Philippine Crypto Exchange Snags $50 Million In Funding Round Led By Tiger Global

Philippine Digital Asset Exchange (PDAX) has raised more than $50 million in a funding round led by U.S. investment firm Tiger Global Management as the cryptocurrency exchange looks to make virtual assets more accessible in the Southeast Asian country. 

UBX, the venture fund of UnionBank of the Philippines, which counts one of the country’s richest clans, the Aboitiz family, as its largest shareholder, has taken part in the financing round, PDAX said in a statement on Thursday. Other investors include Kingsway Capital, Jump Capital, U.S. blockchain payments firm Ripple and DG Daiwa Ventures, the investment company jointly established by Japan’s Daiwa Securities Group and Digital Garage, among others. 

“Today, PDAX facilitates the exchange of crypto and fiat currencies, and enables payments in and out of metaverse applications,” Nichel Gaba, founder and CEO of PDAX, said in the statement. “We are in the middle of developments that will continue to make access to digital assets safer, easier and more efficient for everyone.”

Tiger Global led another $12.5 million funding round in PDAX last August, according to the crypto company. BC Group, a Hong Kong-listed firm that runs the city’s first licensed digital asset platform named OSL, also participated in the round. 


The new investments underscore the potential for cryptocurrencies in the Philippines. The country was ranked third in Southeast Asia in terms of adopting of digital assets last year, according to blockchain data platform Chainalysis. Some blockchain-based games that allow players to earn cryptocurrencies have become an income source for people in the Philippines as the pandemic cut down on physical jobs.

PDAX was established in 2018 by Gaba, who spent nearly a decade working in various roles in investment banking, including HSBC. The crypto exchange is one of the 18 licensed virtual asset service providers in the Philippines as of December, according to the country’s central bank. 

PDAX’s mission to make crypto investments accessible to people in the Philippines has attracted the likes of more established players in the emerging industry. The company said it had struck partnerships with BitMex Ventures, the investment arm of derivatives exchange BitMex, as well as ConsenSys, the blockchain software firm that operates the popular MetaMask crypto wallet.

PDAX has also teamed up with the UnionBank and the country’s treasury bureau to launch a blockchain-based app that allows traders to invest in retail treasury bonds.


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How The Crypto Couple Went From Wannabe Tech Luminaries To Targets In The Biggest Financial Seizure In Justice Department History

Ilya “Dutch” Lichtenstein raised money from Mark Cuban and other well-known investors. His wife, Heather Morgan, built a following as a quirky rapper and social media luminary. 

By Cyrus Farivar, David Jeans and Thomas Brewster

Heather Morgan and her husband, Ilya “Dutch” Lichtenstein, seemed to lead a successful life as tech entrepreneurs and thought leaders. Lichtenstein invested in startups alongside heavyweights like Marc Benioff and had launched his own company backed by Mark Cuban. Morgan styled herself as a prolific thought leader, posting online articles about women in leadership, and even had an alter ego as a goofy YouTube rapper called Razzlekhan, who talked about success and money. 

But they had a secret, according to investigators with the IRS. Morgan, 31, and her husband, Lichtenstein, 34, were arrested in New York on Tuesday and charged with trying to launder $3.6 billion in bitcoin stolen by hackers from the Bitfinex exchange six years ago. If convicted of the charges against them, each could serve up to 25 years in prison. Court documents unsealed this week detail an elaborate scheme to launder and conceal the origins of the stolen bitcoins. Lichtenstein and Morgan are not charged with perpetrating the hack.

Forbes found that as the pair allegedly used a digital wallet to launder the cryptocurrency, they simultaneously styled themselves as self-made entrepreneurs, investing in companies together and, in Morgan’s case, establishing herself as a social media personality.

Since meeting about a decade ago, the two worked hard to gain a foothold in Silicon Valley and New York tech circles. Lichtenstein had proceeded through a series of failed ventures, including running a Ron Paul fan website and setting up a brain-boosting supplements business before co-founding MixRank, now a venture-backed sales and marketing company. Lichtenstein left MixRank abruptly in 2016, the same year that Bitfinex was hacked. 

During that time, Morgan cast herself as an expert in “cold email” – unsolicited communications – and parlayed that into writing gigs and appearances at sales conferences. 

“She came across as a smooth operator but never in a way that raised suspicions,” said Travis Lybbert, a University of California, Davis economics professor, who hired Morgan as a research assistant in 2011. “She was a very confident young person, professional, who would look for opportunities and create them.”

People who knew the couple said they were shocked by the arrests. Lybbert, in a phone interview with Forbes, said Morgan had been a promising student whose understanding of the Middle East was impressive. She “earned a place” as a co-author on the academic book chapter that they wrote together, he said: “Lessons from the Arab Spring: Food Security and Stability in the Middle East and North Africa.” 

The professor said that he had given a guest lecture in one of Morgan’s classes when she was a student at UC Davis, and she approached him later, after her graduation, seeking research opportunities that could aid her “graduate studies in economics, especially in international and developmental economics.”

”She was always looking for the next thing and had really high aspirations for what she wanted to do professionally,” Lybbert said.

Lybbert also said that while he and Morgan were working together in 2011 and 2012, Morgan was ambitious and busy. After graduating from UC Davis, she traveled to Hong Kong, where she worked as an event planner, while also applying to graduate school in economics and starting her own copywriting consulting company, SalesFolk, Lybbert said.

According to Morgan’s LinkedIn page, she moved on from Hong Kong to Cairo, where she completed a masters degree in economics and international development at the American University. Morgan returned to California in 2013 and took a job with a company called Tamatem Inc., an Arabic-language mobile-games publisher, which was incubated in 500 Startups. At about the same time, Morgan launched SalesFolk. Archival copies of her website from June 2013 describe her as an “analytics ninja,” a “published author,” and as having seven years of copywriting experience.

It appears she crossed paths with Lichtenstein around this time. Listed as a testimonial at the bottom of her Salesfolk web page is a comment from Lichtenstein, who gave her services a glowing review, calling her “intense, brilliant, and laser focused,” and adding that “a single hour of brainstorming with Heather pays for itself immediately.” 

In 2014, Morgan began blogging on her own site,, where she described herself as a “shameless economist in pearls.” In a post on April 14, 2014, she wrote: “​​While my risk-loving behavior may have brought me more chaos than most people could handle, mixed with some failures, it also led me to my biggest wins.” A few months later, Morgan interviewed Lichtenstein for her own YouTube channel, asking him about his company, MixRank, in a video entitled “Get your first $1 million in enterprise sales with zero marketing spend.” 

By now, Morgan was getting recognition beyond her own websites. In August 2015, she was interviewed online by a sales management software company called Ambition, which described her as someone who was “rewriting the playbook on cold email outreach for [software-as-a-service] companies all over the world.” Brian Trautschold, now Ambition’s COO, who did the interview with Morgan, expressed shock that she had been accused of a federal crime. It’s “crazy,” he told Forbes in a phone interview. “She was speaking at SaaS conferences and there was no indication that the person wasn’t focused on consulting on email…It’s a shock, seven-plus years later, to see the other side of the story kind of come out.”

A few months before the Bitfinex hack in August 2016, Morgan became a freelance columnist at Inc. magazine, which described her as having gone from “sleeping on couches to creating a bootstrapped seven-figure business called SalesFolk.” The following year, she also became a contributor to the ForbesWomen section on, where she posted articles about topics ranging from music to food. In one post, Morgan discussed how she had a speech impediment growing up and was bullied by other students in school.

In that 2019 Forbes post, she hinted at previous legal issues: She wrote that during a business trip to Asia, she received unspecific “legal threats,” learned that her employees were “fudging numbers,” and was bullied by longtime friends. Forbes removed her as a contributor in September 2021 during a routine semiannual review. 

It was because of professional setbacks like these, she wrote in the Forbes post, that she decided to become a rapper, adopting the name Razzlekhan. In an Instagram post in January 2019, Morgan is wearing a black leather jacket while another woman stands behind her. “So some people in the tech world are a little bit worried about me rapping and are not sure if I should have a rap song, also some corporate people,” she said. “But you know what, I remember just as many people telling me not to take a risk, not to start a company, not to be an entrepreneur.” Many of Razzlekhan’s YouTube videos have been made private or been removed since Tuesday evening.

Since the Bitfinex hack in 2016, the couple’s online posts show an extravagant lifestyle. Morgan documented their jet-setting from Panama to Malaysia and Mexico on social media platforms. 

The same month the alleged hack took place, Morgan posted a photo to Instagram. She and Lichtenstein are sitting on a blue satin couch, laughing. “I always love getting into trouble w/ this crazy guy,” she wrote. “Thanks for always inspiring me to be a better entrepreneur!”

Lichtenstein, for his part, had established himself as a minor player in the New York tech investment world, where, according to the Justice Department, he was living in an apartment at 75 Wall Street, an exclusive block where a typical condo is valued upward of $1 million. 

It was an image of success he had been building for a decade. After graduating with a major in psychology from the University of Wisconsin-Madison, Lichtenstein had sought like-minded entrepreneurs and went to Silicon Valley, where he met other techno-libertarians, according to his trail of now-defunct websites and businesses identified by Forbes. One of his more notable sites was, which contained a stream of news and support for the one-time Republican presidential candidate who became a famous advocate for cryptocurrency. According to the site’s banner, it was the “#1 source for all Ron Paul news.” 

Lichtenstein also dabbled in selling brain supplements around this time, claiming to have created one called Instant Focus that promised to “turbocharge your productivity,” which he said helped him “code longer and be more productive” in a post on Hacker News in October 2010. He also launched weight loss sites, including, which was pushing colon cleanses and acai supplements, and what appeared to be a series of dating websites, and

While those enterprises failed to get off the ground, he found more success as co-founder of MixRank, a data-driven-marketing startup, which was accepted into the Y Combinator accelerator program in 2011. At the time, Lichtenstein was trying to establish himself as a Silicon Valley thought leader, in a blog entitled Influence Hacks. In one post he wrote, “The amount of money you make has nothing to do with how hard you work … What markets really reward is RISK.” 

Among early MixRank backers were billionaire investor Mark Cuban and the 500 Startups venture capital fund, according to Pitchbook, but both sold their stakes to an undisclosed buyer sometime between 2012 and 2015. MixRank’s other founder, Scott Milliken, didn’t immediately respond to requests for comment at the time of publication. In an email, Cuban said he “never met” Lichtenstein.

Later, Lichtenstein founded a blockchain-based cybersecurity company called Endpass and an investment business called DemandPath, alongside Morgan. In just over a decade, he was also investing in startups. Those included Routable, where he was an angel investor alongside more than a dozen other investors, including billionaire Bay Area heavyweights like Scott Belsky, Box founder Aaron Levie and Salesforce founder and co-CEO Marc Benioff. There is no indication that Lichtenstein knew or communicated with the other investors.

In one LinkedIn post from 2021, Lichtenstein wrote that he was “proud to have been among the earliest investors in Routable.” Omri Mor, cofounder and CEO of Routable responded, “Proud to have you with us from the start.” Mor didn’t respond to requests for comment. 

Lichtenstein has not been nearly as prolific on social media as his wife. Over the past decade, his Twitter account was quiet for nearly seven years, from 2013 until 2020. But in January 2021, he complained about what he called “#BigTechCensorship.” Last month, he took aim at the venture capitalist Marc Andreessen, lampooning him over a meme he posted. “How wild that billionaires who can do anything in the world choose to prioritize posting second rate memes on Twitter?” 

Reached by phone, Liechtenstein’s father, Yevgeniy Lichtenstein, declined to speak about his son’s predicament. “I don’t want to discuss it, I’m sorry,” the elder Lichtenstein said.

A 20-page affidavit written by Christopher Janczewski, a special agent with the Internal Revenue Service, accuses Morgan and Lichtenstein of moving the stolen bitcoins “through thousands of transactions to over a dozen accounts” in their own names and businesses. One of those companies was SalesFolk, Morgan’s copywriting consulting company, according to the affidavit.

In June 2019, Morgan allegedly changed a personal bitcoin account to a business account that she had at a specific virtual currency exchange (identified in court documents as “VCE 7”), “in order to receive less scrutiny from VCE 7 about her transactions as she liquidated her BTC in greater volume,” the affidavit reads.

But it was Lichtenstein’s use of a cloud-storage account that led to the unraveling of the alleged plot. The government decrypted a file there that contained a list of 2,000 virtual currency addresses, along with corresponding private keys. Almost all of those addresses were linked to the Bitfinex heist, according to the Justice Department, which said the crypto also passed through entities owned by Morgan. 

Lichtenstein and Morgan’s counsel, Anirudh Bansal, did not respond to Forbes’ requests for comment.

During a detention hearing Tuesday before a federal magistrate judge, Morgan and Lichtenstein were ordered released on bond, over prosecutors’ objections. The objections included the fact that Morgan allegedly “tried to lock her cellular phone to prevent law enforcement examination” and that the pair “engaged in extraordinarily complex laundering” of some of the bitcoins stolen from Bitfinex. In the end, however, Chief Judge Beryl Howell ordered the husband and wife to remain in custody. A hearing has been scheduled for Friday.

In August 2019, Morgan gave a lecture on “How to Social Engineer Your Way Into Anything” to a group in New York City. When asked by an audience where the line should be drawn in social engineering, Morgan responded: “I do believe that the ends justify the means sometimes,” she said. “My end goals aren’t bad or evil. I’m not trying to scam someone out of money or get someone hurt in any way.”


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UConn Star Paige Bueckers Announces Deal With Cash App, Her Third Major NIL Partnership

University of Connecticut basketball star Paige Beuckers announced a new partnership Monday that’s sure to add to her buckets of cash off the court.

The reigning Naismith College Player of the Year is partnering with Cash App, the mobile payment service owned by Jack Dorsey’s Block (formerly Square), to help launch the Paige Bueckers Foundation. Although specific details have yet to be released, the foundation will broadly focus on creating opportunities for children and families and promoting social justice. Cash App plans to endow an initial $100,000 Bitcoin donation, in addition to $100,000 in cash that will be given away to fans in $15 payments to promote the announcement. Other financial terms were not disclosed, but Forbes estimates that Bueckers is still a few deals away from hitting the $1 million mark in endorsements.

“I know this deal isn’t like a super long-term contract,” Bueckers tells Forbes. “But I’m working with people and want to work with people who have the same values as me.”

This marks Bueckers’ third major partnership since the NCAA stripped down its regulations in July, allowing college athletes to profit off their name, image and likeness. She signed with global e-commerce platform StockX in October and, one month later, became the first college athlete to join Gatorade’s ranks. In July, Bueckers trademarked the phrase “Paige Buckets,” which is the point guard’s nickname. 

How Bueckers fares in the nascent NIL market could offer a glimpse of the opportunities emerging for the top tier of college athletes. Based on her sprawling social media presence—Bueckers has more than one million followers between Twitter and Instagram—a study from research outlet AthleticDirectorU named her the most marketable athlete in college sports prior to the NCAA’s rule change.

“She is the best of the best, and these major brands want to leverage her appeal, particularly to a young and growing demographic,” Carnegie Mellon Tepper School of Business associate professor Tim Derdenger wrote in an email. “Her success will certainly spill over to other players.”

It already has. Last month, Gonzaga forward Chet Holmgren signed a deal with Topps that the company said was its largest with a college athlete to date. Fresno State basketball players and TikTok stars Haley and Hanna Cavinder recently cofounded a streetwear clothing company in addition to striking partnerships with Boost Mobile, Champs, Eastbay and WWE. 

The addition of Bueckers rounds out an impressive roster for Cash App, which has signed up a handful of high-profile athletes in the last few months. In November, Los Angeles Rams wide receiver Odell Beckham Jr. and Green Bay Packers quarterback Aaron Rodgers announced they were partnering with Cash App and taking part of their salaries in Bitcoin. Golden State Warriors stars Klay Thompson and Andre Iguodala said they would be doing the same in January. As cryptocurrency becomes a hot topic among athlete investors, at least ten North American-based professional athletes have taken part of their salaries or endorsement payments in some form of crypto.

“Obviously, I’m still learning a lot about it and trying to understand,” Bueckers says. “I just started understanding what to do with my tax money, so now I have to learn what to do with Bitcoin and cryptocurrency.”

A native of Hopkins, Minnesota, Bueckers arrived at UConn in 2020 as the top-ranked recruit in the United States and the 2019-20 Gatorade Female Athlete of the Year. She collected a string of awards during her freshman season and led the heavily favored Huskies to the Final Four, where they were upset by the University of Arizona. Bueckers picked up where she left off during her sophomore campaign before suffering a fracture in her left knee, which has sidelined her for the last two months. She hopes to return at the end of February.

As she adds to her sponsorship portfolio, Bueckers plans to continue to use her platform to advocate for racial equity. At the 2021 ESPYs, where she won the award for best college athlete in women’s sports, Bueckers used her speech to honor and celebrate Black women. She’s adamant about including BIPOC creatives in anything she does. “I grew up with everything, a roof over my head and food on my plate,” she says. “I want to help younger kids that weren’t as fortunate as me.”

This is likely just the start.

“The current set of offers is just the tip of the iceberg,” Derdenger says. “She has a lucrative future ahead of her.”


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Forbes Blockchain 50 2022

Cryptocurrencies hog the spotlight, but blockchain’s biggest innovations are below the surface, saving billons each year for the world’s largest companies.

Reported by Maria Abreu, Nina Bambysheva, Justin Birnbaum, Lauren Debter, Michael del Castillo, Steven Ehrlich, Chris Helman, Katie Jennings, Jeff Kauflin, Javier Paz, Jon Ponciano, Marie Schulte-Bockum  

You’ve come a long way, blockchain! Since our inaugural roundup of the Blockchain 50, published in 2019, the billion-dollar companies (minimum, by sales or market value) on our annual list have moved beyond test projects and now rely on “distributed ledger” technology to do serious work. A lot of the action is in the back office, verifying insurance claims or facilitating real estate deals. It has also become vital to supply chains, whether checking the provenance of conflict minerals like cobalt or tracking auto parts for Renault. Nearly half of the Blockchain 50 are based outside the United States; 14% are Chinese. New this year: venture capital firms, which as a group invested more than $32 billion in the sector in 2021. 

Cryptocurrencies like bitcoin and ether grab all the headlines, especially after booming last year and then losing more than $1 trillion in value since November. But in many ways, speculative cryptocurrencies are the least intriguing blockchain application. The most lasting impact will come as more and more multinationals integrate blockchains into their daily operations, unleashing untold efficiencies. 



In October 2021, the company that makes Photoshop and the keeper of the PDF format launched Content Attribution, which lets creators export their images directly to certain nonfungible-token (NFT) exchanges: KnownOrigin, OpenSea, Rarible and SuperRare. The feature lets artists protect their work against fraudulent claims by irrefutably proving their provenance before “minting” them as NFTs ready for auction. The service will eventually be available to all of Adobe’s 20 million Creative Cloud subscribers. 


KEY LEADER: Will Allen, VP at Adobe overseeing its Content Authenticity Initiative 



The insurance giant ($164 billion, 12-month sales) uses blockchain to streamline cross-border auto insurance claims in Europe. Different teams and incompatible databases used to mean lots of back-and-forth emails. Claims could take months to settle. Now there’s a single source record of each claim. Processing time has been reduced to minutes, and costs have fallen 10%. So far it’s being used by 25 Allianz subsidiaries to settle 850,000 claims. 

BLOCKCHAIN PLATFORMS: Hyperledger Fabric, Corda 

KEY LEADER: Bob Crozier, chief architect of Allianz Technology and global head of blockchain for Allianz Group 

Andreessen Horowitz 


Arguably the largest crypto investor in the world, the venture capital shop also known as “a16z” has raised around $3.1 billion in three dedicated blockchain funds over the past three years. That includes the massive $2.2 billion Crypto Fund III, which launched in June 2021. In total, the blue-chip firm has funded at least 60 startups working with blockchain and was an early investor in Coinbase, now valued at $34 billion. a16z also hopes to shape crypto regulation, having hired former officials from the SEC, Treasury and the Department of Justice to lobby policymakers. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum, Solana, Flow, Celo, Near, Arweave and others 

KEY LEADER: Chris Dixon, general partner and leader of a16z Crypto 

Ant Group 


Since July 2020, this Alibaba affiliate has devoted 10,000 developers to blockchain. Already they’ve created 30 applications, generating over 100 million blockchain-tracked documents including patents, vouchers and warehouse receipts. The most mature AntChain application is Trusple (Trust Made Simple), which connects international buyers of products and components—beads in the apparel industry, say—to 6 million Chinese sellers. The app simplifies tax, customs and shipping, and enables banks to instantly complete payment, reducing auditing costs and default risk. Nearly 20 global banks including CitiBank, BNP Paribas, Singapore’s DBS and Japan’s Mizuho are providing financing via the platform. 


KEY LEADER: Geoff Jiang, president of Intelligent Technology Business Group, Ant Group 



The $137 billion (sales) Blue Cross Blue Shield licensee is testing the blockchain to try to speed up an arcane administrative process known as “coordination of benefits,” which determines one’s primary insurer. It usually requires a series of faxes (yes! faxes!) and phone calls and can take up to three months. Through a shared ledger with Chicago-based Health Care Service Corporation for certain Medicaid members in Texas, the companies now make this determination in minutes or hours. Anthem’s blockchain program processes around 3,000 to 5,000 verifications a month. 

BLOCKCHAIN PLATFORM: Hyperledger Fabric 

KEY LEADER: Rajeev Ronanki, Anthem’s president of digital platforms 



Unintended policy cancellations are a big problem for insurers and often occur when a customer underpays or forgets to pay a premium. In 2021, insurance broker Aon ($12 billion, 12-month sales) partnered with insurance carrier Zurich to move invoicing to an immutable blockchain ledger—already leading to a double-digit decrease in cancellation notices. The technology, known as Adept, was developed by a subsidiary of Acord, the Pearl River, New York–based body that sets standards for the global insurance industry. Aon hopes to bring 10 more counterparties onto its blockchain this year. 


KEY LEADERS: Christa Davies, CFO 

A.P. Moller—Maersk 


The world’s second-largest container shipper ($54.5 billion trailing 12 months) now counts 250 ports and 20 ocean carriers using its proprietary TradeLens blockchain, which cuts time and reams of paperwork out of tracking containers as they move through global seaports. Sportswear giant Puma, which ships out of northern Germany, can now track a specific container in seconds rather than hours, according to Maersk. TradeLens, which Maersk co-developed with IBM in 2018, has tracked more than 55 million container shipments and is now being used by other shipping giants such as Germany’s Hapag-Lloyd and Singapore’s Ocean Network Express. 

BLOCKCHAIN PLATFORMS: TradeLens, Hyperledger Fabric 

KEY LEADER: Christian Hammer, chief technology officer, TradeLens 



China’s fourth-largest tech firm has 20,000 developers building (mostly) financial applications on its open-source blockchain. Last year they generated $47 million in revenue, a drop in the bucket for the $15.5 billion (sales) firm, but the future looks bright. In September Baidu won its largest contract to date, a $25 million deal with the government of Tongxiang, a city southwest of Shanghai, to build software to track the supply chain for the roughly $5 billion worth of synthetic fibers used to make clothes in the textile center. Efficiencies from moving its workflow to a shared ledger have already cut lending costs by 50 basis points. Baidu estimates that the blockchain has helped reduce the supply chain’s energy consumption by 17% and could remove 15,000 tons of carbon dioxide from the environment each year. 


KEY LEADER: Xiao Wei, chief manager of Baidu Blockchain



In 2020 BHP, the $61 billion (sales) Anglo-Australian multinational mining outfit, sold its first “paperless” shipment of Australian iron ore to China. That evolved in 2021 to trading cargoes of copper concentrate to China, with all documents, assays and emissions data enshrined on its MineHub blockchain platform. BHP has since adopted blockchain-based traceability to ensure there’s no “dilution” of the nickel it sells to Tesla’s Shanghai battery factory and to track the carbon emissions of the copper it sends from Chile to electric cable maker Southwire in Carrollton, Georgia. BHP is now in talks with suppliers to use blockchain to guarantee that the rubber in the 6,000 giant truck tires it uses each year was produced without slave labor or illegal deforestation. 

BLOCKCHAIN PLATFORMS: MineHub, Hyperledger Fabric 

KEY LEADER: Michiel Hovers, group sales and marketing officer 



Twitter cofounder Jack Dorsey’s other company, formerly known as Square, generated $42 million in fees from its Cash App’s bitcoin brokerage in just the third quarter of 2021. It’s a safe and easy way for crypto newbies to get into the game: Block generated $9.8 billion in revenue from bitcoin sales in the 12 months ending September 2021. Dorsey left Twitter in November and is a vocal crypto booster, so expect Block to lean into its new name. In July, it created a business called TBD, which focuses on building a decentralized financial system and is looking to build an energy-efficient bitcoin mining system. 


KEY LEADER: Jack Dorsey, CEO 

BNY Mellon 

New York 

This 238-year-old bank is fully embracing the future: The institution that Alexander Hamilton started now wants to be king of back-office servicers for crypto ETFs. The firm already has 90% market share in Canada, meaning it provides tax and administrative services to most of the 17 crypto ETFs currently trading up north. In October it announced another big ETF applicant, Grayscale’s $23 billion Bitcoin Trust. New York–based Fireblocks, which provides crypto custody services, is a new BNY Mellon investment valued at $8 billion. 


KEY LEADERS: Roman Regelman, CEO of asset servicing and head of digital; Mike Demissie, head of digital assets; Ben Slavin, global head of ETFs 



Boeing is partnering with Canada’s TrustFlight and developer RaceRocks to build a so-called digital aircraft record system that helps airlines keep up with required maintenance. This expands on Boeing’s earlier blockchain initiative with Honeywell’s GoDirect Trade platform, which in 2020 securely sold $1 billion in Boeing aircraft parts. In time they envision a global airworthiness records platform, which could save 25% in maintenance costs—worth billions annually across the industry. 

BLOCKCHAIN PLATFORMS: Go Direct, Hyperledger Fabric, Hyperledger Indy 

KEY LEADER: Charles S. Sullivan, president, Boeing Canada Operations 



The luxury watchmaker now tracks 320,000 timepieces on the blockchain, giving customers access to detailed product history and proof of authenticity. Breitling is also using it to move into the resale market. Want to sell an Avenger you were given a decade ago? You can get an instant appraisal via your digital wallet. Looking to buy? Like consulting Carfax before purchasing a Toyota, you can easily check out the number of previous owners and repair history. In February, Breitling will let European owners buy, sell or trade timepieces online; it already allows customers to trade in old watches for store credit. It’s running tests in Switzerland to let customers quickly alert police to stolen goods via their digital wallet and is experimenting with blockchain-based warranty claims for lost watches. 


KEY LEADER: Antonio Carriero, chief digital and technology officer 

China Construction Bank 


The world’s second-largest bank, with $4.7 trillion in assets, has so far processed $141 billion worth of transactions on private blockchains for everything from supply-chain financing to cross-border payments. Among its more recent products is EasyPay, designed to make it simpler for corporations to send large, paperwork-intensive transactions with fewer errors and less need for audits. If a company in Guangxi wants to buy palm oil from Labuan, Malaysia, the counterparties can load their trade contract, receipts and waybills into the shared ledger. Local CCB branches can then process both halves of the trade in parallel, instead of sequentially. The result: Total settlement time is reduced from two days to about ten minutes. The platform now connects 14,000 bank locations. 

BLOCKCHAIN PLATFORMS: Tianshu BaaS, CCB Chain, BC Trade 2.0 

KEY LEADER: Lei Xing, senior manager at CCB Financial Technology Company 

CME Group 


In October, the dollar value of Chicago Mercantile Exchange crypto futures reached $4.7 billion daily, temporarily making the CME the largest crypto derivatives exchange in the world. That same month the SEC approved the first U.S. bitcoin futures ETF, Proshares Bitcoin Strategy ETF (BITO), which now has $1 billion in assets. CME has launched crypto futures contracts for ethereum, as well as “micro” bitcoin and “micro” ethereum futures, tailored for those who want to invest $150,000 or less. 


KEY LEADER: Tim McCourt, global head of equity index and alternative investments 



The largest crypto exchange in the U.S. went public in April 2021, and its market value soared as high as $94 billion before settling to a recent $40 billion. In the third quarter of 2021, Coinbase logged more revenue ($1.3 billion) and net profit ($406 million) than in all of 2020, while its customer base swelled from 43 million to 73 million in the first nine months of the year. Next: diversification. Its “Coinbase Cloud” software aims to help developers build crypto applications, and in October, it announced an NFT marketplace to compete with OpenSea. A month later, CEO Brian Armstrong told investors Coinbase NFT could become “as big or bigger” than its trading business. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum and dozens of others 

KEY LEADER: Brian Armstrong, CEO 

De Beers 


The $5.1 billion (12-month sales) diamond producer has registered more than 400,000 stones, worth some $2 billion, on its Tracr blockchain, up 50% since January 2021. The platform records a diamond’s cut, color, clarity and karat, then tracks it along the supply chain. Users can instantly verify the rock’s origin and authenticity with a simple scan as it’s mined, cut, polished and sold—eliminating the need for costly and time-consuming mail-in verification. Tracr now has more than 30 industry participants, including Zales, Jared and Kay Jewelers. 


KEY LEADER: Jason McIntosh, chief product officer, Tracr 

Depository Trust & Clearing Corporation 


If you bought or sold a security in the U.S. last year, odds are that the clearing and settlement services were provided by DTCC, far and away the largest post-services firm in the world. In September DTCC, which processed $2.3 quadrillion in 2020 trades (total face value of the securities; trailing 12-month sales $2 billion), successfully completed a six-month test on a blockchain project that will reduce errors and cut settlement times from two days to less than one. DTCC’s main business remains publicly listed securities, but its new Digital Securities Management application is targeting pre-IPO companies with privately traded shares. 


KEY LEADER: Rob Palatnick, managing director and global head of tech research 

Digital Currency Group 


Think of DCG as a crypto conglomerate. The firm owns five major crypto companies: trading platform Genesis, news site Coindesk, digital asset exchange and wallet Luno, bitcoin mining firm Foundry and Grayscale, the largest digital asset manager in the world, with more than 150 portfolio companies and $39.6 billion under management. In November, DCG raised $700 million in a private stock sale led by Softbank at a $10 billion valuation, bumping founder Barry Silbert’s net worth to $3.2 billion. DCG’s newest startup, Foundry, has taken advantage of crypto miners being banned from China in May to create the world’s largest bitcoin mining pool, providing 19% of the network’s total processing power. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum, Litecoin and others 

KEY LEADER: Barry Silbert, CEO 



Fidelity started mining bitcoin in 2015 when it was trading below $500, making the $11.1 trillion asset administrator one of the first traditional institutions to dabble in crypto. But true to its conservative nature, the 401(k) giant (2020: $21 billion sales) steered retail customers clear of owning crypto directly. Its main crypto niche today is not retail but providing custodial services and research to institutional clients through its Fidelity Digital Assets unit. The number of these big clients doubled to nearly 200 in 2021. Next: overseas expansion. Last year, Fidelity launched a Canadian bitcoin ETF and secured a permanent crypto license from the U.K. financial regulator. 


KEY LEADER: Tom Jessop, head of Fidelity Digital Assets 



Led by 29-year-old Sam Bankman-Fried, the world’s richest crypto billionaire (net worth: $26.5 billion), FTX dominates the hypercompetitive crypto exchange landscape. It handles some 10% of the $3.4 trillion face value of derivatives (mostly futures and options) traded by crypto investors each month. FTX pockets 0.02% of each of those trades on average, good for around $750 million in nearly risk-free revenue—and $350 million in profit. Additionally, the company hauled in a record $1.5 billion in private funding last year, rocketing its valuation from $1.2 billion to $25 billion. Eager to become a household name, FTX is spending hundreds of millions of dollars on marketing, signing up a slew of celebrity brand ambassadors including Tom Brady, David Ortiz and Kevin O’Leary. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum, Solana and dozens more 

KEY LEADER: Sam Bankman-Fried, CEO 



The $32 billion (12-month sales) telecommunications and computer hardware company runs a blockchain innovation lab in Brussels with more than 40 clients— from a rice-trading startup to giant brewer Anheuser-Busch. The companies use the lab to test fresh ideas, backed by Fujitsu’s technical expertise. In November, for example, water purification firm Botanical Water Technologies started building a trading platform using Fujitsu’s in-house distributed ledger technology, which will allow sugar mills, distilleries and cola makers to sell or reuse the water they would normally discard during production. The platform, launching in April, will trace the water as it’s purified, sold and delivered, and give companies the option to donate a portion of their purified water to water-scarce communities. 

BLOCKCHAIN PLATFORMS: Hyperledger Fabric, Besu and Cactus, plus Ethereum 

KEY LEADERS: Frederik De Breuck, head of Enterprise Blockchain Solution Center; Shingo Fujimoto, manager of data and security laboratory, Fujitsu Research 

Industrial and Commercial Bank of China 


The largest bank on the planet ($5.6 trillion in assets) has 40 blockchain applications, which last year handled a total of more than $48 billion worth of transactions for local governments and industries including construction and transportation. Among its most innovative apps is Icago, which rewards users for making use of energy-efficient vehicles, whether trains, buses or electric cars. The bank’s blockchain connects wallets owned by ICBC customers to government transportation data. Carbon credits issued by the transit commission as nonfungible tokens can be redeemed for China’s new central-bank digital currency. In the future, securitized carbon emissions will be sold as bonds to companies looking to meet carbon reduction requirements. In Qingdao, a city known for its beer, the program removed 99,000 kilograms of carbon in 2021. This year, the program will expand to Shenzhen, Shanghai, Chengdu and seven other cities. 


KEY LEADER: Chaowei Liu, principal manager 

JPMorgan Chase 


JPMorgan’s Onyx Digital Assets network is making waves in the massive ($1.5 trillion a day, face value) repo market, the overnight government bond market that’s a steady source of profits for large financial institutions. By using smart contracts and JPM Coin, a digitized version of the U.S. dollar, Onyx repo trades settle in real time instead of overnight, reducing settlement risk and manual processing. The intraday repo application has so far facilitated the movement of $230 billion in trades, completing about $1 billion in transactions a day. In June, Goldman Sachs began using Onyx. 


KEY LEADER: Umar Farooq, CEO of Onyx by JPMorgan 

Kakao Corporation 

Jeju-si, South Korea 

South Korea’s dominant mobile messenger application, KakaoTalk, is used by nearly 90 percent of the country’s 52 million people, and as of May 2021 it has a marketplace for trading NFTs. Called KrafterSpace, the exchange is fully integrated with OpenSea, the San Francisco–based NFT bazaar that recently raised money at a $13.3 billion valuation. On KrafterSpace users can purchase tokenized artwork directly through Kakao’s messenger app with the accompanying digital wallet, called Klip Drops. Both KrafterSpace and Klip Drops are built on Kakao’s own blockchain, Klaytn, which has more than 800,000 active users. Separately, in August, Kakao launched a $515 million Klaytn Growth Fund to support developers willing to contribute to its blockchain’s ecosystem. 


KEY LEADER: David Shin, head of Klaytn Global Adoption 

LINE Corporation 


Part of Z Holdings, the $36 billion (market cap) Japanese internet conglomerate that also owns Yahoo Japan and Japan’s PayPal competitor, LINE is the country’s largest messaging app, with 300 million users. The company has developed a proprietary blockchain, also called LINE, owned by Softbank Group and South Korean internet conglomerate NAVER Corporation. Its services include a cryptocurrency exchange, an NFT marketplace and a digital wallet with more than 254,000 registered accounts. The associated cryptocurrency, LINK, is a big hit, attracting nearly a million miners. As of late January it had a market cap of $669 million. 


KEY LEADERS: Woosuk Kim, CEO of Unblock and LINE Tech Plus; Keun Koo, head of blockchain development at Unchain 

Marathon Digital Holdings 


Five years ago, Marathon was mostly known as patent troll, filing a raft of lawsuits (most settled out of court) against corporate giants like Apple, Amazon, Dell, Yahoo, Pinterest and Twitter. In 2017 the operation had annual revenues of less than a $1 million and a market cap of less than $10 million. It aggressively pivoted toward bitcoin mining in 2017, and the Nasdaq-traded company now has a market cap of $2 billion on revenue of less than $100 million. A big beneficiary of China’s bitcoin-mining ban, Marathon currently holds at least 8,133 bitcoin worth $300 million. The company intends to put to work 70,000 more servers in early 2022, increasing its computers devoted to crypto mining to 199,000, good for approximately 1.2% of total global bitcoin mining activity. 


KEY LEADER: Fred Thiel, CEO 



Twenty-four crypto cards, including Gemini, Uphold, CoinJar and BitPay, have been launched by Mastercard, letting customers spend their digital assets at 80 million vendors around the world. In October, the credit card giant partnered with Bakkt, a subsidiary of Intercontinental Exchange (owner of the New York Stock Exchange), which will provide technology to allow even more Mastercard issuers the ability to accommodate cryptocurrency transactions. Mastercard also runs a blockchain incubator called “Start Path,” which has so far assisted 12 crypto startups, giving them direct access to the multinational company’s products, customers, workshops and mentoring. 

BLOCKCHAIN PLATFORMS: Terra, Rootstock, Monero, Bitcoin Cash, Litecoin, Bitcoin, Ethereum, Avalanche 

KEY LEADERS: Raj Dhamodharan, executive vice president of digital assets and blockchain products and partnerships 



Facebook’s decision to rebrand as Meta and go all in on the (mostly) theoretical “metaverse” could be a boon to blockchain as well as Facebook, with its 2.9 billion member global community. After all, an immersive, all-encompassing virtual world is a natural environment for cryptocurrencies, custom avatars, NFTs, blockchain gaming, digital wallets and more. Let’s hope Facebook has more success with the metaverse than it did with Libra, its much-hyped cryptocurrency that was announced in 2019, renamed “Diem” in 2020 and sold to California bank Silvergate Capital in January 2022 for $182 million. To date little is known about the technology underlying Facebook’s metaverse. 


KEY LEADER: Mark Zuckerberg, CEO 



Enterprise software provider MicroStrategy and its crypto-Kool-Aid-guzzling CEO, Michael Saylor, are corporate America’s biggest bitcoin owners. The D.C.-area firm, which nominally makes boring back-office business software, has transformed itself during the pandemic into a crypto trading powerhouse. MicroStrategy now holds 124,391 coins worth $4.6 billion at today’s prices and has booked nearly $846 million in crypto trading profits since August 2020. 


KEY LEADER: Michael Saylor, CEO 

National Basketball Association 


The NBA’s Top Shot platform has transformed the sports memorabilia business, bringing NFTs to the average fan. Powered by Vancouver, British Columbia–based Dapper Labs’ “Flow” blockchain, users can buy, sell and collect “moments,” akin to digital trading cards—such as a LeBron James dunk that recently sold for a record-setting $230,023. Its popularity isn’t slowing, either. Since November 2020, 1.3 million people created Top Shot accounts, and total sales have soared from $2.5 million to $992 million. Top Shot’s outsize success has generated broader curiosity about crypto within the league. The NBA formed a blockchain subcommittee to evaluate future opportunities, launched a WNBA version of Top Shot and entered a multiyear partnership with crypto exchange Coinbase. 


KEY LEADER: Adrienne O’Keeffe, vice president of global partnerships and media 



The 141-year-old maker of cash registers and ATMs wants to create a massive global network of 1.5 million locations that will allow passersby to buy bitcoin and other cryptocurrencies. In January it bought Boston-based LibertyX, a bitcoin ATM company that has 30,000 machines scattered across America. In June, NCR spent $2.5 billion to buy Cardtronics, a Houston company with 285,000 ATMs at Circle Ks, CVSs and Krogers in the U.S. and nine other countries. Bitcoin, ethereum and a few other cryptocurrencies should be available on these machines by the end of the summer. 


KEY LEADER: Tim Vanderham, CTO 



Through its Swiss Global Palladium Fund, the world’s largest producer of palladium and refined nickel ($17.7 billion, 12-month sales) has issued $1.3 billion worth of tokenized contracts for its precious and base metals, including gold, silver, platinum, palladium, copper and nickel. The contracts, stored on the Atomyze blockchain, help industrial firms like Umicore, Traxys and Glencore track the origin and environmental bona fides of their metals and make it easier to adjust inventory levels. 

BLOCKCHAIN PLATFORM: Hyperledger Fabric 

KEY LEADERS: Marco Grossi, CEO, Atomyze AG; Alexander Stoyanov, CEO, Global Palladium Fund 



By 2030, some 40% of all new cars will be electric. Demand for cobalt, used in EV batteries, is soaring. Nearly two-thirds of the world’s cobalt supply is mined in the Democratic Republic of Congo, a war-torn country where child labor and other human rights abuses are common. Oracle and British startup Circulor, a raw-materials supply-chain tracking company, have built a blockchain-enabled platform to trace the provenance of high-risk, conflict-area raw materials such as cobalt. Many of the world’s largest EV manufacturers, including Volvo, Mercedes-Benz and Polestar, have signed on for the service, which is built on Oracle’s blockchain. 


KEY LEADER: Wei Hu, senior vice president, high availability technologies 



Started in 2018 by Coinbase cofounder Fred Ehrsam and former Sequoia Capital partner Matt Huang, Paradigm has quickly become one of the most prominent crypto VC firms. Investments ranging from $1 million to over $100 million include FTX, Coinbase, Chainalysis, Uniswap and Sky Mavis. Sixteen are already valued at $1 billion or more. In November, Paradigm announced a new $2.5 billion fund, the largest crypto-centric venture capital fund ever. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum and others 

KEY LEADERS: Fred Ehrsam and Matt Huang, cofounders 



In October 2020, PayPal launched a crypto brokerage service as part of its grand plan to become a one-stop financial super app. Crypto users engage with the app twice as much as regular clients, and its offering of crypto rewards through the Venmo credit card has been a big hit with younger users. Although the company now lets U.S. customers purchase up to $100,000 in crypto per week, most transactions are much smaller; daily trading volume is estimated to be under $50 million. Looking ahead, the company wants to expand its crypto offerings beyond the U.S. and U.K. and is exploring the launch of its own stablecoin. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum, Bitcoin Cash, Litecoin 

KEY LEADERS: Dan Schulman, president and CEO; Jose Fernandez da Ponte, SVP and general manager for blockchain, crypto and digital currencies 

Ping An (OneConnect) 


Through its subsidiary OneConnect’s blockchain financing platform, the sixth-largest company in the world has made more than $12 billion in loans to a million small and medium-sized businesses in China’s Guangdong province since January 2020. OneConnect’s software uses government data to analyze a borrower’s risk profile for banks, cutting transaction processing to as little as 10 minutes—a massive money saver for its 788 client financial institutions, including $5.6 trillion powerhouse ICBC. In November, a OneConnect subsidiary partnered with the People’s Bank of China to use blockchain to track and process the financing of imports and exports from mainland China and Hong Kong. 


KEY LEADER: Li An, associate director of product 



In 2019, Providence, a not-for-profit Catholic health system, acquired Seattle health-tech startup Lumedic. The prize? Lumedic’s blockchain, which helps solve time-consuming administrative problems like “prior authorization”—when a doctor needs to check with a patient’s insurer to ensure certain surgeries or medications will be covered. In 2021, 16 of Providence’s hospitals and four clinics across Washington, Montana and Oregon were using its shared ledger to speed up prior authorization processing time from days to hours. Last year, more than 40,000 treatments were processed on Lumedic’s blockchain. 


KEY LEADERS: Kimberly Sullivan, chief revenue cycle officer, Providence; Mike Nash, CEO, Lumedic (acquired) 



In response to European regulators’ ever-growing technical requirements, the French automaker ($53 billion 12-month sales) launched blockchain platform Xceed in April to track thousands of car parts going into every vehicle manufactured in 16 factories across Europe. If any characteristics—such as the size of a screw or a headrest’s positioning—aren’t up to standard, the manufacturer is automatically alerted and can then notify suppliers with the push of a button, saving weeks of time on audits. Partners include top suppliers like Faurecia, one of the world’s largest makers of automotive interiors, with $18 billion in annual revenue. By 2024, Renault hopes to enlist 3,500 suppliers in a bid to track every one of its 6,000-plus regulated car parts and features. Renault has also started 20 other in-house blockchain initiatives tackling everything from car-buying transactions to supply-chain traceability. 

BLOCKCHAIN PLATFORM: Hyperledger Fabric 

KEY LEADER: Odile Panciatici, blockchain VP 

Samsung Group 


Most Americans know Samsung for TVs and other electronics, but those are just one aspect of the largest ($220 billion 12-month sales) chaebol (conglomerate) in South Korea. It also makes ships, runs theme parks, sells life insurance—and, since 2020, has been using a blockchain-based loan platform to make it easier for small and midsize enterprises to request government loans. Previously, such a request required documents from three parties—the government, the credit guarantor and the bank—which would take three weeks on average to process. The platform reduces paperwork, cutting processing time to 12 days and saving about 13,000 working hours a year. 


KEY LEADER: Jihwan Rhie, head of Blockchain Business Planning 

Signature Bank 


In 2015, Signature became one of the first banks to accept crypto customers. It was a prescient move: Total crypto deposits have surpassed $22 billion, and the bank has processed more than $200 billion worth of payments on its ethereum blockchain–based proprietary network, Signet. This year the company began offering bitcoin-backed loans. It has also partnered with stablecoin issuer TrueUSD to allow clients to mint and send instantaneous payments using the dollar-denominated asset. The market is a fan: Over the last 12 months, Signature’s stock has almost doubled. 


KEY LEADER: Frank Santora, chief payments officer 

Société Générale 


Last year France’s third-largest bank released Cast Framework through its Forge subsidiary. The software lets both mainstream financial firms and crypto startups create regulatory-compliant digital securities on a blockchain. A recent application was helping Banque du France refinance $45 million in securities backed by some of the bank’s home-mortgage portfolio, tracked on a blockchain. Using the blockchain reduced transaction time and saved on auditing costs. SocGen is also developing a so-called “smart contract” library of reusable code specific to financial services and has applied for a French regulatory license that will allow them to manage digital assets for clients. 


KEY LEADER: Jonathan Benichou, chief financial officer, SG Forge 



The 278-year-old art auctioneer, known for selling Picassos, van Goghs and Warhols, is now gleefully hawking cartoon primates and pixelated cyberpunks. In April 2021, Sotheby’s held its first NFT sale, moving a body of work by digital artist Pak for $16.8 million. That was only the start: In all Sotheby’s did more than $100 million in NFT sales last year, contributing to the auction house’s record-breaking gross sales of $7.3 billion. In September, cashing in on the craze for unique NFT profile pictures on social media, Sotheby’s sold 101 images of monkeys, part of the Bored Ape Yacht Club collection of 10,000 animal avatars, for $24.4 million. The auction house now accepts bids in fiat currency and cryptocurrency. 


KEY LEADERS: Stefan Pepe, CTO, Sotheby’s; Sebastian Fahey, managing director, EMEA, and executive lead for Sotheby’s Metavers 

Stone Ridge Holdings Group 


In 2017, the financial firm that already owned a $13 billion asset manager, launched New York Digital Investment Group (NYDIG), a subsidiary aimed at helping institutional investors buy and hold crypto. Stone Ridge has since bought and held some 20,000 bitcoin (worth $740 million at current prices) and last December NYDIG raised $1 billion from nine VCs including WestCap and Bessemer Venture Partners at a $7 billion valuation. Institutional clients include JPMorgan, Wells Fargo and Morgan Stanley; last year it cemented partnerships with banking software giants FIS and Fiserv. 

BLOCKCHAIN PLATFORMS: Bitcoin, Ethereum, XRP, Litecoin,Bitcoin Cash 

KEY LEADERS: Ross Stevens, executive chairman; Robby Gutmann, CEO 

Tech Mahindra 


The technology arm of Indian conglomerate Mahindra Group (2021 revenue: $5.1 billion) has developed more than 60 blockchain-based products spanning telecom, media and entertainment, manufacturing, retail and energy. One of the most interesting: VaccineLedger, which was developed in collaboration with a startup funded by Unicef and Gavi, the vaccine alliance that oversees a worldwide Covid-19 vaccine database with the World Health Organization. The blockchain helps prevent counterfeiting and reduces the number of vaccines that go to waste by tracing the shots from manufacturer to recipient. It records data related to custody, temperature, location and purchase orders for each vial. VaccineLedger already operates in two states in India, with plans to expand globally. 

BLOCKCHAIN PLATFORM: Hyperledger Fabric 

KEY LEADER: Rajesh Dhuddu, global practice leader of blockchain and cybersecurity 



Over the past decade, Tencent has built a Chinese “super app,” used by more than 1 billion people for everything from gaming and social media to messaging and shopping. Now it’s developing a one-stop blockchain platform, Tencent Cloud Blockchain. Ten provinces and cities including Hainan, Guangdong and Beijing already use it to issue electronic bills for things like health care and transportation. As August 2021, Tencent’s blockchain had processed more than 15 million transactions in one city alone. 

BLOCKCHAIN PLATFORMS: ChainMaker, Hyperledger Fabric, FISCO BCOS 

KEY LEADER: Powell Li, general manager of Tencent Cloud 



Crypto’s town square, where Elon Musk shamelessly pumps canine coins and where millions of tiny traders try to send their latest purchases to the moon in 280 characters or less. There were 220 million tweets about NFTs in 2021 and an additional 60 million in January 2022 alone. And just because its crypto-obsessed CEO, Jack Dorsey, left in November to devote all his time to Block (see page 68) doesn’t mean corporate Twitter is forsaking its claim to the decentralized future. Twitter is doubling down on creator tools, like tipping other tweeters with bitcoin and letting users display their NFT collections as profile pictures—for a fee. 


KEY LEADER: Parag Agrawal, CEO 



The credit card giant has partnered with more than 60 crypto platforms including FTX, BlockFi, Coinbase and Binance to make it easy for people to spend digital currency through crypto-linked cards. All 80 million of Visa’s merchants now effectively accept crypto as payment, with the funds automatically converted to fiat currency before they receive it. While crypto transactions can be expensive, Visa leaves that headache to its partners, which charge as much as 2.5% in Coinbase’s case. Consumers have spent more than $6 billion using Visa crypto cards since October 2020. 


KEY LEADER: Terry Angelos, SVP and global head of fintech 



After hundreds of listeria, salmonella and E. coli infections last year, and millions of pounds of recalled food, the FDA finally seems to be getting serious about food safety. It announced in September 2020 that manufacturers and retailers will henceforth be responsible for tracking more than a dozen types of risky foods such as romaine lettuce, soft cheeses and fish at every point along the supply chain in order to identify and toss contaminated items more rapidly. The retailer is already tracking 1,500 items on the blockchain, triple that of a year ago. Its food safety initiatives are becoming more visible to shoppers: A recent Sam’s Club pilot in China let shoppers scan a QR code to gain information about where the produce was grown and when it was harvested. 

BLOCKCHAIN PLATFORMS: Hyperledger Fabric, Walmart Blockchain 

KEY LEADERS: Archana Sristy, senior director, blockchain, Walmart Global Tech; Tejas Bhatt, senior director, global food safety innovation 



One of WeBank’s latest blockchain apps encourages sustainable living by rewarding users for doing things like walking, taking the bus or recycling clothing. The Chinese digital bank, which is 30% owned by Tencent, issues Green Bud Points via a mini-app on WeChat that can later be exchanged for vouchers and gifts. All records are stored on its blockchain to ensure transparency and traceability. The platform already has 1 million daily active users and reports that it recorded a reduction of more than 2,500 tons of carbon emissions over 2021. Overall, WeBank has more than 70,000 coders working on its proprietary “FISCO BCOS” blockchain. 


KEY LEADER: Henry Ma, executive vice president and chief information officer 


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How Crypto’s Original Bubble Boy Rode Ethereum And Is Now Pulling The Strings Of The DeFi Boom

OLAF CARLSON-WEE rode 2017’s “initial coin offering” craze to become one of crypto’s top venture investors. Now he’s raking in hundreds of millions, from a blockchain rage called DeFi, which promotes the fantasy of democratized financial services.

On a frigid, windy day in January, Olaf Carlson-Wee is settling in for a long Zoom call from his $10 million Soho loft in Manhattan, reflecting on how far he has come in the four and a half years since Forbes featured him on its cover, labeling him the poster child for the cryptocurrency bubble of 2017. 

Back then, a speculative frenzy of hundreds of initial coin offerings (ICOs) pushed the cryptocurrency market to well over $100 billion in value as greedy fools bid up junk tokens backed by little more than a white paper and some quirky computer code. Then 27, with three years of Coinbase work experience under his belt, Carlson-Wee was considered a sage. He had started a San Francisco–based hedge fund called Polychain Capital that was backed by Andreessen Horowitz, Union Square Ventures and Sequoia Capital, and his fund’s assets had swollen from $4 million in September 2016 to $200 million. 

Today, despite recent turbulence that saw bitcoin and other cryptocurrencies fall 30% to 50% in a matter of weeks, the market for them is still close to $2 trillion, and Polychain’s assets are $5 billion—up 125,000% since inception. Carlson-Wee just closed a $750 million raise for his third venture fund, led by Tiger Global Management and Singapore’s Temasek Holdings, two of the smartest and most successful investment firms on the planet. 

“We had a lot of interest. Many, many hundreds of millions in demand more than we raised,” boasts Carlson-Wee, now 32, clad in a lime-green tie-dyed T-shirt, running his fingers through his spiky, bleached blond hair. 

“Whatever the ideal, in practice, DeFi is a speculator’s paradise…even after crypto’s recent correction, the amount at risk stands at nearly $80 billion.”

Carlson-Wee’s net worth has grown to an estimated $600 million because among crypto investors, he has an uncanny knack for deftly navigating a market chronically infected by hyperbole and assets without any discernible intrinsic value. Among the most profitable of his early investments was a major stake in ether, the token underpinning the Ethereum blockchain—now worth $2,700, but trading for less than $12 back in 2016 when Carlson-Wee’s Polychain went all in. 

He is not shy about his new riches, quite literally created from ether. His 6,000-square-foot Soho digs, which he recently bought fully furnished, was once an art gallery owned by prominent NYC collectors. Its opulent interior design, described by its realtor as lower Manhattan’s “most Instagram-worthy” residence, was inspired by the luxury Hôtel Costes in Paris and features tin ceilings, gold columns, a cobra-shaped snakeskin chair and chandeliers fashioned from organ pipes and crystal. Its master bathroom is a study in gold, including a mirrored ceiling and a shimmering gold-plated bathtub with a large dollar sign hanging on the wall above it. A few months before he bought this New York party palace, when bitcoin was trading above $50,000, he closed on another trophy property in the Hollywood Hills. That $28.5 million, 12,000-square-foot mansion has breathtaking ocean and Los Angeles skyline views, an indoor pond, infinity pool, seven bedrooms and spaces for ten cars. 

One of the keys to Carlson-Wee’s success has simply been being early. He met Ethereum founder Vitalik Buterin, for example, when the then-19-year-old briefly worked at Coinbase in 2013. That was just before Buterin wrote his revolutionary blockchain white paper, which one-upped bitcoin by creating a multipurpose computing platform based on so-called “smart contracts.” These agreements have no conventional legal standing, but because the terms are blindly enforced by computers, they are more immutable. Without smart contracts there could be no ICOs or NFTs. 

In 2018, at the Web 3.0 conference in Berlin, Carlson-Wee met MIT research scientist Harry Halpin—the co-creator of a super-privacy protocol called Nym. Halpin was frustrated by traditional VCs’ reluctance to back him. Says Halpin, “This smartly dressed young fella came up to me and said, ‘We at Polychain are interested in funding subversive technology.’ ” Polychain led a $6.5 million round for Nym last July, just before the startup hired Chelsea Manning. 

“I like being the first person to believe in someone,” says Carlson-Wee, just back from spending his New Year holiday with a dozen friends in a house he rented in St. Barts. “Our goal is to invest in breakthrough technologies that will enable new types of human organization and behavior.” 

Polychain’s most ambitious investment foray to date has been its backing of a phenomenon known as decentralized finance, or DeFi, which uses blockchain technology in peer-to-peer applications. The promise is that DeFi could eventually become a cheaper, more private, secure and accessible replacement for traditional financial institutions, including banks and exchanges. Carlson-Wee was an early investor in DeFi’s biggest winners, such as Uniswap, an exchange; lender Compound; MakerDAO, a lender and stablecoin creator; and DeFi exchange aggregator dYdX. Blockchain-traded DeFi tokens have had eye-popping returns. The total market now amounts to $78 billion, up from $10 billion in January 2020. 

Crypto idealists, including Carlson-Wee, believe DeFi is the future of finance, and just the thing to level off a lopsided financial playing field. For centuries middlemen bankers—from the Medicis of Florence to JPMorgan’s Jamie Dimon—have wielded great power and amassed huge fortunes. DeFi aims to cut them out. 

All DeFi functions—payments, savings, trading, lending—are conducted on blockchain-based software. Changes are made by token holder vote. There is no central control. 

Carlson-Wee’s success lies not only in his ability to find the most promising DeFi startups but in Polychain’s willingness to make outsize investments in them. Decentralization and democratization may be the DeFi ideal, but when it comes to decisions that might affect Polychain’s returns, Carlson-Wee is very much in charge. He doesn’t hesitate to use his firm’s formidable voting power to ensure that the interests of his partners come first. 

“I’m very much a pragmatist,” he admits. “I don’t think crypto fixes wealth inequality or wealth concentration, but it does shake the snow globe.” 

OLAF CARLSON-WEE’S crypto journey started in 2011, the summer after his junior year at Vassar College in upstate New York. An avid fan of role-playing video games, he had read about how the underground drug marketplace Silk Road was enabled by a virtual currency called bitcoin. His excitement over the new tech drove him to sink almost his entire life savings—about $700—into bitcoin at prices ranging from $2 to $16. He went on to write his senior thesis in sociology on the emerging cryptocurrency. 

After graduating in 2012 and spending a few months working as a lumberjack while living in a yurt on a commune in Washington State, he blindly emailed his thesis to the Brian Armstrong and Fred Ehrsam, the cofounders of budding crypto exchange Coinbase. They hired him as their first employee and put him in charge of customer service. Carlson-Wee famously insisted that his entire $50,000 salary be paid in bitcoin. 

Though he had little coding experience, he helped automate many of Coinbase’s routine customer-service responses. He was eventually put in charge of risk and lowered Coinbase’s fraud rate by 75%. 

Early in his crypto career, Carlson-Wee says, he realized that entrepreneurs with a strong vision for the future were funded and rewarded most, rather than those who were reactive or fast followers. 

“Coinbase had the architecture of a central custodian. It was very contrarian in crypto at the time. It was taking on the compliance and antifraud burdens of accepting bank payments,” he says. “This was something nobody had really been able to do.” 

But as Coinbase expanded and became more mainstream, it was forced to pay greater attention to regulatory demands. It began to intentionally steer clear of crypto’s bleeding edge, where Carlson- Wee felt the most potential lay. He was most excited about Buterin’s new Ethereum blockchain, which unlike bitcoin could (theoretically) run virtually any type of digital platform, making possible decentralized versions of Uber, Facebook, Google or Dropbox. 

Former Coinbase colleague Adam White, recently president of crypto wallet Bakkt, believes that as Coinbase added dozens of software engineers from top schools, Carlson-Wee had become pigeonholed as the “operations guy.” 

“I started to realize that Olaf was more than just the guy who was going to work hard and answer [customer] support tickets,” says White, who recalls a holiday party in 2014 at which Carlson-Wee casually told him that bitcoin would never trade as low as $300 again. 

In 2016, Carlson-Wee informed Armstrong and Ehrsam that he was quitting to form a crypto hedge fund. “I realized that [Coinbase] was going to broadly follow its path with or without me,” he says. “By founding something, I could regain that feeling of super-high leverage.” 

LEVERAGE HAPPENS to be the fuel powering the current DeFi boom. From a capital-raising standpoint, DeFi is the successor to initial coin offerings. Most of the ICOs of 2016 and 2017 were junky digital IPOs in which speculators traded ether tokens to invest in hundreds of questionable projects. The majority were worse than even the shoddiest stocks. There was almost no disclosure, and investors had no real equity or voting power. Billions were lost. 

DeFi is touted as an improvement because investors in these Ethereum-based platforms are merely lending their capital, usually in the form of ether or a stablecoin like USD Coin, to others in peer-to-peer networks. The rules are set out in smart contracts embedded in the Ethereum blockchain. By lending crypto, DeFi investors can make money—lots of it— through something called yield farming. 

It works like this: Say you own $10,000 worth of ether. Rather than having it sit in your digital wallet on Coinbase earning zero interest, you could deposit it in a DeFi platform like Compound, making it available for somebody else to borrow for a set time. In exchange you’ll earn an annual yield as high as 30%. But that’s not all. You’ll also be rewarded with Compound’s own tokens, COMP, the platform’s native asset, which entitles you to vote and have a say in governing the network. COMP tokens also trade actively. Between their launch in June 2020 and mid-2021, they skyrocketed in value from about $65 each to more than $800. Even after the recent crypto crash they’re up about 90% since release. 

“You can now have lending agreements for millions of dollars between two people around the world who don’t know each other’s identities,” says Carlson- Wee, whose 2018 $2 million investment in Compound led its seed round at a $22 million valuation. Compound released its token in June 2020. Its market cap soared to $4 billion in 2021 and now hovers around $800 million. 

“These loans can be an agreement between a person and a computer, or a corporation and a computer. There’s no concept of identity or legal contract. And yet [because of smart contracts] you can have literally billions of dollars [move] between these people,” Carlson-Wee says. 

Whatever the ideal, in practice, DeFi is a speculator’s paradise. The COMP tokens you’re awarded for lending out your ether on Compound can then be deposited in any number of decentralized exchanges such as Uniswap (also a Polychain holding), where you can likewise earn interest and more free tokens. On Uniswap you earn UNIs. Then you can deposit your UNIs on SushiSwap and earn SUSHI. And so on. 

It can seem like a self-perpetuating bubble. Over the last 12 months, DeFi platforms including Uniswap and SushiSwap have averaged over $50 billion in transaction volume per month, but there’s little evidence that any of this goes toward the things banks typically finance—say, company expansion or even buying a home. 

“Polychain is among a handful of big hedge funds and VCs including Paradigm, Bain Capital Ventures and Pantera, which, behind the scenes, centrally control many of the biggest decentralized platforms.”

Things don’t always go smoothly, either. Chainalysis estimates that in 2021, 72% of $3.2 billion in crypto assets stolen came from DeFi sites. In early 2020, when the emerging pandemic caused markets to plummet, investors in a Polychain-backed DeFi platform called MakerDAO suffered $8 million in losses when its underlying software liquidated 1,200 collateral positions in response to a 55% drop in the price of ether. At one point the foundation that runs MakerDAO considered an emergency shutdown. The platform was saved in part because ether rebounded 80% in a few months. Much more is at risk now. In March 2020 the total value of digital assets “locked up” in DeFi platforms was about $10 billion; today, even after crypto’s recent correction, the amount at risk stands at nearly $80 billion. Little wonder that powerful opponents, such as Massachusetts Senator Elizabeth Warren, have called DeFi “the most dangerous part of the crypto world.” 

IF THE NEW WORLD of decentralized finance is a democracy, then Olaf Carlson- Wee is a Tammany Hall boss. With large stakes in the biggest platforms including Compound, Uniswap and MakerDAO, Polychain’s analysts are actively involved in creating their architecture, known as “tokenomics,” as well as designing the incentive mechanisms that attract investors. 

When it comes to Compound’s governance, for example, Polychain is the second-most-powerful voting bloc behind Andreessen Horowitz. It controls 306,000 of 2.8 million votes, roughly 11%. Andreessen has 321,000. Important votes on things like lowering loan collateral requirements require that only 400,000 votes be cast, so, as long as they agree, the venture firms can easily sway any vote their way. In fact, Polychain is among a handful of big hedge funds and VCs including Paradigm, Bain Capital Ventures and Pantera, which, behind the scenes, centrally control many of the biggest decentralized platforms. 

Unlike voting for common stocks, there is no mandate to notify token holders of upcoming votes, and for those who store their DeFi tokens on exchanges like Coinbase there isn’t even a mechanism to allow voting. 

“A decision does not pass on Uniswap, Aave or Compound unless it is approved by the founding team,” says Andre Cronje, founder of Yearn.Finance, a yield farming robo-advisor. Carlson-Wee openly admits that his team works with founders on all major proposals. Adds Cronje, “As much as there is talk of decentralization, unless it is back-channeled there will be no approval.” 

Carlson-Wee prefers not to dwell on DeFi’s inherent contradictions. “I’ve never really viewed decentralization as an end goal or a feature that users want,” he says. “What people really want are security guarantees. And decentralization is usually the best way to get them.” 

These days, he’s focused mostly on where to deploy his $750 million in fresh capital. Polychain takes a thematic approach to investing in early-stage startups (see table, page 65), something that the youthful money man says he gleaned from VC veteran Fred Wilson, of Union Square Ventures. 

In the fast-moving cryptoverse, DeFi is yesterday’s bubble. NFTs and the metaverse are the next wave of froth Carlson- Wee wants to surf. “The internet generation cares about avatars and profile pictures more than clothing and cars. As we transition to digital lifestyles and, eventually, a fully internet-native metaverse, NFTs become the artifacts all around us,” he says, a glint in his blue eyes. “Imagine a game world where the price of a token going up would actually expand the size of the game.” 


MORE FROM FORBESDAOs Aren’t A Fad – They’re A Platform MORE FROM FORBESFlexport Is Silicon Valley’s Solution To The Supply Chain Mess-Why Do Insiders Hope It Sinks? MORE FROM FORBESForget Meta’s Sleek Virtual Reality. Maybe The Metaverse Is Fun, Friendly, 8-Bit — And Already Here


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Polygon Joins Arms Race To Become ‘The AWS Of Web 3’ With $450 Million In Fresh Funding

Ethereum scaling and infrastructure development platform Polygon has raised $450 million in its first major financing round led by Sequoia Capital India.

More than 40 venture capital firms, including SoftBank Vision Fund 2, Galaxy Digital, Galaxy Interactive and Tiger Global, among others, have participated in a private sale of Polygon’s native MATIC token (Market cap as of February 7 is $14.4 billion).

“Our goal is to become the AWS of Web 3,” Polygon co-founder Sandeep Nailwal told Forbes. “We want to provide the entire suite of solutions to the developers.”

Launched in 2017 as Matic Network, Polygon is one of the major so-called Layer-2 chains that are attempting to take the load off Ethereum’s heavily congested network. It hosts more than 7,000 applications and to date has processed over 1.3 billion transactions between 100 million unique wallets. 

“Polygon has become what we see as a platform of choice for folks who are trying to build and scale low-cost applications that we think could actually get adoption,” says Shailesh Lakhani, managing director at Sequoia India. “Probably 70-80% of the startups that we run into in crypto are using Polygon today.”

According to Nailwal, the funds will help the firm build products including Polygon PoS, Polygon Edge and Polygon Avail that are similar to Amazon Web Services’ offerings for Web 2 developers. Polygon is also heavily investing in zero knowledge (ZK) technology, which allows individuals and entities to verify data such as transactions and personal information or identification without handing over control of the information. In August, the project’s team committed $1 billion to ZK-related efforts.

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Why The US Is Taking So Long To Build A Digital Dollar

What Happened

On January 20th 2022, the US Federal Reserve Board released its initial concept paper for a CBDC, a key innovation for the future of the dollar.  It defines a CBDC as a “digital liability of the Federal Reserve that is widely available to the general public” and as such would be “analogous to a digital form of paper money.”  The stated benefits of a US CBDC include providing households and businesses directly with a convenient electronic form of central bank money, with adequate levels of liquidity and security mechanisms.  It would offer a platform on which to innovate financial products and services, advancing faster and cheaper payments domestically and internationally, and promoting financial inclusion.  

On the other hand, a US CBDC also poses risks and policy questions with respect to its impact on the financial market structure, cost and availability of credit, financial system safety and stability, and efficacy of monetary policy.

For a US CBDC implementation to proceed, the benefits must exceed the risks.  The Fed’s priorities for a CBDC design would be to ensure privacy protections, an intermediated structure where specialized external parties would address privacy issues regarding financial transaction data, a wide transferability to ensure accessibility, and robust user identity verifications for the purposes of AML/CFT.[1]

Key Actors

Jerome Powell Chairman, Federal Reserve

Janet L. Yellen Secretary of the Treasury; Convened President’s Working Group on Financial Markets (PWG) 

Chris Giancarlo Executive Chairman, The Digital Dollar Project; Former Chairman, US Commodity Futures Trading Commission (CFTC)

Robert Bench CEO, Boston Fed

Broader Context

CBDCs are coming, and the question is no longer if but when.  On December 8th 2021, the House Financial Services Committee held a hearing on digital assets, largely as an educational session where Congress representatives asked questions to senior executives from the digital asset ecosystem.  One of the main concerns was how to maintain the global dominance of the dollar, particularly in the context of rapid CBDC and broader cryptocurrency developments.  Much of the regulatory discussion on stablecoins, which rose to the forefront since the initial Libra proposal[2] and continue to be a major area of focus, would also apply to a US CBDC given the parallels in structure and use cases.  

The US has been slow playing this new technology.[3]  The Fed’s concept paper had been expected since the summer of 2021, and an assessment of the costs and benefits of a CBDC was announced by Fed Chairman Jerome Powell in September.  For several months, US regulators had not even shed light on what such a digital token may look like, leading to concerns from some interested parties and suspicions of a lack of agreement on a CBDC outlook.  For instance, on January 12 Congressman Tom Emmer (MN-06) introduced a bill that would prohibit retail CBDCs accessible directly to individuals, despite the fact that the Fed had not yet released its initial CBDC concept paper. 

While Washington’s response to the first wave of the Internet in the 1990s was to “do no harm,” the response to the rise of digital assets has often been to revert to the status quo, as opposed to a dynamic regulatory approach that adjusts with innovation.  The US President’s Working Group on Financial Markets (PWG) released a Report on Stablecoins in November of 2021, proposing recommendations[4] that are unlikely to be implemented soon and point toward maintaining the existing regulatory structure.  Although the report accurately discussed requirements for issuance, systemic risks, and potential shortcomings of digital money as it becomes a matter of public interest, it didn’t fully identify the opportunities of the Internet of Value to modernize the financial system.

The PWG report represents a step toward greater harmonization of a regulatory approach, as it involved collaboration with the OCC and the FDIC in the context of a very fragmented regulatory landscape.  Without a cohesive national policy or single supervisory body for digital asset activities, several US agencies at the federal and state level hold various degrees of oversight over digital asset activities.  These agencies also vary in their approach to digital assets, ranging from enforcement actions,[5] bespoke state-specific regulatory regimes,[6] interpretive letters,[7] etc.  This regulatory landscape is unlikely to change and despite the challenges, may be beneficial with the right level of collaboration among agencies.

In the long run, it could be argued that having multiple regulators promotes healthy competition leading to better regulatory responses.  The very strength of the US capital markets historically has depended on its robust regulatory framework, which has upheld the standards of security, credibility, and competitiveness that provided the dollar with the credibility to become accepted as the world’s reserve currency.  With respect to digital assets, several US regulators have devoted significant time and resources to understand the space and support its growth.  

For instance, the Boston Fed has been collaborating closely with MIT to develop technical standards for a US CBDC.  Project Hamilton developed a platform for testing operations and experiment with several CBDC features.  The New York Fed also launched a New York Innovation Center (NYIC) to collaborate with the Bank for International Settlements (BIS) Innovation Hub, the Federal Reserve System, and experts from the public and private sectors to design and experiment with CBDC related innovations.  The Digital Dollar Project has conducted several US CBDC use case pilots in the spirit of Web 3, in collaboration with Accenture and other key stakeholders.  Initiatives like these can ultimately draw on the Fed’s concept paper as a thoughtful analysis and further step toward key stakeholder alignment.

“The Digital Dollar Project commends the Federal Reserve’s CBDC policy paper.  As our nation takes up exploration of a US Central Bank Digital Currency, we must ensure that the values that are enshrined in the dollar today – global acceptance, stable economics, the rule of law, free enterprise, freedom of speech, and yes, individual privacy – are embraced in the digital future of money.”            

–     Chris Giancarlo, The Digital Dollar Project

Key Numbers

The dollar has maintained, and even strengthened, its global presence in the recent year, reaching 12-month highs with the start of 2022.  Data from record US annual economic growth in decades, US labor costs and steady yields, as well as the relative performance of other world currencies, all support a market consensus for a strong dollar going well into 2022.  According to IMF data, dollar denominated currency reserves globally have risen from 6,927.23B in Q3 2020 to 7,081.39B in Q3 2021.  Yet over a longer term, the percentage of total foreign exchange reserves in dollars has declined consistently, from 71% in 1999, the year the Euro was launched, to 55% in Q3 2021.

Official Foreign Exchange Reserves by Currency (US Dollars, Billions)

The foundations being set for the Internet of Value, where money can be exchanged much like email, also rely on the dollar as a main currency of the Internet.  CBDC implementations around the world will need interoperability with the existing dollar-based infrastructure.  Even today, most stablecoins are already pegged to the dollar and hold their reserves in commercial banks, which ultimately depend on the US banking system and the Fed.[8]  The vast majority of stablecoin reserves are held in dollars.  Tether, USD Coin, and Binance USD are the three major stablecoins by market cap, representing close to $120B combined.  Hence many DeFi applications built with these stablecoins point to the concept of CeDeFi (centralized decentralized finance).

Top Stablecoins by Market Capitalization (Billions)

Outlook and Implications

A tokenized form of the dollar would be expected to future proof its strength and determine its trajectory as the world’s reserve currency.  A stronger reserve currency benefits the US not only by lowering transaction and borrowing costs for US persons and businesses, but also by preserving US influence on the global monetary system.  This implies upholding the underlying values of free markets and individual freedoms that have been key to US governance and are likely to guide the design features of a US CBDC.  The Fed, Treasury, and national security agencies will likely have a prominent role in the trajectory of sovereign digital money.[9]

A US CBDC would directly provide households and businesses with a convenient, electronic form of central bank money.  Although not explicitly stated by the Fed and still pending further discussion, this seems to suggest a retail model where individuals could access central bank money directly through digital wallets, rather than a wholesale model where access to such accounts is reserved to commercial banks.  Central bank money is considered the safest form of money as a direct liability of the Fed, as opposed to commercial money and nonbank money, which require deposit insurance to ensure public confidence, and also backing by an underlying pool of assets to maintain value respectively.  Physical currency is the only form of central bank money available to the public today.[10]  Thus, a US CBDC has the potential to provide be the safest digital asset available to the public, with no credit or liquidity risk associated with it.

The openness of the US economy, depth and liquidity of its financial markets, and stability of governance structures have contributed to the credibility of the dollar as the most widely used currency for payments and investments around the world.  As traditional financial market infrastructures transition toward increasing digitalization and disintermediation, the strength of the dollar would also determine the strength of a US CBDC for such use cases.  Automation will increasingly facilitate transactions across all types of assets through tokenization, and the role of a US CBDC would likely take up center stage in this context.  Financial infrastructure plumbing and software are already shifting toward open systems that allow sharing of information across participants.

As the Internet of Value becomes a matter of national interest, the network effects of relying on the dollar would support further use cases for a US CBDC.  The specific role of CBDCs in the context of stablecoin and DeFi developments is yet to be determined and will largely depend on these network effects in addition to design features.  A US CBDC would preserve the use of the dollar, and thus its international role, with the advent of digital money.  The future of money points to a world of multiple complementary currencies, likely both sovereign and non-sovereign, coexisting to facilitate the provision of tailored user-centric financial products and services.  These solutions will enable a truly global and inclusive financial system that will benefit all.

At this point, however, the Fed does not intend to support any policy outcomes or take any steps toward CBDC issuance without clear support from the executive branch and Congress, preferably through an authorizing law.  Thus, the concept paper is the first step in a broader public discussion on CBDCs in general, as well as the specific risks, benefits, policy considerations, and design of a US CBDC.  Moving ahead, the Fed intends to engage key stakeholders from the public and private sectors through a notice and comment period, where the public can submit responses to a questionnaire by May 20, 2022.  The resulting discussion will provide input for the Fed as it proceeds to explore design options and implementations for a US CBDC.  

Decision Points

A successful US CBDC implementation would ensure functionality and complementarity with existing forms of money and financial services.  Future proofing the dollar implies a strong sense of responsibility and will involve a gradual, thoughtful process that goes beyond merely defining design priorities.  A broader mindset is key in order to enable adequate stakeholder alignment and underlying infrastructure.  This would require clarity with respect to the following:

·      Consistent Regulation: Harmonized rules, whether or not under a single entity, require a mature commensurate framework that is dynamic and principles based.  Regulators need to move beyond focusing on how to classify the activities and assets being traded and lent, which only assesses which of the various state and federal agencies have jurisdiction and how to apply it.  There needs to be a clear sense of parity, where digital asset innovations can be treated as delivering traditional functions through digital mechanisms, and thus treated under existing frameworks.  Rule of law is fundamental for credibility and security from fraud and manipulation.

·      Robust Public Private Partnerships:[11]  Central banks and private banks need to collaborate closely on implementation and agree on standards, privacy, security, identity, and interoperability. Alignment across stakeholders is fundamental.  Otherwise, a purely public sector approach, where CBDCs would only be available through Fed accounts, could destabilize the current two-tiered banking system and how people access financial services.  It would forego the technological competitiveness of the private sector.  On the other hand, a purely private sector approach could easily be deemed unregulated and non-compliant with safety and security measures which are key to managing risks and ensuring sustainability.  

·      Adequate Financial Market Infrastructure: The plumbing, and processes to support automated transactions require a modernized financial system.  A widespread adoption of a US CBDC would require important shifts in underlying market infrastructure.  The Principles for Financial Market Infrastructures (PFMIs) established by the Committee on Payments and Market Infrastructure (CPMI) of the Bank for International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) have set 12 standards that preserve financial stability.  These principles should be taken into account, especially in the context of lessons learned from the 2008 financial crisis, so as to reduce systemic risk and prevent financial breakdowns.  For instance, the role of role of narrow banking where deposits are fully backed by central bank reserves,[12] and the ability to transact within and across blockchains[13] could be key considerations.  

·      Privacy: Data from customer transactions, as well as personal identification data about customers, should be safeguarded, with privacy treated as a public good.  The Fed has yet to clarify this with respect to the government’s ability to collect this data and make use of it, especially since the US CBDC concept paper does not seem to support a KYC threshold where transactions below a certain amount would be fully anonymous, but would rather require customer identification for every transaction.  Without adequate privacy protection mechanisms, users may become incentivized to adopt other cryptocurrencies for specific transactions as opposed to a US CBDC, which would undermine the dollar.

Further Reading

·      Money and Payments: The US Dollar in the Age of Digital Transformation

·      President’s Working Group Report on Stablecoins

·      House Financial Services Committee Hearing on Digital Assets

·      Philadelphia Fed Panel: Crypto, DeFi, and Quantum Computing Discussion

·      Exploring a US CBDC

·      Principles for Financial Market Infrastructures

·      Digital Dollar Project Statement Regarding the Federal Reserve Board’s Central Bank Digital Currency Discussion Paper

·      Blockchain Intra- and Interoperability

·      Parasitic Stablecoins

[1] Anti-Money Laundering/Combating the Financing of Terrorism controls, when implemented effectively, not only mitigate the economic impact of criminal activity but also promote financial market integrity and stability.  These rules include customer due diligence, recordkeeping, and reporting requirements.

[2] Regulators at a global level voiced concerns on the implications of a global stablecoin with respect to issues like privacy, monetary policy, and financial stability.  

[3] Declining trust in institutions, particularly financial institutions, largely spurred the momentum toward digital asset growth, separate from regulators.

[4] Recommendations include calling Congress to define who can issue a stablecoin, which would be unlikely to take place soon.  The report also calls the Financial Stability Oversight Council to research systemic risks of stablecoins, which would likely be a gradual process.

[5] The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have asserted jurisdiction over certain aspects the digital asset space through enforcement actions.  They have also established FinHub and LabCFTC respectively, as offices focused on engaging directly with innovators and providing support on conducting operations in a compliant manner.

[6] The New York State Department of Financial Services has established the BitLicense, which requires robust regulatory compliance standards for digital asset activities.  Wyoming has enacted over a dozen bespoke crypto and blockchain friendly pieces of legislation, aimed to attract these activities to the state.

[7] The Office of the Comptroller of the Currency (OCC) has released a series of interpretive letters clarifying the applicability of existing regimes to digital asset activities.

[8] In 2020, stablecoin volumes traded on-chain aggregated to $1 trillion, which would comprise a growing shadow banking sector that remains largely anonymous and outside the purview of financial regulations (Swanson, 2022).

[9] Other agencies like the SEC and CFTC are likely to continue their focus on regulating other cryptocurrencies as forms of non-sovereign digital money.

[10] Commercial banks today also have access to central bank money through digital balances at the Fed, but this is not available to the public.

[11] Two historical examples of public private partnerships are the Manhattan Project and the early Internet.  The Manhattan Project in the 1940s involved a period of research and development, leading to a highly coordinated strategy and cross-country collaboration that brought forth the first nuclear weapons to bring an end to World War II.  The advent of the Internet in 1969 came from research and development in an emerging discipline, initially funded by the US Defense Advanced Research Projects Agency (DARPA), that led to distributed commercial networks and basic protocols on which to build applications with various functionalities including interoperability across countries.

[12] Narrow banking studies have shown no negative impact on economic growth, but rather more robust risk mitigation mechanisms with respect to excessive lending activity that may exceed deposit insurance available in the banking system (Grasselli & Lipton, 2019).

[13] Blockchain intraoperability would enable automated transactions within a blockchain enabled by smart contracts, while interoperability would allow exchanges across different blockchains and systems, including legacy systems (Lipton & Hardjono, 2020).


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IRS May Not Tax Passive Income From Holding Crypto Right Away

What Happened

Taxation of staking rewards has been a controversial topic for many years because the IRS has failed to issue any clear guidance on this matter. In the absence of this guidance, many taxpayers defaulted to following a conservative approach for taxation — reporting income at the time you receive staking rewards. 

Joshua Jarrett, Jessica Jarrett (plaintiffs) v. US (defendant) case 

During 2019, a Nashville couple (Jarrets) received 8,876 Tezos (XTZ) staking rewards. These coins were worth $9,407 at the time of receipt. By relying on the conservative approach above, the Jarrets reported $9,407 as income and paid related taxes. 

On July 31, 2020, the couple filed an amended tax return arguing that $9,407 staking income shouldn’t have been income in the first place. The amended return demanded a $3,793 tax refund from the IRS. The couple didn’t receive a timely response from the IRS. 

In a complaint dated May 21, 2021, the couple argued that newly created property is taxed only at the time of sale, not at the time of receipt. For example, if you create a book, you pay taxes only when you sell it, not at the time you are done authoring the book. In response to this complaint, the Tax division of the US department of Justice ordered the IRS to issue a refund of $3,793 on a letter dated December 20, 2021. Interestingly, the Jarretts refused to accept the refund because the IRS didn’t acknowledge the true reasoning for issuing the refund. This reasoning is essential to create a precedent for other stakers and protect himself from IRS scrutiny in the future. The Jarretts decided to take this to the court to get a formal court ruling. This is an ongoing case.  

“Fast forward to late December 2021 when I received a letter saying the government wanted to grant me a refund—in other words, a year and a half into this process, the government didn’t want to defend the position that the tokens I created through staking were taxable income. At first glance, this seemed like great news. But until the case receives an official ruling from a court, there will be nothing to prevent the IRS from challenging me again on this issue. I need a better answer. So I refused the government’s offer to pay me a refund.” (statement from Joshua Jarrett)

Key Concepts

What Is Staking?

Before we dive into the tax implications of staking rewards and Jarrett’s case, let’s discuss what staking is. Staking is very similar to having an interest-bearing bank savings account. Cardano (ADA), Solana (SOL) & Tezos (XTZ) are some cryptocurrencies you can stake. These coins run on Proof-of-Stake (PoS) consensus mechanism as opposed to Proof-of-Work (PoS) mechanism that powers Bitcoin. 

The way it works is simple. You can leave these coins in your wallet and/or an exchange that supports staking, and receive periodic payouts based on the amount of funds you stake. The below snippet shows how staking rewards appear on a dashboard of a major US crypto exchange.

How Staking Is Taxed Today

IRS has not issued any staking specific crypto tax guidance. The closest guidance that could be used to infer how staking income should be taxed is the tax guidance on mining income issued on Notice 2014-21. According to this notice, mining income should be reported on your taxes at the time you receive the rewards. When you sell those mined coins, another taxable event is triggered.

For example, assume David receives the following XTZ staking rewards on the corresponding days. 

January 1, 2021 – 1 XTZ valued at $10

January 25, 2021 – 1 XTZ valued at $10

May 1, 2021 – 1 XTZ valued at $5

His total ordinary income from staking operation for the 2021 tax year would be $25.

Assume he sells 1 XTZ received on January 1, 2021, for $15 in March 2021. This would also create a capital gain of $5 ($15 – $10). In 2021, his total income subject to taxes would be $30 ($25 + $5).

Why Staking Should Not Be Taxed At The Time Of Receipt

Staking results in a creation of “new property”. New property is taxed only at the time of sale, not when you discover it. As Abraham Sutherland, a lecturer at the University of Virginia, describes on Cryptocurrency Economics and The Taxation of Block Rewards, crops do not generate income until they are sold or exchanged, according to reg. section 1.61-4. According to Reg. section 1.61-3(a) gross income from mined minerals such as gold is only recognized at the time of sale, not at the time of extraction. Applying these fact patterns to staking, it could be argued that staking rewards should only be taxed at the time of sale. This is the exact argument Jarretts made in their complaint. 

Implications of the Jarret’s case

The IRS issuing a refund to the Jarretts signals that staking rewards should not be taxed at the time of receipt. However, a formal court ruling must be issued on the case for others to safely rely on this tax treatment. If a court judgement is made in favor of the Jarretts in a future date, this case could set precedent for how staking income should be taxed going forward. This is a huge win for crypto holders in the US. In light of this new information, even without this formal court ruling, some taxpayers might decide to follow a bit aggressive approach and not report staking income at the time of receipt. 

Also, it is very important to know that the outcome of this case will not completely shield staked coins from taxation. Staking income is NOT taxed at the time of receipt; it will be taxed only at the time of sale. For example, say Sam received 1 ADA staking reward worth $2 in 2022. Sam does not have any taxable income at the time he receives the token. The cost basis of the ADA token will be zero. If Sam later sells this coin for $10, he will have to report $10 of income. 

The Jarretts’ judgement could also lead to many taxpayers amending their previous tax returns with staking income. You can file a Form 1040-X to amend your previous tax returns where you reported staking income when you received it. The IRS gives taxpayers three years from the date the original return was filed to file an amended return and request a refund. Consult your tax adviser to see if you are eligible to amend your tax returns and potential pros and cons.  

Finally, this favorable tax treatment could accelerate the growth of Proof-of-Stake (PoS) based cryptocurrency projects. 

Next Steps

Contact your tax adviser to see if you are qualified to amend your previous tax returns with staking income. 

Further Reading

·      Quick Guide To Filing Your 2021 Cryptocurrency & NFT Taxes

·      How The Infrastructure Bill Is Brewing A Crypto Tax Compliance Nightmare

·      How To Avoid Common NFT Tax Pitfalls.


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DAOs Aren’t A Fad — They’re A Platform

Tribute Labs CEO Aaron Wright and COO Priyanka Desai (above) at a Williamsburg, Brooklyn, mural of a popular nonfungible token (NFT). Their DAO service operation created Flamingo DAO, which turned a $10 million investment into a $1 billion NFT collection. Photograph by Jamel Toppin for Forbes.

The leaderless investing collectives known as decentralized autonomous organizations are generating a lot of eyerolls. Thanks to high flexibility and low regulation, they’ll also soon generate a lot of profits.

By Jeff Kauflin with Isabel Contreras

“This is an incredibly risky move. I don’t know if I agree with this.’’ Erick Calderon, the founder of a company named Art Blocks in a risk-oblivious field, nonfungible tokens, was nonetheless concerned. It was February 2021, and Calderon was one of 59 investors who had banded together to potentially buy a rare set of 150 popular NFTs, CryptoPunks, directly from their producer, Larva Labs. 

The group, a decentralized autonomous organization (DAO) called Flamingo, had pooled $10 million and met weekly via Zoom (audio-only to protect those wanting anonymity) to figure out what to do with it. The CryptoPunk opportunity, at about four ether ($7,200 at the time) per punk, would eat 10% of that, which is partly why Calderon aired his concerns on the group’s Discord channel.

The tension got thicker when members discovered one of their own—someone going by the pseudonym “Pranksy”—had tried to front-run the deal, opening a back channel with Larva Labs to buy 150 punks for himself. In the end, Flamingo members voted to spring for the punks, which were recently valued at $30 million. As for Pranksy, he left the DAO “by mutual agreement,” telling Forbes he was “somewhat naïve [about] the DAO process.” 

Most of America is. Sure, you’re probably familiar with the concept: leaderless collectives in which groups democratically make investment decisions, such as when 17,000 members of a DAO tried to buy one of 13 surviving original copies of the U.S. Constitution last year. Aaron Wright, CEO and cofounder of Tribute Labs, which set up Flamingo, calls a DAO “a sub-reddit with a bank account.” But while the headlines tend toward the splashy or the silly, a new model is emerging that has real legs as an alternative investment vehicle. 

A quarter-century ago, an Illinois “investment club” run out of a church basement, the Beardstown Ladies, spawned a slew of bestsellers and imitators as stock-picking groups proliferated. DAOs have modernized and digitized the concept, incorporating many of the traits that make the blockchain so potent. 

By using tokens, DAOs can efficiently allow votes, empower profit sharing and, crucially, supply liquidity, as tokens can be bought and sold—though for now, trading in tokens is not something the Securities and Exchange Commission is ready to bless. 

By limiting membership to 100 people or fewer, some DAOs are also able to skirt SEC rules, since they fall under a quaint 82-year-old “investment club” exemption—so long as the participants are all involved in managing their kitty and don’t publicly offer their securities. 

And while the leaderless model can be called, by another definition, anarchy, it also lets those interested in alternative assets play without having to outrun the 20% profit share that hedge fund, venture capital and private equity managers regularly charge for what too often is average performance. Syndicate, which makes DAO-in-a-box software, partners with another startup that can help you do all the legal and tax paperwork for $2,000 a year, while Tribute charges 2% a year of the DAO’s original investment to do all that paperwork and incorporate things like coordinating group calls (not coincidentally, the same upfront vig that funds charge). The difference here is that the profits are all yours. 

Combine all that, and you have something that can’t be judged by all the dumb headlines. Instead, think of DAOs as a legal platform, much as nimble LLCs emerged decades ago as an easier way to incorporate than the lawyer-laden C Corp. The early adopters might seem silly. The second wave will make it mainstream. 

Exhibit A: Kinjal Shah is a partner at VC firm Blockchain Capital, in San Francisco, which has a traditional fee structure on $1.8 billion under management. Nevertheless, Shah cofounded a DAO called the Komorebi Collective, which has 35 female investors, $400,000 in capital and a goal of investing in crypto startups with female and nonbinary founders. In creating an investment vehicle (leveraging Syndicate services) that isn’t weighed down by institutional investors or high hurdle fees, Shah says the DAO can “have a lot more experimentation and flexibility.” And those are two terms that tend to portend exponential growth. 

The early days of DAOs did the model no favors. In 2016, early adopters of ethereum formed “The DAO” to back crypto projects, quickly attracted $150 million—and then lost one-third of that to a hacker before making a single investment. While the attacker was denied most of his spoils after developers controversially “forked” (reissued) ethereum, the point had been made: The DAO disbanded, and all DAOs carried a stink akin to that of early dark web marketplace Silk Road. 

Nevertheless, the concept gradually spread. By 2018, roughly 10 DAOs had been formed. By 2020, there were nearly 200 of various types, according to DeepDAO. Yes, embarrassing incidents continued, including numerous “rug pulls”—scammers collect money for a DAO crypto offering and then abscond with the loot, a digital version of The Music Man. Just this January, BadgerDAO, a 24,000-member organization that lets people earn interest on their bitcoin, lost $120 million in a cyberattack. 

But the sheriffs are flooding into this Wild West. Today, more than 50 companies offer blockchain security auditing, according to OpenZeppelin. And the number of DAOs keeps surging—it currently sits at more than 4,000, with over $8 billion in their treasuries. 

Yes, the populist teams and populist themes attract the headlines. PleasrDAO, which has about $100 million in assets and a mission, according to its “chief pleasing officer,” Jamis Johnson, that varies between doing “dope shit” and building “a portfolio of assets that represent internet culture,” shelled out $4 million for the Wu-Tang Clan’s one-of-a-kind album Once Upon a Time in Shaolin (buying it from the feds, who seized it from Martin Shkreli, the jailed “Pharma Bro”). It also spent $5.5 million for the “Stay Free” NFT minted by fugitive National Security Agency whistleblower Edward Snowden and $4 million for an NFT of the original “Doge” image—the mascot of the cryptocurrency Elon Musk promotes in tweets. But look closer, and you’ll see that this isn’t the “stonks” crowd—investors include the platinum-chip venture firm Andreessen Horowitz (firms, as well as individuals, can invest). 

A quarter-century ago, an Illinois “Investment Club” run out of a church basement, the beardstown ladies, spawned a slew of bestsellers and imitators as stock-picking groups proliferated. DAOS have modernized and digitized the concept, incorporating many of the traits that make the blockchain so potent.

While fans may have fantasized through the decades about banding together to buy their hometown sports teams, the Krause House DAO provides a legitimate group with a far more serious path to that unlikely goal, incorporating former players and superfans in a campaign to buy an NBA team. 

A lot of this increasing legitimacy can be credited to Wright, the 41-year-old Tribute Labs cofounder and law professor, who has been obsessing over DAOs since the start. After graduating from Cardozo Law School in 2005, he vacillated between entrepreneurship, cofounding sports discussion site Armchair GM, which was sold to Wikipedia’s for-profit arm for $2 million in 2006, and New York corporate law, even representing Jay-Z in an intellectual property dispute. 

In 2014, seeking more intellectual freedom and better hours, Wright began teaching law at his alma mater and combined his two careers, founding a legal clinic for tech startups and expounding on crypto and blockchain. In 2015, he advised the cofounders of ethereum on their first “crowd sale”—they sold ether for 30 cents that now trades around $2,500—and later offered his thoughts on The DAO. Wright didn’t invest in The DAO, he says, because “it wasn’t 100% clear what you were purchasing, what the structure would look like and whether that would work.” Vindicating his concern, in a postmortem, the SEC concluded the tokens The DAO issued were securities that should have been registered. 

In 2017, Wright cofounded what would become Tribute Labs with Swiss software engineer David Roon to advise companies on how to embed legal contracts into the blockchain, adding new Cardozo grad Priyanka Desai as chief operating officer. In essence, he was selling the pans in the gold rush, but he couldn’t help but prospect too—he’s one of the key figures behind Flamingo. 

While Tribute’s DAOs are funded with ether and operate on the blockchain with certain key protections written into their code, they’re organized as Delaware limited liability companies, with investors holding their equity interest in units, not crypto tokens. To further keep SEC watchdogs and reporting requirements at bay, they’re open only to accredited investors—investment funds and individuals with income above $200,000 or investable net worth above $1 million. No investor can own more than 9%, and Wright limits his own holdings to 1% of each DAO. 

The Tribute DAOs’ bylaws require only a majority of those voting on any deal (not a majority of all members) to approve a purchase and provide for a mechanism for disaffected participants to get their money out—or, as it’s known in the DAO world, to “rage quit.” Despite all their interaction, members can choose to remain anonymous from one another. Tribute Labs, with 12 lawyers, engineers and financial types all working remotely, vets all participants, fulfilling federal “know your customer” requirements and issuing annual K-1 tax reports required by the IRS. Flamingo participants hail from New York, California, Puerto Rico (a crypto investor tax haven) and Australia, among other places. 

Wright points out that the U.S. legal system is more DAO-hospitable than those in Europe, since in the U.S. you can create member-managed companies that don’t designate a single manager or CEO. He helped write a new Wyoming law that allows for LLC DAOs but says the Dela-ware law is just as flexible. 

Additional Tribute-fueled DAOs have sprouted almost organically. Last October, Neon DAO raised $20 million in just 45 minutes to invest in the metaverse and has already bought undeveloped virtual land. Two months later, Noise DAO, focused on music NFTs, closed in 30 minutes and raised $7 million. Red DAO raised $12 million in September to focus on digital fashion (both NFTs representing ownership of a physical piece of clothing and outfits in the metaverse). One member is already advising fashion brands on NFT strategy—not unusual, as DAO members often see themselves as players and not just passive investors. Flamingo, for example, commissioned NFTs by unknown artists who have gone on to digital fame—in part via the credibility conveyed by Flamingo.

How big could investing DAOs get? The global money management industry now tends more than $100 trillion in assets, and Syndicate cofounder and CEO Ian Lee predicts DAOs will hold at least 2% of that in 10 years, increasingly moving into big money pools like stocks and real estate. A former VC and head of crypto at Citigroup, Lee has some big-name backers for Syndicate, including Andreessen Horowitz, Coinbase Ventures, Snoop Dogg, Ashton Kutcher and Reddit cofounder Alexis Ohanian. 

The ecosystem matures quickly. In a house 90 minutes from Vancouver, British Columbia, 39-year-old Jess Sloss is a leader (or, as he calls it, “instigator”) of Seed Club, which aims to be the Y Combinator of DAOs, running eight-week startup workshops for cohorts of 15 that win acceptance into the program. It gives them advice on topics like marketing and how to launch a token. 

Sloss got into digital marketing, then went to work for crypto startups. Along the way, he joined the ranks of those frustrated by the power of the big web companies. “The value that we were creating for these networks was massive, and our ability to have a say in those networks, or have an ownership stake, was minimal or zero,’’ Sloss says. “Are we just going to be living with these feudal overlords and farming for them?” 

Feudal overlords? Sloss isn’t quite as out-there as he sounds. Last year he raised $2 million from dozens of angel investors including a Tribute Labs DAO; Union Square Ventures partner Nick Grossman is a backer. Plus, Seed Club is just one of many DAOs animated by a determination to make sure creators and those who come up with ideas—as well as investors—keep a fair share of the wealth. DAOs, says the 50-something Frank Rotman, a managing partner of fintech venture capital firm QED who has recently started studying DAOs, are “playing to an ethos and a zeitgeist that has hit the next generation.” 

The global money management industry now tends more than $100 trillion in assets, and Syndicate cofounder and CEO Ian Lee predicts DAOs will hold at least 2% of that in 10 years, increasingly moving into big money pools like stocks and real estate.

Out in Silicon Valley, Syndicate is looking to scale up the DAO model far faster, with a service that allows up to 99 investors to instantly turn an ethereum wallet into a DAO—a “Web 3 Investment Club’’ that votes and tracks its holdings on the blockchain. The basic setup is under $300; the service launched in late January, and in under a week, 200 DAOs had signed up. 

Pitfalls abound. Scammers continue their pestilence. If assets do swell into the trillions, it’s hard to see the SEC adhering to rules designed for the financial equivalent of knitting circles. The regulators already consider tokens to be securities if they can be bought and sold—as opposed to merely used for voting and then burned (destroyed) when an investor withdraws. And an entire decentralized trading exchange, Uniswap, already exists. “It really is mass civil disobedience,’’ Rotman muses. 

Finally, there’s the matter of performance. If the wisdom of the crowds better mimics the meme-stock bozos than the enlightened ideals of Aristotle, DAOs will have a short shelf life. After their bestseller drew scrutiny, those Beardstown ladies were ultimately revealed to be market underperformers, rather than Buffetts in the basement. Then again, the faceless hordes behind Flamingo have done far better than just CryptoPunk NFTs—their ahead-of-the-curve calls have helped them turn $10 million into nearly $1 billion in 15 months. A 1% stake in Flamingo, which originally cost $23,000, now goes for 3,000 ether—about $8 million. And new members are screened for the knowledge and influence they can add—not unlike a blue-chip VC or hedge fund seeking partners, but without the crazy fee structure.  


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SEC Objects To MicroStrategy Accurately Valuing Its Billion-Dollar Bitcoin Stash

What Happened

MicroStrategy has been purchasing bitcoin since 2020 as a part of its capital allocation strategy. The company holds over 120,000 BTC as of the end of December 2021. As a U.S. public company, MicroStrategy is required to report earnings and transactions related to bitcoin under Generally Accepted Accounting Principles (GAAP) standard. However, properly accounting for these transactions in GAAP financial statements is an emerging area. The current GAAP standards that classify digital assets as intangible assets with indefinite lives (similar to goodwill and trademarks of a business), fail to capture the true financial behavior of bitcoin holdings. This treatment requires companies to report a loss when digital assets’ prices fall below the cost; however it prohibits marking up digital assets to it’s true value when prices later recover. This discrepancy can negatively impact a company’s net income, which could incorrectly translate into lower price per share. 

To address the shortcomings of GAAP earnings due to bitcoin impairment losses, MicroStrategy added a “Non-GAAP Financial measures” section to Form 10-Q (Quarterly financial report public companies file with the SEC) for the quarter ended September 20, 2021. However, the SEC objected to this new treatment

Key Concepts

The Financial Accounting Standards Board (FASB) is the IRS of the accounting world. The FASB is responsible for creating Generally Accepted Accounting Principles (GAAP). As of the date of posting, there are still no cryptocurrency specific GAAP rules.

In the absence of these crypto specific rules set by the FASB, in 2020, a working group formed by the American Institute of CPAs (AICPA) came up with a Digital Asset Practitioner Guide addressing how to classify cryptocurrencies in GAAP financial statements.

How Cryptocurrencies are Classified on GAAP Financials

According to the white paper issued by the AICPA, crypto assets cannot be classified as “cash or cash equivalents” on GAAP financial statements because they are not backed by a sovereign government or considered legal tender. They cannot be classified as a financial instrument or a financial asset because they are not cash (see above why) and do not represent any contractual right to receive cash or another financial instrument. Additionally, since cryptocurrencies are intangible, they do not clearly meet the definition of inventory and cannot be labeled as inventory on the balance sheet either.

After going through the process of elimination, we are left with only one category to classify cryptocurrencies under: intangible assets with indefinite life. This is how MicroStrategy currently classifies bitcoin in their financial statements. 

(3) Digital Assets: The Company accounts for its digital assets as indefinite-lived intangible assets in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles—Goodwill and Other. The Company’s digital assets are initially recorded at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition” (10-Q, page 11)

Practical Mismatches with Intangible Asset Treatment

There are a few problems with classifying cryptocurrencies as intangible assets with indefinite life. Practically speaking, this accounting treatment does not align with the reality. Cryptocurrencies like bitcoin are liquid and work extremely similar to cash. The purpose of GAAP financial statements is to paint an accurate, unbiased picture of the underlying entity’s financial situation. By treating crypto assets as intangible assets, GAAP financials fails to communicate the high liquidity of crypto assets. 

Second, once an item is classified as an indefinite life intangible asset, it should be tested for impairment. This means, if the value of the crypto asset has gone down at the end of the reporting period, the business gets to write off that amount as an impairment loss (not to be confused with tax losses) on the income statement. However, if the value goes back up (which is common due to high volatility), the business does NOT get to mark up the value of the asset. This overly conservative approach often results in businesses showing poor operating results under GAAP which negative affects investor sentiment and stock price. 

For example, MicroStrategy reported $65,165,000 of impairment losses for the three months ending September 30, 2021, because the market value of bitcoins went below their purchase price. Although this 65M impairment loss was not a cash outflow from the business, it was the largest operating expense which contributed to a net loss of $36,136,000.     

Similarly, during the three months ending September 30, 2021, Tesla reported 51M of impairment loss. Square reported 6M of bitcoin impairment loss in the same period. 

To clarify the situation and show the true performance of the business to investors, MicroStrategy added a section named, “Non-GAAP Financial Measures” in their 10-Q. This section shows what would their operating income be without taking impairment and few other non-GAAP amounts (not related to digital assets) into consideration. 

According to this schedule, if impairment loss was not considered (and few other items not relevant to bitcoin), the company would have a net income of $18,566,000. 

SEC Letter to MicroStrategy

The SEC objected MicroStrategy’s Reconciliation of non-GAAP net income schedule above. On December 3, 2021, it sent the company a comment letter and advised the company to remove it under the Rule 100 of Regulation G.

Reg G requires public companies to “disclose or release such non-GAAP financial measures to include, in that disclosure or release, a presentation of the most directly comparable GAAP financial measure and a reconciliation of the disclosed non-GAAP financial measure to the most directly comparable GAAP financial measure”. 

Although we don’t know the specifics of the situation, it is clear that MicroStrategy’s 10-Q includes GAAP financials & a reconciliation of non-GAAP net income schedule allowing readers to compare numbers easily. The company’s goal is to clearly communicate the true operating performance of the company minus the “paper bitcoin losses” which is required to report under incompatible GAAP rules. Therefore, the specific concern the SEC has with the presentation is unclear. It is also interesting to see that the letter is only talking about the “adjustment for bitcoin impairment charges” among other items included in the Reconciliation of non-GAAP net income schedule such as share-based compensation, interest expense and income tax effects. 

On a subsequent letter from MicroStrategy dated December 16, 2021, the company accepted SEC’s comments and removed the adjustment for bitcoin impairment on the reconciliation of non-GAAP net income schedule. 

Finally, the rising inflation and the uncertainly of interest rates have moved the market sentiment from investing in risky companies to value stocks of profitable companies. Microstrategy may find it challenging to show a net profit under GAAP in the coming months if the price of BTC moves sideways in a bearish market or declines further creating more impairment losses. Even when BTC goes up, Microstrategy will not be able to show a profit under GAAP unless they sell it. This situation could unfairly affect the stock price of the company. If a spot BTC ETF gets approved, investors might be better off directly investing in the ETF compared to using Microstrategy as a way to get exposure to BTC.

Next Steps

Keep an eye on how SEC approaches Non-GAAP disclosures related to bitcoin for other public companies holding bitcoin. 

Further Reading

·      Quick Guide To Filing Your 2021 Cryptocurrency & NFT Taxes

·      How The Infrastructure Bill Is Brewing A Crypto Tax Compliance Nightmare

·      How To Avoid Common NFT Tax Pitfalls.


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