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A Former Coinbase Lawyer Is About to Become Acting Head of US Bank Regulator

A former top lawyer at Coinbase is about to take the top job at a major U.S. bank regulator, at least temporarily.

Brian Brooks, the first deputy comptroller and chief operating officer in the Office of the Comptroller of the Currency (OCC), is poised to become acting comptroller as his boss, Joseph Otting, is planning an imminent departure.

Otting will be stepping down after reforming rules designed to prevent financial institutions from discriminating against low-income and minority individuals, Politico Pro reported Tuesday, and he intends to announce his departure after the new rules are finalized this week. The Wall Street Journal also reported Otting’s plans.

Brooks, as the First Deputy, will take on the role of Acting Comptroller of the Currency until U.S. President Donald Trump nominates a permanent candidate and the U.S. Senate confirms them. The OCC is the only entity that charters national banks in the U.S.

Neither outlet had a firm timeline for Otting’s departure.

Brooks took the role of First Deputy barely two months ago, but has already announced his support of a charter which would allow crypto – and other fintech firms – to be licensed through a national regime, rather than have these companies secure money services business licenses on a state-by-state basis.

Prior to joining the OCC, Brooks was chief legal officer at crypto exchange Coinbase. In recent years, he’s also held leadership and advisory roles at Fannie Mae, and notably was the vice chairman of OneWest Bank between 2011 and 2014. OneWest was founded and owned by Steven Mnuchin, now the U.S. Treasury Secretary who appointed Brooks to his OCC role.

Otting was also at OneWest, as president and CEO between 2010 and 2015.

A spokesperson for the OCC could not immediately be reached for comment.

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Accel, Coinbase Join $17M Pre-Seed Round for Institutional Crypto Trading Firm FalconX

FalconX’s multi-million-dollar pre-seed funding from an impressive list of investors reflects institutional demand for a platform that aims to fight artificially inflated trading volumes in the crypto space.

The cryptocurrency trading platform announced Thursday it had raised a total of $17 million in a round led by Accel – which has Facebook and Slack in its portfolio – and with the likes of Coinbase Ventures, Fenbushi Capital and Land Avon Ventures also investing.

That’s a lot for a pre-seed round. To give some perspective, Facebook – social media giant now worth over $600 billion – raised $12.7 million, in a round also led by Accel, in a Series A in 2005. Of course, inflation means Facebook’s raise would now be worth the same as FalconX’s; then again, a pre-seed is two or three raises behind a Series A.

So what made FalconX such a draw for investors? Put simply: it provides best trade execution. An AI platform plugs into a network of exchanges and dark pools, providing the best available prices and minimal slippage. The idea, explains the firm’s website, is to provide the base trading layer that mainstream financial institutions need to delve into the digital asset class.

See also: Crypto Data Provider Skew Raises $5M, Launches Trade Execution Platform

In an email, a FalconX spokesperson told CoinDesk the platform provides a solution to wash trading, where exchanges or crypto projects trade against themselves to inflate volumes, drive up prices and dump assets on unsuspecting investors.

It’s a known problem in crypto: a report from Bitwise in early 2019 claimed as much as 95% of all exchange volume was fake.

Wash trading is “a pain-point with our institutional clientele,” a FalconX spokesperson said, and systemic data misreporting precludes mainstream institutions from touching the space. Filtering out “bad market data” had allowed the platform to scale to $7 billion in volume “while still in stealth mode and no spend on marketing,” the spokesperson said.

So when it came to the seed round, a pitch of fighting against bad market data “resonated very well with our investors,” they explained. “They went into great detail on how we leverage data science to identify ‘wash volume’ in eliminating slippage, derive time guarantee from dynamic exchange order books, defend against security threats, and improve infrastructure reliability.”

FalconX claims to have around 100 clients: hedge funds, proprietary firms, and OTC desks, as well as some mining firms and crypto exchanges. A further appeal to investors. The spokesperson couldn’t help but mention their team, which included ex-employees from Google, Goldman Sachs, Pantera Capital, Kraken, and PayPal, which may also have helped.

See also: CZ’s Twitter Feed Swayed New CoinMarketCap Ranking That Put Binance on Top

So what will FalconX spend its $17 million on? Per a press release, funding will go on new products and an expanded trade execution suite, as well as changes to the trading infrastructure aimed to help the company scale. Having only launched 10 months ago, FalconX claims to have a quarterly growth rate of 6,000%.

In TechCrunch’s appraisal of the raise, company founders Raghu Yarlagadda and Prabhakar Reddy said potential clients are required to have around $10 million in assets under management (AUM). That requirement isn’t likely to change as FalconX says it has no plans to broaden its client base; retail investors won’t be able to use the platform.

CoinDesk asked whether FalconX is creating two-tiered market access and perpetuating an unfair trading environment.

A spokesperson said some of the firms clients use FalconX’s technology to improve the trading experience for their own retail clients. But they added: “the market remains drastically underserved,” perhaps hinting that there’s nothing to stop other platforms providing best trade executions for retail investors, should they want to,

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Industry Group Led by Polychain, Coinbase Seeks to Get Ahead on Staking Regulations

The Proof of Stake Alliance (POSA), an industry advocacy group, is publishing a series of recommended standards for companies participating in a proof-of-stake consensus protocol in an effort to reduce regulatory clampdowns on different networks.

The group met with members of the U.S. Securities and Exchange Commission (SEC) earlier this year to discuss their proposals and discuss staking more broadly, as well as submit a white paper detailing the industry recommendations. The alliance includes Bison Trails, Coinbase, Polychain, Tezos and the Cardano Foundation, among others.

“We’re coming out with some industry-driven solutions around staking as a service which we believe will really help push the ecosystem forward and ensure that staking as a service and staking can grow in the U.S. without being subject to some regulatory landmines and hurdle,” said Evan Weiss, the group’s founder.

Weiss, who is also chief of staff at Bison Trails, said the idea is entities that stake networks can be seen as service or infrastructure providers, rather than financial product providers.

The recommendations shared with the SEC are essentially:

  • Don’t provide investment advice to market participants
  • Don’t call staking rewards “a profit opportunity”
  • Focus advertising on network participation and security
  • Don’t indicate the service provider has control over inflation rate
  • Don’t provide guarantees on staking rewards

“I do think [with] these networks, we are very clearly seeing that the technology underlying them is very powerful and I see it having an impact, maybe not in the next few months but in the next year or two,” Weiss said.

The group used Tezos and Cosmos as two examples of proof-of-stake networks that are already live, he said, with questions focusing on how they work.

See also: Coinbase Custody to Support Polkadot Staking With up to 20% Returns

Polkadot and NuCypher are another set of networks that haven’t quite launched yet, but which the group hopes to use as examples.

“As they start launching we’re hoping to continue engaging with the SEC,” Weiss said. “They want to be smart on this which makes total sense and in my view they’ve been super reasonable about this.

Network, not tokens

Weiss said the group wanted to focus strictly on the operation of a proof-of-stake network, and not necessarily on the tokens that might be built on them. 

“I think we really hope it looks more at looking at the providers as security and infrastructure providers, not financial providers,” he said.

The group wants to remain small and focused on a single issue rather than field questions about whether a given token is a security, he said, adding the alliance would be willing to collaborate with some of the other trade associations in the space as needed to address these types of questions.

“There’s been a lot of amazing work done by the [Chamber of Digital Commerce], the Blockchain Association so for us being a smaller [group] … I don’t’ think we’ll be taking the lead here,” he said.

The question of how proof-of-stake networks fit into regulatory regimes is still a broad one. Right now the group is focused on advocacy efforts within the U.S., but Weiss hopes any solutions that fit the U.S. framework will be applicable outside the country as well.

“We’ve kind of taken this approach of being very detailed and so we’ve had a few times that we’ve been really focused on,” he said. “Our thinking is if we can get this right in the U.S. it can work [elsewhere] through ripple effects.”

See also: Kyber to Offer Delegated Token Staking After Coming Network Upgrade

What the group needs now is buy-in from industry stakeholders and for conversations with the regulators to continue, he said. 

He also wants to avoid a situation where entities are promoting tokens or a potential repeat of the 2017 initial coin offering market, which in his view “was not a great allocation of resources.”

“A lot of people were hurt by it, so it’s finding a line between people who are really true technologists and making sure the people in the new economy, new interactions have a way to do that,” he said.

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JPMorgan Bank Takes on Coinbase, Gemini as Its First Crypto Exchange Customers

Its CEO once called bitcoin a fraud but now U.S. banking giant JPMorgan Chase has added its first cryptocurrency exchange customers, CoinDesk has confirmed.

Sources told The Wall Street Journal Tuesday the bank signed two popular regulated exchanges – Coinbase and Gemini, the latter founded by Tyler and Cameron Winklevoss.

The fact that both exchanges are regulated in the U.S. was apparently a factor in the approvals, which still took a lengthy period of vetting, the WSJ said. Accounts for the two crypto firms were approved last month, the sources said, and are now in use.

The move by JPMorgan is notable in a nation where banking services are hard to come by for any firms dealing with cryptocurrencies, which are viewed as a high risk by the banking industry. Until now, exchanges and other firms working with digital assets have been served by a few crypto-friendly banking institutions such as Silvergate.

Still, Gemini and Coinbase aren’t the first crypto clients for JPMorgan. TokenSoft, a regulated transfer agent and software vendor for security token services, has had an account at the bank since 2017, CEO Mason Borda said on Twitter.

Speaking at CoinDesk’s Consensus: Distributed event Monday, U.S. banking regulator Brian Brooks said, “Banks not only have the ability, they have an obligation to serve all lawful businesses. They shouldn’t be discriminating because something’s a new technology.” Brian Brooks was formerly Coinbase’s chief legal officer and is now senior deputy at the Office of the Comptroller of the Currency.

“As crypto matures, there are increasingly many companies that have perfectly robust risk management systems and do have an ability to comply with those laws, and they shouldn’t have trouble finding bank relationships,” he said.

With cryptocurrency firms now accepted by a major bank, it’s possible other institutions may follow suit. The traditional finance industry has been becoming more open to the financial technology as it proves a worthy investment at a time when the markets’ favorite assets are struggling.

So far this year, bitcoin as up 20%, while the S&P 500 stock index is down 9.3% and oil has fallen 66%. Traditional safe haven gold is up just 11.5% at a time when markets have been reeling from the effects of the coronavirus pandemic.

The WSJ sources said JPMorgan is now providing Coinbase and Gemini’s U.S. users with deposits and withdrawals via wire transfer and automated Clearing House (ACH) transactions. It’s also helping the exchanges with cash management services, they said.

JPMorgan has also built out its own blockchain settlement service with its own U.S.dollar-backed token, dubbed JPM Coin. Previously a crypto cynic, CEO Jamie Dimon said last year the token “could be internal, could be commercial, it could one day be consumer.”

A JPMorgan spokesperson declined to comment on the news when contacted by CoinDesk.

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Blockchain Bites: Coinbase and BlockFi Do Some Major Hiring, Tron Gets Coronavirus Relief

Justin Sun’s Tron platform successfully applied for a $2 million pandemic relief loan intended for small businesses. Coinbase has scooped up employees from the now-defunct TokenAnylist startup while BlockFi has poached two executives from Credit Suisse and American Express to join its lending firm. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top Shelf

Transaction Throttling 
BitMEX’s daily broadcast of transactions may be spiking Bitcoin fees. The exchange broadcasts thousands of transactions at once around 13:08 UTC (9:08 a.m. ET), leading to a fee increase every day, pseudonymous Bitcoin researcher 0xb10c contends.

https://www.shutterstock.com/image-photo/mexico-city-march-31-singerproducer-akon-28294267
Hip-hop artist Akon is the latest celebrity to join the cryptocurrency industry, setting his sights on Africa with his Akoin token project. (Credit: Shutterstock)

Crypto Across Emerging Markets: Africa
Binance, Akon and other crypto pioneers are placing bets the future of money will be defined by African markets, where cryptocurrency awareness and usage surged dramatically over the past year. Exchange volume has steadily increased on the continent, with a notable spike during the COVID-19 crisis. 

Comply or Die
Dutch crypto companies must register with the Netherlands’ central bank by May 18 or cease operations immediately, the monetary authority said Monday. De Nederlandsche Bank is moving quickly to enforce Dutch anti-money laundering laws, which passed the Dutch Parliament last month.

Trouble Down Under
The CEO of fintech firm iSignthis has accused the Australian Securities Exchange (ASX) of abusing its market-leader position by trying to delay the launch of ClearPay, a blockchain-based trading system on the rival National Stock Exchange of Australia (NSX).

Movers & Shakers

  • Nervos Incubator Nervos has launched CK Labs, a virtual incubator, for early-stage startups building decentralized applications (dapps) on its public blockchain platform. The platform is headed up by Ben Morris, veteran of Status, an Ethereum-based messaging platform.
  • Coinbase Consolidation Crypto intelligence firm TokenAnalyst has shut down after nearly three years in business. Several employees have been scooped up by Coinbase, a representative confirmed. 
  • Traditional Hires Crypto lender BlockFi is adding two traditional finance executives to help the firm roll out new products and expand into new markets. Former American Express executive Wittney Rachlin will join as chief growth officer and former Credit Suisse executive David Olsson as global managing director of the European and Asian markets. 

All But Omni
Tether growth is hitting all-time highs across multiple blockchains, but the first protocol to support Tether is being left behind. Omni Layer, built on Bitcoin, has suffered negative growth in Tether transactions for the last 12 consecutive months. 

Bitfinex Flex
Bitfinex saw revenues of $21.4 million in Q1 of 2020. This represents a near doubling of revenues from last year’s first quarter. (The Block

Land Records
Swedish startup ChromaWay aims to make land ownership in Bolivia, Peru and Paraguay more transparent by putting records on a blockchain. The company announced its LAC PropertyChain pilot on Tuesday.

Tron CEO Justin Sun speaks at Consensus 2019, photo via CoinDesk archives
Justin Sun
Source: CoinDesk archives

Tron’s Relief?
Justin Sun’s blockchain platform Tron will receive $2 million in U.S. coronavirus relief intended for salary protection. (Decrypt)

Seed Capital 
Bitcoin mining firm VBit DC brought in a $1.1 million seed funding round to build a mining operation in Alberta, Canada. (The Block)

Power to Burn
Ukraine’s energy minister has advised the country’s state-owned nuclear power operator to consider using excess electricity for mining cryptocurrencies. Last week, a Chinese city asked blockchain firms to sop up extra hydropower produced during the upcoming rainy season. (The Block

Privacy Deep Dive
As the coronavirus crisis puts pressure on tech startups, privacy-focused firms are poised to last. A reliance on privacy intrusive contact tracing and “identity passports” to combat the viral spread is leading to a conscious effort to prevent data fragmentation and privacy leaks. “The move to remote working and widespread use of shadow IT devices has multiplied cybersecurity risks,” creating a huge opportunity for security-focused companies, said Radoslav Dragov, the Blockchain Lead for Europe at IDC.

CoinDesk Live: Lockdown Edition

CoinDesk Live: Lockdown Edition continues its popular twice-weekly virtual chats via Zoom and Twitter, giving you a preview of what’s to come at Consensus: Distributed, our first fully virtual - and fully free - big-tent conference May 11-15. 

Register to join our seventh and final session Thursday, May 7, with speaker Felipe Duarte from DAOCanvas to show you how to roll your own DAO, hosted by Consensus organizer Bailey Reutzel. Zoom participants can ask questions directly to our guests.

CoinDesk Live: Lockdown Edition continues its popular twice-weekly virtual chats via Zoom and Twitter, giving you a preview of what’s to come at Consensus: Distributed, our first fully virtual – and fully free – big-tent conference May 11-15. 

Register to join our seventh and final session Thursday, May 7, with speaker Felipe Duarte from DAOCanvas to show you how to roll your own DAO, hosted by Consensus organizer Bailey Reutzel. Zoom participants can ask questions directly to our guests. 

Market Intel

Daily Gains
Bitcoin jumped to a high of $9,220 at 10:20 UTC on Wednesday, having settled above $9,000 the day prior to register its first close above that psychological support in two months. Open interest – or the number of futures contracts outstanding on the CME – also rose to $351 million on Tuesday, the highest level since July 10, 2019.

Shorting Bitcoin
A new token lets traders make gains whenever bitcoin’s price falls. Swiss fintech firm Amun launched its BTCSHORT (BTCS) daily inverse token Wednesday, which returns a gain based on bitcoin’s (BTC) inverse price movements in a given 24-hour period. 

CoinDesk Monthly Review: April 2020

CoinDesk Research's monthly review of crypto markets overviews returns, volatility and correlations of bitcoin, ether and other crypto assets - all in a macro context. Plus, we track growth in stablecoins and look at what past halvings can tell us about the upcoming one. The report is free to download.

CoinDesk Monthly Review: April 2020

CoinDesk Research’s monthly review of crypto markets overviews returns, volatility and correlations of bitcoin, ether and other crypto assets – all in a macro context. Plus, we track growth in stablecoins and look at what past halvings can tell us about the upcoming one. The report is free to download.

CoinDesk Podcast Network

The Breakdown
Why crypto matters for financial inclusion, featuring Celo’s Marek Olszewski.

Who Won #CryptoTwitter?

screen-shot-2020-05-06-at-11-33-03-am

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Crypto Forensics Firm TokenAnalyst Shuts Down, Some Employees Hired by Coinbase

Crypto intelligence firm TokenAnalyst has shut its doors, the company announced Tuesday.

The group said in a Medium post it would stop supporting its platform and application programming interface (API), and a flashing note on the company’s website says, “The data on this site does not refresh anymore.” The blog post did not give a reason for the shutdown, though it did say some of the team’s members will be joining Coinbase, the San Francisco-based crypto exchange.

“Our mission was to bring transparency to the decentralized world, and we believe we made significant progress towards this mission,” the post said. “We built a host of tools that made blockchains easier to understand for our users, and we hope you enjoyed using our data and services as much as we enjoyed building them.”

A Coinbase spokesperson confirmed several members of the TokenAnalyst team would be joining.

“We remain committed and driven towards creating an open financial system for the world and we think that Coinbase is a fantastic place to do that,” the Medium post said.

TokenAnalyst was founded in October 2017, just as the initial coin offering boom and crypto prices surged that year. It had a handful of employees – at least six, according to LinkedIn – including its founders, Jai Prasad and Sid Shekhar. Both joined Coinbase, according to their Twitter biographies.

“It was truly invigorating to tweet/WhatsApp/Telegram/email/Signal 24/7 with crypto enthusiasts from all over the world. It was your incredible support, encouragement and passion that kept us going and motivated,” the blog post said.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.



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