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Securities regulators in the U.S. states of Alabama and Texas have set the stage for potential cease-and-desists against crypto startup BlockFi for its Interest Account product.

The Texas State Securities Board alleged in a notice of hearing published Thursday that the BlockFi Interest Account is a security under state law. The notice of hearing gives BlockFi 20 days from the serving date to respond to the TSSB’s notice ahead of a planned October 13 hearing on the matter. CoinDesk first reported the news.

The TSSB said in its notice that it informed BlockFi about its position in late April. 

“On or about April 20, 2021, the Enforcement Division of the State Securities Board (the “Enforcement Division”) notified Respondent BlockFi that Respondents may have offered securities in Texas that may not comply with the Securities Act. The Enforcement Division also explained the regulation of the securities market in Texas, including the identification of laws that require the registration of securities, the registration of dealers and agents, and the truthful disclosure of all known material facts. Nevertheless, Respondents have continued to offer the BIAs to Texans in violation of Sections 7 and 12 of the Securities Act.”

The developments come less than a day after securities regulators in Alabama announced a show cause order, also aimed at the BlockFi Interest Account, which it accused the firm of “the sale of unregistered securities in violation of the Securities Law.” Per the document, “[t]he Order gives [BLockFi] 28 days to show cause why they should not be directed to cease and desist from selling unregistered securities in Alabama.”

Earlier this week, the New Jersey Bureau of Securities ordered BlockFi to stop accepting new interest account users in the state. The initially announced halt date was extended from July 22 to July 29. 

As in the past, BlockFi argues that its interest product is not a security. A representative for the firm told The Block in an email that “[w]e are in active dialogue with multiple regulators to demonstrate that the BlockFi Interest Account (BIA) is not a security and should not be regulated as one.”

“We firmly believe that the BIA is lawful and appropriate for crypto market participants and we remain steadfast in our commitment to fight for consumers’ rights to earn interest on their crypto assets. We welcome discussions with regulators and believe that appropriate regulation of this industry is key to its future success,” the rep continued.

© 2021 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.

Brad Katsuyama’s IEX has long been critical of how exchanges like Nasdaq and Intercontinental Exchange charge for market data. So it’s not surprising the New York-based trading firm is jumping on the bandwagon of Pyth Network, a new decentralized finance data project.

IEX gained exchange status in 2016 from the Securities and Exchange Commission and is well-known for Michael Lewis’ “Flash Boys,” which chronicled the launch of the firm by Katsuyama. Even back then he was calling out the practice of charging for market data.

“Exchanges don’t create any unique content — market data is generated by their members and other market participants including real investors — so it’s very hard to believe that exchanges can perpetually charge their members more every year to look at the members’ own data,” Katsuyama told Insider’s Matt Turner in 2016.

It’s still a problem today, he said in an interview with The Block.

“They charge extreme price mark ups relative to the cost of operating those systems to benefit from those regulatory moats,” he said. “The moats were built when they were non-profit companies … but the moats are still there. That, kind of, in a way created this abusive relationship with market data.”

Free the data

Launched by high-speed trading firm Jump Trading, Pyth was born out of the firm’s deep dive into the DeFi market this past summer, according to a source familiar with its business. The project aims to make market data more accessible for developers. 

Specifically, the platform, which is built on the Solana blockchain, is bringing the stock market’s data on-chain through partnerships with trading firms like Virtu Financial, exchanges like LMAX Group, and now IEX’s data division, IEX Cloud.

Katsuyama said IEX Cloud’s involvement in the project “accelerates the innovation that can happen there and improves the reliability of the data people can build on top of and fits with our mission from the very beginning.” To be sure, it could also help strengthen the relationship between IEX and Jump, which is a client of the exchange. 

In a sense, Pyth isn’t too different from IEX Cloud itself, which provides developers with financial data infrastructure. Those clients include Band Protocol and Brave.

IEX Cloud isn’t unleashing all of its data onto Pyth. It is making available so-called mid-point pricing information but not the full totality of its order book. “It is what is needed for that base layer of innovation,” Katsuyama said. “You don’t necessarily need depth of book data to execute a smart contract.”

Pyth marks IEX’s first major step into the world of DeFi, but it likely won’t be the firm’s last. The firm has been looking at DeFi world for quite some time, according to Katsuyama. “This entry point clearly made sense.”

In the future — if the crypto world gets clearer regulatory oversight — IEX might also enter the cryptocurrency trading world. 

“You have kind of an unregulated trading environment, to an extent…I am not sure there is much that we can offer to the existing framework. However, if the regulatory framework were to change, I think that would be interesting to us,” he said. 

© 2021 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.

Reddit is deploying Layer 2 scaling solution Arbitrum in a bid to upgrade its Community Points — the crypto tokens used as rewards in two of its subreddits — the popular forum announced on Thursday.

This will move the tokens from a testnet to the main Ethereum blockchain, although the transactions will take place via the scaling solution Abritrum. This will enable more transactions while still at low costs.

“You’ll notice transactions happen much faster, and once you’ve created a Vault, you won’t have to keep claiming Moons/Bricks every month,” the Reddit team said in a statement. “They’ll just show up in your Vault like magic!”

Bringing blockchain to Reddit

Last year, the popular online forum launched the two Ethereum-based tokens, Moons ($MOONS) and Bricks ($BRICKS), as part of its Community Points program. Users in the /r/Cryptocurrency and /r/FortniteBR subreddits could earn the tokens for contributing quality content (in theory).

The tokens began on a testnet version of the Ethereum blockchain. This was to reduce fees and allow for a high number of transactions to take place — rather than put extra weight on the main blockchain.

Shortly after, Reddit began its “Scaling Bake-Off” initiative, inviting developers to submit proposals for scaling their new tokens — with the hope of bringing them to the Ethereum mainnet, in some form or another. Over a year later, the platform has decided to scale with the competition winner, Arbitrum. 

Arbitrum is known as a Layer 2 solution. This means that it takes the weight off the main (Layer 1) blockchain — in this case Ethereum — processing transactions on its behalf. This allows the blockchain to support a greater number of transactions, with lower fees. 

Why Arbitrum?

According to the Reddit team, Arbitrum stood out to them for several reasons. 

The project, developed by Offchain Labs, is fully decentralized, deriving its security and finality from the main blockchain (transactions are essentially uploaded to the blockchain every so often, ensuring they eventually reach the mainnet). There are no centralized bridges meaning users will be in control of their Community Points and other digital assets. 

In addition to being fully decentralized, the Reddit team says Arbitrum is developer-friendly and has “broad ecosystem support,” with the potential to grow even further. 

Users will not be able to use their tokens during the migration to the Arbitrum network, which the team says could take several hours. 

Users are encouraged to use the Vault feature built into the Reddit app to store their tokens. However, if members are using other wallets for storage, they will be able to use a tool to transfer their tokens to the scaling network once the migration is complete.  

© 2021 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.

JP Morgan has opened the doors to wealth management clients looking to invest in crypto funds, as reported by Business Insider.

Specifically, orders for Grayscale and Osprey‘s crypto-based offerings are now on the table for wealth management advisors at the U.S.’s largest bank. The move reportedly opens the gates for clients ranging from retail users on Chase’s trading app to the jetset of the bank’s private investment business. 

Notably, these offerings are not themselves crypto investments, but rather trusts based on the performance of crypto assets. JP Morgan is also only authorizing its advisors to process these orders if they come from clients themselves, barring the advisors from presenting crypto-based funds. 

These limitations reflect JPMorgan’s longstanding hesitance to endorse investment in crypto. In May, CEO Jamie Dimon told a congressional committee “My own personal advice to people is to stay away from [crypto].”

Nonetheless, rumors have flown about JPMorgan preparing an actively managed Bitcoin fund of its own. 

We have reached out to JP Morgan for comment and will update this article if we hear back.

For more breaking stories like this, make sure to subscribe to The Block on Telegram.

© 2021 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.

GSR — the Asia-based cryptocurrency liquidity provider and market making firm — is preparing to expand its headcount to beyond 200 as part of a broader growth plan, co-founder Rich Rosenblum told The Block. 

During an episode of The Scoop, Rosenblum — who co-founded GSR in 2013 — said that the firm is looking to establish a bigger footprint in the US. Already, the firm has hired Trey Griggs, a former managing director at Goldman Sachs, to lead its operations in the region, dubbed GSR Services USA.

On The Scoop, Rosenblum said the firm is in the process of acquiring various regulatory clearances, including a broker dealer license and a BitLicense. The firm has also secured office space in Midtown Manhattan. In total, GSR is on track to expand its headcount to more than 200 people from just 25 a year ago, he said. 

All of this is tied to the future growth GSR sees ahead for the crypto market, despite the recent lull in prices. 

“There’s just as much building as we’ve ever seen,” Rosenblum said about the state of the cryptocurrency market. “I do think that the drop in the market really is not evident for what I think is going to happen with the future of prices.”

Indeed, Rosenblum said that the level of building happening in the space is outpacing the ability for projects and firms to hire the right talent.

“We’re doing so much recruiting for our own company it is hard to help our partners,” he said. “Thinking of hiring recruiters specifically to help projects we’re engaged with because on a daily basis they’re saying there’s not enough talent out there.”

Listen to the full episode of The Scoop with Rich Rosenblum, here.

© 2021 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.

Thesis, a crypto venture studio behind the projects like tBTC, has raised $21 million in a Series A funding round.

The round was co-led by ParaFi Capital and Nascent, with participation from Fenbushi Capital, Polychain Capital, and Draper Associates. Angel investors, including Synthetix founder Kain Warwick, Summa (acquired by Celo) founder James Prestwich, and Bison Trails (acquired by Coinbase) protocol specialist Viktor Bunin, also participated in the round, among others.

As part of the deal, Nascent co-founder Dan Elitzer has also joined Thesis’s board of directors, Thesis founder and CEO Matt Luongo told The Block.

The Series A funding was secured via an equity round, said Luongo, adding that it will help launch new projects, including a Web 3 wallet. Thesis is also looking to expand its tech capabilities, enter new markets, and growing its ecosystems, said Luongo, without disclosing specific details.

Founded in 2014, Thesis builds projects and teams in-house, meaning it doesn’t invest in or take on externally developed projects like venture capital firms or startup incubators. Thesis’s projects to date include Fold — a bitcoin-rewards debit card; Keep Network/ tBTC — a decentralized protocol that has built tBTC, an Ethereum-based token backed one-to-one by bitcoin, along with Summa and the Cross-Chain Group; and Saddle — a decentralized exchange for swapping stablecoins.

“Thesis is one of the best repeat builders in our ecosystem, leveraging their early crypto expertise to bring to market technology that plays a pivotal role in making crypto more dynamic and accessible,” said Santiago Roel Santos, partner at ParaFi Capital.

As part of its expansion plans, Thesis is looking to grow its current team of around 40 across all projects, Luongo told The Block. The venture studio is hiring engineers, designers, and product ideators to build decentralized finance (DeFi) solutions, he said.

The Series A brings Thesis’s total funding to date to around $28.7 million. Last year, the studio raised $7.7 million from investors, including Paradigm Capital, Fenbushi Capital, and Collaborative Funds.

© 2021 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

• ShapeShift CEO Erik Voorhees says that the exchange’s path to decentralization “removes some of the ability of regulations to apply.”
• Voorhees further argues that the crypto industry should try to “outmaneuver regulations wherever possible.”
• He sets out how the company will achieve its plan to become fully decentralized.

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Magic Labs (formerly Fortmatic), a decentralized identity startup that provides “passwordless login” solutions, has raised $27 million in a Series A funding round.

The round was led by London-based venture capital firm Northzone, with participation from new and existing investors, including Tiger Global, Volt Capital, Digital Currency Group, CoinFund, and Placeholder. More than 80 angel investors also backed the round, including Reddit co-founder Alexis Ohanian, Github CTO Jason Warner, former Coinbase CTO Balaji Srinivasan, Dapper Labs CEO Roham Gharegozlou, and AngelList co-founder Naval Ravikant, among others.

As part of the deal, Northzone partner Wendy Xiao Schadeck has also joined Magic’s board, Magic co-founder and CEO Sean Li told The Block.

With fresh capital at hand, San Francisco-based Magic plans to scale its platform and expand its team. The current headcount of Magic is over 30, and the firm is looking to hire at least 30 more people across product, engineering, design, marketing, and finance functions, said Li.

As for scaling Magic’s platform, Li said the firm aims to bring more developers building on Magic. Currently, “tens of thousands” of developers utilize Magic to onboard users sans passwords, he said.

Passwordless login

Launched last year, the Magic platform provides developers with a plug-and-play software development kit (SDK) that enables various passwordless login methods for users, including Magic links, social login, and WebAuthn. Li said it is a “breeze” for developers to offer Magic authentication to their end-users with “just a couple lines of code.”

Magic supports various blockchains, including Ethereum, Binance Smart Chain, Solana, Polkadot, and Polygon. Support for more blockchains is to be added, including Bitcoin, said Li.

As of its business model, Magic charges developers a fee per login similar to cloud computing platform Amazon Web Services, said Li.

“We’re securing millions of user identities, growing rapidly week over week,” he said. Magic’s customers include both crypto and non-crypto, including Polymarket, Showtime, Nifty’s, Async Art, virtual event platform Brella, and software firm Uservoice, said Li.

The Series A round brings Magic’s total funding to date to $31 million. Last year, the firm raised $4 million in seed funding. Both the rounds were equity rounds, said Li, adding that Magic is looking to raise more funds in the near future.

© 2021 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

• Consensus mechanisms are a key piece in any blockchain network that impacts decentralization, speed, and security.
• The issues with popular consensus algorithms like Proof of Work and Proof of Stake have led to newer means of achieving consensus which improve upon the faults of earlier protocols. 
• The use and development of new consensus mechanisms can allow for blockchains to reach agreement based on what they deem important in the system.

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this Genesis research on The Block.

ETF provider GlobalX has applied to create a bitcoin ETF with the U.S. Securities and Exchange Commission (SEC). If approved, the trust will trade on the Cboe BZX Exchange.

New York-based GlobalX currently offers 84 ETFs, ranging from cloud computing to cannabis funds. It looks after $35 billion in assets under management (AUM).

In 2018, GlobalX was acquired by Mirae Asset Global Investments, an investment manager with $560 billion in AUM, according to its website.

GlobalX follows several other firms that have also applied to create bitcoin ETFs, including Valkyrie Digital Assets, ARK Investments and Kryptoin.

The SEC has still not yet approved a bitcoin ETF, continually delaying decisions for pending applications.

© 2021 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.