Dates assembled by the author from publicly available government documents and announcements. Graphics designed by Zoe Ellyse Del Rosario.
© 2022 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.
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Author: Kollen Post
Episode 78 of Season 4 of The Scoop was recorded remotely with The Block’s Aislinn Keely and Craig Salm, Chief Legal Officer at Grayscale.
Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.
The US has yet to see a spot bitcoin exchange-traded fund (ETF) reach the market, but when a futures-based product got the green light from the Securities and Exchange Commission (SEC) last year, issuers were hopeful.
Some thought it signified the regulator becoming more comfortable with crypto products and a spot ETF could be on the horizon. But since then, the SEC continued to shoot down application after application on the basis that there aren’t sufficient mechanisms to prevent price manipulation in the spot market.
Grayscale, which has long desired to convert its flagship GBTC product into an ETF, took issue with this. During the SEC’s continued extensions on its application, and after a series of rejections of other similar applications, the firm sent a letter saying the regulator could be violating its own procedures by approving a futures product but refusing to allow a spot-based product. The firm argued that futures are priced based on the underlying spot market, meaning any price manipulation in the spot market would affect futures products.
The idea is if the regulator is comfortable with futures, it should be comfortable with a spot-based product.
But Grayscale, too, received a rejection weeks later, spurring it to mount a legal challenge in the DC Court of Appeals. Now, it’s gearing up to submit its first brief in the case, detailing its qualms with the SEC’s rejection of its application.
In this week’s episode of Policy Scoop, Aislinn Keely sat down with Grayscale’s Chief Legal Officer, Craig Salm, to take an in-depth look at the firm’s argument.
“It wasn’t a decision that we made lightly, and during the course of that comment letter period, we had a couple of meetings with the Commission to try to work through their questions and the issues presented, lay out the arguments and reasoning why we felt that if they were okay with futures, they should now be okay with spot,” said Salm. “It seemed like a natural progression and we were excited by the level of development that we were seeing in the Bitcoin futures markets. Ultimately, we got to a point where we just reached a disagreement.”
In this episode of Policy Scoop, Keely and Salm also discuss:
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On August 1st, 2022, Poloniex launched a faster and more stable trading system along with a brand new user interface. Poloniex was founded in January 2014 as a global cryptocurrency trading platform. With its world-class service and security, it received funding in 2019 from renowned investors, including H.E. Justin Sun, Founder of TRON. Poloniex supports spot and margin trading as well as leveraged tokens. Its services are available to users in nearly 100 countries and regions with various languages available. For more information visit Poloniex.com
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© 2022 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.
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Author: Aislinn Keely
Holdnaut, the embattled crypto lender, faces police proceedings and revealed that it laid off most of its staff.
The Singapore-based crypto firm said there are “pending proceedings” between itself and the Singapore Attorney-General and Singapore Police Force, in a blog post published this morning.
Hodlnaut paused withdrawals earlier this month and later filed for creditor protection in Singapore, seeking time to resolve its liquidity issues.
The startup is one of a string of crypto lenders to have frozen customer funds in the wake of the collapse of Terra, the blockchain underpinning the now-defunct stablecoin UST, and the crypto hedge fund Three Arrows Capital earlier this year. Vauld, which is also based in Singapore, is stuck in a similar situation, as is South Asian crypto exchange Zipmex.
Holdnaut has applied to be placed under judicial management. If successful, the move will hand “ultimate decision-making power on all aspects of the company moving forward” to the judicial manager, per today’s blog post.
The startup added that its financial difficulties stem from losses suffered during the UST crash, as well as “unusually high volumes of withdrawals, the overall decline in cryptocurrency prices from their 2021 highs and issues relating to certain user(s) who have deposited substantial amounts of cryptocurrency with Hodlnaut.”
Hodlnaut has taken dramatic steps to reduce costs. The startup laid off 40 employees or roughly 80% of its staff since halting withdrawals, it said in today’s blog post. “The current team that we have retained are, in our assessment, necessary headcount in order for us to carry out key functions,” the company added.
This is a developing story and will be updated.
© 2022 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.
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Author: Ryan Weeks
As bitcoin miners flock to Texas, one of the toughest things they’ve had to contend with is the heat. In July, however, mining firm Riot Blockchain showed how it’s possible to cash in on it — by not mining bitcoin.
The company reported in its July monthly report that due to the heat it cut power a number of times in that month and that the shutdowns were a big reason behind a 28% drop in bitcoin mined compared with June.
But it also announced that it received $9.5 million in “power credits” and other benefits from the grid operator or a utility company for shutting down during periods of high demand that resulted from a heatwave. The sum “significantly outweighed” the decrease in bitcoin production, according to CEO Jason Les.
That would suggest that shutting down operations when the grid is stressed could be a lucrative business opportunity, and not just for Riot. But what exactly are these power credits and how does a bitcoin miner qualify for them?
Texas has its own electrical grid, which is operated by The Electric Reliability Council of Texas (ERCOT). ERCOT acts as sort of an air traffic controller, balancing supply and demand. One way it can do that is by asking large power users to turn off (or curtail) their power whenever the grid conditions are tight. It does this via a number of so-called demand response programs — some of which come with financial incentives.
As Texas has grown into a bitcoin mining hub, advocates have argued that the ability to quickly stop operating — unlike other power-hungry facilities like factories that may need more time to shut down — will make mining firms valuable users of the grid. That claim was tested in July.
As the heat reached extreme levels, ERCOT made a public appeal to Texans and Texas businesses to cut down on their power use as demand for air conditioning and cooling pushed the grid’s capacity to its limit.
There are no policies requiring firms to curtail their power use during times of high demand. Riot’s payday, however, suggests that financial incentives may be sufficient.
The details about how these demand response incentives work are complicated. But there are three sources of payments by ERCOT for power curtailments, an ERCOT spokesperson said in an email.
First, there are “non-controllable load resource programs.” Essentially, these programs pay power users a certain amount simply for the option of turning them off during emergency situations.
“They may not ever get turned off, but they’ll still get paid to be available to be turned off,” explained Joshua Rhodes, a researcher with the Webber Energy Group at the University of Texas at Austin. “It’s load-side insurance.”
ERCOT said it did not make any payments in July under this program.
Then there are “controllable load resource programs,” which treat participating power customers like a “negative power plant,” Rhodes said. “Just like a power plant gets paid for producing electricity, a controllable load resource gets paid for not consuming.” The program is tied to power price signals and in order for loads to be responsive, they need advanced technology like automated software triggers that can cut power when prices reach a certain threshold.
Finally, there’s something called an “emergency response” service, in which certain power users and generators make themselves available for shutdown or deployment in an electric grid emergency. “Unverified crypto mining loads” totaling 1,000 megawatts in capacity curtailed power for two-and-a-half hours on July 13 under this program, ERCOT said.
There is a funding cap set by the regulators, which determines how often this measure can be used. It was expanded in July as the heat pushed the grid to the limit.
In addition to these power curtailment programs, miners also try to save money by participating in a program called Four Coincident Peak (4CP), through which they can save on transmission costs from their utility providers in the following year if they are powered down during four specific 15-minute periods in the summer months when the grid reaches peak capacity. These 15-minute periods are determined by ERCOT after the fact.
The Block has asked Riot to clarify where their July “power credits” came from but has not received a response. ERCOT, for its part, said that it “does not comment on specific loads or plants.”
© 2022 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.
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Author: Catarina Moura
The United States Trustee wants to appoint an examiner to embattled lender Celsius to produce an unbiased public report providing transparency on the firm’s business operations, investments, transactions, and customer accounts.
Shara Cornell, the representative for the Office of the Trustee, teased the move in this week’s second-day hearing when she opposed Celsius’s motion to access its mined bitcoin. She argued Celsius had repeatedly failed to submit sufficient information to her office, including specifics about costs related to the still-in-progress mining expansion. For that reason, she said during the hearing, her office was considering appointing an examiner for clarity on this and other issues.
Now, a new motion filed by the office is asking the court to enter an order to appoint that examiner.
Celsius filed for Chapter 11 last month after significant market volatility led to liquidity issues forcing the firm to halt withdrawals and enter bankruptcy proceedings. The filing acknowledges its cooperation in the Chapter 11 process but argues significant “financial irregularities” have taken place in the novel bankruptcy case requiring a third party to investigate. This should be a group outside of the creditor committee that speaks for the interests of the creditors and customers, said the Office of the Trustee.
“Irrespective of such cooperation, however, the divergent interests of the various estates, the extreme financial irregularities that have taken place, and the extensive mistrust of the Debtors’ customers, all make the appointment of an independent and disinterested examiner in the best interests of creditors, equity security holders, and the bankruptcy estates,” said the motion.
The filing cites allegations from regulators that Celsius offered unregistered securities and failed to obtain proper licenses and hedge against market volatility.
“If these allegations are true, they could expose further irregularities. An examiner would be able to look into these and other issues to determine if there are any claims or causes of actions that the Unsecured Creditors Committee (the “Committee”) can pursue,” said the filing.
The third-party investigation would also include a look into allegations of “fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of [the Debtors] of or by current or former management of [the Debtors].”
While the filing cites numerous areas in which the office feels Celsius hasn’t been sufficiently transparent, it also points to public sentiment. Indeed, Celsius customers have flooded the docket with letters detailing their predicaments and ensuing mistrust of the firm.
“While the allegations may not be aligned, the overall message is clear—the creditors feel misled by the Debtors and current management,” said the filing.
An outside examiner would provide visibility into Celsius’s business model and balance sheet, as well as “bridge the gap between the creditors and the Debtors by fostering trust in the information provided for a successful reorganization,” the office argues.
“Creditors, as well as investors, require an independent, conflict-free, experienced party investigating the financial affairs of these Debtors, free from the constraints of current management, to serve as a clear, easily understood, and trusted source of information,” said the filing.
© 2022 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.
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Author: Aislinn Keely
A Russian citizen and alleged participant in Ryuk ransomware attacks has been extradited from the Netherlands for trial in the US.
Denis Mihaqlovic Dubnikov and his co-conspirators allegedly laundered $70 million from ransomware attacks, with Dubnikov purportedly laundering over $400,000, the Department of Justice said yesterday. The attacks encrypted files holding them hostage until payment.
The news of Dubnikov’s extradition comes a week after the arrest by Dutch authorities of Alexey Pertsev, developer of the crypto mixer Tornado Cash, who was accused of facilitating money laundering.
The US elevated ransomware investigations to the same priority as terrorism last year following the Colonial Pipeline ransomware attack. The US has since extradited other individuals in the name of ransomware investigations, including in March, when a Canadian man was accused of carrying out dozens of ransomware attacks.
Dubnikov will face trial in Portland on Oct, 4, and could face up to 20 years in prison if convicted.
© 2022 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.
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Author: MK Manoylov
A majority of bitcoin mining stocks fell on the stock market on Thursday, while some still recovered.
Bitcoin was trading at around $23,400 at market close, according to data from TradingView.
Hut 8’s stock fell by 10.03% on Nasdaq, followed by Greenidge Generation (-9.67%) and Cipher Mining (-9.38%).
On the other side, Iris Energy, SAI.TECH and HIVE Blockchain saw their stocks rise by 7.71%, 4.82% and 2.50% (on the Toronto Stock Exchange), respectively.
Here’s how crypto mining companies performed on Thursday, August 18:
© 2022 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.
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Author: Catarina Moura
US House lawmakers are seeking information from four crypto mining companies in an effort to understand the environmental impacts of blockchain technology.
The House Energy and Commerce Committee sent letters to Core Scientific, Marathon Digital Holdings, Riot Blockchain, Inc. and Stronghold Digital Mining on Wednesday. The committee is studying the impact of proof of work and how it relates to emissions and “excess electronic waste.”
The move comes as Washington regulators take a closer look at cryptocurrency amid this summer’s market crash. Additionally, Ethereum is expected to merge its proof-of-work blockchain with its proof-of-stake chain next month.
“While we understand that blockchain technology holds immense promise that could make our personal information more secure and economy more efficient, the energy consumption and hardware required to support PoW-based cryptocurrencies may, in some instances, produce severe externalities in the form of harmful emissions and excess electronic waste (e-waste),” reads the committee letter to Stronghold Digital Mining.
The letter was signed by Rep. Frank Pallone Jr., the committee chair, along with Reps. Bobby Rush, Diana DeGette and Paul Tonko.
The committee requested information on how much energy each company’s mining facilities used in 2021, what energy sources the facilities use and the proportion of energy used that is offset by renewable energy credits. The lawmakers also asked how many days companies curtailed crypto mining to support grid stability in the last 12 months, along with the average cost per megawatt hour and the per megawatt-hour profit at each facility.
Another group of policymakers last month urged the Department of Energy and the Environmental Protection Agency to require miners to report information about emissions and energy use.
© 2022 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.
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Author: Stephanie Murray
Gnosis Safe has confirmed an airdrop of its native token, SAFE.
Gnosis Safe released a spreadsheet highlighting 21,935 Safes (users) are eligible for the airdrop, with an average distribution for each Safe being 2,279 tokens.
Gnosis Safe is used by various DAOs, institutions, and individuals in the industry, such as ConsenSys, Aave, and Synthetix.
Gnosis Safe currently secures over $38 billion worth of assets.
At 10:53 a.m. ET Wednesday, Gnosis Safe tweeted out the proposal for the user distribution of the airdrop after the initial proposal from February 9 was passed.
After raising a strategic funding round of $100 million in July, the goal of the SAFE token will be to govern the Gnosis Safe ecosystem through the newly established SafeDAO. The token will also be used to distribute value capture from the protocol to its users.
Gnosis Safe is also in the progress of setting up the Safe Foundation based in Switzerland, which will oversee areas such as intellectual property, GitHub repositories, and strategic investments. The foundation itself will also issue the SAFE token.
© 2022 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.
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Author: Mike Truppa
Latin American e-commerce company Mercado Libre has introduced a cryptocurrency as part of its loyalty program in Brazil as it seeks to provide more value and experiences to its regular customers.
The company is using the new token, called Mercado Coin, to reward members of its loyalty program when making purchases through its marketplace. Mercado Coin is based on the Ethereum ERC-20 token standard.
“The blockchain technology supporting Mercado Coin allowed us to deliver a secure and open solution,” Mercado Libre Chief Technology Officer Daniel Rabinovich said in a statement. “We continue to follow the evolution of crypto and blockchain as we see significant potential in these technologies to simplify operations and empower our customers financially.”
Mercado Libre, known as Mercado Livre in Brazil, will add a “crypto logo” next to certain products in its Brazilian marketplace, which indicates that users can gain Mercado Coin rewards when purchasing those items. People with Mercado Coins can then use them to buy more items in the marketplace, or use the payments app Mercado Pago to exchange the cryptocurrency into Brazilian reais.
Latin American cryptocurrency exchange Ripio developed the technology behind the token, a Ripio spokesperson told The Block. Ripio is also responsible for providing custody and acting as the exchange for the Mercado Pago crypto transactions.
The new cryptocurrency will be progressively rolled out to Mercado Libre’s Brazilian customers, starting with 500,000 users, the spokesperson confirmed. The coins will first start trading at 10 cents. These details were previously reported by outlets including Reuters and InfoMoney.
This launch of a new cryptocurrency builds on Mercado Libre’s previous efforts to adopt digital assets in the past few years. The company has “assumed positions of $30 million as a crypto store of value,” the company said in today’s press release.
In December 2021, Mercado Libre started working with Paxos to offer users the ability to start trading and holding bitcoin, ethereum and the Pax Dollar stablecoin (USDP) through the Mercado Pago app. That feature gained more 1 million users in 60 days. Then in January, Mercado Libre said it acquired shares in 2TM Group, the parent company of popular Brazilian cryptocurrency exchange Mercado Bitcoin.
© 2022 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.
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Author: Kristin Majcher
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