Darren Kleine

“If you weren&#8217;t in crypto, you might just assume that it&#8217;s one big homogenous group of weirdos,” says Mike Ippolito.



“And it&#8217;s not,” he says, “it&#8217;s a very heterogeneous group of weirdos.”



The best known “tribe” in all of crypto is the Bitcoin culture, which tends to be motivated by macro monetary themes, Ippolito explains. This “OG” group is followed in prominence by the Ethereum crowd, which consists of a very different architecture and consequently, very different adherents.



The examples demonstrate just two of the many different cultures within crypto culture, he explains on the On the Margin podcast (<a href="https://open.spotify.com/episode/0BwZQ6XC5eK4E6gI15aAaG">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/bankruptcies-are-on-the-rise-weekly-roundup/id1558223079?i=1000627287650">Apple</a>).



Ippolito’s “least charitable” description of Bitcoin loyalists is “a little doomer,” he says.&nbsp;



“They’re the survivalists. They’re the anarchists. They’re the libertarians,” replies Morgan Creek Capital founder Mark Yusko.&nbsp;



<a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> resembles the gold community in the traditional finance space, Ippolito says, in that they want to see “consequences for the actions, especially of what <a href="https://blockworks.co/tag/central-banks">central banks</a> have been doing for the last hundred years.”&nbsp;



The <a href="https://blockworks.co/tag/ethereum">Ethereum</a> crowd, on the other hand, tends to leave concerns of macroeconomics and political machinations aside, instead focusing on crypto as a novel form of money with a vast array of potential applications in finance and beyond. 



The sole apparent answer for monetary issues in the world today — that the <a href="https://blockworks.co/news/federal-reserve-crypto-oversight-monitor">Federal Reserve</a> “can buy all the assets and squirrel it away in this box” — is a source of deep frustration for gold and bitcoin bugs alike, Ippolito says.



“The extreme of that is like, ‘Burn it down,’” says Yusko. “I don’t like that.”



“I like normalcy,” Yusko says. “I don&#8217;t want anarchy.” He continues, “Do not bring back Mad Max. That’s not what we want.”



<h2 class="wp-block-heading">Competition is good</h2>



Ippolito responds, “I am glad that there are multiple different ecosystems in the same way that I am glad, despite having a bias living in the United States, I love the United States.”



“I think it&#8217;s the best country in the world, but I&#8217;m really glad that it&#8217;s not the only country in the world,” he says. “If [the US] was the only country in the world, then it would stop being the [US] that we love and cherish.”



Ippolito argues that it’s “a very good thing to have many different countries and perspectives and ways of viewing the world. Same thing applies to crypto.”



Ippolito says “<a href="https://blockworks.co/news/espresso-systems-decentralized-sequencer-testnet">competition is good</a>,” noting that if only one homogenous point of view dominates a culture, “then no one challenges that point of view.”



“That&#8217;s what keeps you honest.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG3395417563" width="100%"></iframe>







“A heterogeneous mix of different cultures and ecosystems and <a href="https://blockworks.co/news/bitcoin-future-change">opinions colliding with one another</a> is much better,” he says, than binary arguments where people would say, “my culture is the best and I want everything to be like my culture.”



“The idea that homogenous outcomes are superior — it’s like bloodlines,” Yusko says. “If everybody comes from the same bloodline, bad things happen biologically and genetically.”



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Bitcoin

Tribalism in crypto is not the answer, say Yusko and Ippolito

Shalini Nagarajan

<div id="highlights-block_62bc5b424d476" class="highlights">
 <ul>
 <li>In February, the company was hit with one of the largest fines on record imposed on a crypto firm</li>
 <li>Crypto exchange FTX offered BlockFi a $250 million credit deal to ease its liquidity woes</li>
 </ul>
 
</div>



BlockFi has secured a payments license in Iowa, two weeks after the troubled cryptocurrency lender was fined in the state for selling unregistered securities.



The firm’s approval in the Midwestern state comes as liquidity issues continue to crop up across the industry, with crypto lender Celsius being the <a href="https://cms.blockworks.co/celsius-clashes-with-lawyers-over-chapter-11-bankruptcy-report/" target="_blank" rel="noreferrer noopener">first domino</a> to fall. BlockFi earlier this month announced it had liquidated a “large client” that failed to meet obligations.



The firm made the payments license announcement in a <a href="https://twitter.com/BlockFi/status/1541787388778844160?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1541787388778844160%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fsurprise-twist-as-blockfi-receives-money-services-license-in-iowa" target="_blank" rel="noreferrer noopener">tweet</a> on Tuesday. Iowa’s Money Service License allows BlockFi to offer stablecoin trading services and instant fund transfers to customers in the state.



<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">We&#39;re excited to announce that we’ve received our Money Services License in Iowa. Iowa residents can now trade stablecoins on our platform and instantly transfer funds via ACH. <a href="https://t.co/sNEFIlCeWY">pic.twitter.com/sNEFIlCeWY</a>&mdash; BlockFi (@BlockFi) <a href="https://twitter.com/BlockFi/status/1541787388778844160?ref_src=twsrc%5Etfw">June 28, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



According to its <a href="https://blockfi.com/interest-account-terms-existing-us/" target="_blank" rel="noreferrer noopener">website</a>, the company’s interest-bearing crypto accounts have not been registered and may not be offered or sold in the US. BlockFi didn’t mention in its tweet whether Iowa’s license covers its yield-generating product.



BlockFi didn’t return Blockworks’ request to elaborate on its license.



Iowa’s securities regulator on June 14 <a href="https://iid.iowa.gov/press-releases/blockfi-ordered-to-pay-more-than-943000-in-iowa-for-failing-to-register-securities" target="_blank" rel="noreferrer noopener">ordered</a> BlockFi to pay a fine of around $943,000 for allegedly selling securities (its crypto interest accounts) without being registered as a broker-dealer.



That penalty was part of a broader <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">$100 million fine</a> to settle allegations levied by the SEC and other state regulators in February. It was <a href="https://www.bloomberg.com/news/articles/2022-02-12/blockfi-to-pay-100-million-to-sec-states-over-crypto-lending" target="_blank" rel="noreferrer noopener">reportedly</a> one of the largest fines on record imposed on a cryptocurrency company.



Earlier this month, BlockFi was said to be looking to raise cash at a valuation shy of <a href="https://www.bloomberg.com/news/articles/2022-06-07/blockfi-looks-to-raise-new-cash-at-reduced-1-billion-valuation" target="_blank" rel="noreferrer noopener">$1 billion</a>, after raising money to a <a href="https://cms.blockworks.co/blockfi-set-to-increase-valuation-to-almost-5b-through-new-fundraising/" target="_blank" rel="noreferrer noopener">valuation of $5 billion</a> last year, highlighting the current distressed conditions of the crypto market.



BlockFi said on June 16 it had <a href="https://cms.blockworks.co/blockfi-says-it-liquidated-a-large-client-amid-3acs-margin-calls/" target="_blank" rel="noreferrer noopener">liquidated</a> a “large client” that failed to meet obligations, with reports pointing to venture capital firm Three Arrows Capital (3AC) as the unnamed counterparty.&nbsp;



BlockFi CEO Zac Prince said on <a href="https://twitter.com/BlockFiZac/status/1537499456349798406" target="_blank" rel="noreferrer noopener">Twitter</a> that no client funds had been impacted by its 3AC exposure. Yet crypto exchange FTX came to its rescue last week, agreeing to extend a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit deal</a> to ease BlockFi’s liquidity fears. Now longtime backer Morgan Creek Digital is reportedly <a href="https://cms.blockworks.co/blockfi-has-a-new-bidder-in-morgan-creek-report-says/" target="_blank" rel="noreferrer noopener">competing with FTX</a> to acquire a majority stake in the lender.



Fears of contagion have spread rapidly across the crypto industry ever since BlockFi rival Celsius <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">froze withdrawals</a> on its platform on June 12. Industry commentators have said Celsius’ potential insolvency could prove harsh for the industry in terms of retail investor trust.



While crypto markets are heavily depressed, Martin Hiesboeck, head of blockchain and crypto research at <a href="https://uphold.com/en-us">Uphold</a>, told Blockworks he hasn’t observed contagion spilling into traditional markets so far.



“This could change if the price of bitcoin remains between $10k and $20k for a prolonged time and more protocols backed by traditional financial firms fail,” he said. “As it stands the sums involved can probably be covered by existing crypto behemoths like FTX and Binance, which have moved enormous amounts of USDT and BTC over the network as our on-chain analysis shows.”



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BlockFi

BlockFi Wins Iowa License Weeks After State Regulator Fined the Lender $943,000

<div id="highlights-block_62b9533f16ccb" class="highlights">
 <ul>
 <li>FTX’s proposal gives it the option to acquire BlockFi at a price of zero, Mark Yusko told investors</li>
 <li>He said he’s working on securing an equity offer for BlockFi</li>
 </ul>
 
</div>



Asset manager Morgan Creek Digital wants to compete with FTX’s support for troubled crypto lender BlockFi.



The investment firm is looking to raise $250 million from investors to acquire a majority stake in BlockFi, <a href="https://www.coindesk.com/business/2022/06/25/morgan-creek-is-trying-to-counter-ftxs-blockfi-bailout-leaked-call-shows/" target="_blank" rel="noreferrer noopener">CoinDesk</a> reported on Sunday, citing a leaked investor call. 



Morgan Creek, a longtime BlockFi backer, reportedly came up with this plan after FTX last week announced a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit line</a> for the lender. According to the leaked audio, Morgan Creek Digital’s Managing Partner Mark Yusko said he had been “making calls all day.”



Crypto billionaire and FTX CEO Sam Bankman-Fried has been labeled a “lender of last resort” for attempting to rescue the struggling industry. In a <a href="https://twitter.com/SBF_FTX/status/1539268638791696385" target="_blank" rel="noreferrer noopener">tweet</a> on Tuesday, he said his company is committed to protecting the digital asset ecosystem and its customers.



Multiple venture capital funds are reportedly casting around for ways to provide BlockFi with funds and bolster its balance sheet amid the shaken market.



According to Yusko, FTX’s $250 million credit deal with BlockFi raises a point of concern for existing shareholders, including Morgan Creek — it provides FTX with the option to acquire BlockFi at no cost. If the crypto exchange goes ahead with this option, then BlockFi’s existing equity shareholders, investors in prior venture rounds, management and employees with stock options would all be liquidated.



If FTX were to exercise that option after extending its credit line, only investors in the most senior tranche of BlockFi’s latest fundraise would recover a minimal amount on their investment, Yusko said. Morgan Creek would be among those caught in a tight spot.



This might make the FTX deal look tricky. But there was a rational reason BlockFi’s founders accepted the terms, Yusko said, according to CoinDesk. Of the many emergency financing offers the firm reportedly received, FTX’s deal was the only one that wouldn’t diminish the role of client assets.&nbsp;



That means if BlockFi went ahead with another offer, its depositors would have to stand by until the new lender was repaid first. Yusko didn’t mention which other firms approached BlockFi with bailouts. Furthermore, the lender hadn’t received any equity financing options by then.



The only other option, Yusko told investors on the call, is for BlockFi to raise an equivalent amount in equity. He said he expects a 10% chance for this idea to work out, “but not zero.”



Yusko also told an investor he’s open to a deal that would allow FTX and Morgan Creek to each put up a portion of their capital.&nbsp;



So far, Yusko has reportedly spoken to an investor that could issue a $100 million check and two others who could finance up to $50 million. He warned that efforts toward securing an offer are far from certain.



Morgan Creek declined to comment. BlockFi didn’t immediately return Blockworks’ request for comment.



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Morgan Creek

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