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Kraken agreed to settle charges brought by the Securities and Exchange Commission for failing to register the offer and sale of its “crypto asset staking-as-a-service program” and will pay a $30 million fine. 

“Today’s action should make clear to the marketplace that staking-as-a-service providers must register and provide full, fair, and truthful disclosure and investor protection,” said SEC Chair Gary Gensler in a statement on Thursday.  

The SEC alleged that since 2019, Kraken offered and sold its staking services to the general public via Kraken pools certain “crypto assets transferred by investors and stakes them on behalf of those investors.” 

“When investors provide tokens to staking-as-a-service providers, they lose control of those tokens and take on risks associated with those platforms, with very little protection,” the agency said.  

Kraken did not admit or deny the allegations.  

The settlement a day after Coinbase Chief Executive Officer Brian Armstrong tweeted that he heard “rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers,” and after Bloomberg reported that the regulator was investigating Kraken over securities violations. 

© 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.

Su Zhu, a co-founder of the collapsed crypto hedge fund Three Arrows Capital, said Thursday that a waitlist is now open at a new marketplace called OPNX for trading claims and derivatives related to funds stuck on failed exchanges.

“Our vision is unlocking trapped claims, radical transparency,” he wrote in a lengthy thread on Twitter, adding that the platform would build out fully decentralized custody and clearing services in the coming months before expanding into stocks, FX and other products. “We spoke to creditors about several plans. and everyone we talked with thought this one was the wisest way to use our existing resources.”

Zhu said the platform had resulted from talks he held with Mark Lamb, the co-founder and CEO of Coinflex, which The Block first reported last month was looking to raise funds for the new exchange.

The platform will use the FLEX token, Zhu said.

OPNX presently welcomes users to join a waitlist under a banner that reads “Do you have money stuck on a crypto platform?” A manifesto posted on the site says that a $20 billion market of claimants involving  FTX, Voyager, Celsius, Genesis, BlockFi, Mt Gox, among others, is “desperately looking for a solution.”

© 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.

MakerDAO integrated Chainlink’s decentralized oracle into the framework that helps to maintain the stability of its DAI stablecoin, after a successful governance vote.

With the vote passed, MakerDAO can now onboard Chainlink Automation to its Keeper Network. MakerDAO’s Keeper Network is responsible for ensuring DAI stability. It is a network of bots that controls parameters like price and debt ceiling to ensure that DAI maintains its parity with the U.S. dollar.

Chainlink Automation becomes the latest third-party protocol added to the technology stack that runs the DAI stablecoin. The Chainlink oracle will be put to work on functions like price updates, liquidity rebalancing and upgrading of the debt ceiling for DAI collateral assets. Debt ceiling refers to the maximum number of DAI that can be minted against supported collateral assets.

The Chainlink integration was part of a voting package agreed upon by DAO delegates on Thursday. The voting package also included dust parameter changes for several vault types and compensation for recognized DAO delegates for January. There are 17 DAO delegates who will receive a total of 109,048 DAI ($109,048).

The Chainlink Automation integration itself on the Keeper Network will also receive a stream of 181,000 DAI ($181,000). This sum will cover a period of 6 months, amounting to 1,000 DAI tokens per day.

© 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.

Bored talking to OpenAI’s overly polite chatbot ChatGPT? You’d prefer an AI-powered virtual assistant with a bit more attitude?

Then meet Anima’s new Onlybots, non-fungible tokens that can not only be bought and sold, but also possess their own unique set of personality traits engineered to inform both their mood and vernacular.

“Yo, I’m dope cause I can tell jokes and stay totally rad,” said a pink-and-white Onlybot named Dex Cat when asked during a demonstration why people would have more fun talking to it than ChatGPT.

Shortly after start-up Anima allowed people to acquire its AR-powered virtual pets called Onlybots — NFTs minted on Ethereum and trading on OpenSea since December  — the company has plans to imbue its collection of cute robots with the breadth of knowledge ChatGPT possesses. Except Anima has decided to utilize the tech behind ChaGPT in a way the company hopes Onlybot fans and owners will appreciate.

“Each Onlybot has all of the artificial intelligence that OpenAI has built but it’s sort of skewed through a personality,” said Anima cofounder Alex Herrity during an interview. The goal with this new initiative, he said, is to bring the company’s collection of augmented-reality NFTs to life and make them fun to interact with.  “This project, while it’s done well as an NFT, people that have latched on to it are not your typical NFT collectors.”

Onlybot named Levi placed in the physical world with Anima’s augmented-reality technology during a demonstration.

Anima has positioned itself as the first company to create “on-chain AR” digital assets. After acquiring an Onlybot, owners can use their smartphone camera to place the mini augmented-reality robots within the physical world.

The basis of Anima’s strategy is to become a “protocol for dynamic and ownable augmented reality.” 

By adding OpenAI’s “GPT-3” tech to Onlybots, which Anima plans to deploy later this year, the company hopes owners will find new ways to interact with the talking NFTs.

“Kids are super into it,” said Herrity, adding that because children don’t have to type into a computer to talk to Onlybots, he believes it makes using OpenAI’s impressive chatbot technology more accessible, including to his seven-year-old child, who likes to use it for “homework help.” 

It’s easy to see why kids might get a kick out of the chatty Onlybots. When an Onlybot named Megan was asked how AI is going to change human life, although the 3D robots use of proper grammar left a lot to be desired, it was quick to offer a lengthy and enthusiastic reply.

“With AI we can unlock potentials we never could have imagined,” said Megan. “Get ready for the wild ride. Fam, it’s going to be fire. AI future look lit.”

Onlybots also don’t pull any punches when it comes to discussing the dangers of trading digital assets.

“NFTs got some gnarly downsides. They can be expensive, could be scams and ain’t all folks can buy them,” said the skateboard-riding Dex Cat when asked about the dangers of non-fungible tokens. “They ain’t regulated by the government either. So savvy shredders gotta be careful when they cruise down that highway.”

© 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-related stocks sold off at the open, with Coinbase and Silvergate leading the drop.

Coinbase shares fell over 8% to $63 by 11:15 a.m. EST, according to Nasdaq data. Last night Coinbase CEO Brian Armstrong said it would be a “terrible path” for the U.S. if it were to restrict crypto staking.

COIN chart by TradingView

Shares are trading down primarily as a result of Armstrong’s comments, John Todaro of Needham told The Block. “While staking is still a small portion of COIN’s overall revenue today, it is an important piece to diversify revenue away from trading and is seen as a potentially high-growth vertical.”

Two million ETH are currently staked on Coinbase, with close to 20 million ETH under custody. “If Coinbase can convert a larger portion over to staking, it could start to become an important revenue driver,” Todaro noted, adding that “investors now have to start pricing in the possibility that this future revenue vertical gets removed if regulation comes down strict enough to shut the product down.”

Crypto-friendly bank Silvergate was down, too, dropping 5.3% to $16.50. Jack Dorsey’s Block shed just 3.7% as it traded below $79 for the first time since late January. MicroStrategy dipped about 4.2% to $264.

Argo Blockchain shed 12% today. CEO Peter Wall announced his resignation earlier in the day. 

© 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.

Cryptocurrency prices slipped across the board, even as the sector buzzes about the future of AI and big data tokens.

Bitcoin was trading at $22,722 by 9:35 a.m. EST, down 1.5% over the past day, according to TradingView data. 

BTCUSD chart by TradingView

Ether fell 1.6% over the past 24 hours, trading at about $1,645. Binance’s BNB dropped 3%, while Cardano’s ADA fell 2.8%. Dog-themed memecoins experienced sharper sell-offs, with dogecoin down 3.1% and shiba inu losing 5.2%.

Structured products

Grayscale’s bitcoin trust, GBTC, has been trading down throughout the week, having reached a high of $12.93 last week. The fund’s discount to net asset value has also widened to 43.5%, the widest gap since early January, according to The Block data.

AI and big data x blockchain

Artificial intelligence and big data tokens have rallied recently on the back of a sudden fascination with AI chatbots, but the move has split opinions, with Fantom’s Lead Developer Andre Cronje saying AI and blockchain aren’t complimentary. 

The convergence between machine learning and blockchain data could be a “killer use case,” according to 21Shares Director of Research Eli Ndgina, who stated that “blockchain data is a dark and complex forest with mechanisms that varies across ecosystems like Ethereum and Solana.”

“The Graph (GRT), up 147% in 30 days, built a global API to index blockchain data across dozens of ecosystems to retrieve for example, token prices on decentralized exchanges without the need to download a full node,” he added.

GRTUSD chart by TradingView

Ndinga said the tokenization of assets and more use cases will dominate crypto, giving blockchain infrastructure players like The Graph an important role in accessing blockchain data such as using AI to label wallets and spot patterns of certain wallets. This will also create applications for investors and law enforcement.

“A concrete example is retrieving lost funds in the aftermath of a hack or after debacles like FTX,” he said.

© 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.

Venture capital firms Bitkraft and Fabric Ventures led a $6.5 million round into Cub3 (pronounced Cube), a customer loyalty platform that aims to automate web3 rewards based on participants’ real-world activities. 

CMT Digital, Red Beard Ventures and Geometry Labs among others also participated in the Series A round, said the company. 

Currently supporting the Ethereum and Polygon chains, the Cub3 platform enables brands to create loyalty programs that reward users in tokens for completing certain actions.  These could be tweets about a specific brand or uploading a video of themselves dancing to TikTok. These can be traded for perks such as exclusive content or discounted merchandise. 

“Our clients are anyone who wants to improve the way they engage their users, customers, or fans,” said CEO Linc Gasking in a written interview with The Block.

Gasking said that it originally launched in the music space and has so far worked with clients covering artists including Duran Duran, Annika Rose and Roxy Music. Clients in the charity, sports and retail sectors are set to launch campaigns using the Cub3 technology soon, he claimed. 

Proving your loyalty

Much of the funding will be funneled into launching its so-called Proof of Behavior protocol. Currently, in beta, the company says this system uses artificial intelligence and machine learning to identify and evaluate behaviors both real-world and on social media platforms. Behaviours and their subsequent rewards and then stored on-chain so that brands can access analytics to measure their return on investment. 

“From receiving a digital collectible for a retweet to incentivizing fans with unique rewards for streaming artists’ new music, Cub3 is creating a Proof-of-Behaviour Protocol including a full-service web3 toolsuite where brands, publishers, agencies and artists can use positive reinforcement to create brand alignment and incentivize user actions,” said Bitkraft founding partner Malte Barth in the release. 

Cub3’s funding round comes amid recent mixed fortunes for web3 loyalty programs. Brazil’s Mercado Libre rolled out a loyalty token in August and coffee conglomerate Starbucks began beta testing its NFT loyalty program at the tail end of last year. Still, neobank Revolut pushed back its native token intended to operate in a similar way to air miles schemes, per reports last month, and Porsche’s NFT drop that would allow holders access to events and exclusive merchandise fell short of selling out. 

© 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.

CleanSpark is expected to post a nearly 13% bump in revenue from the previous quarter when it kicks off the earnings season for bitcoin miners after the U.S. close today. 

The company is expected to report a loss of $31.3 million on revenue of $29.5 million for the quarter that ended in December, according to analyst estimates compiled by FactSet. That would be narrower than the $42.3 million loss from the previous period. 

The miner posted net income of $14.5 million on revenue of $41.2 million in the same period a year earlier.

CleanSpark will be the first miner to report results for the quarter, which saw the biggest player in the space, Core Scientific, file for bankruptcy and Argo Blockchain sell its flagship facility to Galaxy Digital in order to avoid the same fate.

Miners are still struggling as a result of months operating at depressed margins, but January has been kinder with bitcoin surging back up to August levels at around $23,000.

CleanSpark picked up thousands of discounted machines, as well as two sites in Georgia, during the down market.

It also met its 2022 hashrate goal of 5.0 EH/s in October, although it cut back projections for 2023 from 22.4 EH/s to 16 EH/s because of build-out delays coming from its infrastructure partner, Lancium.

© 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 miner Birfarms settled $21 million in debt from BlockFi with a single payment of $7.75 million in cash.

The value of mining machines that collateralize those loans has dropped significantly and the bankrupt crypto lender has reportedly been looking to sell around $160 million in debt.

Like many miners, Bitfarms has been making efforts to deleverage itself for the past few months, bringing down its debt from a high of $165 million in June to $25 million now.

“Our remaining debt, mostly secured by new, high efficiency mining equipment in Quebec, matures on or before February 2024, enabling us to be debt free before the next halving event expected in May 2024,” said Bitfarms CFO Jeff Lucas.

The deal also unemcumbered 6,100 miners belonging to its subsidiary, Backbone Mining Solutions, Inc — the entity that actually entered into the BlockFi loan, originally $32 million, and that operates Bitfarms’ 20-megawatt sites in Washington state.

“This successful negotiation and settlement furthers our initiatives to reduce indebtedness, enhance liquidity and increase financial flexibility in line with today’s market conditions,” Lucas said.

© 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.

Vault, a music platform built with web3 technology, raised a $4 million Series A led by Placeholder VC. 

The equity round closed in the third quarter of last year at a $42 million pre-money valuation, said founder and CEO Nigel Eccles in an interview with The Block. It also featured participation from consumer technology-focused investors such as Alleycorp and Bullpen Capital, which backed Eccles’ and co-founder Rob Jones’ previous endeavor FanDuel, a sports betting platform. 

Having previously raised seed funding as a “mobile Discord platform” called Flick, the founders pivoted the startup in the summer of 2021. Now, Vault enables artists to release so-called digital music collectibles (DMCs) that rely on NFTs on the Solana blockchain to allow fans to access extra content and open up an extra revenue stream for artists. 

“One artist dropped in stems (a type of audio file that breaks down a complete track into individual mixes) of drums, vocals, etc so you could listen to those separately or you could even remix [the track] yourself,” said Eccles. “A lot of artists have tons of voice recordings — a melody or a lyric that they test out — and a lot of them want to share that with their fans.” 

But don’t call Vault NFT-gated. Eccles eschewed the term, saying that — unlike other solutions — users usually aren’t aware of the underlying technology unless they opt-in for self-custody. 

“I would say that probably 95% of our users aren’t aware of anything that’s going on underneath,” he said. “So what happens is that someone will purchase with a credit card, PayPal or in-app and we’ll mint an NFT, create a wallet and put that NFT in the wallet.”

Changing perceptions

Eccles admitted that the current perception of NFTs in the music industry isn’t exactly stellar and said he initially avoids talking about crypto when convincing artists to list a project on Vault. 

“I would say that a year ago when we talked a lot about crypto it was very hard to get into these conversations [with artists] — we got mislabeled as this music NFT platform,” he explained. “Now we go to them and say think of this as a digital boxset… where fans can download and listen to it on their phone immediately and they could see video and all this other content.” 

It’s only later on that Vault talks crypto with artists, Eccles said, noting that Fletcher, an upcoming pop singer that recently listed a project on Vault, is aware of the underlying technology. During her most recent tour, the singer released digital collectibles of some of her tracks — the highest selling of which dictated which would be performed. 

Part of the funding will be used to scale up its own proprietary protocol, which will be opened up to allow third parties to support the Vault format.

© 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.