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Ben Strack

Brazilian asset manager Hashdex will be ready to convert its bitcoin futures ETF to a spot product, a company executive said, considering regulatory clarity around such a fund is coming.&nbsp;&nbsp;&nbsp;



It’s just a matter of time. New legislation or a court ruling are both possible options.&nbsp;



Bruno Sousa, head of Hashdex’s US business, told Blockwork his company’s product has an advantage over other competing products on the market when it comes to making the switch. 



The Hashdex Bitcoin Futures ETF (DEFI), which the company launched <a href="https://blockworks.co/news/teucrium-bitcoin-futures-etf-now-carries-hashdex-brand">with the help of fund issuer Teucrium</a> in September 2022, was filed under the Securities Act of 1933 (‘33 Act). Other futures ETFs were filed under the Investment Company Act of 1940 (‘40 Act).&nbsp;&nbsp;&nbsp;



“The concept was that to hold bitcoin, the ‘33 Act structure is a proper structure,” Sousa said in an interview. “The ‘40 Act can only have securities; it can never hold bitcoin itself…so those ‘40 Act ETFs using bitcoin futures don’t have the structure to take on bitcoin directly at any point.”



The ’33 Act structure could well be easier to convert from holding <a href="https://blockworks.co/price/btc">BTC</a> futures to bitcoins than a ’40 Act fund might be, should that conversion process be approved by the SEC, according to Lara Crigger, editor-in-chief at data firm VettaFi.



“That’s because ’40 Act funds have very strict rules around the diversification of holdings and making distributions; as a result, they can’t invest in ‘riskier’ assets, like commodities,” she told Blockworks in an email. “33 Act funds, however, can take the form of grantor trusts, which hold physical commodities … and commodities pools, which hold futures.”&nbsp;



<h2>Who could be first?</h2>



Sousa’s comments come as the prospect for spot bitcoin ETFs have once again gained prominence.



Grayscale Investments is enveloped in a case against the SEC after the regulator last year declined the proposed conversion of the firm’s flagship Bitcoin Trust (GBTC) into an ETF. GBTC shares are now offered through a private placement exempt from registration under the ‘33 Act. They’re initially only available to accredited investors as a result.&nbsp;



During oral arguments in the DC Circuit Court of Appeals earlier this month, <a href="https://blockworks.co/news/grayscale-appears-to-win-opening-sec">judges grilled the SEC</a> on why the regulator approved bitcoin futures exchange-traded products (ETPs) and not the GBTC conversion.



Industry watchers previously told Blockworks, however, that a <a href="https://blockworks.co/news/grayscale-win-over-sec-might-not-change-much-industry-watchers-say">favorable Grayscale ruling might not mean much</a>, as the SEC might choose to deny GBTC’s conversion, and other spot bitcoin ETF applications, for a different reason.



Hashdex launched the world’s first crypto index ETF in February 2021 on the Bermuda Stock Exchange. Now, Sousa argued DEFI has the most “straightforward process” to gaining spot bitcoin ETF approval when the time comes.



“Our conversion is not really a conversion; it’s just a change in investment policy — a very simple procedure,” he said. “And we will re-file whenever there’s a new fact that can lead us to the idea that the SEC might position itself differently.”



The first bitcoin futures ETF in the US, the ProShares Bitcoin Strategy ETF (BITO), hit the market in October 2021. It was filed under the ‘40 Act structure.



Valkyrie Investments, which launched a bitcoin futures ETF also filed under the ‘40 Act in that month, gained approval for a ‘33 Act <a href="https://blockworks.co/news/another-bitcoin-futures-etf-approved-by-sec-with-no-spot-product-in-sight">bitcoin futures ETF</a> last year.



A Valkyrie spokesperson did not immediately return a request for comment on its plans for the product.&nbsp;



Sumit Roy, a senior analyst at ETF.com, said other issuers could just file for a separate spot bitcoin ETF rather than convert their existing futures-based funds.



“If and when the SEC finally allows a spot bitcoin ETF to come to market, I think — and I would hope — that several such funds would be approved at the same time, and that fund structure wouldn&#8217;t be a deciding factor,” he said.



Keep reading for more excerpts from Blockworks’ interview with Sousa. 



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Blockworks: Hashdex’s bitcoin futures ETF has less than $2 million assets under management, compared to BITO, for example, which has about $960 million. Why has DEFI had such little interest?



Sousa: Last year&#8217;s bear market was a challenging environment for crypto ETFs globally, but bitcoin is clearly on its path to recovery.



We are anticipating more demand from investors as the macro environment shifts and the global banking crisis shines a light on bitcoin’s benefits.



Blockworks: What needs to happen before a spot bitcoin ETF is approved?



Sousa: A lot of the background issue here has been the dispute between the SEC and the CFTC. We’re seeing the commissioner of the CFTC saying that ether is a commodity, and we’re seeing the SEC saying time and time again — and giving indications — that this is a security.



The parallel discussion … is once you have the federal legislation determining who regulates crypto exchanges — we believe that will be the CFTC — and the CFTC rolls out rules for crypto exchanges, then the argument for unregulated markets or market manipulation goes under.



After that, essentially the SEC would be in a position to approve.&nbsp;



Blockworks: When will that be?&nbsp;



Sousa: It depends…but it’s feasible that it can happen this year if the world doesn’t blow up with everything that’s happening, and the folks in DC, New York and other places don’t have to focus on saving the current financial system.



It will eventually come out. It’s closer and closer.



This interview was edited for clarity and brevity.



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Hashdex US Head: BTC ETF ‘Feasible’ in 2023 if the ‘World Doesn’t Blow Up’

Casey Wagner

South Dakota is keeping its crypto regulatory policy as-is for now. Legislators cited concerns about the bill’s treatment of crypto, even though the word is never mentioned in the text.&nbsp;



Republican Governor Kristi Noem vetoed <a href="https://sdlegislature.gov/Session/Bill/23995/250850">House Bill 1193</a>, which would amend the state’s Uniform Commercial Code (UCC) to exclude all digital assets from the definition of money except for a central bank digital currency.&nbsp;



Noem’s main issue with the proposed law was that it could “pave the way for a government-led CBDC,” she <a href="https://twitter.com/KristiNoem/status/1634403770049220608?s=20">told</a> conservative personality Tucker Carlson earlier this month.&nbsp;



“I believe it’s to pave a way for the federal government to control our currency, and thus control people,” Noem added. “It should be alarming to people and it’s being sold as a UCC guidelines update.”



The bill never mentions the term <a href="https://blockworks.co/tag/cbdc">CBDC</a>, but it does define “money” as any medium of exchange “currently authorized or adopted by a domestic or foreign government.”



Bitcoin, even though it has been adopted as legal tender in El Salvador, would likely not fit the definition, considering bitcoin is not backed or controlled by El Salvador — or any other government. And bitcoin was created long before El Salvador’s adoption of the asset.&nbsp;



Money is not “an electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government,” the bill said.&nbsp;



Noem vetoed the bill last week, but the South Dakota House of Representatives opted to uphold the decision Monday evening in a 37-30 vote. The House would need a two-thirds majority to override the veto.&nbsp;



Other states are looking into similar UCC update bills, Noem said.&nbsp;



Proponents argue that the changes outlined in the bill say it could have laid the foundation to link governments and cryptocurrencies.



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South Dakota Governor Turns Down Crypto Regulation Bid

Michael Bodley

Interest in tokenized real estate is spreading. All the way to south Texas.&nbsp;



In the latest <a href="https://blockworks.co/news/tokenized-home-nets-thousands">indicator of the once-niche sector’s spread</a>, startup Homebase has closed out the tokenization of its first single-family rental property, the company told Blockworks exclusively.&nbsp;



The McAllen, TX, single-family home was valued at $235,000. Homebase drummed up $246,800 in about two weeks by tokenizing the residence on Solana (<a href="https://blockworks.co/price/sol">SOL</a>) via a smart contract tied to an NFT created for the purpose: “Homebase 1 [<a href="https://explorer.solana.com/address/9dKvUmegQGtW5uNXGr1XH3ud7wtAk1V87xmqSzC57cDj">The Cardinal</a>].”&nbsp;



The total amount <a href="https://explorer.solana.com/address/9dKvUmegQGtW5uNXGr1XH3ud7wtAk1V87xmqSzC57cDj">raised</a> includes $11,800 set aside to “to account for maintenance and other issues,” a spokesperson said in a statement.



Homebase, according to Domingo Valadez, the company’s chief executive and one of three co-founders, spent seven months getting just the legal and compliance details of its real estate offering ready for market.&nbsp;



The overall effort took a year and involved the regulatory and fiat side of things: filing the SEC paperwork to market security tokens to both retail and accredited investors.&nbsp;



Of the 38 participating investors, 30 were non-accredited, according to the filing. The minimum investment for the sale reported to the SEC was $500.&nbsp;



Homebase spent some time weighing the benefits and drawbacks of various blockchains to host the NFTs and smart contracts. Homebase eventually settled on Solana. The startup supports USDC to allow users to buy tokenized property slices “in one click,” the statement said. 



Homebase considered the Ethereum ecosystem, he said, but was put off in part by concerns over ether (<a href="https://blockworks.co/price/eth">ETH</a>) gas fees that were rising.&nbsp;



Polygon (<a href="https://blockworks.co/price/matic">MATIC</a>) was also in contention, according to Valadez, but blockchain bridges that Homebase would have had to employ resulted in funds disappearing for like “15 minutes,” which would have been “especially scary” for investors new to the sector.&nbsp;



<h2>Fractionalizing real estate mints potential</h2>



Valadez, originally from south Texas himself, spent about five years working for Google before leaving to start up Homebase with two additional co-founders in early 2022.&nbsp;



Living in the pricey Bay Area, Valadez realized something: He “still couldn’t afford anything in the Bay Area after working at Google for five years.”&nbsp;



In spite of working tech hours and earning a tech salary, Valadez said buying a property at the time was out of the question. The US housing market has <a href="https://www.bankrate.com/real-estate/is-the-housing-market-about-to-crash/">slowed</a> in recent months, with some analysts eyeing an even more dramatic drop in residential and commercial property prices on the horizon.&nbsp;



A <a href="https://blockworks.co/news/tokenized-real-estate-crypto">number of tokenized real estate initiatives</a> have started to take shape, including Homebase’s first foray into the competitive market. Those maneuvers come as the Federal Reserve has flashed some indicators that it plans to raise interest rates in a more gradual fashion moving forward.



The Fed’s <a href="https://blockworks.co/news/federal-reserve-interest-rate-25-bps-march">March rate hike clocked in at a 0.25%</a> increase, which appeared to have been largely already priced in by both traditional and digital assets markets.&nbsp;



But the Bay Area and other municipal US hotspots remain stubbornly out of reach in terms of price for most, according to Valadez.&nbsp;



The median February Bay Area home went for a whopping $1,050,000, according to real estate data provider Norada.&nbsp;



<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">Why we chose to bring real estate on-chain on Solana, a 🧵👇&mdash; Homebase🏠 (@HomebaseDAO) <a href="https://twitter.com/HomebaseDAO/status/1608604206625132544?ref_src=twsrc%5Etfw">December 29, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Read more: <a href="https://blockworks.co/news/real-estate-investing-guide">The Crypto Native’s Guide to Real Estate Investing</a>&nbsp;



Homebase thinks it can provide a viable alternative — even with real estate prices where they are, by tapping Solana and ensuring compliance with related SEC regulations.&nbsp;



The end goal is to create a product that makes money and helps homeowners, as well as investors, in the process, Valadez said.&nbsp;



<h2>The mechanics of NFT real estate</h2>



Homebase essentially captures a spread on the transaction. The startup put in a small amount of its own capital, which Valadez said was designed to ensure an alignment of financial interest.&nbsp;



“Tokenization in real estate is a means of crowdfunding,” he said. “We see the value in a decentralized future. We see some of the issues in the current financial structures…How do we give more power to individuals when they truly have ownership around their assets?”



Here’s how, in Valadez’s estimation:



<ul>
<li>The Solana tokenization of the McAllen single-family property went live in early March, generating enough demand that a mix of retail and accredited investors filled the Solana order book at the $1,200 average check size in under two weeks.</li>



<li>There was no lien or mortgage on the property, meaning Homebase didn’t have to work around outstanding debt on the transaction. The owner, as a result, held onto 80% of their equity in the property. Homebase took on a 1% interest, and the remaining 19% now belongs to investors in the tokenized offering.&nbsp;</li>



<li>Of that approximately 19%, half was raised in fiat and the remainder was processed by USDC. A total of 38 investors participated, and a spokesperson said the “majority were first-time real estate investors and new to Web3.”</li>



<li>The process resulted in 15 of the 28 backers creating their first Solana wallet, per the company.</li>
</ul>



Homebase started the process by agreeing to exclusive terms with the rental property’s owner. The startup then spun up an SPV (special purpose vehicle) to market the tokenized equity sale.&nbsp;



Investors are required to hold on to their NFTs representing their equity interests for at least one year. The process is verified on-chain.&nbsp;



Backers can then freely buy and sell their Solana NFTs on the open market, and underlying smart contracts tie those transactions to their corresponding equity stakes in the home.&nbsp;



Homebase’s “operating agreements say that non-fungible tokens represent ownership of that SPV,” Valadez said, adding that that way “you don’t have to get a lawyer involved.”&nbsp;



“The way we’re marketing this on the demand side is keep all of your assets on-chain and get to invest in rental properties that are truly able to accrue in value,” he said. “On the homeowner&#8217;s side, it’s an additional option you have when it comes to liquidity — especially in today’s environment, when interest rates are like 6%…[You now have] an additional potential stake to get equity out.”



Homebase’s second tokenized offering is already in the works.



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Real Estate Investors Buy Solana NFT Home for $246,800

Bessie Liu

The exploiter of DeFi lending protocol Euler Finance has sent a series of messages through the blockchain, apologizing for stealing funds and promising to return all stolen money.&nbsp;



Euler <a href="https://blockworks.co/news/euler-suffers-200m-exploit">suffered a $200 million exploit</a> earlier this month in which a hacker used a series of flash loans to trick Euler’s smart contract into believing it had fewer collateral tokens than debt tokens.&nbsp;



Now, the hacker — who goes by “Jacob” — seems to have had a change of heart.



“Jacob here. I don&#8217;t think what I say will help me in any way but I still want to say it. I fucked up. I didn&#8217;t want to, but I messed with others&#8217; money, others&#8217; jobs, others&#8217; lives,” the hacker <a href="https://etherscan.io/tx/0xedd8102ca037abaeb75ce6a1afe951d2953258392d891ff23510276993a5437c">said</a> in an encoded blockchain message, asking for forgiveness.



In its initial recovery efforts, Euler Foundation launched a <a href="https://blockworks.co/news/euler-bounty-defi-flash-loan-attack">$1 million reward bounty</a> to incentivize the arrest of the attacker.&nbsp;



<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">euler just sent an on-chain message to the hacker <a href="https://t.co/0wKIW51NjM">pic.twitter.com/0wKIW51NjM</a>&mdash; 0xngmi (llamazip arc) (@0xngmi) <a href="https://twitter.com/0xngmi/status/1635769041909342208?ref_src=twsrc%5Etfw">March 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Threats to the culprit came in from multiple angles, as an address associated with the Ronin bridge hacker — believed to be based in North Korea — attempted to trick the Euler hacker into sending over their private key information through a phishing scam.



The Euler team then sent an <a href="https://etherscan.io/tx/0x054409f252ac293a0ed34108b25e5906476817c5489bd3e98a5d3e1ee0825020">on-chain message</a> to the Euler hacker, warning them of the probable phishing attempt and again urged the return of the stolen assets, noting “the simplest way out here is to return funds.”



Since then, things have taken a positive turn. On Saturday, the Euler attacker returned <a href="https://etherscan.io/tx/0xb0308ee113c541e7c6f4623e833417524d68fd6267d23f43d9041f583c14343f">51,000</a> ETH (about $88 million) to a wallet under the Euler team’s control, and more recently an additional <a href="https://etherscan.io/address/0xb66cd966670d962c227b3eaba30a872dbfb995db">four transactions</a> of 7,800 <a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a> and $30 million in the <a href="https://blockworks.co/price/dai" target="_blank" rel="noreferrer noopener">DAI</a> stablecoin has been returned to a wallet labelled Euler multisig 2, alongside a pledge to make good on all of it. 



<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">Currently, the hacker holds: $18.35M of ETH &#8211; 8K ETH in the Main Caller address &#8211; 2.5K ETH in the Tornado Cash address $13.1M of DAI &#8211; $12M in the Euler Tertiary account &#8211; $1.1M held across Child 1 and 2 They have returned 85K ETH and 30M DAI. That is $177M, 86% of the total. <a href="https://t.co/RuUEZIuZFK">pic.twitter.com/RuUEZIuZFK</a>&mdash; Arkham (@ArkhamIntel) <a href="https://twitter.com/ArkhamIntel/status/1640773421666824195?ref_src=twsrc%5Etfw">March 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“The rest of the money will be returned ASAP. I only look after my safety, and that is the reason for the delay. I&#8217;m sorry for any misunderstanding,” Jacob <a href="https://twitter.com/fewture/status/1640594111144292353/photo/1">wrote</a> in a separate on-chain message.



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Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
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Euler Exploiter Says ‘Sorry,’ Returns Stolen $177M

Crypto investment firm Paradigm is urging the courts not to embrace what it argues the SEC is pushing for — that crypto tokens are essentially temporary securities.



The argument came in an amicus brief — insight filed by an entity who is not a party in a legal case — in the SEC’s case against Ishan Wahi.&nbsp;



US authorities <a href="https://www.justice.gov/usao-sdny/pr/three-charged-first-ever-cryptocurrency-insider-trading-tipping-scheme">charged</a> Wahi, a former product manager at Coinbase, with wire fraud last July as part of an alleged scheme to commit crypto-related insider trading. He <a href="https://www.justice.gov/usao-sdny/pr/former-coinbase-insider-pleads-guilty-first-ever-cryptocurrency-insider-trading-case">pleaded</a> guilty to two counts of wire fraud conspiracy in Manhattan federal court last month.&nbsp;



But the SEC’s case against Wahi is ongoing. Judge Tana Lin, of the US district court for the western district of Washington, allowed Paradigm’s amicus brief to be filed on Monday, Paradigm crypto counsel Rodrigo Seira said in a tweet.&nbsp;



<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">Today, Judge Tana Lin officially granted <a href="https://twitter.com/paradigm?ref_src=twsrc%5Etfw">@paradigm</a> leave to file our amicus brief in the SEC&#39;s case against Ishan Wahi Our brief rejects the SEC&#39;s expansive and unsupported application of securities laws to crypto secondary markets <a href="https://t.co/OWxiajwuxZ">pic.twitter.com/OWxiajwuxZ</a>&mdash; Rodrigo (@RSSH273) <a href="https://twitter.com/RSSH273/status/1640405640907751424?ref_src=twsrc%5Etfw">March 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The US securities regulator alleges that Wahi offered inside information to his brother, Nakhil Wahi, and Sameer Ramani, who then allegedly traded based on that knowledge. This included trading in at least nine crypto assets, according to the SEC — assets the regulator is calling securities.&nbsp;



<h2>Temporary securities?</h2>



Paradigm says in the brief the SEC is incorrectly arguing that because the crypto tokens were sold as transactions defined as investment contracts, the tokens themselves became investment contracts — deemed as a type of security per the Securities Exchange Act of 1934.&nbsp;



The nine tokens would not be considered securities “without considering extrinsic factors,” according to the brief.&nbsp;



“The SEC asks the court to accept the novel idea that these tokens are securities for only so long as they are deemed to “embody” an ongoing investment scheme…making them effectively temporary securities,” Paradigm states.



Accepting this “embodiment theory,” as Paradigm calls it, could have “sweeping and unintended effects” on the crypto industry, the company added.&nbsp;&nbsp;&nbsp;



“Essentially, the SEC seems to suggest that market participants should simply assume that&#8230;virtually all crypto assets are securities until the SEC tells them otherwise, a power not granted to the SEC by the Congress,” Paradigm said.



The SEC did not immediately return a request for comment.&nbsp;



<h2>Securities or not?</h2>



Though Paradigm calls the SEC’s latest argument “a novel idea,” the broader argument of whether crypto tokens are securities is not new.



The SEC alleged in 2020 that Ripple Labs and two of its executives raised more than $1.3 billion in 2013 through the sale of crypto token XRP as part of what it deems to be an unregistered security offering. <a href="https://blockworks.co/news/sec-ripple-xrp-case-trial">That case is ongoing</a>.



The regulator <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit">served Coinbase with a Wells notice</a> last week about alleged securities violations, though the exchange has <a href="https://www.coinbase.com/blog/coinbase-does-not-list-securities-end-of-story">argued</a> the digital assets it lists are not securities.&nbsp;



Industry participants have told Blockworks that US regulators are jockeying for position in regulating the crypto industry in the absence of comprehensive regulation.The CFTC <a href="https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit">called bitcoin, ether and litecoin commodities</a> in a lawsuit brought Monday against Binance and its CEO.



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Paradigm: SEC’s Temporary Securities Theory Could Have ‘Unintended Effects’

Federico Ast

Online organizations are becoming a normal setting for a large part of our social and economic interactions. And just like in the offline world, disagreements are now cropping up in these online spaces.&nbsp;



Web3 is no exception: We have recently witnessed disputes in communities such as <a href="https://www.coindesk.com/business/2022/07/06/is-makerdao-becoming-a-company-run-by-politics/">MakerDAO</a>, <a href="https://medium.com/@ClementLesaege/making-sense-of-recent-drama-in-proof-of-humanity-ccf3082eb0fa">Proof of Humanity</a> and <a href="https://decrypt.co/es/124083/defi-llama-drama-resolved-no-token?amp=1">DefiLlama</a>.



Those conflicts were of political nature and involved deep disagreements between different factions within the projects. Members disagreed on matters ranging from resource allocation (how funds and other assets should be assigned), community norms (how members are expected to treat each other) and legal issues (how to manage compliance requirements).



These recent public community governance dramas have put a spotlight on the fact that we are still learning how to govern decentralized organizations. As such conflicts are more likely to become commonplace, decentralized communities need to start experimenting with how to resolve them.



The problems of DAO governance need to be dealt with by people that understand the value of a humanistic, big-picture approach, who realize that there is ultimately nothing new under the sun. If you look all the way back to the days of ancient Athens, philosophers have been trying to understand how to create environments where humans can collaborate effectively and thrive — and DAOs are no different.



<h2>How to agree to disagree</h2>



What do the philosophers of ancient Athenian democracy and the founding fathers of the United States have in common? A big concern about factionalism as the main threat to a working democracy.



When factions win, citizens turn their focus away from the common good and toward the particular interests of their clan or party.



In the book How Democracies Die, Steven Levitsky argues that a key reason for the success of American democracy was the development of a number of informal norms on how disagreements had to be handled and how one was expected to treat political adversaries. A civilized way to agree to disagree.



Efforts should be taken in DAO communities to develop norms of civility, open debate and mutual respect. While this is easier said than done, the way in which a community recruits and educates their new members can play an important role.



<h2>Who’s in charge?</h2>



Many DAO disputes arise from poorly designed governance systems leaving ambiguity on how decisions should be made and who should make them.



Should every member be allowed to vote on every issue, or only experts get the votes? Who counts as a “community member” anyway? Should the DAO work on a 1 token/1 vote system or 1 person/1 vote system?



For example, the failure of Proof of Humanity DAO was attributed to a lack of clear decision rights, according to an <a href="https://drive.google.com/file/d/1l_faHo8WAr-T4MzagCcLyfvIA7xRlUD5/view">ethnographic research paper</a> published by BlockchainGov.



We are already witnessing the rise of constitution-building processes for DAOs. Clarifying the way in which the governance system works (who gets to decide about what and how) will be an important avenue for conflict prevention in the future.



<h2>Bring on the third parties</h2>



After a conflict starts, it’s typically too late to agree on a dispute resolution method —&nbsp;especially in a decentralized organization that owes its existence to a set of rules. DAO governance rules should have an explicitly stated structure for resolving all disputes from the get-go.



DAOs can take an example from the oil and gas or construction industries and make use of a neutral evaluation process: a non-binding mediation or conciliation facilitated by a trusted third party.



Contracts in these industries usually involve long-term commitments between parties over large amounts of money. If a conflict arises (an economic shock unexpectedly sends the price of oil skyrocketing!) parties need a neutral way to resolve the issue while at the same time avoiding any damage to their business relationship.



If the non-binding agreement fails, then the conflict could potentially escalate to a binding instance, a mechanism similar to a “<a href="https://blog.kleros.io/kleros-a-decentralized-supreme-court-for-daos/">Supreme Court of the DAO</a>” which would have the right to make an authoritative decision.



This process should certainly have clear guidelines (how to start the mediation, the type of evidence that would be acceptable), impartial arbitrators, transparency and an enforcement mechanism.



<h2>A forking procedure (when DAOs get divorced)</h2>



Sometimes disagreements between the different factions go so deep that the only option is divorce. When this happens, a number of decisions will have to be made about how to split the right to use the brand and how to divide the treasury and other assets.



Most sovereign states don’t recognize the right to self-determination through secession in their Constitution. But this isn’t <a href="https://en.wikipedia.org/wiki/Secession#Rights_to_secession">without precedent</a>. For example, <a href="https://en.wikipedia.org/wiki/Withdrawal_from_the_European_Union#Procedure">article 50 of the Treaty of the European Union</a> gives the right to withdraw from the EU, which was used by the UK for Brexit. For DAOs, it&#8217;s way easier, as the majority don&#8217;t have a physical territory. If a DAO has a predefined forking procedure from the get go, then this can avoid lots of conflict about the terms for the split (similarly to how prenup agreements can avoid messy divorces).



A DAO constitution should have some guidelines on how to conduct the forking process in case it happens and to give all parties in the conflict clear expectations about the outcome.



<h2>Humans over machines</h2>



Ultimately, putting aside the technical sophistication of blockchains, DAOs are made up of humans who have emotions, passions and fears. Creating good governance systems for DAOs must be more about dealing with the “mental software” of humans rather than the “computer software” of machines.&nbsp;



Topics such as power, inclusion, opportunism and loyalty have been recurrent throughout history. Even if DAOs are novel forms of human organization due to their structure, we can always remember the words of Winston Churchill, “Study history, study history. In history lies all the secrets of statecraft.”



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


<div class="wp-block-post-author-biography">Federico Ast graduated in economics and philosophy from the University of Buenos Aires and holds a PhD in management from IAE Business School. He is founder and president at Kleros, a legaltech company using game theory and blockchain technology in arbitration. As a pioneer in the field of decentralized justice, he has lectured in universities such as Stanford, Oxford and Columbia and in international organizations such as the United Nations.</div>


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Made by Humans but Governed by Code?

John Lee Quigley

A multi-signature wallet is one of the advanced security tools available to cryptocurrency users. Yet, many investors do not use them because they do not understand how multi-signature, or multisig, wallets work.



There is also a false narrative that multi-signature wallets eliminate all security risks associated with holding cryptocurrency. Although multisig wallets provide remarkable security, some high-profile breaches, such as <a href="https://blockworks.co/news/sky-mavis-ronin-network-bridge-exploited-for-over-600m">Ronin Network&#8217;s $625 million hack</a>, have come from <a href="https://blockworks.co/news/nomad-token-bridge-raided-for-190m-in-frenzied-free-for-all">compromised multisig wallets</a>, where the private keys were stored improperly.



Read on to learn what a multisig wallet is and why they are considered a must-have for storing digital assets in a corporate setup, as well as the available types of multisig wallets and the advantages and disadvantages of adopting these solutions.



<h1>What is a multi-signature wallet?</h1>



A multi-signature wallet is a cryptocurrency wallet that requires multiple signatures — instead of just one — to execute each transaction. The signatures are associated with different cryptographic private keys, while a defined threshold of keys must sign a transaction to validate it.



The workflow of a multisig wallet is the same irrespective of the number of signers. Any parties to a multisig wallet can initiate a transaction signed with their private key. However, the transaction is displayed as pending until other parties sign it.&nbsp;



Multisig wallets may implement an N-of-N setup where all signatories must validate a transaction before. The similar example is a 2-of-2 method where two parties must validate a transaction for it to be considered valid.&nbsp;



Alternatively, an N-of-M setting requires a specific subset of signers to approve a transaction. Using a 3-of-4 wallet as an example, three out of four signers must validate the transaction for it to be executed.&nbsp;



In either case, it is essential to distribute multisig private key access among distinct entities. A multisig setup where a single entity holds multiple private keys and stores them in a single location is essentially the same as a single-key wallet. The ideal scenario is giving access to entities in a way that a single security breach does not lead to the loss of two or more keys.



Many blockchains integrate functionality that enables users to implement multi-signature wallets. Cryptocurrency exchanges and custodians also implement multisig wallets and store associated private keys in diverse locations to protect client assets.



<h2>Why use a multisig wallet?</h2>



When used properly, a multisig wallet offers extra security by eliminating the single point of failure risk associated with having one private key. It makes it difficult for hackers to steal funds from a wallet, because they must have the different keys to complete any action.



A multisig feature is especially desirable in a corporate or organizational structure. For instance, a decentralized autonomous organization (DAO) may distribute its multisig wallet key access among distinct ecosystem projects actively contributing to its development. These members must approve new smart contract upgrades or fund transfers for purposes approved by the <a href="https://blockworks.co/news/the-investors-guide-to-daos">DAO</a>. Keyholders must be selected carefully, mindful of the possibility of collusion.



Some security-conscious investors may choose to adopt a multisig wallet as an extra layer of security to <a href="https://blockworks.co/news/cold-wallets-secure-crypto-custody">cold wallets</a>. Such implementation means that users must complete several steps to authorize transfers and may choose to extend responsibility to a trusted third party, such as a family member or an attorney.



<h2>Types of multi-signature wallets</h2>



<ul>
<li>1-of-2 signatures: A 1-of-2 setup is one of the most basic forms of multisig storage. The user binds two private keys to a single wallet, allowing anyone holding either key to approve transactions. This setup is ideal for a small business where either of two founders can transfer funds and trust is established through contractual and personal relations. A 1-of-2 setup is also a useful personal backup solution, as users can recover funds even if they lose one private key.</li>
</ul>



<ul>
<li>2-of-3 signatures: This multisig wallet requires two out of three registered signers to complete a transaction. It is useful for escrow transactions and also implemented by cryptocurrency custodians as an additional security measure.&nbsp;In the latter use case, the company may hold two of the keys with one securely stored offline and the other held online to make the signing process easier. The third key is delegated to a trusted blockchain security company, which may be required if the crypto custodian loses one of its keys.</li>
</ul>



<ul>
<li>3-of-5 signatures: This is a more robust multisig setup that requires three out of five signatures to validate transactions. It is useful for a corporate structure where several decision makers must approve transfers. As long as over 50% of the parties consent to the decision, then they can approve fund transfers. As with other forms of multi-signature setups, delegating signatures to entities in diverse geographical locations could improve security.</li>
</ul>



<ul>
<li>Hosted vs. unhosted: A hosted multisig wallet is one created with a third-party platform such as Coinbase Custody or BitGo. These entities secure cryptocurrencies using institutional-grade solutions, while giving clients access to multi-signature functionality. Thus, clients register approved signatories and define signature thresholds for fund transfers. An unhosted multisig wallet (also known as self-hosted wallet, or <a href="https://blockworks.co/news/warren-unveils-new-crypto-bill">simply a wallet</a>) is one where the individual or organization holds the private keys, instead of using a trusted third-party. The setup process for unhosted wallets is usually more complex as users require security-optimized infrastructure and best practices. However, the user enjoys greater convenience and eliminates the counterparty risk associated with third-parties.</li>
</ul>



<h2>Advantages of multisig wallets</h2>



Multi-signature wallets offer several unique benefits to users. They also serve specific use cases that are generally considered out of reach for single-key wallets.&nbsp;



<h4>Increased security</h4>



Multisig wallets are synonymous with increased security and peace of mind. This is especially important given the growing security concerns in the cryptocurrency space and the irreversibility of blockchain transactions. With a multisig wallet, users can rest assured that the odds of a hacker acquiring all associated private keys are low.



A multisig wallet also provides a backup option. As long as the setup does not require all signatures to validate transactions, users can easily recover their wallets if one or more private keys goes missing. New signatures can also be added to further distribute ownership and improve security.



<h4>Escrow transactions</h4>



Multi-signature wallets are ideal for escrowed transactions. They guarantee that each party will fulfill their obligations once the agreed terms are met. Using the example of a 2-of-3 multisig, the buyer could deposit funds in a wallet with a promise to release the funds to the seller as soon as the purchased goods are received and deemed satisfactory.&nbsp;



The seller also holds a key alongside a trusted third party used as the final signatory to the multisig contract. Both buyer and seller could sign to confirm the trade as soon as the conditions are met. However, the third party could release the funds to either buyer or seller if the other party breaches the contract terms.



<h4>Two-factor authentication (2FA)</h4>



Multi-signature wallets provide a form of two-factor authentication (2FA) because eligible signers must validate any pending transaction before approval. Users can easily halt any malicious actor that gains unauthorized access to an associated key and revoke their access. This security feature is further strengthened by keeping the private keys in multiple locations or with different individuals.&nbsp;



<h4>Cooperation between multiple parties</h4>



A multisig wallet is perfect for an organizational setup where two or more parties must consent to make business decisions. This is especially helpful in an era where an increasing number of strangers meet online to pursue common objectives, such as a DAO.&nbsp;



A multisig wallet checkmates power abuse, gives parties a sense of responsibility and ensures no one can transfer funds without requisite approval. This feature also doubles as voting rights, because signing a transaction represents approval of the business decision.



<h2>Disadvantages of multisig wallets</h2>



The security provided by multisig wallets come at the cost of convenience. This trade-off makes multisig wallets less ideal for certain scenarios.



<h4>Transaction speed</h4>



Users give up speed for security when they choose to use a multisig wallet. It could take anywhere from a few hours to days to execute a transaction from a multisig wallet, with factors such as the number of signatories and geographical boundaries limiting their usage. These limitations make multisig wallets less convenient for emergencies or routine payments.



<h4>Technical knowledge</h4>



Users require more than basic security knowledge and practices to adopt multisig wallets. The setup process may require consulting a third-party wallet provider, installing specific software, or purchasing dedicated equipment such as multiple hardware wallets and safe boxes. These requirements are relatively complex for the average crypto investor and are one of the key factors impeding the adoption of multi-signature wallets.



<h4>Fund recovery and custodian</h4>



Compared to single-key storage, it takes considerably longer and requires more coordination to recover funds stored in a multisig wallet. Further, N-of-N setups fail to provide a backup or recovery solution for rare situations where one of the signers is unavailable.



Meanwhile, entities that choose the relatively easier multisig wallet hosted with a third-party custodian expose themselves to counterparty risk. A security breach at the third-party custodian could have far reaching consequences.



<h2>Should I use multisig?</h2>



Multi-signature wallets are an excellent way to protect your digital assets. However, they are not perfect. You should only use a multisig wallet if you understand cryptocurrencies and consider yourself knowledgeable with advanced operations security (OpSec). That said, multisig users enjoy a greater sense of security and immunity from most basic risks associated with storing cryptocurrencies.&nbsp;



<h2>Multisignature wallets: A secure standard for crypto storage</h2>



A multisig wallet eliminates the single-point of failure risk faced by most cryptocurrency investors. Both individual and corporate investors can adopt different multisig setups depending on their specific needs.&nbsp;



Readers considering multi-signature wallets will find it helpful to study their advantages and disadvantages. That way, they can make research-driven decisions on the best options to provide the highest level of security for their digital assets.



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What Are Multisig Wallets?

Shalini Nagarajan

The UK appears to have scrapped plans to launch an NFT, a move earlier championed by Prime Minister Rishi Sunak.



Economic Secretary Andrew Griffith said Monday that the Royal Mint’s decision to back away from NFTs was made in consultation with the UK Treasury. The proposal will go under review, he added.&nbsp;



He was responding to a written <a href="https://questions-statements.parliament.uk/written-questions/detail/2023-03-09/162176#">question</a> from conservative politician Harriett Baldwin, who enquired about whether the NFT is still under consideration by the UK’s chief finance minister.



Baldwin, chair of the Treasury Select Committee, guessed that the Treasury’s decision was motivated by insufficient evidence showing the value of NFTs, the <a href="https://www.bbc.com/news/uk-politics-65094297">BBC</a> reported.



&#8220;We have not yet seen a lot of evidence that our constituents should be putting their money in these speculative tokens unless they are prepared to lose all their money,” she said. &#8220;So perhaps that is why the Royal Mint has made this decision in conjunction with the Treasury.&#8221;



The UK’s plans for an NFT first came up when Sunak served as Chancellor of the Exchequer. In April last year, the UK Treasury said Sunak asked the institution to create an NFT by the summer. “This decision shows the forward-looking approach we are determined to take towards cryptoassets in the UK,” the Treasury <a href="https://twitter.com/hmtreasury/status/1510971092072079360">said</a> in a tweet.



The institution did not lay out what the NFT would consist of — an image, video or an object — nor whether it would be utilized for profit by the state. It also wasn’t known whether the Treasury would’ve accepted cryptocurrency for the tokens.



A Treasury spokesperson confirmed that the plans are abandoned for now. “The Royal Mint operates as a commercial business and has confirmed now is not the right time to launch an NFT,” they told Blockworks via email.



“In light of recent developments in the wider crypto market and the Royal Mint’s current capacity for delivery, the Treasury agreed the NFT should not be pursued at this time. However, the Royal Mint will keep this under review.”



<h2>UK PM has been pro-crypto</h2>



Sunak himself has been a vocal crypto enthusiast and has often declared his interest in blockchain.



“It’s my ambition to make the UK a global hub for cryptoasset technology,” he has said. But the crypto ecosystem has faced a slew of critical incidents since, including crashing prices and a string of critical bankruptcies.



London itself has seen more than 600 people in the crypto sector losing their jobs in the last year, according to a recent <a href="https://www.bitcoincasinos.com/blog/2023/02/27/crypto-layoffs/">study</a>. The report predicts that the number of layoffs in 2023 is set to outpace those in 2022.



The UK can still achieve its ambitions by creating a supportive regulatory framework and developing crypto-friendly infrastructure, according to Alexandr Onufriychuk, head of growth at Corite, a firm that creates NFT collections and works with artists in the UK.&nbsp;



Other steps could include encouraging investment in the crypto space, he said, or collaborating with the private sector to develop blockchain-based solutions for supply chain management or digital identity verification.



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UK Treasury: Not the Right Time To Launch Official NFT

Florida lawmakers may have to revise a recently passed bill barring central bank digital currencies (CBDCs) to avoid inadvertently banning bitcoin.



Governor Ron DeSantis’ proposal would make Florida the first US state to ban CBDCs, with a House panel voting 15-5 in favor on Monday.



DeSantis, who has served as Florida governor since 2019, is opposed to the idea of a federally-controlled digital currency, arguing it would hurt innovation and “promote government-sanctioned surveillance.”



The bill blocks the use of a federally-backed <a href="https://blockworks.co/tag/cbdc" target="_blank" rel="noreferrer noopener">CBDC</a> as currency under Florida’s Uniform Commercial Code. It also prohibits CBDCs issued by a foreign reserve or foreign sanctioned central bank, and calls on other states to embrace the same prohibitions.



A CBDC is a type of digital currency, which may or may not run on a blockchain or distributed ledger system, backed and issued by a central bank. <a href="https://blockworks.co/news/biden-signs-crypto-executive-order-promoting-responsible-innovation">US President Joe Biden signed an executive order</a> last year asking federal agencies to study benefits and risks of a US CBDC, but no definite decision has been made on whether the US will actually come up with one.



Even so, the <a href="https://blockworks.co/news/us-treasury-weighs-prospect-for-cbdc-adoption">US Treasury is working on the technology</a> that would be required to create a CBDC if lawmakers do decide to go ahead with the concept.



But there’s a small problem with DeSantis’ bill. Per <a href="https://floridapolitics.com/archives/598740-house-moves-on-gov-desantis-call-for-centralized-digital-currency-ban/">Florida Politics</a>, it defines CBDCs as digital currencies “validated directly by” a foreign government.&nbsp;



While the language is somewhat open to lawmaker interpretation, bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) can fit that description: <a href="https://blockworks.co/tag/el-salvador" target="_blank" rel="noreferrer noopener">El Salvador</a> has adopted bitcoin as legal tender, thereby “validating” it in the non-technical sense (it’s unclear whether El Salvador’s central bank or other government institution runs fully-validating Bitcoin nodes, also known as full nodes).



Wyman Duggan, a member of Florida’s House of Representatives sponsoring the bill, reportedly said they hadn’t set out to ban bitcoin along with CBDCs, and that they may change the bill if necessary.&nbsp;



The Bitcoin Policy Institute, a nonpartisan bitcoin think tank, recently <a href="https://www.btcpolicy.org/articles/in-attempt-to-stop-cbdcs-states-are-rejecting-ostensibly-pro-bitcoin-legislation">warned</a> that anti-CBDC legislation could unwittingly make it more difficult for the bitcoin ecosystem to flourish, unless they include specific language vetting BTC.&nbsp;



DeSantis has previously presented as pro-bitcoin, having floated accepting the top crypto for state taxes last March.



<h2>CBDCs and the US Constitution</h2>



While proponents of CBDCs argue that they can be used to speed up transactions, make cross-border payments more efficient, and discourage criminal activity, opponents like DeSantis believe such a system raises heavy privacy and security concerns.



Some Florida lawmakers have agreed with DeSantis’ view. Rep. Duggan reportedly raised apprehensions that CBDCs would give government in-depth insight into consumer purchases and could potentially freeze or seize anyone’s assets.



DeSantis himself previously <a href="https://floridapolitics.com/archives/596576-gov-desantis-wants-centralized-digital-currency-ban-raises-fear-government-could-control-purchases/">warned</a> that government oversight of digital currency would mean people wouldn’t be able to purchase gas or guns. “Who knows whether they would let you buy a firearm or things they disapprove of?” he said.



<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">The Biden Administration’s creation of a central bank digital currency is about one thing &#8211; control. I am calling on the Legislature to prohibit the use of a so-called CBDC in Florida, protecting Floridians from government surveillance and control of their personal finances. <a href="https://t.co/ob1E90R5Gn">pic.twitter.com/ob1E90R5Gn</a>&mdash; Ron DeSantis (@GovRonDeSantis) <a href="https://twitter.com/GovRonDeSantis/status/1638173916299657225?ref_src=twsrc%5Etfw">March 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Democrats were among those who voted against the bill. They raised the debate of unconstitutionality, since it is the US Constitution that gives the federal government the power to create and circulate national currency.



Rep. Allison Tant reportedly asked the House panel whether such a move indicated that Florida would be lagging economically. Duggan disagreed that this would happen, but admitted that there could be legal challenges if the bill became law.



“There’s obviously a federal Supremacy Clause in the [US] Constitution. That’s an enumerated power of the federal government, to mint money,” Duggan said. “We’re clearly going to have to have a court explore the contours of this relationship.”



The bill hasn’t yet become law and must pass the entire chamber of the House and Senate, before finally reaching the governor. He can then choose to sign it, or allow it to become law without signature, or veto it.



David Canellis contributed reporting.



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Florida Bill Banning CBDCs Might Accidentally Ban Bitcoin Too

Crypto was created for this moment, Galaxy Digital CEO Mike Novogratz said during the company’s fourth quarter earnings call Tuesday morning.&nbsp;



Galaxy Digital, traded on the Toronto Stock Exchange, hosted the call Tuesday before the open.



“Satoshi Nakamoto, way back in 2009, worried about the breakdown of the legacy financial system, he worried about… constant printing of fiat currencies and a debasement of money and created Bitcoin,” Novogratz said.



“Bitcoin really is the first decentralized store of value or money, which then really gave birth to this whole industry of a decentralized revolution.”



Galaxy <a href="https://viavid.webcasts.com/viewer/event.jsp?ei=1602915&amp;tp_key=afe1222a80" target="_blank" rel="noreferrer noopener">reported</a> a net loss of $288 million for the fourth quarter of 2022, <a href="https://investor.galaxy.com/financials/quarterly-results/default.aspx" target="_blank" rel="noreferrer noopener">earnings</a> show, compared with a net income of $521.3 million during the fourth quarter of 2021. For the year of 2022, Galaxy logged a net loss of $1 billion. 



“The loss was primarily attributable to unrealized marks to market on investments in our Principal Investments portfolio, driven by depressed market conditions,” the earnings report noted.



Galaxy Trading’s counterparty trading volume increased about 19% from the third quarter of 2022, the company noted in its report, and lost about 65% from the fourth quarter of 2021.&nbsp;



Galaxy still plans to list in the US after reorganizing and becoming a Delaware-incorporated company and completing the necessary SEC review. Galaxy’s most recent amended registration was submitted to the SEC in February 2023 and is currently under consideration, the filing noted. 



Shares of Galaxy are currently up about 1% year-to-date, but have lost 86% over the past 12 months. 



“I feel for you, our stock price has been ugly,” Novogratz said. “Last earnings call I cared a lot about the stock price, and, you know it&#8217;s lower, not higher.”&nbsp;



<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/13225386/embed#?secret=ZSIzhy021Y" data-secret="ZSIzhy021Y" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Galaxy stock and Coinbase diverged at the start of the year</figcaption></figure>



Galaxy is committed to cost-saving efforts, Novogratz said. The company announced layoffs in late 2022 and its bonus pool is now “way down,” the CEO said.&nbsp;



“Our stock is just at the wrong price,” Novogratz said.&nbsp;



In terms of the future of crypto as a whole, Novogratz said we are at a crucial inflection point.&nbsp;



The industry seems to be thriving overseas, he said said, but regulatory headwinds in the US makes expansion in America challenging.&nbsp;&nbsp;



“I go to bed and I say a Hail Mary hoping that the stewards of our country and our economy can land the plane, can actually maneuver our economy into something that&#8217;s sustainable without a real disaster, but that challenge is real and a challenge gets worse and worse,” Novogratz said. 



“And so things like this banking crisis are a great reminder, and it gives bitcoin and bitcoin’s community unbelievable resilience.”



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Galaxy Still Hopes For US Listing, Application Under SEC Review

Shortly after <a href="https://blockworks.co/news/noble-solve-cosmos-liquidity" target="_blank" rel="noreferrer noopener">coming out</a> of stealth, token protocol Noble has announced it has partnered with Circle to bring USD Coin (USDC) natively to the Cosmos ecosystem in Q2.



USDC is the second-largest stablecoins in the cryptocurrency ecosystem behind Tether, and is pivotal to many decentralized finance (DeFi) projects. It is often used as collateral for lending and borrowing to generate yield due to its ability to remain steadily pegged to the US dollar.



Although it recently went through a <a href="https://blockworks.co/news/stablecoins-peg-usdc-all-time-low" target="_blank" rel="noreferrer noopener">few hiccups</a> following the collapse of Silicon Valley Bank and Silvergate bank, the stablecoin has now regained its peg to the dollar.



Noble CEO Jelena Djuric told Blockworks in an interview that the Cosmos inter-blockchain communication protocol (IBC) ecosystem hasn&#8217;t yet gained a native fiat-backed stablecoin that is not only highly liquid but also fully collateralized on its network.



“That’s about to change with Noble’s first issuance partner, Circle,” she said. “They’re bringing a native USDC to Cosmos for the first time.” Noble, a token issuance protocol, will help facilitate USDC&#8217;s management and issuance.



<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">This is a huge moment for our ecosystem.<a href="https://twitter.com/cosmos?ref_src=twsrc%5Etfw">@Cosmos</a> has never had a native, fiat-backed stablecoin that is highly liquid &amp; fully collateralized. For the first time in <a href="https://twitter.com/cosmos?ref_src=twsrc%5Etfw">@Cosmos</a> history, 50+ IBC-enabled blockchains (&amp; counting!) will soon be able to access USDC natively via IBC.&mdash; Noble (@noble_xyz) <a href="https://twitter.com/noble_xyz/status/1640670153535897600?ref_src=twsrc%5Etfw">March 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Currently on Cosmos, the major stablecoins can only be accessed through <a href="https://blockworks.co/news/bridge-protocols-race-to-win-consumer-trust" target="_blank" rel="noreferrer noopener">bridge protocols</a> such as Gravity and Axelar. Estimates suggest around 100 different bridged USDC assets currently exist across the Cosmos landscape.



Now that DeFi protocols can stick with just one single official stablecoin, Noble hopes this partnership will inject and and facilitate new liquidity in the ecosystem. Circle first <a href="https://www.circle.com/en/pressroom/circle-announces-next-wave-of-usdc-support-for-multi-chain-ecosystem" target="_blank" rel="noreferrer noopener">flagged</a> intent to issue USDC on Cosmos last September.



“It’s also for the users themselves to have a seamless process of accessing native assets in the ecosystem,” Djuric said. “At the end of the day, we’re seeking to rectify the challenges that users and app chains face when interacting with bridge assets.”



The decision to quickly onboard USDC onto Cosmos is also related to the fact that popular lending protocol dYdX will soon migrate from Ethereum onto the Cosmos IBC.



“We’re very much doing this in preparation for dYdX’s launch. We see this as a huge moment for the Cosmos and the app chain thesis because this is a project that has already got a lot of success on Ethereum,” Djuric said.



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Circle Stablecoin USDC To Launch on Cosmos

Sebastian Sinclair

US federal regulators are allegedly waging a “clandestine financial war” against the crypto industry, according to Washington, D.C. law firm Cooper &amp; Kirk PLLC.



The FDIC, the OCC and others are allegedly using “regulatory tools and pressure tactics” to limit the extent digital assets have on the financial system, the law firm said Monday in a <a href="https://www.cooperkirk.com/wp-content/uploads/2023/03/Operation-Choke-Point-2.0.pdf" target="_blank" rel="noreferrer noopener">white paper</a>.



The law firm is calling the latest regulatory actions in the US “Operation Chokepoint 2.0.” The operation is modeled after a similar initiative under the Obama administration, which attempted to target fraudulent and high-risk industries, including the tobacco and payday lending industries.



Its white paper attempts to explain how regulators are issuing informal guidance documents that target crypto users deemed as posing a higher risk to banks. The paper raises concerns over the way in which the crypto industry has been subject to increased regulatory scrutiny in recent years.



It follows <a href="https://blockworks.co/news/banks-should-back-crypto-deposits-with-cash">prior statements</a> by banking regulators last month in which they pressed banks to apply existing risk management principles when it came to crypto-related transactions.



“Operation Choke Point 2.0 deprives businesses of their constitutional rights to due process in violation of the Fifth Amendment,” the firm said. “Operation Choke Point 2.0 violates both the non-delegation doctrine and the anticommandeering doctrine, depriving Americans of key structural constitutional protections against the arbitrary exercise of governmental power.”



The end result has led to industry-related firms and individuals being debanked and revoked access to the automated clearinghouse network, it said. 



Cooper &amp; Kirk said in a statement on Monday, while it was instrumental in halting the original operation 1.0 from progressing further, it would be up to Congress to hold federal banking regulators accountable.



Principal author and Cooper &amp; Kirk attorney, David H. Thompson, said in the paper, federal bank regulators are dodging the notice and comment rule-making requirements by implementing binding measurements on the banking industry.



“Having decided that they will not permit banks that serve a broad base of customers to serve the crypto industry, the federal bank regulators are now taking steps to ensure that those banks that specialize in serving the crypto industry are unable to do business in the US,” Thompson said.



A spokesperson for the FDIC told Blockworks while it would not comment on the whitepaper, banking organizations are neither &#8220;prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation.&#8221;



<a href="https://blockworks.co/tag/banking">Several banks</a> with ties to crypto collapsed earlier this month, including Silicon Valley Bank, after facing a liquidity crisis spurred on by poor risk management.



The OCC and Kirk &amp; Cooper law firm did not immediately respond to requests for comment.



Updated March 29, 2023 at 6:18 PM ET: adds comment from FDIC



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US Bank Regulators Waging Secret War on Crypto Says Law Firm

The net worth of Binance CEO Changpeng Zhao fell more than $2 billion on Wednesday following revelations the CFTC is pursuing legal action against his exchange.



Zhao dropped seven placements from #46 at $27.9 billion to #51 at $25.8 billion, <a href="https://www.bloomberg.com/billionaires/profiles/changpeng-zhao/#xj4y7vzkg" target="_blank" rel="noreferrer noopener">according to</a> the Bloomberg Billionaire Index.



Even at current paper valuations, Zhao’s worth can purchase up to 13.2 million troy ounces of gold, and 330 million barrels of crude oil. That’s equivalent to 0.11% of the US’s total GDP, index data show.



Born in China, Zhao was later raised in Canada by his mother, a teacher, and his father, who received a job at the University of British Columbia as an academic.



To date, Zhao has seen more than 65% of his paper net total worth erased from a year ago, from $73.9 billion to current levels, Bloomberg data shows. The losses come after several industry-wide company failures in 2022 negatively impacted digital assets valuations and harmed investor interest.



The CEO’s fortune stems from his controlling interest in Binance, which is said to serve more than 120 million users worldwide and plays host to hundreds of cryptoassets. Zhao also owns Binance.US, which was previously valued at $4.7 billion in a funding round in March of last year.



<h2>“Unexpected and disappointing civil complaint”</h2>



The CFTC sued the exchange, Zhao and Binance’s former chief compliance officer, Samuel Lim, on Monday over allegations of trading and derivatives violations.



Zhao responded Monday, tweeting the number “4” in reference to a <a href="https://twitter.com/cz_binance/status/1610018096122851328?s=20" target="_blank" rel="noreferrer noopener">separate tweet</a> in January, meant to spur observers into ignoring “fake news” as well as fear, uncertainty and doubt.



In a <a href="https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282" target="_blank" rel="noreferrer noopener">blog post</a> on the same day, Zhao said the CFTC’s suit contains an “incomplete recitation of facts” before attempting to address several issues in the complaint. 



The CEO pointed to Binance’s multiple industry licenses, its “transparency” with law enforcement and its KYC measures, intended to block US users by nationality — a subject the CFTC takes particular issue with.



Industry observers have painted a dim picture for the exchange, which they say would have a hard time defending those allegations in what is perceived as a “<a href="https://blockworks.co/news/reactions-to-cftc-lawsuit-binance">fatal blow</a>” to its operations.



It follows similar actions taken against crypto firms by regulators this month, including the SEC serving Coinbase a <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">Wells notice</a> as it intends to probe the exchange over allegations of securities violations.



But Dmitry Lapidus, of crypto-native investment fund Dragonfly, told Blockworks the drop in Zhao’s worth meant little more than an “ego hit.”



“When you’re the king, everyone comes at you right?” Lapidus said.



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Over $2B Wiped From Binance CEO’s Net Worth Thanks to CFTC Suit

The native digital asset of the world’s largest exchange is facing significant sell-side pressure after the US commodities regulator announced legal action against Binance and its CEO.



The CFTC filed suit against the exchange and CEO Changpeng Zhao for allegedly violating trading and derivatives laws. Binance’s former chief compliance officer, Samuel Lim, is also named as a defendant in the suit.



Zhao said in a <a href="https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282" target="_blank" rel="noreferrer noopener">statement</a> late Monday he disagrees with the “characterization of many of the issues” alleged in the CFTC’s complaint. 



A spokesperson told Blockworks the company has made “significant investments” to ensure it did not have US users active on its platform — from boosting compliance staff to implementing market surveillance and investigative tools.



Binance’s BNB token — the utility of which is derived from reducing fees on the exchange — fell more than 6.2% on Monday to $308, the hardest hit among the top 20 cryptos by market value.&nbsp;



BNB is the fourth-largest crypto by total market capitalization with a value of $48.7 billion, <a href="https://www.blockworksresearch.com/assets">Blockworks Research data shows</a>.



<h3>Broader market</h3>



Other exchange tokens have fared better.&nbsp;



Rival exchange Huobi’s native token (HT) was down 3%, as of 7:30 p.m. ET, while Crypto.com’s token (CRO) had shed 4% on the day. LEO, which is used for trading fees and other services for the Bitfinex exchange — was down about 3%.



Those moves are in line with the broader digital asset market sell-off over the last 24 hours.



Bellwether asset bitcoin has shed 3.2% of its value to $27,000, technically its steepest decline since the start of the month. The industry’s total market capitalization, which measures the value of all crypto in circulation, has dipped 2.3% to $1.17 billion.



It appears the CFTC is seeking to strike a legal <a href="https://blockworks.co/news/reactions-to-cftc-lawsuit-binance">hammer blow</a> against the exchange in an attempt to do what others around the world have failed so far — bring Binance under their purview.



“Obviously if Binance goes under due to overwhelming fines then it&#8217;s unlikely BNB is worth much anymore,”&nbsp; Xavier Ekkel, founder of DeFi trading platform prePO told Blockworks.



The asset, however, may retain some “ghost value,” similar to how FTX’s native token, FTT, managed to retain a portion of its value despite the collapse of Sam Bankman-Fried’s empire, Ekkel added.



A hit to BNB’s value follows from the start of the month’s turmoil for another Binance branded token — its BUSD stablecoin — which faced regulatory actions from the New York Department of Financial Services (NYDFS) and the SEC. Several on-chain metrics are now pointing to a <a href="https://blockworks.co/news/the-end-of-busd-on-chain-metrics">swift end for BUSD</a>.



Binance declined to comment on BNB.



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Binance Token BNB Falls 6% after CFTC Files Suit

Ticketmaster has launched a feature that allows artists to grant NFT owners special access to events, marking another use case for the evolving technology powering digital collectibles.



Such “token-gated ticket sales” are compatible with Ethereum-minted tokens stored in digital wallets, including MetaMask or Coinbase, Ticketmaster said in a statement on Monday.&nbsp;



Heavy metal band Avenged Sevenfold (A7X) first requested the tool as a way to reward holders of its Deathbats Club NFT collection, launched in late 2021. In addition to presale access, rewards can include specific seats or custom travel packages — at the discretion of the artist.



Decrypt first <a href="https://decrypt.co/124607/ticketmaster-debuts-nft-gated-ticket-sales-starting-avenged-sevenfold">reported</a> the Ticketmaster launch.&nbsp;



M. Shadows, A7x’s lead singer, outlined his band’s link-up with Ticketmaster in a tweet earlier this month.&nbsp;



<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">Yes, we have integrated <a href="https://twitter.com/DeathbatsClub?ref_src=twsrc%5Etfw">@DeathbatsClub</a> into <a href="https://twitter.com/Ticketmaster?ref_src=twsrc%5Etfw">@Ticketmaster</a> assuring that fans get the best tickets at the best prices without Bots, scalpers and long wait times. More info to come but there is 3 hours left. So if you have a Deathbat head here… <a href="https://t.co/lB8hlLCkkF">https://t.co/lB8hlLCkkF</a>&mdash; M. Shadows (@shadows_eth) <a href="https://twitter.com/shadows_eth/status/1636037928257458177?ref_src=twsrc%5Etfw">March 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



“This new capability allows artists to get special access and rewards to specific fans they want to super serve,” David Marcus, Ticketmaster’s executive vice president of global music, <a href="https://business.ticketmaster.com/business-solutions/nft-token-gated-sales/">said</a> in a statement. “Artists like Avenged Sevenfold are using Web3 and NFTs to build deeper relationships with their fans, and we’re proud to help foster that connection through live events.”



M. Shadows said in a separate tweet last week that holders of Deathbats NFTs “had the easiest experience I’ve ever seen for buying tickets.”&nbsp;



“Let’s hope more bands follow,” he said on Twitter.



The launch follows Ticketmaster introducing an offering last August that aimed to give sellers on its platform the ability to issue NFTs before, during or after events.&nbsp;&nbsp;



Ticketmaster had already minted more than 5 million NFTs on the Flow blockchain, Dapper Labs <a href="https://www.dapperlabs.com/newsroom/ticketmaster-launches-new-capability-to-issue-digital-collectible-nfts-to-fans-before-during-or-after-an-event">said</a> in a blog post at the time. <a href="https://blockworks.co/tag/dapper-labs">Dapper Labs</a>, the company behind CryptoKitties and NBA Top Shot, created the Flow (<a href="https://blockworks.co/price/flow">FLOW</a>) blockchain in 2019.



Ticketmaster also utilized Flow to distribute more than 70,000 commemorative ticket NFTs at Super Bowl LVI in 2022.



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Ticketmaster Goes Live With NFT-gated Features

US law enforcement officials are lauding Blockchain Intelligence Group for the crypto investigative firm’s “significant collaboration” with federal officers probing the Frosties NFT collection rug pull.



Blockchain Intelligence Group’s role, officials said in a <a href="https://www.globenewswire.com/news-release/2023/03/27/2634710/0/en/Crypto-Investigative-Support-Company-Recognized-in-U-S-Department-of-Homeland-Security.html">statement</a> on Monday, resulted in the first federal arrest pertaining to an alleged NFT scam and prevented “additional victims from being defrauded.”&nbsp;



Federal authorities awarded Blockchain Intelligence Group’s parent company, the publicly traded BIGG Digital Assets, the Homeland Security Investigations’ annual “private sector partnership award,” they said. Firm executives and employees were recognized in a ceremony at New York’s John Jay College of Criminal Justice on Friday.&nbsp;



Blockchain Intelligence Group CEO Lance Morginn accepted the honor on behalf of the company, according to the company. It was bestowed by Ivan J. Marvel, who holds the title of special agent in charge for the New York unit of Homeland Security Investigations (HSI).



The Frosties scam is said to have resulted in NFT holders being defrauded of as much as $1.3 million in early 2022. At the time, the ruse was indicative of rising proliferation of bad crypto actors in a bullish digital collectibles space.



Frosties are a “cool, delectable, and unique” NFT collection, according to its OpenSea <a href="https://opensea.io/collection/frosties-nft">page</a>, which lists the 8,888 total Frosties minted.&nbsp;



Ethan Vinh Nguyen and Andre Marcus Quiddaoen Llacuna were <a href="https://www.justice.gov/usao-sdny/pr/two-defendants-charged-non-fungible-token-nft-fraud-and-money-laundering-scheme-0">charged</a> by the Department of Justice in relation to the rug pull, which was <a href="https://blockworks.co/news/nft-creators-stole-1-3m-from-investors-then-vanished-sources-say">previously reported by Blockworks</a>. The previous account cited sources, including interviews with Frosties holders who said they were defrauded, in breaking the news.&nbsp;&nbsp;



In the statement on Monday, Morginn said that when the Blockchain Intelligence Group “identified suspicious behavior occurring over social media channels relating to what appeared to be an apparent rug pull involving the Frosties NFT” and notified law enforcement “without hesitation.”&nbsp;



The blockchain tracing specialist then teamed up with law enforcement officials, Morginn said, and “quickly tracked and traced the flow of funds as well as the NFT all on one graph.”



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