re doubling down and working on a decentralized prover and sequencer network. After mainnet, that’s our main priority,” said Pseudotheos. “After the zk-EVM gets out the door, we’re not even close to done. We have years of work cut out for us, as far as properly decentralizing — but that’s our main priority.”

Scroll has an in-house security team trying to make sure the network is secure. It has also frozen some of its codebase and sent it to an auditor for review. It plans to have further audits down the line.

Why Scroll is taking the harder route

There are two main ways that zk-EVMs can be built (technically more in-between, but let’s not go too deep).

On one side, you can use a programming language designed for zero-knowledge proofs and then have to translate Ethereum applications from Solidity — Ethereum’s native language — to the new language. This is easier to build but makes life harder for developers porting from Ethereum to the platform.

On the other side, you can build a zk-EVM to use the same code currently used for Ethereum applications. This makes it really easy to port applications over to the network. However, this is a much harder task because zero-knowledge proofs work in a very different way to how the Ethereum Virtual Machine operates — so you have to code them to work in a way they’re not designed to.

Scroll is taking the more challenging route to building a zk-EVM, but, it hopes, one that will be more compatible with Ethereum and should spearhead greater adoption. 

“When the EVM was designed, it was not designed for zero-knowledge proofs in mind at all. The way you write a zero-knowledge program is completely different from the way you write traditional software,” said Pseudotheos.

This approach is kind of like writing a sentence in English while complying with the syntax rules of another language. Tricky but not impossible.

It has benefits: it should make it much easier for Ethereum developers to build on Scroll and port their projects to it. And that’s why Scroll reckons the hard graft will be worth it.

Polygon is also working on this type of zk-EVM, while StarkWare is taking the opposite approach and zkSync is somewhere between the two.

While Scroll is neck and neck with multiple other projects aiming to bring out a zk-EVM, Pseudotheos doesn’t think being first to market will make much of a difference. They pointed to Arbitrum and Optimism, which were released a few months apart — yet are both still finding traction. 

“It doesn’t matter who’s first,” they said. “I think that there’s room for co-existence, especially as a lot of these rollups are taking different approaches and their nuances with [zero-knowledge proofs].”

© 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.

Coinbase will suspend trading of Binance USD (BUSD) on March 13 at around noon EST.

The crypto exchange said the decision was based on its most recent review of the stablecoin, which Paxos recently stopped issuing following an order from a New York regulator.

“Our determination to suspend trading for BUSD is based on our own internal monitoring and review processes,” a Coinbase spokesperson told The Block. “When reviewing BUSD, we determined that it no longer met our listing standards and will be suspended.”

Customers will still have access to and be able to withdraw BUSD funds. However, trading will be suspended on Coinbase.com (Simple and Advanced Trade), Coinbase Pro, Coinbase Exchange, and Coinbase Prime, the exchange said.

Paxos got a Wells notice from the U.S. Securities and Exchange Commission (SEC) earlier this month alleging that it listed BUSD as an unregistered security. The stablecoin issuer said it “categorically disagrees” with the SEC’s categorization but is in “constructive discussions” with the regulator. It also cut ties with Binance.

© 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.