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A new report from Elliptic shows that the Securities and Exchange Commission (SEC) leads U.S. regulators in monetary penalties against crypto firms by a wide margin. 

Since bitcoin’s creation in 2009, regulators have levied $2.5 billion in enforcement actions against various crypto projects. Most of that comes from unregistered securities offerings, according to Elliptic’s research.

Of the $2.5 billion, $1.69 billion came from actions brought by the SEC. Most of the SEC’s total, $1.38 billion of it, resulted from unregistered securities offerings.

The first major action from the SEC came in 2014 when the agency ordered Bitcoin Savings and Trust to pay more than $40 million in penalties related the Ponzi scheme.

Still, the bulk of the $2.5 billion comes from the close of the Telegram case this year, when TON Issuer Inc. settled with the SEC over its alleged unregistered securities offering. The firm agreed to return over $1.2 billion to investors and pay an additional $18.5 million in penalties.

To put that in perspective, the SEC’s disgorgement ordered for all cases in fiscal year 2020 totaled $3.589 billion, while penalties reached $1.091 billion. 

Though the SEC has made up the lion’s share of enforcement actions, Elliptic documented that the Commodities Futures Trading Commission (CFTC) has so far outstripped the securities regulator in 2021. 

“More recently, the Commodity Futures Trading Commission (CFTC) has emerged as a major source of enforcement actions against crypto businesses, for violations relating to fraud, reporting failures and wash trading,” said the report.

That refers to the CFTC’s case against Benjamin Reynolds, who received a default judgment in New York this year compelling him to pay $572 million over an alleged fraudulent business that solicited bitcoin from victims. 

© 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.

The Banque of France announced Monday that it successfully completed an experiment with a Swiss bank to test cross-border settlements,

According to a translated release from France’s central bank, the experiment, born out of the Banque of France’s solicitation request in March, was facilitated between itself, Banque Internationale à Luxembourg, LuxCSD, and SEBA bank — a Switzerland-based bank that deals with cryptocurrencies in addition to digital and conventional assets. 

The experiment tested CBDC issuance and settlements on a public blockchain through a smart contract simulation. Specifically, the CBDCs represented listed securities designed to trigger TARGET2-Securities on its Conditional Securities Delivery feature. Though the central bank didn’t’ state the name of the public blockchain, it has previously used Ethereum in its experiments. 

“This experiment made it possible to demonstrate the possibilities of interaction between conventional and distributed infrastructures,” Nathalie Aufauvre, General Director of Financial Stability and Operations at the Banque de France, was quoted saying. “It also paves the way for other alliances in order to benefit from the opportunities offered by financial assets in a blockchain environment.”

As the first deputy governor of the Banque de France Denis Beau said in December 2020, there will be up to eight CBDC experiments determining the viability of such currencies and whether the French financial regulatory system must change to accommodate them. 

Experiments will continue until mid-2021, after which the Banque de France will contribute its findings to further conversations about the Eurosystem’s “more global reflection on the benefits of CBDC,” according to the Monday release.

Another experiment between the Banque of France and Switzerland’s Central Bank is to commence sometime 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.

Remember that age-old saying about diamonds being a girl’s best friend?

Luxury auction house Sotheby’s might just flip that notion over its head because it’s auctioning off a 101-carat diamond to just about anybody, provided you have as much as $15 million dollars – be it in ether, bitcoin or traditional currency – to spare.

That’s the price the auction house estimates its “101.38-carat pear-shaped flawless diamond” will fetch in an auction it is hosting early next month. 

According to Sotheby’s, this is the first time a physical object this valuable will ever be publicly offered for purchase with cryptocurrency.

100-carat diamonds are considered extremely rare, particularly those that are pear-shaped. This diamond, which Sotheby’s is calling “The Key 10138,” is the second-largest pear-shaped diamond to appear on the public market. 

The diamond will be auctioned off in a single-lot live sale at Sotheby’s Hong Kong on July 9. The gem will be on public display at Sotheby’s Hong Kong gallery for one week leading up to the auction. 

© 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.

Losses at London-based fintech firm Revolut increased significantly in 2020, despite growth in revenue and user numbers.

Revolut’s annual report highlights a total comprehensive loss for the 12-month period ending December 12, 2020, of £168 million — up from £107 million the previous year.

The startup’s adjusted revenue grew 57% to £261 million in 2020. That number includes the gains related to crypto holdings which came about as the result of a change in accounting methods, without which the firm would have posted £222 million in revenue for the year.

Of that £222 million, £41 million can be attributed to foreign exchange and wealth activities, which is comprised of revenues derived from foreign exchange, stock trading and crypto trading.

A person close to the company suggested crypto trading specifically accounted for less than 15% of Revolut’s overall revenues. 

Revolut, which has long eyed profitability, said in a press release that it achieved “adjusted operating profit” in the last two months of 2020.

In the first quarter of 2021, its revenues increased more than 130%. The app now has more than 15.5 million customers.

Launched in 2015 as a foreign exchange app, Revolut today offers a range of banking services alongside products like stock and crypto trading. The business recently ramped up its crypto business activities significantly by allowing certain users to withdraw tokens from the app for the first time.

© 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.

Blockchain analytics firm Blocktrace is launching Fusion, an API that draws on blockchain datasets from other analytics firms.

Fusion will bring together blockchain datasets containing crypto wallet ID information from companies including Elliptic and Ciphertrace as well as more firms in the future.

Austin-based Blocktrace first come onto the crypto stage in 2015 when it was enrolled in a three-month program called Barclays Accelerator in London. Since then, it has largely been a service provider to the U.S. government, along with financial risk institutions, while keeping a relatively low profile.

With Fusion, however, the firm is going commercial.

“Our primary goal of announcing Fusion publicly is to gain the attention of crypto businesses and banks who are looking for a comprehensive crypto anti-money laundering solution,” said Blocktrace founder Shaun MaGruder.

In its announcement of Fusion, Blocktrace identifies “third-generation crypto laundering threats” facing authorities; Fusion’s API allows clients to access formerly siloed blockchain data to help fight such threats. And although it’s currently limited to just a couple of clients, the list could be expanded if more providers allow Fusion access.

“It is also worth mentioning that we will be able to add functionality of other providers (e.g. Chainalysis) without them being official Fusion partner. All we need is a provider’s AML API integration document to add additional functionality to Fusion. It’s quite simple to make these changes,” said MaGruder.

Increasing demand for blockchain analysis

Blockchain analysis is a growing field. High-profile examples of illicit crypto use — like the Colonial Pipeline ransomware attack — have drawn public attention to the need for such thorough on-chain investigation. This means that investigators, from criminal authorities to intelligence services to private financial risk assessors, are reconfiguring their operations to track crypto transactions. 

Just last week, the Dallas office of Immigration and Customs Enforcement gave Blocktrace a $36,000 contract. Neither MaGruder nor the ICE contracting officer would provide details. 

The contract is a relatively small sum compared to the $14 million fundraise that analytics firm TRM labs saw last week. That, in turn, pales in comparison to the $2 billion valuation that leading U.S. government contractor Chainalysis hit in March. 

© 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.

Software company MicroStrategy announced Monday that it had bought an additional 13,005 bitcoins for around $489 million in cash.

The average purchase price per bitcoin was $37,617, said MicroStrategy. The price of bitcoin has fallen sharply over the past few days, and one bitcoin is currently priced at around $32,500.

MicroStrategy’s new bitcoin purchase comes after the company completed its $500 million offering of secured notes last week. The offering was of secured notes due 2028 that bear an annual interest rate of 6.125%.

Nasdaq-listed MicroStrategy starting buying bitcoin last August and since then has accumulated 105,085 bitcoin on its balance sheet. The aggregate purchase price of these bitcoins is around $2.75 billion at an average purchase price of about $26,080 per bitcoin. MacroStrategy LLC, a recently formed subsidiary of MicroStrategy, holds approximately 92,079 of the bitcoins.

© 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.

Blockchain firm Securitize, which provides asset tokenization services, has raised $48 million in a Series B funding round.

The round was co-led by Morgan Stanley and Blockchain Capital. Specifically, Morgan Stanley Tactical Value Investing, a team within Morgan Stanley Investment Management, invested in Securitize.

As part of the deal, Pedro Teixeira, co-head of Morgan Stanley Tactical Value Investing, has joined Securitize’s board of directors.

This is Morgan Stanley’s first venture capital investment in the blockchain space, according to Teixeira. “We make long-term investments in businesses and asset classes that are ahead of the curve,” said Teixeira. “Our investment in Securitize is a sign that we believe in the growth and adoption of digital asset securities.”

Several other investors, both new and existing, also participated in Securitize’s Series B round. New investors included Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, Ava Labs, IDC Ventures, Migration Capital, and NTT Data, a Japanese IT company. Existing investors, including Ripple and Blockchain Ventures, also participated in the round.

The firm is developing a marketplace called Securitize Markets for the trading of digital asset securities. The marketplace, expected to launch in the coming months, aims to provide liquidity for the private capital markets.

Founded in 2017, U.S.-based Securitize allows private companies to raise capital by issuing digital securities through its blockchain-based platform. Securitize says more than 150 companies have used its platform to date and have raised funds from over 300,000 investors. The firm also manages an asset management unit called Securitize Capital, which offers two cryptocurrency yield funds. The funds — bitcoin and USDC yield funds — provide accredited and institutional investors exposure to cryptocurrencies and decentralized finance (DeFi) in the form of digital asset securities.

The Series B round brings Securitize’s total raise to date to $87.5 million. The firm has previously raised a total of $39.5 million in various rounds, according to Crunchbase.

© 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

• Taproot is the first major upgrade (locked in for November) to Bitcoin since Segregated Witness in 2017 — improving the efficiency of complex transactions and enhancing privacy.
• Taproot uses a data structure called Merkelized Abstract Syntax Tree (MAST) to only reveal the parts of scripts that are executed and Schnorr signatures for signature aggregation.
• Overall, the upgrade is obviously beneficial to Bitcoin, but it’s also worth noting that Taproot only provides an incremental benefit to the existing feature set.

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In its latest effort to crack down on crypto trading activities, China’s central bank has required domestic banks to cut off the funding channels of crypto over-the-counter (OTC) merchants.

The People’s Bank of China issued a statement on Monday, stating that it has recently summoned a meeting with several domestic banks and mobile payment service providers. That included the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Construction Bank of China, Postal Savings Bank of China, the Industrial Bank, as well as mobile payments app AliPay.

The PBoC said the speculative activities around crypto trading has severely disrupted the financial order of China and has created the risk of illegal capital outflow across the border and money laundering. It reiterated its 2017 stance that no financial institutions should provide banking and settlement services for crypto-related transactions. 

It added that the banks should make sure to check if any OTC traders are using their services to provide on- and off-ramps for Chinese traders in a peer-to-peer fashion. “The institutions should immediately cut off their payment and funding channels,” the central bank said. 

The Agricultural Bank of China had put out an announcement earlier Monday that reiterated the same stance it has imposed since 2017. The only difference was that it stated the bank would terminate customer accounts if any users were found dealing with crypto transactions and would report the issue to the relevant authorities. But the bank took down the announcement shortly afterwards.

Bitcoin’s price dropped below $34,000 shortly after the ABC released the now-deleted announcement. Following the PBoC’s official statement, bitcoin’s price further dropped towards $32,000 but has bounced back to above $33,000 at time of writing.

Ever since the PBoC issued a ban on initial coin offerings (ICOs) in 2017 and cut off fiat on-ramp channels for crypto exchanges, a lot of the bigger exchanges largely switched to crypto-to-crypto-only order books. 

Chinese crypto investors have hence been relying on OTC merchants to get between fiat and crypto in a peer-to-peer fashion. For instance, User A would send crypto assets to User B after User B wires an equivalent amount of the Chinese yuan through mobile payment apps or bank transfer. 

It appears the latest measure would likely target such funding methods to prevent the fiat currency from flowing into the crypto markets.

China’s wider crackdown on crypto

The PBoC’s new measure comes after the State Council’s meeting last month that mentioned escalating the crackdown on bitcoin trading and mining activities.

Following the central government’s high-level comment, provincial and municipal government agencies in Inner Mongolia, Xinjiang, Qinghai and Sichuan have all issued orders to their local state-owned power grids to cut off electricity supply to bitcoin mining facilities.

Earlier this month, nearly two gigawatt of energy capacity that had been powering up bitcoin miners in Xinjiang was shut down. 

Sichuan made a similar move last week by shutting down 26 bitcoin mining farms as an initial target and ordered local power plants to expand their inspections.

Bitcoin’s total network hash rate has declined by more than 30% since the shutdown orders in the two major mining hubs, forcing pressure on Chinese miners to either be done with mining or migrate overseas.

© 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.

Both chambers of Colorado’s legislature have approved legislation that, if signed into law, would study a range of new technologies like blockchain for their potential use in managing the state’s water supplies.

Forty-five lawmakers co-sponsored the legislation, which states:

“[I]t is in the public interest to authorize and direct the University of Colorado, in collaboration with Colorado state university and the Colorado water institute, to conduct feasibility studies and pilot deployments of these technologies and to report to the general assembly on the potential of these technologies to improve Colorado water management.

The legislation envisions studying unmanned aerial vehicles, remote sensors and “blockchain-based documentation,” the latter of which would be comprised of:

“[B]lockchain-based documentation, communication, and authentication of data regarding water use; fulfillment of obligations under Colorado’s system of prior appropriation, including augmentation plans; and water conservation.” 

Any conclusions from the feasibility studies would be presented to the legislature sometime in the next year, according to the text. The bill was sent to Colorado’s governor, the crypto-friendly Democrat Jared Polis, for signature on June 17.

The bill’s approval comes as western U.S. states grapple with an ongoing drought as well as the long-term issue of water rights and management. 

© 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.