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On Wednesday, the U.S. Securities and Exchange Commission said that it wants more input as it considers whether to approve a bitcoin exchange-traded fund (ETF) proposed by asset management firm VanEck.

VanEck formally refiled for its proposed bitcoin ETF in December, with Cboe — the exchange that would list the product — submitted a proposed rule change in March that would clear the way for its listing. In late April the SEC issued a notice saying that it would take additional time to reach a decision. June 17 was the decision date previously designated in that notice.

As indicated in Wednesday’s notice, the SEC wants to solicit more feedback on the proposed rule change. It states:

“The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act14 to determine whether the proposed rule change should be approved or disapproved. Institution of proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change, as discussed below. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change.”

The notice indicates the potential avenue by which it might disapprove of the application, in order to spur additional commentary:

“Pursuant to Section 19(b)(2)(B) of the Act, the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest.”

The notice follows on the heels of additional decision delays for other proposed bitcoin ETFs. A slew of other firms, including Fidelity, have also proposed bitcoin ETFs before the SEC.

The SEC said Wednesday that commenters should make their submissions within 21 days from the notice’s publication in the Federal Register, which typically takes three business days. Rebuttals should be submitted within 35 days of that publication.

© 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.

Yesterday, Congresswoman Maxine Waters announced the formation of a new working group for House Democrats to focus on cryptocurrency policy.

In a statement shared with The Block on Wednesday, Waters’ team revealed the roster of the group, which features 12 members of the House Financial Services Committee.

On the roster was Stephen Lynch, who is the chair of the Fintech Task Force. It was, in fact, in the task force’s first hearing that Waters made the announcement. 

Also in the working group is Bill Foster, who chairs the task force on AI, is a member of the Blockchain Caucus, as well as likely the only blockchain programmer in Congress. In a statement to The Block, Foster wrote: 

“The United States is playing catch-up to the rest of the world when it comes to digital currency, and if we’re going to protect the U.S. dollar’s status as the world’s reserve currency, we need to make the development of secure and privacy-preserving digital currency a priority.”

In her announcement, Waters identified the group’s goals:

“Members plan to work together on legislation and policy solutions on such matters as cryptocurrency regulation, the use of blockchain and distributed ledger technology, and the possible development of a U.S. Central Bank Digital Currency.”

The working group’s membership also includes Sylvia Garcia, who introduced the “Managed Stablecoins Are Securities Act of 2019” in response to Facebook’s work on Libra (now Diem). The most senior member is the famously anti-crypto Brad Sherman, who joined yesterday’s hearing in order to express fears about a U.S. CBDC’s possible utility in tax evasion. 

From across the aisle, Republican Congressman Warren Davidson tweeted support for the new working group, saying he looked “forward to working with colleagues to provide the regulatory clarity America needs to see this aspect of FinTech flourish.”

© 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.

Bitwise, the $1 billion-plus crypto asset management firm, announced a Series B funding round to further advance its index and fund products on Wall Street.

With the raise, Bitwise became the latest startup in the digital asset industry to raise fresh capital amid a period of heightened interest from institutions and their clients.

In this episode of The Scoop, Bitwise co-founder and CEO Hunter Horsley explained how the industry is creating access for new classes of investors. In Horsley’s view, traditional portfolio managers and financial advisors remain an untapped market for the nascent crypto asset management industry. 

“We think about serving the financial advisers, serving the long-term investor, a retirement account, and what are the solutions that will really work for them. That’s why you’ve seen us focused on index products that rebalance themselves so that if the space changes, they don’t need to be trading.”

In terms of the volatility, Hunter sees this as a positive. For Bitwise, volatility means the opportunity for financial advisors to enter the cryptocurrency market by adopting crypto as another asset class in a client or portfolio’s diversification strategy.

“The volatility of crypto is a magical gift for a financial advisor. What do I mean by that? If you’re an individual who downloads one of the incredible apps that you have today, you see this jagged price chart, this twenty-four-hour price chart. Right. It’s very scary, prone to emotional trading. And that’s the scary version of volatility. If you’re a financial advisor constructing a portfolio that you want to have certain low correlations, you want to have a certain Sharpe ratio, you want to balance across different asset classes. Well, in that case, crypto volatility is actually very useful.”

Looking back to Bitwise’s latest round, the startup managed to attract notable backers. Indeed, some of the investors involved in raising the Series B round were industry heavy-hitters.

As Horsley put it:

“[The Series B Funding was] collected by Elad Gil, one of the most accomplished technology investors, Electric Capital, one of the leading crypto venture capital firms and some renowned Wall Street investors; Dan Loeb’s Third Point, Daniel Ochs Willoughby, Louis Bacon’s Moore Strategic Ventures, Henry Kravis, Stanley Druckenmiller and [Bridgewater CEO] Dave McCormick.”

© 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.

Following a four-hour summit in a villa in Geneva, the presidents of the United States and Russia gave separate press conferences accounting for the results of the closed-door meetings. 

Cybersecurity and, especially ransomware, placed high on the agenda. The Biden administration has spent weeks identifying ransomware as a key national security priority following high-profile attacks on the Colonial Pipeline and meat producer JBS.

Specifically, the administration has identified these attacks with Russian hacking groups. The U.S. is trying to add pressure on the Russian government to do something about this home-grown industry, going so far as to cast suspicion on Putin as being at least complicit in letting these hackers operate in the Russian Federation. As Biden noted in his conference: “Certain critical infrastructure should be off-limits from cyberattacks. Period. By cyber or any other means.”

Speaking to journalists following the summit, Putin also identified cybersecurity as a key area of their conversation, saying: “The cybersecurity space is extraordinarily important throughout the world.” 

Biden went further, saying that “responsible countries need to take action against criminals who conduct ransomware activities on their territory.” He said he and Putin had agreed to task experts to “follow-up on specific cases that originate in other countries.”

The Russian president, however, denied his government’s complicity in recent ransomware attacks. Referring to “American sources,” Putin said they found that “the largest number of cyberattacks originate from the US. Second is Canada, then the UK.” He further pointed to an attack on Russian healthcare systems that had come from U.S. cyberspace to which the U.S. government had not responded. 

An example like the SolarWinds hack, suspected of coming from the Russian state, remains a bone of contention. In response to a question from a reporter as to whether Putin was aware of consequences of violating “off-limits” infrastructure, Biden said:

“I pointed out to him that we have significant cyber capability. And he knows it. If they violate these basic norms, we will respond in a cyber way.”

Another reporter asked Biden if he and Putin had discussed a possible military response to a ransomware attack. Biden initially brushed the question off, before saying that “we didn’t discuss a military response.”

Even before the Colonial Pipeline attack, the White House had busily spotlighted Russia’s role in cyberattacks. In response to a buildup of Russian forces along the Ukrainian border, Biden’s team released a new package of sanctions that banned the purchase of Russian bonds. The sanctions also added 28 crypto wallet addresses to the Office of Foreign Asset Control’s blocked list. 

© 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.

DeFi loan platform Alchemix has paused one of its contracts after a bug inadvertently allowed certain withdrawals, leading the vault to become undercollateralized. 

Alchemix is a rather innovative and complex platform in the DeFi space. When you take a loan, the collateral you use is put to work via yield farming — a way to generate yield in DeFi. The interest this generates is used to pay back some or all of the loan.

alETH is a token backed by ether (ETH). DeFi users can swap other tokens that are pegged to the value of ETH for alETH. They can then use alETH for loans on the Alchemix platform, or simply trade it like any other token.

During today’s harvest — when token rewards are gathered and handed out proportionally to those holding tokens in the pool — a bug in the system led to withdrawals that shouldn’t have been allowed. 

“TL;DR of the Alchemix debacle: The last harvest returned 100% of the ETH funds to alETH borrowers treated by the system as repaid debt, thereby allowing withdrawals. In short, alETH is currently undercollateralized,” tweeted a pseudonymous researcher known as FAANGanon, who works for crypto trading firm Alameda Research.

On Alchemix’s Discord channel, billionaire Mark Cuban weighed in, acknowledging the “challenging situation” but encouraging the team to tweet about it and make an announcement in Discord. “More eyes on Alchemix than whoever hangs out here on Discord,” he said.

Alchemix then tweeted that there had been an incident with the alETH contracts and that the project was working on a solution and a post-mortem. It said that the contract has been paused, adding that, “funds are safe.”

The Alchemix token price is down 15% in the last 24 hours, at a current price of $549.

© 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.

For the fourth time this year, the federal auctioning site General Services Administration Auctions will auction off another lot of bitcoin and, for the first time, litecoin. 

According to a release from GSA Auctions and available lots, 150.2 litecoin, 8.925 bitcoin, and 0.000229 Bitcoin Cash will be auctioned off on the GSA website. The litecoin and bitcoin cash will be auctioned in one lot in addition to 10 lots of bitcoin ranging from 2 BTC to 0.025 BTC. 

The auction begins June 18 at 5 p.m. ET and closes June 22 at 5 p.m. ET., though additional bidding may extend the auction’s close time. 

“Experienced investors recognize a good opportunity when they see it, which is why our auctions have generated so much enthusiasm among the crypto community,” Thomas Meiron, Regional Commissioner for GSA’s Federal Acquisition Service, was quoted as saying in the release. “With the addition of a new type of cryptocurrency, this promises to be one of our most exciting auctions of the year.”

GSA Auctions held its first bitcoin auction in early March, followed by two more in late March and late April. In total, GSA Auctions auctioned off 16.99 BTC and amassed $937,000 in winning bids, according to the release.

While the winning bidder of the first GSA Auctions bitcoin auction paid a $9,000 premium for their bitcoin, its recent auctions mostly sold bitcoin below market value.

© 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

• India’s Crypto Covid Relief Fund received over $1 billion last month from Ethereum creator Vitalik Buterin.
• While the fund’s value has dramatically fallen since then, it is still worth around $375 million.
• Here’s how the fund is cashing out since crypto remains a legal grey area in India.

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subscribers of The Block Daily.
You can continue reading
this Daily feature on The Block.

In March, a pair of Ethereum-focused development teams proposed a merger of their respective protocols. 

Months later, the communities around Keep Network and NuCypher have approved the merger plans, according to a Tuesday announcement post. Both votes took place on Friday.

“The snapshot vote concluded Friday after months of community collaboration, and we’re delighted to announce that the Keep x NuCypher network upgrade is moving forward with approximately 93% of individual Keep stakers voting for the initiative and 78% of staked KEEP supporting the measure,” the Keep team wrote.

NuCypher holders approved their end of the vote unanimously, per a separate blog post.

“The proposal received unanimous support on the NuCypher side. It was simultaneously approved on the Keep side, which means the first-ever on-chain network upgrade to combine two decentralized networks will proceed,” the post explained.

Successful votes in hand, the merger projected, dubbed KEaNU, now moves toward implementation, specifically the development of the “staking contract for KEaNU and the associated adapters to grandfather in existing NU and KEEP stakes,” per NuCypher’s post. This process will take place as Keep’s team works on the next version of its wrapped bitcoin project, TBC. Future community decisions will focus on the governance aspects of the KEaNU decentralized autonomous organization, or DAO.

© 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.

A new proposal on the Curve governance forum asks whether the decentralized finance (DeFi) project should try to enforce its intellectual property in court.

Not only does the proposal consider whether the IP should be enforced more broadly, but it considers a specific example of Saddle Finance, which the proposer claims has been accused of copying Curve’s code.

“I propose Curve engage competent counsel both in the USA and (to the extent Saddle or other infringers or their VC’s have identifiable assets abroad) other relevant jurisdictions,” the proposal states. 

Curve is a decentralized exchange running on the Ethereum blockchain. The platform is managed by a core team but it has a decentralized autonomous organization (DAO) that is able to propose and vote for ways it should be changed, using Curve’s governance token CRV.

The key questions are whether Curve can enforce its IP — since the organization itself is largely decentralized — and also whether it should, something that would be new to the largely open-source and unregulated DeFi industry.

As noted in the proposal, Curve’s code has a license that states, “no license, right of reproduction or distribution or other right with respect thereto is granted or implied.”

In January, some members of the Curve community alleged that Saddle Finance’s code was based on Curve’s. According to an audit by Quantstamp, Saddle Finance’s implementation of StableSwap was ported from Curve Finance’s contracts. And when asked the difference between Curve and Saddle, the official Curve Twitter account said, “For now, seems like exactly the same math but with VCs. Will see how it plays out.”

The proposal argues that Curve’s governance forum should review proposals from law firms and put them to a vote. And if a lawsuit results in a proposal of a settlement, that would also go to a vote.

“This will also set an important precedent in DAO’s and DeFi that decentralization does not mean that VC’s get to steal from communities,” the proposal states.

Response to the proposal

The comments section shows a mixed reaction to the proposal. 

Curve team member Julien Bouteloup argues that it’s a “very good proposal” that may have the result of disincentivizing other projects to impede on Curve’s IP.

Others were concerned, however, that this might bring regulatory scrutiny to the project and its token. 

“It all makes a lot of sense, just afraid this would make CRV and veCRV a security and bring a lot of pain to everyone, more than non enforcing IP rights,” writes Daniele Sesta, a self-proclaimed “Chief Rug Puller” at Popsicle Finance.

An anonymous user writes that it could raise questions in court about Curve’s lack of a money transmitting license, while reiterating concerns over the tokens being deemed unregistered securities.

© 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.

Despite the slump in cryptocurrency prices, the number of firms raising in the decentralized finance (DeFi) market has continued to pick up. 

Lending protocol Goldfinch offers the latest example. The project announced Wednesday the completion of a $11 million fundraise led by venture capital investment giant a16z. The firm, which has grown by 2.5x over the last few months, provides borrowers the ability to take out an under-collateralized loan — a unique offering in a market where borrowers typically have to post more collateral than they want to borrow. 

“I’m not used to dealing with this many zeros,” said Mike Hall, a former Coinbase product analysis. Hall co-founded Goldfinch with Blake West, who also spent some time at Coinbase as a backend engineer. 

While the DeFi market has typically been associated with rogue bands of retail traders, Goldfinch is wooing an array of institutions to help build out its platform. The three-sided market is made up of borrowers looking for capital, liquidity providers, and backers of the loans. It’s being examined by credit funds managing billions that are looking to lend and financial technology firms that are looking to borrow. 

In a sense, Goldfinch mimics some of the features of the traditional lending market, where banks assess the creditworthiness of a given borrower based on their own credit and risk analysis. “The backers are the core participants that help determine credit worthiness,” said West. 

Still, the mechanism by which users show their credit worthiness is decentralized, according to the project. 

“The protocol does this by using the concept of “trust through consensus”: that borrowers can show creditworthiness based on the collective assessment of other participants, rather than based on their crypto assets,” a press release explained. 

The fresh capital injection will help Goldfinch make a few new hires, including a business operations manager and several software engineers. 

As for the raise, a16z participated along with Mercy Corps Ventures, A Capital, SV Angel, Access Ventures, Divergence Ventures. Former Coinbase CTO Balaji Srinivasan and Messari CEO Ryan Selkis also participated. 

© 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.