David Canellis

Regulatory agencies around the world are in contact with FTX lawyers, who have said there could be anywhere from 100,000 to more than one million users affected by the exchange’s shock bankruptcy.



The firm’s flagship entity, FTX Trading Ltd, filed a <a href="https://pacer-documents.s3.amazonaws.com/33/188450/042120644082.pdf" target="_blank" rel="noreferrer noopener">motion</a> with the US bankruptcy court in Delaware on Monday, seeking authority to contact its creditors via email.



Law firm Sullivan &amp; Cromwell also requested relief from filing a list of the top 20 creditors for each of the 134 FTX affiliated entities which filed for Chapter 11 bankruptcy last Friday.



Instead, the motion asks the court to allow it to file a single, consolidated list detailing the top 50 creditors across all FTX companies by Friday.



“The Debtors [FTX] expect that the exercise of compiling separate creditor lists for each individual Debtor would consume an excessive amount of the Debtors&#8217; limited time and resources at this critical time,” lawyers said.



The filing marks one of the first moves in what’s set to be a sprawling and landmark bankruptcy case for the crypto industry.&nbsp;



&#8220;As set forth in the Debtors&#8217; petitions, there are over [100,000] creditors in these Chapter 11 Cases. In fact, there could be more than one million creditors in these Chapter 11 Cases,&#8221; lawyers wrote.



FTX, led by founder Sam Bankman-Fried, was one of the largest crypto exchange brands in the world at the time of its collapse, handling billions in daily trade volume, second only to <a href="https://cms.blockworks.co/tag/binance/" target="_blank" rel="noreferrer noopener">Binance</a>.



Once valued at more than $32 billion, <a href="https://cms.blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events/" target="_blank" rel="noreferrer noopener">FTX suddenly collapsed last week</a>. Its sister trading outfit Alameda Research, purportedly a totally separate firm, was revealed to be working with a precarious balance sheet heavily weighted toward the exchange’s native token FTT.



Binance CEO Changpeng Zhao, who had previously led his crypto exchange to invest in FTX, announced he’d soon be offloading his FTT stake to avoid outsized exposure. Markets reacted negatively, sending FTT down almost 90% and triggering a $6 billion bank run on FTX.



FTX users had rushed to withdraw their funds from the Bahamas-based platform, causing severe withdrawal bottlenecks. Around the same time, Zhao and Bankman-Fried floated a <a href="https://cms.blockworks.co/news/binance-triggers-liquidity-crisis-then-acquires-bankman-frieds-ftx-crypto-exchange/" target="_blank" rel="noreferrer noopener">potential buyout deal</a> to save FTX customers, which would&#8217;ve seen Binance absorb FTX.



The deal ultimately fell through, leading to FTX’s bankruptcy and countless customers out of pocket, including <a href="https://cms.blockworks.co/news/funds-with-ftx-exposure-have-7-to-12-of-aum-trapped-report/" target="_blank" rel="noreferrer noopener">hedge funds</a> and crypto projects.



Details of epic mismanagement at FTX later emerged — most glaringly the use of customer funds to make risky bets across the crypto ecosystem which amounted to a black hole of more than $8 billion. It&#8217;s a mess that must now be cleaned up by restructuring expert John Jay Ray III, who handled disgraced corporate giant Enron following its own bankruptcy.



&#8220;Immediately upon appointment, [Ray] began working with FTX&#8217;s external legal, turnaround, cybersecurity and forensic investigative advisors to secure customer and debtor assets around the world,&#8221; lawyers wrote.



Ray and his team stopped trading and withdrawal functionality on FTX and ordered the firm&#8217;s digital assets be moved to a new cold wallet custodian, a response to a <a href="https://hub.elliptic.co/analysis/477-million-moved-out-of-ftx-in-suspected-theft/" target="_blank" rel="noreferrer noopener">hack</a> involving nearly half a billion dollars in FTX assets over the weekend.



Bahamian authorities have already announced a <a href="https://edition.cnn.com/2022/11/13/business/ftx-bahamas-criminal-investigation/index.html" target="_blank" rel="noreferrer noopener">criminal investigation</a> into FTX and froze its local assets. FTX&#8217;s recent bankruptcy filing cited “substantial interest in these events among regulatory authorities around the world.”



FTX representatives have &#8220;been in contact over the past 72 hours with the U.S. Attorney&#8217;s Office, the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, and dozens of Federal, state and international regulatory agencies,” the filing reads.



If that disclosure is anything to go by, this whole ordeal is just getting started.



H/T: <a href="https://twitter.com/kadhim/status/1592434339970969601" target="_blank" rel="noreferrer noopener">Kadhim Shubber</a>



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FTX Doom Draws Dozens of Federal, State, International Agencies

Sebastian Sinclair

In Australia, crypto startups are preparing for the government’s multi-stage approach to regulating crypto, pitched to protect consumers from what it considers unsustainable business models.



The previous government failed to take the time to future-proof regulatory frameworks, leading to consumer exposure to recent risks, Treasurer Jim Chalmer’s office said in a joint <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/making-crypto-safer-consumers" target="_blank" rel="noreferrer noopener">statement</a> Friday.



“While the industry continues to develop and expand, crypto assets are still commonly associated with speculative trading, posing significant risks,” an accompanying <a href="https://treasury.gov.au/sites/default/files/2023-02/c2023-341659-cp.pdf" target="_blank" rel="noreferrer noopener">consultation paper</a> reads.



Beginning with the first of its three-stage approach, the Australian Securities &amp; Investments Commission, the country’s main financial regulator, will begin bolstering the size of its crypto team.



It will also ramp up efforts to undertake legal action against certain project offerings that fail to register for appropriate credit or financial services licenses while ensuring risks to consumers are clearly disclosed.



Additionally, the Australian Competition and Consumer Commission will scale up its operations to prevent digital asset scams, per the statement. A spokesperson for the Treasury department did not immediately respond to a request for comment.



<h2>Parts two and three: licenses and token mapping</h2>



The previous federal center-right party, the Liberal National Party (LNP), which had retained power in Australia for more than a decade, had made efforts to reinforce existing crypto regulatory frameworks. 



That included a “token mapping exercise” which attempts to define digital assets as it pertains to existing financial law.



The exercise formed part of a recommendation by way of the “Australia as a Technology and Financial Centre Senate select committee” in 2021, spearheaded by Liberal Party Senator Andrew Bragg.



While the LNP had dabbled in crypto regulation, it had prematurely jumped straight to options without first understanding what was being regulated, the new <a href="https://ministers.treasury.gov.au/ministers/stephen-jones-2022/media-releases/work-underway-crypto-asset-reforms" target="_blank" rel="noreferrer noopener">Labor government</a> said last year.



As part of its second stage, the government will reform the licensing and custody of crypto assets and establish a set of obligations and operational standards for crypto asset service providers.&nbsp;



It’s particularly interested in the subset of digital assets that currently fall outside the financial services <a href="https://asic.gov.au/regulatory-resources/financial-services/#:~:text=The%20regulatory%20framework%20covers%20a,and%20means%20of%20payment%20facilities." target="_blank" rel="noreferrer noopener">regulatory framework</a>. Consultation on the design of a custody and licensing framework is expected to begin later this year.



In part three of its multi-pronged approach, the Labor government is seeking to establish a framework for reform based on the token mapping exercise in an attempt to discover which assets require additional regulatory attention.



“This will help the government and stakeholders to focus on regulatory gaps and ensure emerging risks are identified and controlled,” per the statement.



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Australia To Tackle Crypto Regulation in Three Stages

Ben Strack

MicroStrategy’s net loss jumped quarter over quarter to $250 million — though executives said the firm is going to keep up its longtime strategy of buying and holding bitcoin on its balance sheet.&nbsp;



MicroStrategy’s stock closed the day at $292.13 — down about 14% in the past year, but up 100% from a month ago. The stock was down about 3% in early after-hours trading in New York.



MicroStrategy, co-founded by bitcoin bull Michael Saylor, increased its bitcoin holdings by 2,500 BTC in the fourth quarter to 132,500 BTC, according to the company’s earnings out Thursday. 



“Our corporate strategy and conviction in acquiring, holding and growing our bitcoin position for the long term remains unchanged,” MicroStrategy Chief Financial Officer Andrew Kang said in a statement.&nbsp;



Bitcoin is up about 43% year to date after a brutal 2022 for the asset.&nbsp;



Saylor, who is MicroStrategy’s executive chairman, said Thursday that bitcoin was up 98% from August 2020 — when the company began its bitcoin acquisition strategy — to Feb. 1. The S&amp;P 500 is up 23% over that span, he added.



The executive noted the bankruptcies of companies such as Voyager Digital, Celsius, BlockFi and FTX last year, as well as the collapse of tokens such as UST, LUNA and FTT.&nbsp;&nbsp;



“In our opinion these were all very weak use cases, they were very fragile structures and it was a matter of time before they did melt down,” Saylor said. “The meltdown of that has created short-term negative headwinds for bitcoin…but long-term the rationalization of the crypto market will be beneficial for bitcoin.”&nbsp;&nbsp;



MicroStrategy’s fourth quarter results came after the Virginia-based business intelligence firm reported a net loss of $27 million in the third quarter — a drastic improvement from its <a href="https://blockworks.co/microstrategys-saylor-to-step-down-as-ceo-to-double-down-on-buying-bitcoin">$1.1 billion net loss</a> in the prior three-month period. 



MicroStrategy’s digital asset impairment charges — which comes into play if the market value of bitcoin decreases below its market-adjusted purchase value — were $700,000 during the third quarter, compared to $918 million in the second.&nbsp;



Digital asset impairment charges reached roughly $198 million during the fourth quarter.&nbsp;



MicroStrategy <a href="https://blockworks.co/news/microstrategy-bitcoin-wash-trading-tax-harvesting">sold 704 bitcoins on Dec. 22 for roughly $11.8 million</a>, according to a <a href="https://www.sec.gov/Archives/edgar/data/1050446/000119312522313098/d398241d8k.htm" target="_blank" rel="noreferrer noopener">filing</a> — receiving about $16,700 per bitcoin. Two days later, the company bought 810 BTC for about $16,800 per token.&nbsp;



“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit,” the filing stated.



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Bitcoin-hungry MicroStrategy Posts $250M Net Loss in Q4

Casey Wagner

It happened. Bitcoin runs DOOM.



To the delight of crypto Twitter and <a href="https://www.reddit.com/r/CryptoCurrency/comments/10rt887/someone_uploaded_doom_on_bitcoin/" target="_blank" rel="noreferrer noopener">Reddit</a> circles, someone has uploaded a cloned version of the 30-year-old video game classic DOOM to the Bitcoin blockchain as an inscription on the network’s own NFT protocol, Ordinals.&nbsp;



Thanks to a happenstance loophole enabled by Bitcoin’s Taproot upgrade pushed in Nov. 2021, a budget (read: free) version of DOOM has been permanently etched on a <a href="https://ordinals.com/sat/1905393798236699" target="_blank" rel="noreferrer noopener">single satoshi</a> via block 774526, which was added to the blockchain on Wednesday morning.



Being written to Bitcoin means the <a href="https://ordinals.com/inscription/521f8eccffa4c41a3a7728dd012ea5a4a02feed81f41159231251ecf1e5c79dai0" target="_blank" rel="noreferrer noopener">functional game</a> will forever live on the immutable blockchain. As long as the network is online, folks can play this version of DOOM.



Web browsers are still required to compile the code, but forcing unconventional technologies to run DOOM is a meme in tech culture. Crafty hackers have made DOOM <a href="https://www.gamesradar.com/12-things-that-prove-that-doom-will-run-on-literally-anything/" target="_blank" rel="noreferrer noopener">run</a> via pregnancy tests, calculators, ATMs, smart watches, toasters and Pelotons — even “unhackable” crypto <a href="https://thenextweb.com/news/hacker-doom-bitfi-cryptocurrency-wallet" target="_blank" rel="noreferrer noopener">wallets</a>, among other zany conduits.



While the clone is fun in its own blocky-and-basic way, an actual copy of the real DOOM looks destined to make it to the Bitcoin blockchain sometime soon (a Reddit <a href="https://www.reddit.com/r/itrunsdoom/comments/7ue6vd/it_runs_on_the_ethereum_blockchain_doom_at_745/" target="_blank" rel="noreferrer noopener">thread</a> from Feb. 2018 suggests DOOM was once playable on Ethereum, however the linked YouTube video is now unavailable).



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="514" height="590" src="https://cms.blockworks.co/wp-content/uploads/2023/02/bitcoindoom3.gif" alt="" class="wp-image-46304"/><figcaption class="wp-element-caption">DOOM on Bitcoin via a single satoshi</figcaption></figure>



Meanwhile, Ordinals continues to pepper conversation amongst Bitcoiners as the community parses what bringing NFTs to the oldest blockchain really means for the future of network and the NFT ecosystem writ large.



The protocol notably just enabled the <a href="https://blockworks.co/news/inside-bitcoin-biggest-block" target="_blank" rel="noreferrer noopener">biggest-ever Bitcoin block</a> to be mined. A high-definition “Taproot wizard” was inscribed to a satoshi this week, clocking a 3.96MB transaction — close to Bitcoin’s 4MB block size limit (originally 1MB but stretchable via SegWit).



As for the DOOM Ordinal, it was only 31.2 KB big.&nbsp;



Remember: It’s not the size that matters. The ability to run DOOM is far more important.



Updated Feb. 3, 2022 at 3:42 am ET: Added context.



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You Can Now Play DOOM Directly On Bitcoin

Canadian crypto exchange Bitbuy’s upcoming Super Bowl ad has a different vibe than the company’s 2022 spot after an eventful year shook the industry.&nbsp;&nbsp;



Bitbuy is expected to be <a href="https://blockworks.co/news/whos-coughing-up-crypto-winter-dollars-for-super-bowl-ads">among the only crypto firms</a> set to advertise around the NFL championship game on Feb. 12 as companies in the space cut budgets and look to regroup as the crypto winter continues.



Of last year’s crypto advertisers, FTX <a href="https://blockworks.co/news/whats-next-for-ftx-and-its-customers-after-bankruptcy-filing">went bankrupt</a> and online brokerage eToro told Blockworks it won’t be running an ad. Coinbase last month implemented <a href="https://blockworks.co/news/coinbase-lays-off-950-staff-cuts-operational-costs-by-25">cost-saving measures</a> and exchange OKX, which <a href="https://blockworks.co/news/what-crypto-super-bowl-ads-can-we-expect-in-2023">planned to buy an ad</a>, has changed its mind.



The Bitbuy ad, which <a href="https://www.youtube.com/watch?v=02ivqdVzwS8" target="_blank" rel="noreferrer noopener">went live</a> online Thursday, will be the firm’s second consecutive Super Bowl showing. NBA star Kyle Lowry appeared in <a href="https://www.youtube.com/watch?v=aI3LNq_lres&amp;t=2s" target="_blank" rel="noreferrer noopener">the company’s ad</a> last year featured during the game’s Canadian broadcast. 



Bitbuy’s upcoming 60-second commercial, also to appear only in Canada, is set to run within an hour before the Kansas City Chiefs and Philadelphia Eagles kick off.&nbsp;



Crypto markets plummeted amid the collapse of Terra’s algorithmic stablecoin in May and the subsequent bankruptcies of companies such as <a href="https://blockworks.co/news/3ac-files-for-bankruptcy-as-co-founders-location-unknown" target="_blank" rel="noreferrer noopener">Three Arrows Capital</a>. The industry was once again rattled as FTX crashed in November, shaking confidence in centralized exchanges and similar entities. 



“Whereas the theme for Bitbuy&#8217;s 2022 commercial was missed opportunities, 2023&#8217;s theme is trust,” Binu Koshy, Bitbuy’s branding and communications director, told Blockworks.&nbsp;



“We wanted to remind people in a sort of outlandish way that by being locally based and fully regulated, Bitbuy provides investing services with a personal touch.&#8221;&nbsp;



The new Bitbuy spot features Toronto Raptors forward Scottie Barnes, who Bitbuy <a href="https://www.youtube.com/watch?v=2AjDKl6h_vA" target="_blank" rel="noreferrer noopener">marketed</a> as a brand ambassador Tuesday.



Exchanges typically send a confirmation email to a user who makes a digital transaction. In the upcoming Super Bowl commercial, Barnes gives a Bitbuy user a confirmation hug.&nbsp;



Koshy declined to comment on how much Bitbuy spent on the commercial.&nbsp;The executive previously <a href="https://blockworks.co/news/exchanges-compete-to-grab-super-bowl-spotlight">told Blockworks</a> that roughly 25% of the company’s 2022 marketing budget went to signing Lowry, as well as producing and buying last year’s Super Bowl ad.



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Bitbuy Shifts Super Bowl Ad Focus From ‘Missed Opportunities’ to ‘Trust’

South Carolina Sen. Tim Scott has his eye on a bipartisan regulatory framework for crypto following the crash of FTX and other industry players in 2022.&nbsp;



To serve as ranking member of the US Senate Committee on Banking, Housing and Urban Affairs, Scott is set to work with US Sen. Sherrod Brown, D-Ohio, a crypto critic who chairs the unit. 



Scott, a Republican elected to the Senate in 2013, acknowledged “expansive growth” of the digital assets industry in <a href="https://www.politico.com/f/?id=00000186-0fe2-df27-abcf-8fefd8610000" target="_blank" rel="noreferrer noopener">a Thursday memo</a>, first <a href="https://www.politico.com/newsletters/morning-money/2023/02/02/the-debt-ceiling-is-not-powells-problem-00080804" target="_blank" rel="noreferrer noopener">reported</a> by Politico, adding that an increasing number of consumers are interacting with crypto.



“Several high-profile failures resulted in lost consumer assets, exposed regulatory gaps, and highlighted concerns with illicit finance,” the memo states. “Moving forward, the committee should work to facilitate a bipartisan regulatory framework.”



The senator could not immediately be reached.



Brown, who became chair of the Senate Banking, Housing, and Urban Affairs Committee in February 2021, has historically compared crypto to risky mortgage bonds and over-the-counter derivatives during the lead up to the financial crisis.&nbsp;



After the bankruptcy of crypto exchange FTX in December, Brown <a href="https://www.brown.senate.gov/newsroom/press/release/sherrod-brown-on-ftx-crypto-puts-consumers-and-our-national-security-at-risk" target="_blank" rel="noreferrer noopener">called for</a> a framework “that looks at crypto products for what they are, not what crypto executives want them to be.”



“The things that look and behave like securities, commodities, or banking products need to be regulated and supervised by the responsible agencies who serve consumers,” he added at the time. “Crypto doesn’t get a free pass because it’s bright and shiny. Or because venture capitalists think it might change the world.”



Brown also urged US Treasury Secretary Janet Yellen in <a href="https://www.brown.senate.gov/newsroom/press/release/sherrod-brown-to-treasury-we-need-to-work-together-on-crypto-legislation" target="_blank" rel="noreferrer noopener">a November letter</a> to work on legislation that would create authorities for regulators to supervise crypto players. He noted that single agencies “currently generally do not have a comprehensive view of crypto asset entities’ activities.”



Crypto firms are seemingly anticipating intensified regulatory scrutiny this year, as companies including Binance, Tether, and a16z have <a href="https://blockworks.co/news/mike-pence-nephew-binance-newest-lobbyist">added lobbyists in recent months</a> to boost their presences in Washington, DC.



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Crypto Framework a Priority for Republican Senator Scott

Bessie Liu

A cryptocurrency linked to a cost of living index is now available to select users on Ethereum scaling solution Arbitrum.



DeFi protocol Nuon announced in a blog post that it would be gradually rolling out its <a href="https://blockworks.co/news/what-are-flatcoins-and-are-they-a-better-inflation-hedge">NUON flatcoin</a> over the course of a month-long trial.&nbsp;



Once operations are confirmed to run smoothly, the cryptocurrency will be available to all users for permissionless minting via added collateral.



The protocol has chosen this “guarded launch” approach to minimize financial risks and repercussions.



“The guarded launch means that the WebApp will be alternating between Open and Closed states so as to better manage and control the launch and protest user’s funds,” the company said in a <a href="https://nuon.fi/blog/launch-release-note-and-faqs/" target="_blank" rel="noreferrer noopener">blog post</a>.



<h2>What is a flatcoin?</h2>



Flatcoins operate similarly to stablecoins, but rather than being pegged to the value of an asset — such as the US dollar or gold — it is pegged to an independent measure of the cost of living and its purchasing power remains “flat.”&nbsp;



The concept of this type of cryptocurrency is not entirely new. It has been discussed by the likes of Brian Armstrong and Vitalik Buterin, who <a href="https://www.youtube.com/watch?v=GUhDXUA4mfQ&amp;ab_channel=Coinbase" target="_blank" rel="noreferrer noopener">noted</a> in a podcast in August last year that “there is value in having some kind of cryptoasset that is intentionally designed to be as stable as possible.”



In the case of Nuon, its flatcoin is designed to hedge against inflation by recalibrating its daily value to account for the rising cost of living, <a href="https://truflation.com/methodology" target="_blank" rel="noreferrer noopener">using</a> the Truflation Index as an <a href="https://www.blockworksresearch.com/glossary#oracles" target="_blank" rel="noreferrer noopener">oracle</a>.



<h2>Stability and design&nbsp;</h2>



Nuon maintained its peg through what the team calls a “triple redundancy mechanism” where the protocol incentivizes users to “mint or burn NUON.”



If the price goes above the peg, the liquidation ratio drops, creating an incentive for users to mint more and sell the token. On the other hand, when the price of the token dips, the liquidation ratio increases, urging users to increase collateral or burn NUON to maintain safe collateral.



That means minters will have to have a reason to risk their collateral and watch the liquidation ratio closely.



Nuon CEO Stefan Rust acknowledges the risk but remains optimistic.



“Our vision for Nuon — inflation-proof money — is ambitious to say the least,” Rust said.



The mechanics differ from the failed <a href="https://blockworks.co/tag/terra">Terra USD</a> design in that NUON is only minted from collateral. In theory, that should put a buffer for the arbitrage mechanism to keep the peg.



Just as decentralized protocols are the answer to risks posed by centralized currencies, and over-collateralization is the answer to maintaining value in the face of market instability, inflation-proof flatcoins are the solution to preserving value over time.”



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‘Flatcoin’ Targets Inflation With Collateral-backed Arbitrum Stablecoin

Michael Bodley

What’s an institutional allocator to do in a crypto winter like this?&nbsp;



Pay attention to the online footprints of the traders vying for the players with abundant dry powder still in the wings. Keep dialing up references. Call them again. And then call them again.



In sum: due diligence checks that run the gamut from crypto natives to Wall Street types with a vested interest, according to Joe Marenda, a partner at Cambridge Associates.&nbsp;



Marenda, for going on a year now, has held the title of global head of crypto investing for the Boston-based Cambridge, which specializes in devising customizable portfolio blends for the likes of pensions and endowments. He’s been drawing on his deep experience in vetting traditional asset management strategies to do due diligence on digital asset portfolio managers. And he has a suggestion or two along those lines.



Marenda spoke to Blockworks <a href="https://blockworks.co/news/regulators-speeding-up-crypto-timeline">at the iConnections Global Alts conference</a> in Miami this week, dishing out his thoughts on where we are in the cycle, how we got here and where we are going.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">&quot;Managers that are trying to raise now, wait until third quarter.&quot; &#8211; Joe Marenda<a href="https://twitter.com/michael_bodley?ref_src=twsrc%5Etfw">@Michael_Bodley</a> moderated the &#39;Fundraising Outlook for 2023&#39; panel today, joined by Zoe Cruz, <a href="https://twitter.com/SteveKurz?ref_src=twsrc%5Etfw">@SteveKurz</a>, Joe Marenda and Katherine Molnar.<a href="https://twitter.com/Blockworks_?ref_src=twsrc%5Etfw">@Blockworks_</a> <a href="https://twitter.com/galaxyhq?ref_src=twsrc%5Etfw">@galaxyhq</a> <a href="https://t.co/Fdw2I6jIwk">pic.twitter.com/Fdw2I6jIwk</a>&mdash; iConnections (@iconnections_io) <a href="https://twitter.com/iconnections_io/status/1620496398327382016?ref_src=twsrc%5Etfw">January 31, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The gist: The bottom may well be in. “Crypto is still very much emerging, with very few exceptions,” valuations are returning to something approaching normal, and volatility at the moment should <a href="https://www.institutionalinvestor.com/article/b1yhfhknybjnrg/Crypto-Hedge-Funds-Deliver-Bitcoin-Like-Returns-Without-the-Volatility" target="_blank" rel="noreferrer noopener">surprise</a> no one.



Picking up the phone and knocking on doors and doing the (due diligence) work is perhaps now <a href="https://blockworks.co/news/what-do-crypto-traders-tell-their-lps">more important in the industry than ever</a>, the San Francisco-based Marenda said. Managers may want to err on the side of patience for the foreseeable as those rigorous processes play out.&nbsp;



Read More: <a href="https://blockworks.co/news/what-do-crypto-traders-tell-their-lps">How “radio silence” from crypto traders drove LPs “all but mad” in Q4</a>



Here’s how he’s going about it. Marenda declined to comment on specific funds or clients, and expressed his personal opinion throughout.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: Cambridge has been around for decades. Crypto has not. You all have due diligence on traditional strategies down, right? What’s different?



Marenda: There’s a lot more reference checks, to start…What the entrepreneurs in the space think of [venture capitalists] is crucial. And it’s their reputation that gets them deal flow — one of the fascinating things about crypto entrepreneurs is they have no filters. So, when you actually interview them, they’re very blunt and honest about <a href="https://blockworks.co/news/crypto-due-diligence-startup-vying-to-bring-transparency-to-opaque-industry">how they evaluate what they think</a> of this VC versus that VC.



They’ll just tell you if somebody promised something to get on the cap table, and they didn’t deliver, they will throw them under the bus.



Blockworks: Which you would almost never see in TradFi.



Marenda: Exactly…that has been wonderful. That tells you more about a fund than anything else. And the fact that they will talk about other funds when you’re like, “I’ll call them about Fund X. And then they start talking about Fund Y, Z, ABC.”&nbsp;



It’s incredibly useful, because the reputation of the fund ultimately is what drives the deal flow. That’s very different from traditional finance.



Blockworks: What else is different?



Marenda: The other aspect I think that’s really different is the fact that this is such a [broadly] social-dominated industry. There’s a lot more information out there that you have, that you can call on — and it’s not just crypto Twitter. It’s Reddit…It’s Substack and everything.&nbsp;



Because there, you can build an entire history of their thought processes on investing. And if they tell a different story now [compared to earlier in Cambridge’s due diligence process]…I see there’s a difference between what you say now and what you said before, so that’s a big deal.&nbsp;



The other one is something that I’ve been asking about recently, looking at their true social posts to see what kind of lifestyle they’re living.



Blockworks: The lambo lifestyle? A little less buttoned-up lifestyle?&nbsp;



Marenda: I’ve been thinking about whether they’re actually more interested in investing or in the lifestyle than investing, you know. [Crypto] allows them to do that, and I want people that just love investing, and, if they walk everywhere, that’s probably something that’s pretty exciting.&nbsp;



As long as they’re looking both ways when they cross the street.&nbsp;



This interview was edited for brevity and clarity.



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Inside Crypto LP Big Leagues: ‘A Lot More Reference Checks’

The biggest Bitcoin block ever has just been mined, 14 years after the blockchain went live.



It contained an Ordinal, the controversial <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">new genre of NFT which recently debuted on Bitcoin</a>.



In an apparent tease for a forthcoming bitcoin NFT collection, Luxor Mining and popular Bitcoin figure Udi Wertheimer mined the largest-ever bitcoin block, the company announced Tuesday.&nbsp;



Block <a href="https://mempool.space/block/0000000000000000000515e202c8ae73c8155fc472422d7593af87aa74f2cf3d" target="_blank" rel="noreferrer noopener">774628</a> housed the “Taproot Wizard,” a play on the legendary “magic internet money” meme featuring a bitcoin wizard. It was 3.96MB large, close to Bitcoin’s block size limit (which can be <a href="https://blog.bitmex.com/the-segwit-transaction-capacity-increase-part-1/" target="_blank" rel="noreferrer noopener">stretched</a> to 4MB with SegWit). 



The <a href="https://mempool.space/tx/0301e0480b374b32851a9462db29dc19fe830a7f7d7a88b81612b9d42099c0ae" target="_blank" rel="noreferrer noopener">transaction</a> containing the Ordinal made up 3.94MB, about 99.5%. There were 63 transactions in total, including the 6.25 <a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a> ($149,000) coinbase reward, which also went to Luxor.



&#8220;The image is higher resolution so it contains more pixels (and thus more bytes),&#8221; Colin Harper, head of research and content at Luxor Mining, told Blockworks.



Luxor announced the block via <a href="https://twitter.com/LuxorTechTeam/status/1620921129287430144?s=20&amp;t=vje_Chh6vf4U_Q9UbW0bzQ" target="_blank" rel="noreferrer noopener">Twitter</a> Tuesday evening, teasing followers that other wizards may be available soon. The firm earned an additional 0.009 BTC ($209) in fees for successfully mining the block.



<a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">Ordinals</a> — the new platform taking the industry by storm — store texts, images, SCG or HTML on-chain, attached to individual satoshis, bitcoin’s smallest unit currently worth $0.000231.&nbsp;



Read More: <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">Bitcoin NFTs: Love ‘Em or Hate ‘Em, You Can’t Ignore ‘Em</a>



Similar to the NFT concept, inscribed satoshis can then be transferred freely via the Bitcoin blockchain.



<figure class="wp-block-embed aligncenter is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Behold, the Taproot Wizard, untethered and freed from his bondage! In his ubiquity, he&#39;s present in the hearts, minds, and hard drive space of Bitcoin node operators the world over. He refuses to be censored, he refuses to be silenced.<a href="https://t.co/WCjQpTRMLg">https://t.co/WCjQpTRMLg</a> <a href="https://t.co/gkxeAS4rOm">pic.twitter.com/gkxeAS4rOm</a>&mdash; Luxor Mining (@LuxorTechTeam) <a href="https://twitter.com/LuxorTechTeam/status/1620922782845669378?ref_src=twsrc%5Etfw">February 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">This image is&nbsp;<a href="https://ordinals.com/sat/1308063627208201" target="_blank" rel="noreferrer noopener">inscribed</a>&nbsp;forever to satoshi 1308063627208201</figcaption></figure>



The features are made possible using a loophole from the Taproot upgrade in 2021, which enabled “practically unlimited (capped by block size) storage using Opcodes, an executable script in a txn that can store arbitrary data,” <a href="https://www.blockworksresearch.com/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> analyst <a href="https://twitter.com/MattFiebach" target="_blank" rel="noreferrer noopener">Matt Fiebach</a> said.



Ordinals creator Casey Rodarmor boasts the NFT protocol holds digital artifacts to a “higher standard,” he wrote in a <a href="https://rodarmor.com/blog/" target="_blank" rel="noreferrer noopener">blog post</a>. Ordinals cannot be stored off-chain or on centralized servers, he said.&nbsp;



Industry members continue to take a mixed view on Bitcoin NFTs, but Ordinals appear to be here to stay.



Updated Feb. 2, 2023 at 12:05 pm ET: Added comment from Luxor Mining&#8217;s Colin Harper.



Updated Feb. 2, 2023 at 1:39 pm ET: Adjusted excerpt.



Updated Feb. 2, 2023 at 4:33 pm ET: Corrected Bitcoin&#8217;s block size limit.



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What Was Inside Bitcoin’s Biggest Block?

The world’s largest custodian bank has named a leader for its digital assets division as it seeks to accelerate initiatives in the segment despite the ongoing crypto winter.&nbsp;



BNY Mellon named Caroline Butler as its CEO of digital assets Thursday. The post is a newly created role for the bank. 


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="241" height="300" src="https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-241x300.jpeg" alt="BNY Mellon's CEO of Digital Assets Caroline Butler" class="wp-image-46260" srcset="https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-241x300.jpeg 241w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-206x257.jpeg 206w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-210x261.jpeg 210w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-176x219.jpeg 176w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-64x80.jpeg 64w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets.jpeg 628w" sizes="(max-width: 241px) 100vw, 241px" /><figcaption class="wp-element-caption">BNY Mellon&#8217;s CEO of Digital Assets Caroline Butler | BNY Mellon</figcaption></figure></div>


Roman Regelman, CEO of BNY Mellon’s securities services and digital, said in a statement that Butler would lead their enterprise-wide initiatives as the company accelerates its efforts around digital assets and other emerging technologies.



“As institutional adoption of digital assets continues to evolve, we are committed to being a trusted provider of services to the broader financial ecosystem,” Regelman added.



A spokesperson declined to comment further.



Butler, who joined the company in 2020, was previously CEO of the bank’s custody services. In that role, she led development of BNY Mellon’s digital custody and administration platform for traditional and digital assets.



That platform went live in the US for select institutional clients in October.



BNY Mellon had $44.3 trillion in assets under custody or administration, as well as $1.8 trillion in assets under management, as of Dec. 31.&nbsp;



<a href="https://www.linkedin.com/in/caroline-butler-b489821/" target="_blank" rel="noreferrer noopener">Butler</a> said in an October statement that as the world’s largest custodian, BNY Mellon is the “natural provider” to create a safe custody platform in the space for institutional clients.



A research <a href="https://www.bnymellon.com/content/dam/bnymellon/documents/pdf/insights/migration-digital-assets-survey.pdf?mkt_tok=MzUzLUhSQi03OTIAAAGHvmLXAzH2AAbtr4WhHPMQ9VVq5uJ1KZRfRulJLv16X1_ZoOjbzOvT6K_QZLbyEh56IoS06me2xKP5MVsRYWOmWjfHUvagHGV1EWrMvzGY" target="_blank" rel="noreferrer noopener">report</a> by the bank published that month found 70% of surveyed institutional investors would increase digital asset activity “if services like custody and execution are available from recognized, trusted institutions.” 



Ed Groshans, a senior research and policy analyst at Compass Point Research &amp; Trading, told Blockworks last month, <a href="https://blockworks.co/news/banks-crypto-efforts-undeterred">BNY Mellon could be well-positioned to be a leader in the space</a> after events such as the crash of FTX shook the industry.&nbsp;



“They can really flesh out their business model over the next several months to several years to put themselves as a linchpin of trust in the crypto space from a custody perspective,” he said.



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BNY Mellon Names Digital Assets CEO

Shalini Nagarajan

New decentralized social network protocol Nostr officially went live via mobile app stores on Wednesday.



Nostr, which stands for Notes and Other Stuff Transmitted by Relays, aims to create a censorship-resistant global social network where users are identified by a public key rather than a name or user handle like on most social platforms.



“It doesn&#8217;t rely on any trusted central server, hence it is resilient; it is based on cryptographic keys and signatures, so it is tamperproof; it does not rely on P2P techniques, therefore it works,” its GitHub page says.



The protocol gained popularity after an endorsement from former Twitter CEO Jack Dorsey, which enabled its mobile app Damus to hit its beta testing limit before its open launch in <a href="https://apps.apple.com/in/app/damus/id1628663131" target="_blank" rel="noreferrer noopener">Apple’s App Store</a> and the <a href="https://play.google.com/store/apps/details?id=com.vitorpamplona.amethyst&amp;hl=en" target="_blank" rel="noreferrer noopener">Google Play Store</a>.



Nostr is similar to Twitter, meaning that users can publish posts, ‘like’ them, follow people they want and report content posted by others. And just like posts on Twitter are called Tweets, Nostr calls them a ‘note’ or just ‘post.’



Dorsey, currently chief executive at Block, <a href="https://twitter.com/jack/status/1603535971114487816" target="_blank" rel="noreferrer noopener">donated</a> 14 bitcoin (worth $245,000 at the time) to Nostr last year to fund its development after pointing out <a href="https://twitter.com/jack/status/1602800292424212480" target="_blank" rel="noreferrer noopener">flaws</a> in traditional social media. He also specifically mentioned the 280-character limitation on Twitter, which is not a feature on Nostr. He <a href="https://twitter.com/jack/status/1620552041600000000" target="_blank" rel="noreferrer noopener">hailed</a> its launch on Apple’s App Store as a “milestone for open protocols.”



The network itself points out what it thinks the problems with Twitter are: that it has ads, uses “bizarre techniques” to keep users addicted, doesn’t display a historical feed from people you actually followed, bans and shadow bans users, and that it’s full of spam.



Nostr is supported by bitcoin maximalists, and although it isn’t built on the Bitcoin blockchain, it supports payments over Bitcoin’s Lightning Network.



National Security Agency whistleblower Edward Snowden has also <a href="https://mobile.twitter.com/Snowden/status/1617626864016822274" target="_blank" rel="noreferrer noopener">touted</a> Nostr for its ability to replace Twitter and Instagram, while Ethereum creator <a href="https://twitter.com/VitalikButerin/status/1607372009356361729" target="_blank" rel="noreferrer noopener">Vitalik Buterin</a> and US Sen. <a href="https://twitter.com/CynthiaMLummis/status/1607216133933006849" target="_blank" rel="noreferrer noopener">Cynthia Lummis</a> are other supporters of the platform.



The tech world is increasingly seeing a desire for a next-generation, decentralized form of social media that prioritizes its users rather than a controlling corporate entity.



Last year, Aave <a href="https://blockworks.co/news/aave-launches-alternative-to-traditional-social-media">launched the Lens social platform</a> powered by NFTs to allow developers to build social media apps and recommender systems in marketplaces. Industry observers expect <a href="https://venturebeat.com/datadecisionmakers/web3-holds-the-promise-of-decentralized-community-powered-social-networks/" target="_blank" rel="noreferrer noopener">Web3 to disrupt</a> many of the existing Web2-based business models.



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Jack Dorsey-backed Web3 App Aims To Disrupt Twitter

The European Investment Bank (EIB) is once again leveraging Ethereum in its quest to tokenize capital markets, this time while issuing the first-ever digital pound sterling (GBP) bond on a seperate private blockchain.



EIB, the primary lender of the European Union, deployed the £50 million ($86.6 million) bond to a permissioned network underpinned by HSBC’s tokenization platform, Orion. The EIB is a public institution owned by the EU&#8217;s 27 member states.



The bank opted for a private network for privacy and efficiency, according to a <a href="https://www.eib.org/en/press/all/2023-030-eib-issues-its-first-ever-digital-bond-in-british-pounds" target="_blank" rel="noreferrer noopener">statement</a>. In an effort to increase transparency, the bond was also recorded on Ethereum, a spokesperson told Blockworks. 



This was done to provide evidence the issuance took place while still maintaining the anonymity of bondholders (Blockworks reached out for some transaction IDs but they weren&#8217;t readily available. We&#8217;ll update this piece should EIB provide them).



HSBC debuted Orion last November, when it first flagged intent to launch the tokenized GBP bond. BNP Paribas, HSBC, and RBC Capital Markets were named as joint lead managers of the bond, with those firms serving as custodians. Client assets will be stored in digital securities accounts kept on Orion, the bank said.



The EIB&#8217;s new vehicle is expected to bring a range of benefits to market participants, including reduced costs, improved efficiency and real-time data synchronization in an otherwise cumbersome process.



Digital bonds have garnered interest from financial institutions in various countries, including Australia, Germany, France and Sweden since at least 2017.



A Luxembourg legal framework that enables firms to issue dematerialized securities using distributed ledger technology was enacted into law in January 2021, paving the way for further exploration.



Dematerialized securities refer to digital representations of financial assets that exist only in electronic form, rather than as physical certificates or paper documents.



&#8220;The time has come for further innovation in the financial sector,&#8221; said EIB Vice-President Ricardo Mourinho Felix. &#8220;This new financial tool will provide additional capital flow that the EIB will invest in projects with global impact.&#8221;



This isn’t the first digital bond issued by the EIB. That <a href="https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain" target="_blank" rel="noreferrer noopener">happened</a> back in Apr. 2021, when the European Union&#8217;s investment bank deployed a two-year, 100 million euro ($110 million) bond entirely on Ethereum.



David Canellis contributed reporting.



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European Union Bank Again Uses Ethereum to Explore Tokenized Bonds

MakerDAO governance has approved a new multi-million fund aimed at reimbursing certain individuals&#8217; legal expenses.



The Defense Fund, consisting of 5 million dai (<a href="https://blockworks.co/price/dai">DAI</a>) — Maker’s US dollar-pegged stablecoin — is intended to fund costs incurred from legal and regulatory bouts, the DAO said in a <a href="https://twitter.com/MakerDAO/status/1620795631668285443" target="_blank" rel="noreferrer noopener">tweet</a> on Wednesday.



Direct funding will only be provided for select Maker participants including recognized delegates, core unit facilitators, core unit permanent contributors and active MKR holders.&nbsp;



A <a href="https://vote.makerdao.com/polling/QmUbqKMy#vote-breakdown" target="_blank" rel="noreferrer noopener">ratification poll</a>, initially proposed early last month, approved the fund following a governance vote on Wednesday, with 72% of participants in favor of the move.



On paper, the budget appears to offer significant financial assistance to those locked in legal disputes. Though, according to <a href="https://www.contractscounsel.com/b/how-much-do-lawyers-cost#:~:text=Throughout%20the%20United%20States%2C%20typical,hour%20to%20%24400%20an%20hour." target="_blank" rel="noreferrer noopener">data</a> provided by legal services marketplace ContractsCounsel, typical attorney fees across 50 US states range from between $100 an hour to $400 an hour.



Based on the median cost for an attorney, around $350 an hour, legal fees could chew up significant portions of the fund in short order in the event multiple legal cases arise.



It is unclear whether the contingency budget of 5 million DAI is expected to grow over time. Maker did not immediately respond to a request for comment.



For now, Maker is concerned with laying the foundation for the fund, including how lump sum payments are expected to be delivered.



The organization has tapped insurance and risk management firms Gallagher and Artex to develop a claims procedure manual following a feasibility study on the average legal defense costs.



All claims and payouts will be handled by an “external technical committee” composed of insurance and risk management experts, Maker said. The committee will then issue a recommendation to approve or reject a payout based on a claim.



Self-insurance is a well-known risk management technique comprising setting funds aside to cover a possible future cost, Maker said in an <a href="https://forum.makerdao.com/t/mip55c3-sp14-defense-fund/19076" target="_blank" rel="noreferrer noopener">original proposal</a> laid out late last year.



Unlike Wyoming, <a href="https://blockworks.co/news/these-5-crypto-friendly-us-states-show-initiative-on-tax-laws">which recognizes decentralized autonomous organizations (DAOs)</a> in the same capacity as LLCs, most other US states and the wider world do not. That presents legal headaches for participants operating within the freshly conceived organizational construct.



&#8220;DAOs are novel organizational structures and, as such, may expose their participants to novel legal risks,&#8221; the organization said. &#8220;MakerDAO is not a legal subject, hence is unable to limit liability risks for its participants.&#8221;



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MakerDAO Earmarks $5M For Legal Defense

Artificial intelligence continues to grip the imagination of traditional market participants over its potential to disrupt entire sectors of the economy, though crypto is still miles ahead this year.



Several crypto-related exchange-traded funds (ETFs) are up between 9% and 64% in year-to-date terms, beating out the more mildly performing AI ETFs, up between 4% and 32%.



Global X Robotics &amp; Artificial Intelligence’s ETF (BOTZ) for instance, is up 16% YTD while Cathie Wood’s ARK Autonomous Technology &amp; Robotics ETF (ARKQ) has risen 18%.



Taking a look at crypto funds — the picture of whose ahead becomes clearer. Of the 39 AI/robotics ETFs Blockworks analyzed, performance across the board averaged around 12.4%. Crypto’s ETF performance for the year is averaging around 38.3% — a difference of roughly 26%.



VanEck’s Digital Transformation ETF (DAPP), the sector’s best-performing fund, is up a whopping 67% since the new year began. DAPP’s top 15 holdings include the likes of Coinbase, Block Inc, Bitfarms and Riot Platforms — all listed on major US exchanges.



That’s followed closely by Global X’s Blockchain ETF (BKCH) at 64% YTD and Bitwise’s Crypto Industry Innovators ETF (BITQ) — up 61% over the same period.&nbsp;



Like DAPP, both funds track roughly the same publicly-traded crypto and blockchain firms, as the choice remains relative to its more developed and long-standing AI cousins.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12625850/embed#?secret=QiOEisD1Zt" data-secret="QiOEisD1Zt" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">DAPP is outperforming year to date, but BOTZ is a clear winner over the past year | Chart by David Canellis </figcaption></figure>



For the AI and robotics sector, performance is more muted, at least as the second month of the year gets underway.



Direxion Daily Robotics, Artificial Intelligence &amp; Automation Index (UBOT) is topping the list among best-performing AI-related ETFs this year, up 32%. But, it should be noted, UBOT features one of the lowest make-up of assets in its fund, when compared to its peers — totaling just $18 million.



Crypto funds total assets are also modest, averaging around $95 million, with one outlier — the $431 million Amplify Transformational Data Sharing ETF (BLOK) — up 25%.



By comparison, the average total funds in AI ETFs stand at roughly $5.89 billion, likely due to greater enthusiasm around the tech over crypto and blockchain, which is currently experiencing a lull.



Recently renewed interest in AI, courtesy of OpenAI’s ChatGPT 3 language model, Tesla’s self-driving cars and Jasper.ai’s ability to create art has led to an explosion of new business ideas.



An <a href="https://www.pwc.com/gx/en/issues/analytics/assets/pwc-ai-analysis-sizing-the-prize-report.pdf">analysis</a> by global “big-4” accounting firm PricewaterhouseCoopers (PwC) predicts the AI sector to contribute $15.7 trillion to the world’s gross domestic product by 2030.&nbsp;



Of that figure, roughly 6.6 trillion is likely to come from increased productivity while $9.1 trillion will derive from “consumption-side effects,” PwC said.



Cathie Wood’s Ark Invest expects blockchain and crypto to match that. The firm claims over the next 10 years, cryptocurrencies and smart contracts could command <a href="https://blockworks.co/news/ark-blockchains-are-future-of-money">$20 trillion</a> and $5 trillion in market value, respectively.



What does ChatGPT have to say about that?



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/9WbaEpjf3I9rDmQKgT5Yvar9JIqML-lRVfct_pUGrwJHwN7lN9wHQxyux46xEYaY2lnVaW5EUENCCzfmt3Ky0pHIsxlK2dxPa6UCzJB9eua-Qk1fseKIxft8etusL-lopkXa2Z0jnv0j5Tw7dO_4qko" alt=""/></figure>



Fair enough.

Crypto ETFs Outperforming AI by 26% YTD

India announced its annual budget for the year 2023-24 on Wednesday, introducing a penalty for individuals that avoid paying taxes on cryptoassets.



The budget, which details the government’s fiscal roadmap for the upcoming year, set out several priorities covering infrastructure and investment, green growth, youth power and the financial sector.



“The Union Budget 2023 has unveiled several new policies and initiatives designed to foster growth through digital transformation. It&#8217;s great to see the financial sector as one of the seven priority sectors in the budget,” Ashish Singhal, CEO at CoinSwitch, said in a statement.&nbsp;



Anticipating the upcoming budget, several Indian-origin CEOs and investors had hoped the budget would bring in a deduction in crypto-related tax, but policymakers <a href="https://www.indiabudget.gov.in/doc/Finance_Bill.pdf" target="_blank" rel="noreferrer noopener">didn’t oblige</a>. India had established a <a href="https://blockworks.co/news/indian-crypto-trading-volumes-plunge-as-new-tax-rules-kick-in">crypto tax slab</a> effective July 2022, requiring investors to pay a 1% tax deducted at source (TDS), on top of a flat 30% tax on crypto profits, on the transfer of virtual digital assets. 



“A reduction in 1% TDS to 0.01% would have helped the millions of traders in India,” WazirX CEO Nischal Shetty <a href="https://twitter.com/NischalShetty/status/1620747247087656960" target="_blank" rel="noreferrer noopener">said</a> on Twitter, and indicated that he expects the country to wait until global regulations are clearer. 



Meanwhile, Singhal noted that although the TDS of 1% for crypto transactions remains as it was, a clarification should be made.



“The onus of deducting TDS has been on crypto exchanges or on the user (if using P2P or other means), but until now there was no penalty for non-deduction,” he said.



“This is to say, don’t try to avoid TDS by using offshore or non-compliant platforms. You may be penalized as per Section 271C of the Income Tax Act. If you are investing in crypto, use a tax-compliant platform.”



The government doesn’t mention cryptocurrencies specifically in its Income Tax Act, but refers to them as “virtual digital assets.”&nbsp;



Notably, the budget has introduced a penalty for offenders or platforms that don’t pay up TDS on VDAs through an amendment to <a href="https://incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&amp;cname=cmsid&amp;cval=102120000000073646&amp;searchfilter=%5B%7B%22crawledpropertykey%22:1,%22value%22:%22act%22,%22searchoperand%22:2%7D,%7B%22crawledpropertykey%22:0,%22value%22:%22income-tax+act,+1961%22,%22searchoperand%22:2%7D,%7B%22crawledpropertykey%22:29,%22value%22:%222019%22,%22searchoperand%22:2%7D%5D&amp;k=&amp;isdlg=0" target="_blank" rel="noreferrer noopener">Section 271C</a> of the Income Tax Act.



From April 1, people failing to pay up TDS could be fined in the amount of the liability or get jail terms of between 3 months to 7 years.



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India Keeps Crypto Tax Provisions in New Budget

The net losses endured by Meta’s division responsible for producing metaverse-related technology continue to grow quarter over quarter — as the damage amounted to nearly $4.3 billion in the final three months of 2022.



Despite the hit to the unit known as Reality Labs, the tech giant’s net income for the quarter stood at $4.65 billion, as its family of apps unit posted a gain of $10.7 billion. The segment includes Facebook, Instagram, Messenger and WhatsApp.



Meta’s stock price was $153.12 at the end of the trading day, down more than 50% over the past year but up about 23% in the last month. The price was up about 19% in after-hours trading, as of 6 p.m. ET.



The results came after Meta revealed on its November earnings call that Reality Labs <a href="https://blockworks.co/news/metas-metaverse-division-loses-nearly-3-7b-in-q3" target="_blank" rel="noreferrer noopener">lost nearly $3.7 billion</a> during the third quarter — up from the division’s <a href="https://s21.q4cdn.com/399680738/files/doc_news/Meta-Reports-Second-Quarter-2022-Results-2022.pdf" target="_blank" rel="noreferrer noopener">second-quarter loss</a> of $2.8 billion and a $2.9 billion loss in the first quarter. &nbsp;



Reality Labs’ net loss totaled $13.7 billion last year, the company revealed Wednesday.



The division includes augmented reality, virtual reality and the company’s metaverse software platform.



Then-Meta Chief Financial Officer David Wehner said in a November statement that the company was expecting Reality Labs’ operating losses to grow year over year in 2023.



Susan Li, who has since taken over as Meta’s chief financial officer, reiterated that projection during Meta’s earnings call Wednesday.&nbsp;



“We’re going to continue to invest meaningfully in this area given the significant long-term opportunities that we see,” she said.



Meta CEO Mark Zuckerberg added the company is “constantly tuning the roadmap” for Reality Labs. 



“Even though none of the signals I’ve seen so far suggest that we should shift the Reality Labs strategy long-term, we are constantly adjusting the specifics of how we execute this,” Zuckerberg said.&nbsp;



The continued losses in this business segment come after Facebook <a href="https://blockworks.co/zuckerberg-says-facebooks-new-name-will-be-meta" target="_blank" rel="noreferrer noopener">changed</a> its name to Meta in October 2021 to capitalize on the anticipated metaverse trend.&nbsp;



Zuckerberg said on the company’s November call its future initiatives include a social metaverse platform with avatars, augmented reality and neural interfaces.



“I get that a lot of people might disagree with this investment,” the CEO added at the time. “But from what I can tell, I think this is going to be a very important thing, and I think it would be a mistake to not focus on any of these areas, which I think will be fundamentally important to the future.”



About a week later, Zuckerberg said in <a href="https://about.fb.com/news/2022/11/mark-zuckerberg-layoff-message-to-employees/" target="_blank" rel="noreferrer noopener">a letter</a> the company decided to layoff about 11,000 employees — roughly 13% of Meta’s workforce.



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Meta Metaverse Division Posts $4.3B Net Loss in Q4 2022

In the latest “Big Ideas” report by ARK Invest, the popular US asset manager claims blockchain will be one of the most significant technologies to shape an already technological era.



The report highlights 14 different technologies pegged to impact multiple sectors and serve as essential platforms for further innovation — including smart contracts and cryptocurrencies.



With global adoption, smart contracts and public blockchains will play a pivotal role in verifying digital scarcity and proof of ownership, Ark said.



“The financial ecosystem is likely to reconfigure to accommodate the rise of cryptocurrencies and smart contracts,” the report states.



“These technologies increase transparency, reduce the influence of capital and regulatory controls, and collapse contract execution costs.”



Ark has been a long-time supporter of crypto and blockchain. Its CEO Cathie Wood previously predicted that the price of bitcoin would reach $1 million by 2030.&nbsp;



The firm also boasts a <a href="https://blockworks.co/news/ark-invest-ftx-opportunity-for-coinbase">significant amount of shares</a> in top US exchange Coinbase, owning <a href="https://ark-funds.com/funds/arkk/">4.53%</a> of the company’s stock, representing roughly $347 million dollars.



<h2>An on-chain future driven by blockchain technology</h2>



The cryptocurrency industry has been continuously growing despite the collapse of prominent players in the market, which recently saw around $1.5 trillion wiped from the industry, the report said.



As the market slowly goes into recovery mode, Ark believes there will be a long-term opportunity for Bitcoin, DeFi and Web3. The firm claimed that over the next 10 years, “cryptocurrencies and smart contracts could command $20 trillion and $5 trillion in market value, respectively.”



The total value of all cryptocurrencies is currently just shy of $1.1 trillion; that figure would need to grow by 1,700% for Ark’s prediction to realize.



ARK pegged three revolutions of industry to get us there: upheavals across money, finance and the internet.



<h2>Money</h2>



The money revolution will see a movement away from fiat currencies and central banking systems into a global, more decentralized system. In particular, the report notes the long-term opportunity for Bitcoin is strengthening.



“Bitcoin’s volatility has obscured its long-term returns. Despite five drawdowns greater than 75% since its inception in 2009, bitcoin has delivered positive annualized returns over 3-, 4-, and 5-year time horizons,” Ark said.



Adding that, “the price of one bitcoin could exceed $1 million in the next decade,” more-or-less reiterating Wood’s bullish call.



<h2>Finance</h2>



On the finance side, there’s opportunity for decentralized financial (DeFi) to bring financial services to unbanked communities. Ark reasoned there are over 2 billion people who currently lack access to essential banking services.



“Financial services deployed on open protocols enable anyone with an internet connection access to custody, trading, and lending facilities,” the report said, “As insolvencies mounted across crypto lending businesses like Celsius and Voyager, decentralized lending markets like Aave continued to operate as designed.”



The report notes that if DeFi builders were to charge just a third of legacy finance rates — and financial services were to move to blockchain infrastructure at the same internet adoption rate in the early 2000s — the DeFi industry alone could be valued at $5.3 trillion by 2030.&nbsp;



<h2>Internet</h2>



ARK remains bullish on a potential internet revolution. Web2 thrives under tech monopolies that monetizes via user data — but this could change with the adoption of Web3 technologies which “introduces digital property rights for the first time.”



“Decentralized protocols enable the governance of — and open access to — distributed data, limiting central aggregator control,” the report said.&nbsp;



“Web3 embeds economics into software, enabling users to monetize and participate in network development.”



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The Future of Money and Contracts Is Public Blockchains: ARK

Matthew Fiebach

SUSHI

Sushi Governance Update

Permissionless is the brainchild of Blockworks and Bankless. Over 5,500 people attended the inaugural event in 2022, making Permissionless the world’s largest DeFi conference.&nbsp;



What sets Permissionless apart? It’s a crypto native’s paradise, crafted specifically for both builders and investors who are dedicated to scaling the industry.&nbsp;



Permissionless is headed to Austin in 2023, and you know what they say… Everything is bigger in Texas.&nbsp;



Permissionless 2023 will feature the biggest names in Web3, a gargantuan exposition hall filled with the top brands in the space, an awe-inspiring NFT Gallery, inclusive, community-focused parties and events, metaverse experiences, and so much more.



See you in Paradise.

Tickets

Buy Tickets

Prices increase every 2 weeks. Only 250 tickets available in each drop. Register today and save!

General Admission Pass

Get notified 

Student tickets will be launching in early 2023

Student Ticket 

Prices increase every 2 weeks. Only 250 tickets available in each drop. Register today and save!

Speakers

Erik Voorhees

Mary-Catherine (MC) Lader is the Chief Operating Officer of Uniswap Labs, a developer of foundational web3-based products and applications. In this role, she oversees the company’s growth efforts, strategic initiatives, and operations. Previously, she held various leadership roles at BlackRock, including as the Global Head of the firm’s digital sustainability business, Chief Operating Officer of the firm’s digital wealth business, and leader of the firm’s strategic fintech investments and blockchain activities. MC began her career as an investor in Goldman Sachs’ Special Situations Group. She received her J.D. and M.B.A. degrees at Harvard Law School and Harvard Business School, respectively, and her B.A. at Brown University.

Mary-Catherine Lader

Zaki Manian is a Co-Founder of Sommelier, the most powerful coprocessor yet for DeFi traders and Liquidity Providers. He’s also a Co-Founder of iqlusion, which provides infrastructure like a data center and a Cosmos validator for next-gen crypto technologies. Previously, Zaki helped build the Cosmos ecosystem, including launching the first public Cosmos testnet, and served as a director of Tendermint. Zaki has been a leading developer in the blockchain space since 2014, when he taught himself cryptography and began contributing to projects including Bitcoin, Ethereum, Zcash, and Tendermint. Having studied history of science at the University of Pennsylvania, Zaki’s skill sets in software engineering, programming, and computer science are largely self-taught.

Zaki Manian

Justin Drake

At Alluvial, Chief Growth Officer Mara Schmiedt focuses on advancing industry participation and adoption of Liquid Collective, seeking out world-class partnership opportunities, and overseeing Business Development, Sales, and other strategic functions. Mara recently joined Alluvial as Chief Growth Officer from Coinbase, where she served as the Head of Sales for Coinbase Cloud, the leading developer platform for blockchain-based infrastructure products and APIs. She expanded Cloud's staking business, supporting large-scale organizations, enterprises, and institutional investors. Prior to joining Coinbase, she managed Business Development at Bison Trails, a leading provider of blockchain-based infrastructure acquired by Coinbase in February 2021. Mara also served as Strategy Manager at ConsenSys, where she supported the strategic development of Codefi, the blockchain application suite for Web3 Commerce and Finance.



Mara is passionate about open-source technology and has published multiple research reports and papers on liquid staking, such as <a href="https://drive.google.com/file/d/13-s15SvCIUBukhSZiNkpd0sTff3izQ5G/view">The Internet Bond</a> and <a href="https://consensys.net/insights/eth-2-staking-ecosystem-report/">Ethereum 2.0 Staking Ecosystem Report</a>.&nbsp;



Additionally, she has led various industry initiatives, including leading the working group with the Ethereum Foundation that developed the Ethereum Launchpad and the first distributed validator technology (DVT) PoCs. Mara's deep experience in bringing technology and blockchain-based products and services to market — as well as her track record of building world-class business and sales organizations — bolsters Alluvial's support of Liquid Collective.

Mara Schmiedt

Stani Kulechov

Hasu

Christine is a Partner and Head of Digital Asset Strategy at Apollo Global Management, Inc. In this newly created position, Christine leads digital asset strategy across the firm, exploring more ways to apply blockchain technologies to Apollo’s business. She also plays a key role in Apollo’s strategy to invest in some of the most innovative digital asset companies and founders, with a specific focus on those transforming the financial services sector where Apollo can serve as a validator and enabler of new technologies. Previously, she was a Managing Director at J.P. Morgan and led its Blockchain/Crypto/Metaverse program through initiatives in digital assets, tokenized payments, internet of-things, decentralized identity, NFTs, and virtual worlds. She is a graduate of Brown University. Christine was named in Fortune’s The Ledger 40 Under 40 list of “the most impressive, young superstars transforming business at the leading edge of finance and technology.”

Christine Moy

Santiago Roel Santos (CryptoPunk #9159) is an investor focusing at the intersection of DeFi and the Web3 metaverse (NFTs/gaming). Most recently was a Partner at ParaFi Capital, one of the largest crypto funds specializing in DeFi. Prior to that, he was at Sageview Capital investing in Internet and software and, before that, at JP Morgan investment banking. Santiago began investing in crypto in 2012.

Santiago Roel Santos

Michael Anderson is the co-founder of Framework Ventures, one of earliest and largest VC firms to enter the “DeFi” or Decentralized Finance industry. With over $1B in AUM, the firm has since expanded into additional maturing verticals like blockchain gaming and social crypto. Prior to Framework, Michael and his co-founder Vance Spencer launched Hashletes, a digital collectible startup with official licensing from the NFL. Before entering crypto, Michael served as a product manager at both Snapchat and Dropbox, where he helped build out their monetization platforms.

Michael Anderson

Soona Amhaz is founder and GP of Volt Capital, a venture firm that focuses on pre-seed and seed companies in the digital assets space. Soona is also an advisor to On Deck, Forbes 30 under 30 in VC, and an alum from the University of Michigan School of Engineering.

Soona Amhaz

Colleen Sullivan is Co-Head of Ventures at Brevan Howard Digital. Prior to joining Brevan Howard Digital, Colleen co-founded and served as CEO of CMT Digital, where she was also a partner with the broader CMT Group and commenced activities in the crypto industry in 2013. Prior to starting CMT Digital, Colleen co-founded Sullivan Wolf Kailus, a boutique law firm that specializes in hedge fund, private equity, venture capital, digital assets, and other alternative investment products. Colleen also previously practiced law in the Investment Funds and Derivatives group at Sidley Austin LLP and, at age 25, co-founded a company called iOptions Group LLC, which developed hedging and monetization strategies for holders of employee stock options. Ms. Sullivan currently serves on the Advisory Board of the Chamber of Digital Commerce.

Colleen Sullivan

Tarun is an alumni of D. E. Shaw Research (DESRES), Vatic Labs, an HFT firm, and Cornell. He fell into the blockchain world in 2011, when he was working on ASICs at DESRES and observed Bitcoin ASIC mining rigs substantially delay DESRES’s ASIC production. He has spent the last seven years working on simulation-based R&amp;D at the intersection of high-performance computing and AI and is applying this knowledge to the blockchain ecosystem.

Tarun Chitra

Kevin Owocki is the founder of Gitcoin.co — Where builders &amp; funders come together to build the open web.  Gitcoin has delivered <a href="http://gitcoin.co/results">$50mm worth of value</a> to OSS devs in the last several years. He has a BS in Computer Science, 15 years of engineering leadership experience in Open Source Software and Web Startups. Kevin is a community organizer in the Boulder Colorado Tech Scene.

Kevin Owocki

Meltem Demirors is Chief Strategy Officer of CoinShares, a publicly listed investment firm that manages over five billion in digital assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem.



 An established veteran of digital asset investing, Meltem draws on her substantial experience and widespread influence to accelerate growth and acceptance of the asset class. Prior to joining CoinShares, Meltem helped build and grow Digital Currency Group, raising capital from the world’s largest corporations and managing a portfolio of 120 companies and 4 subsidiaries. Before she was bitten with the bitcoin bug, Meltem worked in the Oil &amp; Gas industry in trading, corporate treasury, and M&amp;A roles. 



Meltem has been recognized for her personal contributions to the industry and serves as an outspoken advocate. She is a founding member of the World Economic Forum Blockchain Council. Meltem teaches at her alma mater MIT as well as Oxford, and is passionate about privacy and civil rights.

Meltem Demirors

Vance is the co-founders of Framework Ventures, a thesis-driven venture capital firm whose team of technologists, researchers, and investors partner with founders and teams to build token-based networks and develop the requisite cryptoeconomics, governance, and community to scale.

Vance Spencer

Jim Bianco is President and Macro Strategist at Bianco Research, L.L.C. Since 1990 Jim’s commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades long reputation for objective, incisive commentary that challenges consensus thinking. In nearly 20 years at Bianco Research, Jim’s wide ranging commentaries have addressed monetary policy, the intersection of markets and politics, the role of government in the economy, fund flows and positioning in financial markets.



Jim appears regularly on CNBC, Bloomberg and Fox Business, and is often featured in the Wall Street Journal, Bloomberg News, Grants Interest Rate Observer, and MarketWatch. Prior to joining Arbor and Bianco Research, Jim was a Market Strategist in equity and fixed income research at UBS Securities and Equity Technical Analyst at First Boston and Shearson Lehman Brothers. He is a Chartered Market Technician (CMT) and a member of the Market Technicians Association (MTA). Jim has a Bachelor of Science degree in Finance from Marquette University (1984) and an MBA from Fordham University (1989).

Jim Bianco

Mr. Forman is the Founder and Managing Partner of ParaFi Capital. ParaFi is a leading investment firm focused on the blockchain and digital asset markets, and an early pioneer in decentralized finance (“DeFi”). ParaFi is one of the largest investors, users, and governance participants within the DeFi ecosystem, spanning the full network lifecycle from pre-launch to full decentralization. Mr. Forman serves as the Chief Investment Officer across the firm’s strategies, which include investing in public and private cryptoassets, systematic credit and market neutral DeFi strategies, and blockchain-focused venture capital and growth equity investing.



Prior to founding ParaFi in 2018, Mr. Forman spent 10 years at leading alternative investment managers, including KKR and TPG. While at KKR, Mr. Forman served as a Director in the Credit business, investing across a wide array of industry sectors and strategies, including distressed special situations, private credit, and opportunistic and liquid credit. Prior to KKR, Mr. Forman served as a Vice President with TPG’s former credit business, Sixth Street Partners, as one of the first investment professionals to join the platform, helping scale its private credit vehicle, TPG Specialty Lending, which listed publicly in 2014. Earlier in his career, Mr. Forman worked in private equity at Littlejohn &amp; Company and investment banking at Rothschild &amp; Co. Mr. Forman graduated with a B.A. in Philosophy, Politics and Economics, magna cum laude, from the University of Pennsylvania.

Ben Forman

Haseeb is a Managing Partner at Dragonfly. He was previously a partner at Metastable Capital, and has a background in software engineering at Airbnb and Earn.com (acquired by Coinbase).

Haseeb Qureshi

Vanessa Grellet is a Managing Partner at Aglaé Ventures. Vanessa is a Global Executive with over 20 years of expertise in the Financial Services and Tech industry. At Aglaé Ventures she manages the Web 3 focused fund. Prior to joining Aglae she has Head of Portfolio growth at CoinFund and Executive director at ConsenSys where she focused on driving adoption for Ethereum based products,  Strategic initiatives, Alliances and Channels.  She was involved in setting up the Enterprise Ethereum Alliance (EEA), the Accounting Blockchain Coalition (ABC) and the Blockchain for Social Impact Coalition (BSIC). Prior to ConsenSys she was a Strategy Executive at NYSE focused on investments and M&amp;A and a key member of PwC’s global wealth management team. Vanessa is a Founding Board member of AABC focused on Blockchain and Art, a member of the Advisory Council of ConsenSys, a Milken Institute Associate, a contributor to the  World Economic Forum Digital Future Council and part of <a href="https://cointelegraph.com/top-people-in-crypto-and-blockchain-2022/vanessa-grellet">Cointelegraph’s list of 100 most influential people for 2022</a>. Mrs. Grellet graduated Cum Laude from Law School (Paris II Assas) and Business School (HEC).

Vanessa Grellet

Mihailo Bjelic received his MSc in CS from the University of Belgrade. Prior to entering Web3/blockchain industry, he co-founded an AI/ML-powered platform for automotive industry and several other smaller startups and side projects. In 2017, he decided to join the Web3 movement full-time, primarily as a researcher interested in Ethereum scaling and multi-chain paradigms. In parallel with his work, he became one of the prominent Ethereum proponents and community members. In 2019, he started working on Polygon and conceptualized its architecture, vision and brand. In 2020, he joined hands with the Matic Network team and they have been working together on Polygon since then.

Mihailo Bjelic

Ben is a co-founder of Optimism, a leading Ethereum L2 ecosystem. He served as Chief Scientist before becoming a director at the Optimism Foundation. In his free time, he makes Ethereum-based parody songs under his stage name, Weird ETH Yankovic.

Ben Jones

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Speaker applications can be submitted <a href="https://form.asana.com/?k=L3gwAY1GRAX-RRAGDZYc0g&amp;d=1199885946213540">here</a>. Due to the high volume of submissions, we will not respond to all applicants. We anticipate &lt;2% of applicants being selected.
Blockworks&#8217; content team will reach out in the event you are accepted to speak. Please do not follow up directly.

Speaker Application

<h2>Why Sponsor Permissionless 2023?</h2>
If you’re serious about crypto, you have to be at Permissionless. Permissionless brings together DeFi builders, DAO participants, protocol developers, crypto companies, funds and institutions, and more. It’s a true crypto-native’s paradise, where you’ll have the opportunity to showcase your offerings and form lasting connections with the community.
We’ll work with your team to define the perfect sponsorship opportunity that best fits your needs and budget. Want to do something completely revolutionary? Our team can help design a bespoke package that brings your vision to life.
Get in touch with us at <a href="mailto:sales@blockworks.co">sales@blockworks.co</a>
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