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A Virginia bill allowing state-chartered banks to provide custodial services for “virtual currency” was approved by Governor Glenn Youngkin on Monday.

The law, which will come into effect on July 1, will essentially allow banks in Virginia to hold the keys to someone’s crypto wallet, according to Republican Delegate Chris Head, who introduced it.

Banks will be required to have “adequate protocols in place” and to “carefully examine the risks,” the bill stipulates.

How this system will look like precisely is yet to be worked out in the upcoming months between the banking regulator at the State Corporation Commission (the Bureau of Financial Institutions) and the bankers, according to Democratic Delegate Mark Keam, the other co-sponsor of the bill.

“I think this is a great way for our state and the rest of the country to start mainstreaming the idea of cryptocurrency,” he told The Block. “We wanted people to identify it as something where you can have a physical aspect of it. You can walk into a bank and still deposit your virtual currency and have the bank safe keep it.”

The delegate said that while many people might be “nervous” about blockchain technology, everyone is familiar with banks.

Head, who introduced the bill, said that it will put Virginia at a “significant advantage”.

“Cryptocurrency is something to which everyone should pay attention. This is an emerging economic asset that is growing in popularity, and that has significant potential for economic development in areas that embrace it,” he told The Block via email.

Head said he came up with the bill after seeing how Texas was addressing the issue similarly at a regulatory level. In June of last year, the Texas Department of Banking allowed state-chartered banks to custody crypto assets. In July 2020, the US Comptroller of the Currency, a regulator of federally chartered banks, undertook a similar move.

The Virginia bill was passed in the House of Delegates and Senate with no opposing votes.

“For something like this, I didn’t want to be seen as a political or partisan,” said Keam in reference to when he was approached by the Republican delegate.

© 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.

Quick Take

• In this weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• L1 teams continue to raise record amounts of capital to fund ecosystem development. Meanwhile, networks are undergoing major upgrades, with some facing significant issues along the way
• This week, we take a look at NEAR, Cosmos, and Solana  

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Elon Musk has made a cash offer to buy Twitter for $54.20 per share, in his latest play for the social media giant. 

The Tesla billionaire said on Thursday in a letter to the chairman of Twitter’s board Bret Taylor, disclosed via a 13-D filing, that if the offer is not accepted he would “need to consider [his] position as a shareholder.”

The price is a 54% premium over the day before he began investing in twitter and a 38% premium over the day before his investment was publicly announced, he said in the note. 

The offer is worth more than $41 billion. 

The move comes following a week of flip-flopping on his official position at the company. Earlier this week, Musk said he would not be joining Twitter’s board, a move that would have prevented him from increasing his stake in the social media firm beyond 14.9%. 

The news came five days after twitter CEO Parag Agrawal said Musk was joining Twitter’s board, following the billionaire’s purchase of a 9.2% stake in the company.

Musk’s appointment was subject to a “background check and formal acceptance” on April 9, but Musk informed Twitter of his decision on the same day.

He remains the biggest shareholder of Twitter and Agrawal said the company will remain open to Musk’s input.

Twitter’s share price was up around 11.6% in pre-market trade on Thursday, according to data provided by MarketWatch.

© 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.

Ava Labs, the main developer of the Avalanche blockchain, is reportedly raising $350 million in new funding at a $5.25 billion valuation.

Bloomberg reported the new fundraising on Thursday, citing people familiar with the discussions — although only one source gave the valuation.

The Block has reached out to Ava Labs for comments and will update this story should we hear back.

The Avalanche blockchain was launched in September 2020 by Ava Labs as an “Ethereum killer.” It has garnered over $13 billion worth of total value locked (TVL) to date compared to Ethereum’s over $115 billion, according to data from DeFi Llama. Avalanche is currently the fourth-largest blockchain after Ethereum, Terra and Binance Smart Chain.

If successful, the fundraise will make Ava Labs one of the highest valued crypto startups.

Ava Labs and related entities have raised nearly $250 million to date from high-profile investors. Last September, the Avalanche Foundation raised $230 million in a token sale led by Polychain and Three Arrows Capital. It had previously raised $18 million in two rounds.

Given Avalanche’s growing adoption, its native token AVAX has also shot up in price. The price has climbed about 5% over the past 24 hours to reach nearly $81, according to CoinGecko. The token’s fully diluted valuation currently stands at over $58 billion. 

© 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 class-action lawsuit from a Uniswap user alleges that Uniswap Labs and its investors are culpable for her losses due to a failure to comply with securities laws.

Nessa Risley of North Carolina is alleging a lack of know-your-customer due diligence and failure to register as a broker-dealer with the Securities and Exchange Commission (SEC) allowed scammers to execute pump and dump schemes with the Uniswap protocol. Risley says she and others lost funds as a result of these actors and has accused Uniswap Labs of doing little to root out fraudulent activity.

Plaintiff Risley claims the tokens traded on Uniswap constitute unregistered securities, and Uniswap Labs’ failure to register with the SEC as a broker-dealer and comply with securities laws put investors at risk. Risley argues that had she had access to disclosures consistent with securities laws, she and other investors may have avoided some fallout in markets around tokens including EthereumMax, Bezoge Earth, Matrix Samurai, Alphawolf Finance, Rocket Bunny and BoomBaby.io. The complaint also alleges a lack of KYC or other identification checks “has led to rampant fraud on the exchange.” 

Uniswap Labs is the legal entity that manages the decentralized Uniswap protocol, but as regulators have yet to fully hammer out how to regulate decentralized exchanges, it’s unclear what regulatory burdens rest on entities like Uniswap Labs.

However, regulators may be looking into this area. Last September, reports circulated that the SEC was investigating Uniswap Labs, asking for information on how investors use the Uniswap protocol and how Uniswap Labs markets the platform. 

With Uniswap Labs, the complaint also names Uniswap founder Hayden Adams, and backers Paradigm, AH Capital Management, Andreessen Horowitz and Union Square Ventures.

The lawsuit alleges these backers “together participated in, and/or aided and abetted” Uniswap’s failures to do more to protect customers from scams for the sake of profit. 

“Defendants are well aware of the fraud perpetrated on the Exchange, but have done nothing to stop these activities, even though they could easily do so,” said the complaint. “Instead, Defendants encourage fraudulent conduct by guaranteeing fees on all trades to issuers of tokens on the Exchange. To date, Uniswap has siphoned over $1 billion in fees from its users so that issuers of tokens may continue to profit from their conduct—no matter how fraudulent.”

Uniswap Labs told The Block it plans to fight the case.

“These allegations are meritless and the complaint is riddled with factual inaccuracies,” said a Uniswap Labs spokesperson. “We plan to vigorously defend against this suit.”

Risley is seeking a declaration that Uniswap is in violation of federal securities laws as well as damages, disgorgement and interest to be determined at trial. 

Risley vs Universal by Mike McSweeney on Scribd

© 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.

Swiss-based Astra Protocol has hired Mick Mulvaney, former White House acting chief of staff for former US President Donald Trump, as a strategic advisor.

The crypto firm is a decentralized compliance solution, which helps protocols deal with compliance regulation “without giving up decentralization or putting investors at risk,” it states on the website.

Mulvaney told Bloomberg that firms like Astra “can take some of the cloak-and-dagger out of crypto and take some of the mystery out of blockchain.”

Astra will tap into the former government official’s “expertise across a variety of regulatory environments,” according to a statement from the company.

Mulvaney also served as director of the US Office of Management and Budget during Trump’s presidency. Prior to that, he notably served as a US Representative from the state of South Carolina.

Recently Mulvaney was also tapped by CBS News to work as a contributor, a move that caused some controversy.

© 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.

Asset management giant BlackRock is studying the crypto sector broadly, said BlackRock CEO Larry Fink, in a conference call reported by the Wall Street Journal. 

On Tuesday, crypto payments company Circle, which manages the USD Coin stablecoin, announced partnering with BlackRock as a strategic advisor after a $400 million funding round, as The Block previously covered.

During today’s conference call, Fink said BlackRock has been working with Circle for the past year managing some of the company’s cash reserves, with the goal of becoming the primary manager of those reserves. 

Within crypto, BlackRock is looking at assets, stablecoins, permissioned blockchains and tokenization. “We are increasingly seeing interest from our clients,” he said on the call, which he also mentioned in a letter to shareholders last month. 

In the same letter, Fink had also mentioned that the firm is “studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients.”

© 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.

On April 11, the price of DeFi protocol Ichi’s native token suddenly collapsed, losing most of its value. The token, which was worth $143 prior to the crash, has now dropped to as low as $1.70 — down a staggering 99% — before a slight rebound.

Following the incident, some commentators claimed that insiders carried out a “rug pull” and possibly sold a large chunk of ICHI tokens they owned in their own liquidity pools leading to the collapse of the token’s price.

However, in reality what happened was a major error on the part of the team. A problematic protocol change created a sudden rise in ICHI’s price, which was immediately followed by a large crash. 

The token price crashed significantly very quickly. Image: CoinGecko.

In this piece we explore what went so terribly wrong for the protocol, leading to its eventual collapse, and that this shows just how fragile DeFi protocols can be.

What Is Ichi?

Ichi is a DeFi protocol that markets itself as “currency for every community” and lets third-party projects create stablecoins of their own. These stablecoins are called oneTokens and can be minted using collateral like USDC and wrapped bitcoin. 

The protocol’s stablecoins (oneTokens) maintain a peg to the US dollar via incentivized liquidity pools. This is where the protocol rewards users with tokens to help maintain a value around a dollar mark.

Ichi operates liquidity pools and lending markets for oneTokens using decentralized exchange Uniswap as the base protocol, as part of its Angel Vault offering. The protocol also manages a lending market Rari Capital’s Fuse protocol (not to be confused with Fuse Network). This is called token vault #136.

In the #136 token vault, depositors can supply different assets to earn a yield, and borrowers can borrow assets in exchange for a fee. The pools pay rewards in its governance token called ICHI, which like most cryptocurrencies is naturally volatile in price. 

The key mistake

Rari Capital’s #136 Fuse vault is where the incident largely took place. The problems started when the Ichi team decided to increase the loan-to-value (LTV) limit for lending assets within the #136 vault to 85%.

The LTV limit determines how much a user can borrow on their collateral from a lending protocol. If a project has a low LTV limit, then it’s much safer because if the value of the collateral drops, the loan is less likely to get liquidated. Having a higher LTV limit means higher risk.

A liquidation is where the lending protocol automatically sells off the collateral to recover the value of the loan. For this vault, liquidations are triggered if the value of the collateral falls by 15% — and the loan is on the edge of going underwater.

Rinsing the protocol

After the team raised the LTV limit, some users started making significant loans and then using them to borrow ICHI tokens, and repeat the process over.

The excessive borrowing and resulting liquidations is the reason why the token price rallied and then came down sharply. Reports say liquidations cascaded as soon as prices started to correct, starting with one large sale of $10 million in Ichi, according to a post-mortem report from the Ichi team.

Jonathan Wu, who leads growth at Aztec Protocol, said in a Twitter post stating the ICHI-denominated collateral within the #136 Rari Capital token vault sunk in value with the token crash — causing most of the loans to be liquidated. The continous selling of ICHI tokens led to the drying up of liquidity within the vault, according to Wu. 

The problem was anyone could deposit 10,000 ICHI tokens (worth $1 million when the price of the token was $100) and borrow 850,000 in USDC stablecoin, and take another loan. Those that did this were essentially using the protocol to get into a leveraged position.

But there wasn’t enough liquidity across DEXs to support such a high LTV. When the price of ICHI suddenly moved by 15% from its highs, the protocol liquidated all ICHI lenders and their corresponding collateral was sold on the market. 

Jack Longarzo, a developer at Rari Capital, said the situation was a consequence of “plenty of red flags” from the team and that a 85% collateral factor was too high for the protocol to function normally.

“A collateral factor of 85% is extremely high. Additionally, the team didn’t use supply caps and allowed an infinite amount of ICHI to be used as collateral. This allowed ICHI holders to borrow extensively against uncapped collateral,” Lorzango explained, speaking of the team’s mistake. 

The sales created a spiraling effect further pushing down ICHI’s price. The post-mortem report said the recent events were “not in line with our core values or the expectations of our community.” The team has even apologized for the incident within its Telegram channels. It has since lowered the LTV limit to 50%.

The protocol raised $3.5 million in February 2022 to build a protocol that aims to remove DeFi’s dependence on centralized stablecoin issuers, and create a system using so projects can build their algorithmic stablecoins with various crypto assets as collateral. 

According to DeFiLlama, the total value locked on the Ichi protocol now stands at $31 million — a fraction of $130 million in assets deposited in its token pools before the crash.

© 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 startup Context announced a $19.5 million seed round led by early-stage investors Variant Fund and OpenAI CEO Sam Altman on Wednesday.

The startup, which allows users to monitor other people’s wallets and transactions through an Instagram-esque feed, also released a new version of its product that will now help users automatically find the wallets linked to people they follow on Twitter.

Founded last year, Context believes that watching wallets of friends, influencers, DAOs and celebrities will be the “follow/subscribe of the Web 3 era” and takes inspiration from platforms such as Instagram and Pinterest.

In a sense, Context’s app can perhaps be viewed through the growing intersection between web3 capabilities and social media platforms. That intersection was on display earlier this year when Twitter rolled out support for NFT-linked profile pictures as part of its Blue subscription services. Instagram, too, is moving toward some form of NFT-style integration. 

Indeed, Context’s app is geared toward the particulars of the web3 era, including non-fungible token projects and collectors. The app additionally includes market data from marketplaces such as OpenSea and Rarible.

Context is led by co-founders Luke Miles and Adam Ludwin, and today has a seven-person strong team, with plans to double staff in 2022. Ludwin is the former CEO and co-founder of Chain, which was acquired by Stellar in 2018. Miles formerly worked at Stripe and was the founder and CEO of “hype culture marketplace” Restocks.

Widening the lens, Context is part of a broader ecosystem of tracking tools that let users follow the activities in the web3 space.

Nansen, which last year was valued at $750 million, offers paid-for services which track the on-chain actions of high-value investors. Meanwhile, Lithuania-based DappRaddar provides data on decentralized application activity including transactions, token volume and the number of active users.

Funders participating in the round run the gamut from crypto CEOs to artists. Among them is venture capitalist Lachy Groom (who, like Miles, is a former Stripe staffer), Dragonfly Capital, Quora CEO Adam D’Angelo, Vine co-founder Dom Hofmann, and Phantom CTO and co-founder Francesco Agosti.

They are joined by Trevor McFedries, Meltem Demirors, Jacob Horne, Tess Rinearson, John Palmer, Andy Chorlian, Mathew Dryhurst, Holly Herndon and David Rudnick.

© 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.

Blockchain.com announced Wednesday the close of a sponsorship deal with the Dallas Cowboys as part of a broader marketing push to expand its retail user base in the US. 

The deal comes as companies across the crypto industry ramp up their marketing spending, particularly in the area of sports. Major sporting franchises, too, have eyed crypto as a way to expand fan outreach. Recent deals include ByBit’s 3-year, $150 million deal with Red Bull Racing and Crypto.com’s $175 million, 10-year deal with the UFC.

Elsewhere, the crypto-sporting intersection was fully on display during the recent Super Bowl championship, as The Block previously reported. 

Blockchain.com’s partnership with the Dallas Cowboys, announced by general manager Jerry Jones and the exchange’s CEO Peter Smith, includes a range of advertising and event initiatives, including the ability for Blockchain.com users to access Cowboy-related content via its retail mobile app. 

In an interview with The Block, Smith said that the firm’s conversations with the Cowboys started last year as the company was exploring the benefits of sports marketing. 

“The Cowboys are the biggest sports team in America if you look at the data,” Smith said. Data from Statista showed that the Dallas Cowboys boasted more than 8 million fans on Facebook as of early March. 

“They have more fans than crypto companies have users,” Smith told The Block. “For us, it is a consumer-first partnership. But Texas is obviously a big home for bitcoin mining, so we will be doing some institutional stuff. “

The firm plans to invest more resources into its marketing efforts in the next year. Historically, Blockchain.com has spent effectively “zero” on marketing, according to Smith. He estimated that the firm could spend around $50 to $70 million this year. 

“You won’t be able to escape crypto and Blockchain.com, even on Sundays,” said Smith. 

© 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.