FreeCryptoCurrency.Me

A Terra validator voting against Do Kwon’s plan to revive the network has hit out at the way the vote has been managed, blasting a lack of decentralization.

Allnodes CEO and founder Konstantin Boyko-Romanovsky told The Block, “We didn’t like the fact that the whole governance process of this proposal looks like a dictatorship model. It looks like the launch of [the] new chain is decided even before voting is finished.”

TerraUSD, a stablecoin native to the Terra blockchain, lost its peg to the US dollar last week, destroying more than $40 billion of value in a few days. To revive the network, Terraform Labs CEO Do Kwon is seeking approval from validators to fork Terra and reallocate its tokens, with many subject to vesting periods.

While a majority of validators — who stake tokens and processes transactions on the network — have so far voted in favor of the plan, many in the wider Terra community have expressed concerns. Boyko-Romanovsky went as far as to say that the way the vote has been managed goes against the decentralized philosophy of crypto.

Allnodes is one of five validators voting against the plan and represents 1.49% of the Terra network’s staked Luna, the token used to vote. Currently 19.7% of votes are vetoing the plan. If this climbs to more than 33.4% when the poll ends in six days, the vote won’t pass.

Ahead of the main vote, there was a preliminary poll on the Terra governance forum. Nearly 7,000 people voted, with 91% against the idea of a fork. 

Boyko-Romanovsky said he didn’t like what happened regarding the preliminary poll. “90% of [the] active community is against [a] fork and still the founder pushes his own narrative without listening to his community,” he said.

He added that the proposed solution was not the best option and that more time should be given to discussions about the path forward. He said that since Terraform Labs may have access to significant voting power, Allnodes decided to stand on the community’s side and vote to veto the proposal.

© 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.

Revolut’s planned native crypto token will aim to reward customers for their loyalty, CEO Nik Storonosky said in an interview, in which he also shared details on the neobank’s forthcoming non-custodial wallet.

Speaking to The Block at the Finance FWD conference in Hamburg, Storonosky said the long-rumored native token — which some have dubbed “Revcoin” — will function in a similar way to airline Air Miles programs, where users earn rewards based on how often they use the service.

“It definitely won’t be a stablecoin,” he said. “The goal is to make loyalty tradable.” 

Separately, Storonosky said the company is building a non-custodial wallet, where users are entrusted with the seed phrase and private key and empowered to link to other decentralized wallets.

Revolut currently only offers customers the option to host crypto in a custodial wallet, where the private keys are managed by a third party and bitcoin is the only token that can be withdrawn to a user’s external wallet. Storonosky confirmed earlier reports that the financial app will add staking, deposits and withdrawals, and lending to its custodial wallet offering.

A full web3 wallet 

The non-custodial wallet will function both as a separate standalone app and as an option within the Revolut in-app hub, where a plethora of features from pet insurance to hotel booking to remittances are already available. 

There are plans to add support for non-fungible tokens (NFTs) to the wallet but this is currently “deprioritized,” according to the Revolut founder.

“We want to start with the basics,” he said. 

Giving further details into how the wallet will look, the billionaire Revolut founder said that while it will function similarly to MetaMask, he wants to make it as simple as possible for the user. That means the complexity of different blockchain networks and bridges that some crypto-native wallets make visible will be hidden. 

“We want to make sure that people can just transfer crypto in the same way they do with bank accounts,” he explained. 

He did note, however, that it will likely initially launch as a single-chain wallet. 

“Initially we’ll launch on Ethereum but going forward after that we will make it multichain,” he says, with Revcoin following a similar trajectory.

When asked if the above details were a direct confirmation of Revolut’s plans for a native token, Storonsky remained coy. 

“We’re working on many things,” he said, adding that it will be launched “hopefully one day”. 

© 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.

Azra Games, a blockchain gaming startup, raised $15 million in seed funding, according to a Thursday announcement.

The venture capital firm Andreessen Horowitz (a16z) led the round, with additional participation from NFX, Coinbase Ventures, Play Ventures and Franklin Templeton. 

Azra Games will use the funds to build out its first game Project Arcanas, a sci-fi fantasy epic with mass combat and role-playing game (RPG) elements. The game will feature web3 technology like virtual collectibles. 

The firm was founded by Mark Otero, former general manager of the video game giant Electronic Arts (EA), and spearheaded the popular video game Star Wars: Galaxy of Heroes. 

“Mark Otero is a seasoned game director who was at the forefront of mobile free-to-play games with the hit franchise Star Wars: Galaxy of Heroes,” said a16z general partner Jonathan Lai in a statement. “We’re excited to partner with Mark and the Azra team as they apply their expertise to web3 games in creating new types of gameplay and economy design.” 

A16z recently funded other blockchain gaming starts this month, such as LootRush, in addition to launching a $600 million venture fund for blockchain gaming on May 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.

FTX.US is going where no crypto exchange has gone before: US equities. 

The firm — which is owned by billionaire wunderkind Sam Bankman-Fried — announced on Thursday the launch of a stock trading feature that would make the firm one of the most prominent companies in the crypto space to make the move into regulated securities. According to a press release, FTX Stocks will be offered through the FTX US mobile application. It is set to offer trading in hundreds of US-listed companies and exchange-traded funds. 

Elsewhere, rivals like Coinbase have indicated that they do not intend to move into trading US securities. In 2021, Binance shut down its stock-tied token trading operation. 

FTX, according to a press release, is offering brokerage services through FTX Capital Markets, which is “an affiliated broker-dealer registered with the SEC and member FINRA/SIPC.”

“Our goal is to offer a holistic investing service for our customers across all asset classes,” commented FTX US president Brett Harrison, a former high-speed trading tech wonk at Citadel Securities and Jane Street. “With the launch of FTX Stocks, we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface.”

The news is striking given that Sam Bankman-Fried recently acquired a 7.6% stake in the poster-child of US retail stock trading: Robinhood. The stake — which amounted to about $648 million at the time of the investment — has spurred speculation among individuals close to the billionaire that he is keen to acquire the entire company. Such a move would fit in neatly with his ever-expanding grip over US capital markets. 

FTX US has plans to offer crypto derivatives in the US via a proposal that would allow it to offer such instruments direct to consumers, potentially posing a threat to CME Group. Currently, exchanges offer futures and options products to customers through intermediaries like brokers and futures clearing merchants. CME Group — which dominates trading across commodity derivatives — has come out firmly against FTX, with its CEO Terry Duffy noting in a recent press release that FTX’s proposal is “glaringly deficient and poses significant risk to market stability and market participants.”

FTX’s mounting presence in traditional markets is also illustrated in its significant stake in equities exchange IEX, which was revealed in April. 

Still, FTX US plans to route its orders to Nasdaq’s market, according to news release. The firm does not plan to monetize the business via payment-for-order flow, which is the typical mechanism through which brokers make money. Through PFOF — as it is known in the industry — brokers route orders to liquidity providers to execute. Those trading firms pay the brokers for that order flow. 

“There is clear market demand for a new retail investment experience that offers full order routing transparency to customers and does not rely on payment for order flow,” Harrison said. “As we grow the product offering and capabilities, we are excited to give our customers even greater choice for order execution, as well as the tools they need to make informed routing decisions.”

The firm’s stock offering will not charge commission fees and allow clients to fund their accounts with the popular stablecoin USDC. 

© 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.

Babel Finance announced on Thursday that it successfully issued its first collateralized USDC note, in a move that demonstrates crypto’s potential to enter the $100 trillion global bond market. 

The note is a smart contract-based global debt instrument, provided by blockchain startup FQX on Solana, the company said in a press release.  

It was executed via eNote, a blockchain-based debt instrument which is recognized around the globe, and can be used for a broad variety of financing purposes.

The move, a demonstration of FQX’s proof-of-concept, provides a legal layer for decentralized financing, and shows how certain tech can increase legal certainty and optimize the loan-to-value ratio in the massively overcollateralized DeFi space. 

The transaction was executed using a Fireblocks custody wallet, with the principal provided by a Swiss investment firm and secured with smart contract-based collateral denominated in SOL.

“Prolonged manual processes, limited secondary market liquidity, and mostly bilateral settlements offer a number of areas in debt markets which can be improved by blockchain and smart contracts,” said Richard Astle, head of Switzerland and Middle East, at Fireblocks.

“Through tokenization, investors are able to participate with smaller transaction sizes than traditional debt issuance, making it much more accessible to the broader market.”

For the delivery-versus-payment, as well as for the collateral management, FQX’s decentralised escrow programs were used. 

The new way to issue transferrable debt will soon be available through Wallet Connect’s Solana gateway to Fireblocks using FQX’s eNote dApp.

© 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.

Crypto-focused research and investment group Delphi Digital has published a post-mortem on the losses inflicted by last week’s collapse of TerraUSD (UST) algorithmic stablecoin, concluding that it “always knew something like this was possible.”

“We understood the risks of the algorithmic model upfront and sought to be transparent about them throughout; however, it’s clear we miscalculated the risks,” Delphi wrote in a blog post late Wednesday. “To the vocal critics of Terra’s algorithmic design — you were right and we were wrong.”

UST de-pegged from the dollar in catastrophic fashion last week, destroying more than $40 billion in value for investors. Delphi, which competes with The Block to offer research on the crypto industry, had been a backer of the Luna Foundation Guard (LFG), a Singapore-based non-profit entity with a mission to boost the Terra ecosystem. 

“We always knew something like this was possible, and we tried to stress the risks to a system like this in our research and public commentary, but the fact is we miscalculated the risk of a ‘death spiral’ event coming to fruition,” Delphi said. “We’ve taken some heat for this over the last week, and we deserve it. The criticism is fair and we accept it.”

As recently as April, Delphi had written in a research newsletter that LFG’s bitcoin purchases “gives higher security to defend UST’s peg to the dollar” and is “likely reducing the risk of it heading into a death spiral.” And in March the firm had launched an offer to allow clients to pay for their subscription with their UST balance and interest earned from Terra’s Anchor Protocol. 

Delphi is one of a large number of crypto operators that carried significant exposure to the Terra ecosystem at the time of its collapse. In its post, the group assessed the damage publicly for the first time.

Delphi said its venture capital arm Delphi Ventures Master Fund had, in early 2021, purchased an amount of Terra’s native token Luna equal to 0.5% of its net asset value (NAV). That exposure increased over time, resulting in “a large unrealized loss.” At its peak price, Luna and other Terra-native tokens accounted for around 13% of Delphi Ventures’ NAV.

These numbers include a $10 million investment in Luna in February, part of a $1 billion token sale by LFG. Delphi said that investment is “entirely lost” based on Luna’s current price, but stressed that it sold no Luna during the token’s slide. José Maria Macedo, a partner at Delphi Digital, is a member of LFG’s governing council.

Delphi Labs, the software research and development company, suffered worst among the group’s offshoots. Delphi Labs spent more than a year working on joint ventures focused on the Astroport and Mars protocols on Terra — and had received grants of 30,000 LUNA and 466,666 UST from Terraform Labs for its work on the latter. The group stressed that the labs entity never sold any of the tokens it holds.

“We decided to build on Terra because we believed that decentralized money had the greatest chance of succeeding if it were to be integrated at the L1, focused on real world adoption, and built on a relatively scalable and interoperable blockchain,” said Delphi. “As for the future, after making a big bet on Terra and failing, we want to make sure we learn our lessons and make the right choice on where to focus our efforts. We’ve put together a cross-sectional team of some of our brightest minds across Research and Labs and we’ll be taking our time to ensure we assess all possible options and make the right long-term decision.”

Not fast enough

Delphi also shared reflections on Terra’s Anchor Protocol, which advertised interest rates of 20% to UST depositors.

The group said it had seen the LFG — and the bitcoin reserves it amassed to backstop UST in times of stress — as a “a massive step” towards mitigating the risk of a bank run on the Anchor Protocol. “It effectively converted some of the excess UST demand into exogenous reserves that could be used to defend the peg if necessary,” said Delphi. “Creating partial exogenous collateralization while bringing down Anchor APY would materially reduce the systemic risk in the network.”

Delphi continued: “We believed a high level of external collateralization was a necessity in the long run, and we saw this as a path to get there. Unfortunately it didn’t grow fast enough compared to UST supply, and, combined with a fall in value of the BTC reserves, the liability overhang was too large to be defended.”

Delphi’s research arm had churned out six Terra-focused reports since February 2021 — none of which were paid for, according to the group’s blog post. It said Delphi Research was largely unaffected by Terra’s implosion, from a financial standpoint.

© 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.

Former BitMEX CEO Arthur Hayes is slated for sentencing this Friday after pleading guilty to violating the US Bank Secrecy Act (BSA).

Though Hayes faces a possible maximum sentence of five years in prison, it’s uncommon for BSA violations to result in jail time.

The sentencing will close a legal chapter that began in October 2020, when the Department of Justice and the Commodity Futures Trading Commission (CFTC) lodged parallel actions against crypto derivatives exchange BitMEX and its owner-operators. Those owner-operators included Benjamin Delo, Samuel Reed and Hayes.

The timeline

The three co-founders faced a civil complaint from the CFTC alleging they violated CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures. The DOJ lodged separate criminal charges of violating the BSA. 

At the time the complaints were filed, Hayes was living abroad in Singapore. After negotiations on a surrender agreement, Hayes traveled to Hawaii where he appeared before a federal judged and was later released on a $10 million bond with plans for future court proceedings to take place in New York. 

Hayes and Delo both pleaded guilty to one count each of violating the BSA, which carries a maximum penalty of five years in prison. At the time of the plea, a BitMEX spokesperson told The Block: “Mr. Hayes accepts responsibility for his actions and looks forward to the time when he can put this matter behind him.”

That time could be coming soon. Since then, the CFTC case has been resolved in a $30 million penalty for the three co-founders. Each is responsible to pay $10 million for violations of federal commodities laws. BitMEX itself also entered into an August 2021 settlement that required it to pay a $100 million penalty and barred it from offering derivatives products in the US. 

With the civil enforcement resolved, Hayes is hoping his criminal charges will resolve without jail time.

In a letter early this month, Hayes requested probation with the ability to travel and reside abroad over jail time. His counsel argues that Hayes’s actions were consistent with industry practice at the time and occurred without clear guidance from regulators. He also has no prior offenses and is already facing the $10 million CFTC fine.

Outcome

As Hayes’s probation request points out, the BitMEX case is a first-of-its-kind prosecution for the government.

It marks a significant enforcement action against a crypto firm for BSA violations – a level of compliance that wasn’t always upheld by the industry. In the BitMEX case, the US has made it clear that adherence to existing traditional finance guidelines around anti-money laundering is mandatory. 

Felony BSA violations are a serious offense, but it’s uncommon for them to result in jail time, according to Jaimie Nawaday, a former federal prosecutor in the Southern District of New York and current co-head of Seward & Kissel’s Government Enforcement and Internal Investigations Group. 

The guidelines for felony BSA charges range from six to 12 months. For guidelines of that range, Nawaday says there’s often a good chance of avoiding jail time. Additionally, in Hayes’s case, the probation department came out in favor of no jail time and two years probation, though the prosecution has pushed for a one-year minimum sentence.

“Given the low guidelines range to begin with, that it is a novel prosecution, which is one of the things that the defense is right to point out, and that the probation essentially sides with the defense in supporting no jail time at all, I would say it’s pretty unlikely,” said Nawaday.

If Hayes does receive jail time, anything over 12 months would be a meaningful decision that could have an impact going forward, according to Nawaday. A short-term sentence, like six months, would be less impactful. Whether a request to travel abroad will be granted is harder to discern since the request is more novel. 

© 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.

Crypto exchange Coinbase is launching a new crypto-focused, in-house think tank. 

The think tank will work with academic institutions and other think tanks to conduct research. The first partnership of this kind is with the University of Michigan’s Survey Research Center, which conducts surveys for the U.S. Census Bureau and the Department of Defense.

The first survey in partnership with Coinbase will focus on the “adoption of and sentiments toward crypto” in U.S. households. The think tank will also work with crypto leaders and policymakers, starting with its first project on crypto and the climate. 

Launching today is also the first Monthly Insights Report, which focuses on providing real-time analysis of market movements in crypto and traditional finance. 

Named the “Coinbase Institute,” the think tank consists of an in-house team led by Hermine Wong and Dr. Cesare Fracassi.

Wong previously served in the U.S. Securities and Exchange Commission at their Division of Economic and Risk Analysis, and is currently Coinbase’s Director of Policy and Director of the Coinbase Institute. Fracassi was an associate professor of finance at the University of Texas at Austin, where he directed the Blockchain Intuitive and the Fintech Research Lab. Fracassi is currently Director of Economic Research and Chief Economist of the Coinbase Institute. 

© 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.

After bitcoin mining companies recovered in the stock markets Tuesday, most incurred stock price declines on Wednesday.

Argo Blockchain, which held its Q1 earnings call on Wednesday, saw its stock drop -5.88% on the London Stock Exchange and -3.91% on the Nasdaq.

Riot, Marathon and CleanSpark registered the biggest losses, at -9.06%, -8.39%,  and -8.00%, respectively.

BIT Mining, however, ended the day on a positive note, with its stock climbing +15.38%.

Here’s how other crypto mining companies performed in the market on Wednesday, May 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.

As the TerraUSD stablecoin was losing its peg to the dollar last week, one high-profile crypto critic posted a tweet warning about one of the crypto market’s signature features.

“Crypto trades 24/7. This is not necessarily a good thing and we may soon find out why,” said Ben McKenzie, an actor best known for his role in the crime drama Gotham, who is now working on a book about crypto and fraud.

McKenzie is of course correct that, unlike equities or bonds, crypto trades on-chain, across over-the-counter desks, and on exchanges every day. 

Over the years, that has caused some headaches for traders who might yearn for peace and quiet amidst gyrating prices. 

“I’d like to lodge a complaint against whoever decided that crypto should trade 24/7,” crypto mogul Barry Silbert mused in a recent tweet making light of the situation in the midst of the Luna-triggered drawdown. 

Traders large and small have lost money while sleeping — and the always-open crypto markets can become especially risky during times like last week, when the prices of TerraUSD (UST) and its companion token, Luna, were in freefall. 

An undeniable aspect of a 24/7 market is that there are pockets of low liquidity when market participants pull back — for instance, over the weekend or during holidays — leaving the market open to manipulation. Historically, crypto markets are more volatile during weekend trading sessions, according to data from The Block.

But would shorter market hours really translate into more robust markets? Experts disagree on the matter.  

“I definitely think there are advantages to concentrating liquidity into certain time periods,” market structure expert Dave Lauer told The Block in a recent interview. “I think continuous markets, in general, are really bad because they struggle to do that.” 

“If people wake up in Europe and Bitcoin is down because it was manipulated during a low liquidity period, I don’t think you are necessarily going to see a recovery,” he added. 

David Mercer, chief executive at LMAX, has a different point of view.”You can’t stop money,” he said.

In 2020, LMAX expanded its own foreign exchange business to service clients over the weekend. It also operates a 24/7 crypto exchange business. 

In Mercer’s view, a 24/7 market levels the playing field for market participants who don’t have the sophisticated tools at their disposal to hedge positions during off-market hours. While a large investment firm may be able to do off-book trades with another large counterparty, a mom-and-pop retail trader in the US must wait until 9:30 am EST to act on her market decision. 

“Any time you pick [to close the market] will disadvantage one participant over another,” said FTX.US President Brett Harrison. His firm has been hinting at the launch of its own trading service for US equities. 

“And if you’re using liquidity as a yardstick for trading, then why stop at the weekend? why not close trading during lunchtime on Friday or the day before Thanksgiving?” said Harrison. “We should accept that there are periods of low liquidity. 

Besides that, 24/7 markets are better for price discovery, argues Doug Colkitt, a former quant researcher at Citadel Securities and founder of DeFi project Crocodile Labs. The ability for market participants to continuously contribute their view to the market adds a level of “fidelity” to the crypto market, according to Colkitt.

“Markets are tools for price discovery,” he said in a recent tweet. “Continuous trading is high fidelity information.”

In an interview with The Block, Colkitt argued that even if you pause the market during periods of market tumult — such as when Luna was hurtling towards zero— this will not keep it from ultimately finding the “correct response.”

Good or bad, it is unlikely that the genie will be put back in the proverbial bottle for crypto markets. And some even think that 24/7 markets are likely to become the norm in traditional markets. 

According to LMAX’s Mercer, this type of expansion of hours is “inevitable.”

Rival Robinhood has already hinted that it is keen to expand its market to 24/7 for its stock brokerage business. The firm launched extended hours trading in March. 

“Our new extended trading hours for equities will give them more opportunities to manage their portfolio at a convenient time for them, whether that’s in the early morning or in the evening,” Robinhood said at the time. 

© 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.