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Proposed legislation in Kentucky would, if approved, make crypto mines in the state eligible for incentives awarded to clean-energy facilities.

The bill, submitted in the Kentucky Senate earlier this month, applies changes to the state’s Incentives for Energy Independence Act, signed into law in 2007. The idea behind the bill was to award tax incentives to business entities with buildings or operations that run on clean energy.

State Senator Brandon Smith’s measure adjusts the language of the Act to include “cryptocurrency facilities with a minimum capital investment of one million dollars” that engage in mining activities. It doesn’t specify what type of cryptocurrencies would be mined at those locations. 

If approved, the legislation would become effective on July 1 of this year.

Other lawmakers in Kentucky have eyed incentives for crypto miners. In some ways, the bill mirrors one filed last month in the lower house of the Kentucky legislature. Like Smith’s bill, that particular measure effectively puts tax incentives on the table in an effort to bring mining operations into the state.

Such legislative efforts come as the institutional footprint in the U.S. mining sector continues to grow, as previously reported by The Block. That push has come amid heightened demand for hardware and near-record prices for cryptocurrencies like bitcoin. 

© 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 Financial Action Task Force (FATF) will be seeking public comment on updated guidance related to virtual assets. A  post-meeting statement from the international regulatory body recapped plans for the coming year, including its dealings with digital asset standards.

In June 2019, the FATF released guidance affecting cryptocurrency and digital assets. The most notable portion was the so-called “travel rule” which required virtual asset providers (VASPs) to provide originator and beneficiary information to one another during transactions. The heightened standards are aimed at curbing money laundering and illicit finance.

Many expressed concerns over the implications of the travel rule and argued a solution would take time to develop. The crypto industry has responded with a number of possible solutions for compliance. The FATF has now begun its second 12-month review of the global implementation of its standards, according to a statement. Its first review showed the public and private sectors made progress in compliance, but both required additional guidance to reach adequate implementation.

Now, a public consultation draft with amendments and clarifications to the 2019 guidance will be coming in March. The updated guidance is slated for release in June. 

“The FATF has now updated its guidance to address specific areas, including on how to apply the FATF Standards to so-called stablecoins, how public and private sectors can implement the travel rule, and how to address the risks of disintermediated peer-to-peer transactions,” the body said in a statement.

© 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.

Crypto exchange unicorn Coinbase’s S-1 filing went public as part of its bid for a direct listing on Nasdaq. Included in that document were hints at a possible token issuance in the future. 

On page 68 of the filing, as part of its risk disclosures, Coinbase said that it may raise additional capital to “support business growth.” To that end, the firm could issue new shares or stock that could take the form of a blockchain token that could be tied to “customer reward or loyalty programs.”

“If we issue additional equity securities, including in the form of blockchain tokens, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued common stock,” the firm said in the filing. 

In another section, the firm said it could “authorize the issuance of ‘blank check’ preferred stock and common stock that our board of directors could use to implement a stockholder rights plan or issue other shares of preferred stock or common stock, including blockchain tokens.”

To be sure, the mention of a blockchain token in the risk disclosure sections doesn’t mean that Coinbase has concrete plans for such a launch. Still, its inclusion suggests that some degree of consideration has taken place. It also signifies Coinbase’s interest in an area that other exchanges, such as FTX and Binance, have pursued.

Exchange tokens typically provide traders with discounts on trading fees and are tied to the success of the platform. Their status as securities has been debated. 

It’s also worth noting that Coinbase acquired a broker-dealer, Keystone Capital, which could give the firm a regulatory framework for an in-house token.

In a tweet, former Coinbase employee Adam White — who currently is the president of digital assets firm Bakkt — raised the question of whether Coinbase is creating an exchange token. 

“Will be interesting to keep an eye on this and how other exchanges respond,” White wrote. 

Coinbase declined to comment when reached.

© 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

• Switzerland has made many advances in recent years to provide a comprehensive regulatory framework for digital assets.
• Recent legislative amendments continue to attract new businesses engaging in cryptocurrency activities.

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Two of the three largest Ethereum mining pools are the latest to take a public stance on Ethereum Improvement Proposal (EIP)-1559, a proposed protocol update that could reduce miners’ transactional revenues.

F2Pool, currently the third-largest Ethereum pool with about 11% of the network’s hashrate, has said it supports the EIP-1559 proposal in a post on February 26 entitled “Staying on the (b)right side of history.“

“Today, the general community along with core developers are siding with evolving Ethereum to include EIP-1559. It is important to side with the users and core contributors,” F2Pool wrote in the post.

F2Pool’s stance comes a day after Sparkpool, the largest mining pool with about 24% of the hashrate, said in a Tweet that it opposes the proposal, highlighting the degree of division within the Ethereum mining community.

First proposed by Vitalik Buterin in 2018, EIP-1559 is perhaps the most anticipated upgrade in Ethereum’s history after its launch, apart from the Eth2 switch from proof-of-work to proof-of-stake.

Under the upgrade, the network would burn part of the transaction fees as profits to ETH holders instead of miners. The overall goal is to improve network’s security and ensure the network’s transaction fees won’t be as highly variable as they are now.

As such, miners would lose out on one of their major revenue sources, as The Block Research detailed in a roadmap piece here. Ethereum miners have earned more than $600 million in mining fee revenue since the start of February, according to data collected by The Block Research.

Per the roadmap, the upgrade is scheduled for three to six months after Ethereum’s Berlin hard fork, which is likely to happen by the end of 2021’s second quarter at the latest. 

Opposition party

Sparkpool already expressed concerns with EIP-1559 earlier this month, having promoted arguments against EIP-1559’s fee burning mechanism in January.

“It is a tyranny of the majority in the name of better UX (in fact not). It is robbery. Why we love ether and btc? Because it gives us perfect property right,” Sparkpool said in a Twitter thread on February 5. “EIP 1559 will break this. We are sad to see many people only care about price now.”

In January, Bitfly, the operator behind eEthereum’s second largest mining pool Ethermine (which possesses about 20% of the hashrate), said in a Twitter post that it is “against adopting EIP-1559 in its current state,” arguing that “Ethereum’s future may be at risk.”

Those remarks joined those from a group of smaller Ethereum mining pools that have called to stop EIP-1559.

Now with Sparkpool onboard, the side that opposes the plan has above 50% of the network’s total hashrate at the current moment. That said, the upgrade’s development is at an early stage, during which time pool participants have the option to shift their hashing power to different sides depending on their own preferences.

Yet F2Pool argued in its post that it believes there’s “a high likelihood that EIP-1559’s inclusion has been priced in today’s ETH price.”

“If the proposal fails to be implemented, the likely effect on short-term ETH prices will not be favorable as ETH holders account the new no-action on EIP-1559 into their thesis for ETH. The unfavorable price action might set off a sequence of events leading to further deleveraging both on centralized and decentralized financial markets. Eventually, the miners will also be impacted as their revenues are dependent on ETH prices,” F2Pool argued in its post.

© 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

• Coinbase reported net income of ~$322 million in 2020 on total revenue of $1.28 billion
• About $1.1 billion (86%) of its revenue in 2020 came from transaction fees while the rest came from subscription services and other
• Coinbase has ~43 million registered retail users and ~7,000 institutional accounts with nearly 3 million monthly active transactors
• It stores a total of $90 billion in assets stored across both retail and institutional platforms
• Coinbase currently serves customers in over 100 countries with ~76% of customers in the United States and 24% in Europe

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.

Rebecca Patterson,‎ director of investment research at Bridgewater Associates — the world’s largest hedge fund manager, has explained what could make the firm invest in bitcoin.

In an interview with Bloomberg TV on Wednesday, Patterson said, firstly, bitcoin’s volatility needs to be reduced. “Right now, bitcoin can move 10% on a tweet. That’s not exactly a stronghold of wealth for most institutional investors,” she said, adding that bitcoin’s volatility is about ten times that of the U.S. dollar and still double that of the Venezuelan Bolivar.

“You want to see lower volatility, more stable asset if you want to consider it as a stronghold of wealth, a diversifier,” said Patterson.

Secondly, bitcoin needs to have greater liquidity, and finally, it needs to have regulatory certainty, said Patterson.

“The more you get a real regulatory ecosystem developing around bitcoin, other cryptocurrencies, the more other types of investors are going to be comfortable coming in. That’s going to bring the liquidity. That’s going to reduce the volatility,” said Patterson. “If there were one thing I were watching first, it would be seeing more regulatory certainty, and I’m not sure when that’s going to come in the U.S.”

Patterson further said that she doesn’t view bitcoin as a currency, but the cryptocurrency may become digital gold over time.

Bridgewater, founded by Ray Dalio in 1975, manages more than $150 billion worth of assets. Last month, Dalio said, bitcoin is “one hell of an invention,” and it “won’t escape our scrutiny.”

© 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.

Bitcoin’s price has slid below $45,000, resulting in a nearly 15% drop in the last 24 hours.

Bitcoin was trading at around $52,000 yesterday and is currently changing hands at about $44,900.

Macro factors could be at play for the downfall. Other asset classes, including stocks and bonds, have also seen selloffs.

Bitcoin futures’ open interest, an indicator of flows into the market, has fallen sharply over the last five sessions, from around $19.1 billion to $15.1 billion, according to data from tracker Bybt.com.

© 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.

An HM Treasury-ordered review of UK fintech has called for the introduction of a new UK regime for the regulation of crypto-assets.

Recent moves by UK regulators – including a ban on the sale of crypto derivatives and a somewhat botched anti-money laundering register – have led some to suggest that local crypto startups will look to move to friendlier jurisdictions.

The review, announced in chancellor Rishi Sunak’s debut budget back in March 2020 and spearheaded by former Worldpay boss Ron Kalifa, points out that other markets are pressing ahead with the development of crypto-specific frameworks, such as the EU’s Markets in Crypto-Assets proposals – and states that the UK needs to move fast to maintain its position as a hub for digital assets.

The report states:

“The UK should aim to be at least as broad in ambition as MiCA – but should also consider whether it can develop a bespoke regime that is more innovation-driven.

“A bespoke regime for cryptoassets should adopt a functional and technology-neutral approach, in line with the principles of the current regulatory framework, as well as the concept of “same risk, same regulation”, while being tailored to the risks arising from cryptoasset-related activities. It should also be flexible enough to deal with future challenges – such as how Decentralised Finance (DeFi) should be regulated.”

The Treasury published a consultation paper and call for evidence on the UK’s regulatory approach to crypto and stablecoins in January.

The review also called for the UK to continue to participate in the Global Financial Innovation Network – a working group of national regulators – and to lead the way on crypto policy and regulation. The government should keep the initiatives of other international markets “under review” so as not to fall behind, it added. 

The long-anticipated Kalifa review is an effort to help the UK maintain its position as a leading hub for fintech businesses – something of an obsession among British politicians.

It is comprised of five key workstreams, which are policy and regulation; skills; investment; international connectivity; and national connectivity.

Calls for the creation of a £1bn growth fund had already grabbed headlines when they leaked in January.

“This would be a market-led, specialist £1bn Fintech Growth Fund. It would be funded by holders of domestic institutional capital and, where feasible, utilise existing regulatory concessions made applicable only to the fund, thus providing a vehicle to support growth from Series B to pre-IPO stage and the option to hold beyond,” the report stated.  

The review also called for changes to UK listing rules through the reduction of free float requirements (the proportion of shares startups have to make available for investment when they go public), the introduction of dual class shares, and the relaxation of pre-emption rights.

These recommendations come amid fears of a mass exodus of the UK’s promising pipeline of potential fintech IPOs to the US.

© 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.

Crypto exchange-operator Kraken is reportedly seeking to rake in new cash in a raise that could value the firm above $10 billion. 

As per Bloomberg News, the U.S. exchange is in talks to raise funds from firms including Fidelity, Tribe Capital and General Atlantic.

The report added that while the terms aren’t final, the exchange could nab a valuation above $20 billion if there is high enough demand.

On Thursday, Kraken’s rival Coinbase submitted a public S-1 filing, which sets the stage for its direct listing on Nasdaq under the ticker symbol ‘COIN.’

The filing offers insight into the growth of the crypto exchange businesses on the back of bitcoin’s price rally last year. Coinbase posted $1.1 billion in net revenue for 2020, which more than doubled since 2019. It also brought home $322.3 million in profit last year after a $30 million net loss in 2019.

© 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.