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Quick Take

• Flow is a Layer-1 blockchain developed by the NFT gaming studio Dapper Labs
• The surge in popularity of NBA Top Shot, the collection of NFT-converted NBA highlights, put Flow blockchain and the NFT market into broad daylight
• The Block has mapped 199 projects across 15 verticals within Flow’s ecosystem

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Former Commodity Futures Trading Commission chair Chris Giancarlo says the current US regulatory framework is “not fit for purpose” when it comes to crypto.

At FTX and SALT’s Bahamas conference, Giancarlo sat on a panel with former acting CFTC head and current legal policy and regulatory strategy of FTX, Mark Wetjen. The two discussed the current state of crypto regulation in the US.

When asked how they’d grade the US regulatory structure for crypto on a scale of 1 to 10, Giancarlo said he’d give the country a zero.

“I mean no disrespect to the regulators,” he said. “These are regulations written 90 years ago, in the 1930s.”

Wetjen, for his part, graded the US a “four to five,” given the flexibility in those 90-year-old regulations. To close the gap, he said there are some barriers in current regulations, but more importantly, there needs to be a more active embrace of the crypto industry from people at the top. 

“What we really need to see I think is more entrepreneurialism and aggressiveness on the part of the staff of the staff at agencies, and I think they’re trying as hard as they can, but it really takes some leadership at the top,” he said.

The recent executive order from the Biden Administration is a good start, Wetjen continued.

Giancarlo also pushed for a privatized approach to the use of crypto in societies, like the growth of central bank digital currencies (CBDCs). He said he’s concerned crypto will become marked by a central bank approach, in which central bankers set the terms of crypto use, including the issuance of CBDCs, rather than a free-market approach to crypto solutions.

Giancarlo also runs an initiative advocating for the creation of a digital dollar, called the Digital Dollar Project. 

Wetjen touted FTX’s proposal before the CFTC, which posits a framework for crypto derivatives trading, as a means for the agency to make a forward leap in its treatment of crypto regulation. 

© 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.

A new bill looking to establish a reporting regime for cryptocurrency exchanges is now formally before Congress. 

On April 28, Glenn “GT” Thompson (R-PA) introduced Digital Commodity Exchange Act. The DCEA would set up a reporting regime for crypto exchanges with the Commodity Futures Trading Commission. 

Thompson’s announcement of the bill said “The DCEA builds upon and is complimentary to existing authorities for the CFTC and the Securities and Exchange Commission. It helps to close the regulatory gaps that have created uncertainty in the marketplace and discouraged innovation in the United States.”

Co-sponsoring the bill alongside Thompson are representatives Ro Khanna (D-CA), Tom Emmer (R-MN) and Darren Soto (D-FL).

The CFTC, per its name, traditionally regulates futures trading rather than spot markets, with its primary authority in spot markets coming in the form of enforcement actions. The DCEA includes a reporting regime that would provide more ongoing regulatory oversight but would, critically, not bar exchanges from operating in the US without such a registration. It would be a voluntary regime.

It also would seem to block the Securities and Exchange Commission from authority over crypto exchanges, an authority which SEC chair Gary Gensler has been after for much of the past year. “The Commission shall have exclusive jurisdiction over any agreement, contract, or transaction involving a contract of sale of a digital commodity in interstate commerce,” the DCEA reads. 

In November, Thompson began circulating a draft of the same bill. The updated bill retains most of the major precepts of the original, with the notable addition of another voluntary regime for token developers to register with the CFTC, which would target initial listings. 

The House Agriculture Committee governs the CFTC on the House side. There is no companion bill before the Senate Agriculture Committee, but that committee has also seemed receptive to CFTC chair Rostin Behnam’s push to regulate cryptocurrency markets.

A key sticking point is likely to be the optional nature of this reporting regime, which is popular in much Republican-driven legislation addressing crypto, but which critics say leaves loopholes that firms could easily exploit to avoid oversight. It is consequently important to note the presence of bipartisan co-sponsorship. 

© 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.

Aave founder Stani Kulechov returned to Twitter on Thursday after the social media firm reversed a ban it had imposed after failing to see the funny side of a tweet.

Kulechov’s account was reactivated following a ban that lasted more than 15 hours. He appeared to run afoul of Twitter’s moderators after tweeting “BREAKING: Joining Twitter as interim CEO” on Wednesday. His first tweet back following the suspension read “I’m back as interim CEO of Twitter.”

Kulechov runs a competing social media platform to Twitter, which accepted a $44 billion takeover offer from Elon Musk on Monday. The founder of the popular DeFi lending platform, who has more than 170,000 followers on Twitter, had earlier hit back against his suspension in comments to The Block. 

“Musk has claimed that he believes Twitter should be an unregulated global town hall, and Twitter has long prided themselves on being the arbiters of public conversation,” Kulechov said. “But if that was truly the case, then the digital town hall would be owned by the public as well, not just hosted by a centralized force that could close their doors to people at their choosing.”

Lens launch

He argued that this type of action – “the removing of a profile and a following that one has spent years building” — had inspired Aave to launch its own decentralized social media ecosystem in February, dubbed Lens Protocol. 

“A user should have full ownership over their content. That means that no centralized entity can take it away from you. With apps powered by Lens, if you do not like the policy of one platform, you can take your profile with you to another one,” Kulechov said. 

Twitter’s decision to ban Kulechov had faced criticism from some notable names, especially as Musk, Tesla’s billionaire CEO, had argued that one of his main motivations for buying Twitter was to promote free speech.

“Stani is an entrepreneur who created a Twitter competitor. He got banned yesterday from Twitter for making what was obviously a joke,” tweeted Chris Dixon, head of a16z Crypto. 

Hayden Adams, the founder of the Uniswap decentralized exchange, posted, “There is plenty of spam, harassment, etc to go after — let’s keep jokes on this platform and #FreeStani.”

Before the decision was reversed, Kulechov’s account had been hit with a permanent suspension. That meant he wouldn’t even be allowed to create new accounts, according to Twitter’s rules.

Violators can appeal permanent suspensions if they believe Twitter has made an error. Upon appeal, if Twitter finds that a suspension is valid, it responds to the appeal with information on the policy that the account has violated.

Twitter didn’t respond to The Block’s earlier requests for comments.

© 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.

Self-hosted crypto wallets remain solidly on the radar of US anti-money-laundering regulators. 

On April 28, Himamauli Das, acting director of the Treasury’s Financial Crimes Enforcement Network, appeared before the House Financial Services Committee to testify on the state of FinCEN.”

As has been the case in most finance hearings of the past two months, concerns about the sanctions regime against Russia were central to the conversation. Crypto has never been far from these discussions. 

“I’m paranoid about the whole cryptocurrency issue and I think I’m going to remain paranoid about it for a long time,” said Representative Emanuel Cleaver (D-MO), a senior member of the committee. 

Das repeatedly described FinCEN as “very focused” on this range of issues, noting an alert that the office put out in March. 

“We’ve not seen large-scale evasion of sanctions through cryptocurrency,” said Das. “But we are mindful of that.”

The issue of self-hosting has cropped up as a particular area of concern. The Block’s readers may remember a rule from the final weeks of Steve Mnuchin’s Treasury that would require crypto exchanges and intermediaries to identify the owners of self-hosted wallets with which they transact. 

While that rule has not publicly seen any progress, its principles remain core to the current debate.

“I worry that we are less equipped to handle transactions involving self-hosted wallets or that are generally off-exchange,” said Rep. Bill Foster (D-IL), who also co-chairs the Congressional Blockchain Caucus. He continued, referencing the testimony of several CEOs of crypto firms at a December hearing: 

“There is no alternative to having all crypto transactions pseudonymously attached to a legally traceable secure digital identity from a country that we have extradition treaties with.” 

Das responded that “It is not that unhosted wallets are entirely opaque.”

The concept of a fixed digital identity attached to crypto addresses is, however, controversial. 

“You get registered at birth and you become documented in the system and, frankly, everything’s like a multi-sig wallet where the government’s got to sign off on access to anything, basically. That’s his vision for the future. To him, it seems like a utopia and to me, it seems like a dystopia,” Rep. Warren Davidson (R-OH), who also sits on the Financial Services Committee, told The Block. 

Elaborating on his proposal, Foster told The Block:

“You’d set up something like a licensing regime that was initiated by the free democracies of the world. And these would allow crypto assets to have a pseudonymous chain of custody attached to them, which would be anonymous under almost all circumstances until there were reasons to believe that a crime had been committed.”

Foster has not yet introduced legislation that would set up this sort of identity regime. 

© 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.

The lower chamber of Oklahoma’s state legislature approved a bitcoin mining-focused bill this week.

As previously reported by The Block, the Commercial Digital Asset Mining Act of 2022 is among a raft of measures developing around the US that aim to provide tax incentives to bitcoin miners. If approved, Oklahoma’s proposed law would help cut the spending related to hardware and electricity used by commercial miners.

“Blockchain technology used in the commercial mining of digital assets is an industrial process that should be taxed in a manner similar to historical forms of manufacturing or industrial processing in order to encourage the location and expansion of such operations in this state rather than in competing states,” the bill’s text explains.

The Oklahoma House of Representatives passed the act by a 64-18 margin, public records show. The State Senate conducted its first reading of the bill on Wednesday.

© 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.

HCS Pharma became the first non-crypto company to offer “pre-IPO” tokens to investors on Thursday as the company launched a security sale on the European Digital Assets Exchange (EDSX).

The French biotech is raising funds before joining the Frankfurt Stock Exchange in a traditional initial public offering (IPO) later this year, according to a statement from EDSX. 

Ahead of that IPO, the company is selling crypto tokens representing a Simple Agreement for Future Equity (SAFE). These tokens give holders the right to receive a 20% discount on the listing price of the IPO proper.

Over 2 million tokens have been sold so far, with a total value of €2.1 million ($2.2 million), according to the EDSX website. That’s almost 30% of its €7 million target.

EDSX is based in Zug in Switzerland and was founded in 2019. It’s one of the first security token exchanges and this month it completed the compliance procedure to provide a secondary market for security tokens in Switzerland, which is set to open in the third quarter of 2022.

© 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.

The New York State Department of Financial Services (NYDFS) on Thursday encouraged crypto firms working in the state to adopt blockchain analytics tools and services. 

The guidance establishes “the use of blockchain analytics tools as a best practice to prevent and manage financial risks and suspicious activities,” the agency said. The NYDFS is the chief state regulator in New York for crypto firms. 

Superintendent Adrienne Harris said in a statement:

“Blockchain analytics tools provide companies with an efficient, data-driven way to conduct customer due diligence, transaction monitoring, and sanctions screening, among other things, which are all critical elements of our virtual currency regulation. We expect regulated entities to utilize best practices to uphold the safety and soundness of the virtual currency market and to protect consumers.” 

The guidance follows comments in early March from state leaders, including Governor Kathy Hochul, on the use of such tools in the context of potential Russian sanctions evasion. 

© 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.

Ukraine’s government launched a website where people can donate and buy non-fungible tokens (NFTs), in an attempt to raise more funds for the war efforts.

The new site lists several NFTs, including a mfer and a MoonCat with a Ukrainian flag, and links to their pages on OpenSea, where users can place bids to buy them. The mfer and the MoonCat have asking prices of five ETH and two ETH, respectively.

“All funds as always will contribute to the Ukrainian victory. Ready, steady, NFT,” Vice Prime Minister and Minister of Digital Transformation of Ukraine Mykhailo Fedorov said on Twitter on Wednesday.

The website also features an Ethereum address for anyone who wants to donate NFTs. Additionally, it lists a number of NFT collections that the government “supports,” including Doge in Ukraine and Russia For Sale.

Ukraine launched its own NFT collection at the end of March. Those NFTs are not available for purchase on the new site, however. This week, the government announced a second NFT drop planned for May 1. 

According to Ukraine’s general crypto donation website, the country has received at least $60 million in donations. It has been able to use some of that money to buy thousands of bulletproof vests, packed lunches, medicine items and other supplies for the armed forces.

“Blockchain, crypto & NFT won’t stop the missiles, but do offer a way to protect our defenders and rebuild Ukraine as an innovation-friendly country,” said Deputy Minister of Digital Transformation of Ukraine Alex Bornyakov on Twitter.

© 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.

Venly, a Belgium-based crypto firm that provides technology to e-commerce brands and gaming platforms, just raised $23 million in Series A funding.

The round was led by Courtside Ventures with participation from Transcend Fund, Coinbase Ventures, Tioga Capital, and others.

Venly, founded in 2018, integrates wallet and NFT products with a brand’s blockchain, regardless of the blockchain being used (though Venly partners include Polygon, Binance, Avalanche, and Hedera.)

“The problem today is that most developers and end-users have difficulty interacting with Web3 technology. It needs to be more aligned with Web2 usability, which is exactly what the Venly platform provides. Our APIs and services allow a Web2 company to seamlessly integrate with Web3,” said Tim Dierckxsens, CEO of Venly. 

 For example, Venly’s NFT app partnered with Web2 e-commerce business Shopify, to allow users to sell NFTs without having to worry about coding or minting, making the process of onboarding new users into the company’s web3 efforts more efficient.

With the new funding, the company is developing “deeper platform integrations” with gaming companies and e-commerce platforms.

One area of focus is incorporating gaming software development kits, “making gaming its most immediate focus due to fast scaling opportunities,” said a statement from the company.

Another project forthcoming is an accelerator for gaming studios and Web3 startups which will allow them to gain mentorship from Venly’s team and partners while also using its products at a discounted rate.  

The company is also working on launching an internal token called “VENS” which will reward users for using the Venly marketplace to buy, sell, and make bids on NFTs. Users who end up on a leaderboard will be rewarded USDCs at the end of each month. 

The company has around 2.5 million wallet users with $1.5 million in revenue. Before this round, Venly had raised $2 million in capital. The team currently employs 36 people full-time, and in the coming months will be focusing on hiring more.

© 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.