Sequoia Capital Slashes Crypto Fund as It Downsizes Amid Startup Crunch (WSJ)
Sequoia Capital pared back the size of two major venture funds, including its cryptocurrency fund, as part of a dramatic downsizing the storied venture firm is undertaking amid a broad startup downturn. Sequoia cut the size of its cryptocurrency fund to $200 million from $585 million, according to people familiar with the matter. It also slashed the size of its so-called ecosystem fund, which invests in other venture funds, to $450 million from $900 million, the people said.
MarketVector, Figment Introduce First Staking Rewards Indexes (The Block)
MarketVector Indexes is partnering with staking infrastructure firm Figment to introduce what it says are the industry’s first Ethereum staking rewards indexes. “We’ve been proud to be on the forefront of digital assets indexing and this partnership with Figment reflects our commitment to providing institutions and investors with exposure to leading assets," MarketVector digital assets product strategist Martin Leinweber said in a statement. "Now, asset managers and advisors are able to have customizable access to staking rewards as an industry first," he continued.
FTX and Genesis Reach Agreement in Ongoing Bankruptcy Dispute (CoinDesk)
Bankrupt crypto firms FTX and Genesis have reached an agreement in principle that would resolve claims made by both parties in their ongoing dispute. “The Parties have reached an agreement in principle, subject to documentation, regarding a settlement that would resolve, among other things, the claims asserted by the FTX Debtors against the Debtors in these Chapter 11 Cases and the claims asserted by the Genesis Debtors against the FTX Debtors in the FTX Chapter 11 Cases,” a letter filed by their legal representatives to Judge Sean H. Lane reads.
SEC Official Warns Accounting Firms About Legal Liability for Crypto ‘Audits' (The Block)
A senior Securities and Exchange Commission official warned accounting firms that they could be held legally liable for statements made by crypto companies that tout partial reviews of their finances as “audits.” “Following the recent waves of scandal and insolvency in the crypto industry, there has been a renewed focus on the firms, including accounting firms, that have been retained by companies in the crypto-asset space—in particular, crypto asset trading platforms,” said SEC Chief Accountant Paul Munter in a prepared statement on Thursday. “Certain crypto asset trading platforms, with others in the crypto industry, have marketed to investors their retention of third parties, sometimes accounting firms, to perform some sort of review of certain parts of their business, often presented as a purported ‘audit.’”
U.S. Senate Passes $886B Military Spending Bill With Crypto AML Provision (CoinDesk)
The U.S. Senate on Thursday evening passed the 2024 National Defense Authorization Act (NDAA), which included a provision that tightens oversight over financial institutions engaged in crypto trading and takes aim at crypto mixers and “anonymity-enhancing” crypto assets. The amendment was brought forward by a bipartisan group of U.S. Senators, comprised of Kirsten Gillibrand (D-N.Y.), Cynthia Lummis (R-Wyo.), Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.), who said in a press release that the move represented "one of the most substantial congressional actions to date regarding crypto assets."
Prosecutors Want Sam Bankman-Fried Jailed Before Fraud Trial (WSJ)
Federal prosecutors asked a judge to revoke FTX founder Sam Bankman-Fried’s bail and send him to jail, ratcheting up a monthslong battle over his behavior while awaiting trial on fraud charges connected to the implosion of his cryptocurrency exchange. The tipping point, prosecutors said Wednesday during a hearing in New York, was what they allege were Bankman-Fried’s attempts to discredit a former member of his inner circle who is expected to testify against him. Bankman-Fried provided private writings of Caroline Ellison, his onetime lover and former chief executive of his crypto investment firm Alameda Research, to a New York Times reporter that were cited in a story published last week.
Crypto Regulatory Framework Bill Endorsed by House Financial Services Committee (Bloomberg)
Legislation championed by crypto advocates that sets clearer rules for the nascent industry was approved by a key US House panel on Wednesday. The Republican-led bill was approved by the House Financial Services Committee in a 35-15 vote, mostly along party lines. A handful of Democrats, including Jim Himes of Connecticut and Ritchie Torres of New York, also voted in favor of the legislation and argued the status quo wasn’t working.
SEC Charges Quantstamp Over $28 Million ICO (The Block)
A blockchain security company will have to pay about $3.4 million to settle Securities and Exchange Commission charges for conducting an unregistered initial coin offering. Quantstamp raised close to $28.35 million in ether and stablecoin USD through the sale of its QSP token to more than 5,000 investors back in 2019, the SEC said. The firm released a white paper in 2017 describing its plans to create a protocol on the Ethereum blockchain to “provide automated security audits of smart contracts,” the agency said on July 21 in a statement.
Singapore High Court Declares Crypto as Property in Case Involving Bybit (CoinDesk)
Singapore’s High Court has recognised crypto as a property capable of being held on trust, in a case involving Seychelles-based exchange Bybit and a contractor, according to a court judgement published on Tuesday. Bybit brought a case against Ho Kai Xin, claiming that in breach of her employment contract, she abused her position to transfer over 4.2 million USDT (stablecoin issued by Tether) to addresses owned and controlled by her. Ho also transferred a quantity of fiat currency to her own bank account.
Winklevoss Twins Gamify Overseas Derivatives Trading Platform to Boost Demand (Bloomberg)
The billionaire twins Tyler and Cameron Winklevoss’ Gemini is turning to a long-time crypto industry tactic to bolster usage on its derivatives exchange — daily competitions for prizes and the bragging rights that come with being listed as the most successful traders. The Gemini Foundation will be hosting its first-ever “leader board” competition on the exchange in August. Participants will have to fund accounts with at least $250 of the Gemini Dollar stablecoin, and to maintain a similar balance during the month-long contest.
Some Binance.US Crypto Trading Was a Mirage, the SEC Alleges (WSJ)
When crypto company Binance launched its U.S. exchange in 2019, almost $70,000 of bitcoin changed hands in the first hour. But the demand didn’t come from external traders. “That was ourself, I think,” Binance Chief Executive Changpeng Zhao said in an internal message viewed by The Wall Street Journal. Just how much crypto trading volume is due to actual trades versus exchanges and coin promoters shuffling assets among themselves is an issue for regulators and investors trying to gauge the depth of these markets. The issue revolves around what is known as “wash trading.”
Judge Issues Gag Order on Sam Bankman-Fried as Prosecutors Call for Jail Time (The Block)
A federal judge issued a gag order on former FTX CEO Sam Bankman Fried, limiting him from speaking publicly about his case to the media. “The parties in this case, their attorneys, and their agents are prohibited from publicly disseminating or discussing with any public communications media anything about the case,” New York United States District Judge Lewis Kaplan ordered on Wednesday. Kaplan added that the order did not apply to “assertions of innocence.”
Avalanche Foundation to Invest $50M in Asset Tokenization on Its Blockchain (TechCrunch)
The Avalanche Foundation is allocating up to $50 million to purchase tokenized assets created on its layer-1 blockchain, the company exclusively told TechCrunch. The initiative, Avalanche Vista, aims to highlight the value of tokenization in different sectors like equity, credit, real estate and commodities. Tokenization is the process of creating a digital representation of a real-world asset (RWA) on a blockchain. “It creates a faster, more efficient way for companies to issue assets, individuals to own them, and everyone to transfer value,” John Wu, president of Ava Labs, the firm that created Avalanche, told TechCrunch.
Bank Objections Over State Provision Could Complicate Stablecoin Bill (The Block)
A portion of the stablecoin bill due for consideration in the U.S. House of Representatives later this week has drawn concern from major trade associations representing the vast majority of U.S. financial institutions. In two letters sent last week, both co-signed by the American Bankers Association, industry associations representing banks and credit unions took issue with part of the comprehensive regulatory framework for stablecoins that the House Financial Services Committee will debate and vote on Thursday.
Couple to Plead Guilty in $4.5 Billion Bitcoin-Laundering Case (WSJ)
A married New York couple charged with conspiring to launder billions of dollars of bitcoin that was stolen in the 2016 hack of crypto exchange Bitfinex are set to plead guilty, according to a court order and a person familiar with the matter. Federal prosecutors in Washington, D.C., charged Ilya Lichtenstein and Heather Morgan in February 2022 after investigators used software to trace stolen digital currency to accounts the two owned. Each was charged with conspiring to launder money and conspiring to defraud the U.S.
Ethereum Software Infrastructure Provider Flashbots Raises $60 Million (Bloomberg)
Flashbots, a provider of software used to package Ethereum blockchain transactions, raised $60 million to help finance the development of a new version of the technology. The San Francisco-based firm Paradigm led the series B round, a shift from the recent trend among Silicon Valley venture capitalists pivoting to artificial intelligence companies from crypto. The financing was raised through a so-called “beauty contest for decentralization” in which investors were selected based on their reverse pitches, according to a statement Tuesday from Cayman Islands-based Flashbots. The funding gives it a valuation of at least $1 billion, a representative of Flashbots said.
Binance to Scale Up Services on New Japan Platform in August (Bloomberg)
Binance will roll out full services on its new platform for Japan in August, the crypto exchange’s founder Changpeng Zhao said via video at a conference in Tokyo on Tuesday. The firm bought Sakura Exchange BitCoin last November and said in May this year that it was creating a platform to fully comply with local rules.
Crypto Exchange KuCoin to 'Adjust Some Personnel as Needed', but Denies Report of Major Layoffs (CoinDesk)
Crypto exchange KuCoin said Tuesday it might reduce some its staff as part of a routine adjustment of personnel, but denied that it plans to lay off a large portion of its workforce. Citing three confirmed but anonymous internal sources, Twitter news account Wu Blockchain tweeted on Tuesday that the Seychelles-based exchange plans to lay off as many as 30% of its employees as it grapples with a decline in profit after the New York State Attorney General Letitia James sued KuCoin in March on allegations that it violated securities laws by offering tokens – including ether. The exchange recently instituted mandatory identity checks on its customers, which Wu Blockchain said cut into profits.
Binance, Billionaire Zhao to Seek Dismissal of CFTC Lawsuit (Bloomberg)
Binance Holdings Ltd., its founder Changpeng Zhao and the crypto exchange’s former Chief Compliance Officer Samuel Lim plan to seek the dismissal of a Commodity Futures Trading Commission lawsuit. The response to the CFTC complaint is due July 27 and the defendants intend to submit motions to dismiss, according to a court filing on Monday. They also sought permission to exceed a 15-page limit on supporting briefs, citing the complexity of the case and the number of arguments they anticipate making.
EU Stablecoin Issuers With Bank Assets in Reserve Will Get Extra Regulation, EBA Draft Says (CoinDesk)
European stablecoin issuers would face extra rules if their reserves have a lot of derivatives or covered bonds under draft rules circulated by the European Banking Authority Monday. New laws known as the Markets in Crypto Assets regulation (MiCA) mean any stablecoins deemed to be overly connected to the financial system face extra capital requirements and centralized supervision by the European Union (EU).
Vitalik Buterin Outlines ‘Four Major Risks’ With Worldcoin Following Token Launch (The Block)
Ethereum co-founder Vitalik Buterin highlighted four potential pitfalls of Worldcoin's iris-scanning identity verification solution, co-founded by OpenAI CEO Sam Altman, which launched its WLD token earlier today. Buterin pointed to privacy, accessibility, centralization and security as the major risks associated with Worldcoin’s Proof-of-Personhood (PoP) construction and proposed an alternative solution to mitigate against them in a blog post on Monday.
FedNow Launch Hints at Payments Wars to Come (Axios)
The launch of the FedNow instant payments system on Thursday marks official ratification from the U.S. central bank of a model that has taken off very impressively elsewhere in the world. The big picture: If it catches on here, the biggest losers are likely to be the major credit card issuers. Why it matters: Interchange fees — the swipe fees paid by merchants when customers pay by credit card — reached $100 billion in 2022, per Matt Schulz of Lending Tree. That's more than $800 per household.
Putin Says ‘Yes’ to Russia’s Digital Ruble (Blockworks)
Russian President Vladimir Putin has signed a bill that will introduce a digital version of the ruble, after the effort was initially sanctioned by the Duma on July 11, 2023. Putin quite literally gave the law his stamp of approval on Monday, which now makes Russia the largest nation in the world to implement a central bank digital currency (CBDC). The CBDC pilot will go into effect on Aug. 1, 2023, which comes a little under three years after the Russian government first published a consultation paper on the digital ruble in October 2020. Elvira Nabiullina, the governor of Bank of Russia, said in a statement that citizens would not be forced to use the CBDC and that it will serve as an additional currency.
Sam Altman’s Worldcoin Crypto Project Officially Launches (Bloomberg)
It took three years, multiple digital-asset market dislocations and hundreds of millions of dollars, but the eyeball-scanning crypto project known as Worldcoin has officially launched. “Worldcoin is an attempt at global scale alignment,” the digital identity and crypto payments project co-founded by OpenAI Chief Executive Officer Sam Altman said in a statement Monday. “The journey will be challenging and the outcome is uncertain.”
SEC Signals Appeal to Crypto Ripple Ruling in Response to Terra Case (Bloomberg)
The US Securities and Exchange Commission asked a federal judge to ignore parts of a recent ruling in the regulator’s litigation with Ripple Labs Inc., saying the decision doesn’t square with existing securities laws and that it may appeal. The ruling in the Ripple case concluded that sales of Ripple’s XRP token directly to institutional investors violated the SEC’s rules, but offerings to retail investors on exchanges didn’t, delivering what was widely seen as a victory to the crypto industry.
Celsius Network Reaches Key Settlements to Resolve Litigation (WSJ)
Celsius Network reached settlements that potentially clear a path for the crypto lender to win court approval for its plan to return assets to its customers and conclude its bankruptcy. One of the settlements resolves customer claims over allegations of fraud and misrepresentation by prior Celsius management by bumping up recoveries by 5%. The agreement resolves 30,000 claims seeking $78 billion in compensation, according to court papers filed on Thursday by lawyers for Celsius.
Bitfinex Hackers Agree to Forfeit Billions in Bitcoin in Plea Deal (Decrypt)
The couple charged with laundering $4.5 billion in cryptocurrency and conspiracy to defraud the United States through a 2016 hack of crypto exchange Bitfinex have reached a plea deal, according to court documents Friday morning. As part of the plea deal, the couple has agreed to forfeit proceeds from the almost 120,000 Bitcoin they stand accused of laundering. Ilya Lichtenstein and his wife Heather Morgan, both of whom were arrested early last year, are set to appear before a judge on August 3rd, and could face up to 20 years in prison.
Anchorage Sees Institutional Crypto Pie Expanding, Despite Bear Market (The Block)
The summer doldrums may have set in, but the past weeks have seen a flurry of activity on the institutional side of crypto that hasn't seemed to die down. From filings for spot bitcoin ETFs to broader issues surrounding custody and upcoming legislation in the U.S. Congress, debates over foundational topics continue to rage. The Block spoke with Anchorage Digital co-founder and president Diogo Mónica in a wide ranging interview that touched on regulation, legislation and the broader global market. The firm is a federally chartered crypto bank in the U.S.