Three Arrows Capital failed to meet demands from lenders to stump up extra funds after its digital currency bets turned sour, tipping the prominent crypto hedge fund into a crisis that comes as a credit crunch grips the industry. Financial Times reports: The group's failure to meet margin calls this past weekend makes the group the latest victim of an acute fall in the prices of many tokens like bitcoin and ether that is rippling across the market. Singapore-based Three Arrows is among the biggest and most active players in the crypto industry with investments across lending and trading platforms. Lenders have sharply tightened up how much credit is on offer following tremors over the past month.

Celsius, a major crypto financial services company, blocked withdrawals last week, while a pair of major tokens collapsed in May. US-based crypto lender BlockFi was among the groups that liquidated at least some of Three Arrows's positions, meaning it reduced its exposure by taking collateral the fund had put down to back its borrowing, according to people familiar with the matter. Three Arrows, which made a "strategic" investment in BlockFi in 2020, had borrowed bitcoin from the lender, the people said, but had been unable to meet a margin call. One of the people said the liquidation had occurred by mutual consent.

Crypto staking and yield generation platform Finblox has imposed a $1,500 monthly withdrawal limit and paused rewards in light of uncertainty surrounding crypto hedge fund Three Arrows Capital, which made a $3.6 million investment in the Hong Kong-based platform last December. From a report: According to a statement shared on Twitter, Finblox has made the changes as it evaluates the impact of Three Arrow Capital's reported issues. It was reported on Wednesday that Three Arrows Capital is facing possible insolvency after incurring at least $400 million in liquidations.

Don't count Bill Gates among the fans of cryptocurrencies and NFTs. From a report: Those digital asset trends are "100% based on greater fool theory," the Microsoft co-founder said Tuesday at a TechCrunch conference, referencing the notion that investors can make money on worthless or overvalued assets as long as people are willing to bid them higher. Gates added that he's "not long or short" crypto. And he mocked Bored Apes NFTs, joking that "expensive digital images of monkeys" will "improve the world immensely." Instead, Gates said he prefers old fashioned investing. "I'm used to asset classes, like a farm where they have output, or like a company where they make products," he said.

The UK's digital minister reiterated the government's ambition to make Britain a global crypto hub while sounding a cautious note about the potential criminal uses of digital assets. From a report: "We do intend the United Kingdom and London to be crypto centers," Chris Philp said in an interview with Bloomberg Radio on Wednesday. "But of course we've got to do that in a way that protects the public and in particular pays attention to issues concerning for example money laundering, and making sure that crypto is not used as a way to circumvent things like sanctions." The UK Treasury in April announced plans to make the country a global crypto hub, soothing an industry that had sparred with the financial regulator over what it considered to be overly strict guardrails. Retail investors in the UK are barred from using crypto derivatives, and authorities are imposing tougher rules on marketing. [...] "The Treasury are working closely with the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority to make sure that balance is struck in the right way," said Philp.

The Block reports: The future of crypto hedge fund Three Arrows Capital hangs in the balance as the firm faces potential insolvency after being liquidated by its lenders. According to well-placed sources, the investment firm -- which counts the likes of options exchange Deribit and financial services firm BlockFi among its venture bets -- is in the process of figuring out how to repay lenders and other counter-parties after it was liquidated by top tier lending firms in the space. Sources declined to share the names of those firms on the record for fear of reprisal, but three people said the liquidation totaled at least $400 million. They added that the firm has maintained limited contact with its counter-parties since being liquidated. The liquidation event is just one of several setbacks by the firm, which has backed projects like Avalanche, Polkadot, and Ether which are all down 57%, 38.8%, and 47% over the last 30 days respectively. The fund sustained significant losses during the collapse of the Terra ecosystem last month, after investing heavily in its native token LUNA. The firm, which reportedly managed approximately $10 billion at market peak by some estimates, is led by former classmates Su Zhu and Kyle Davies.

Bitcoin plunged to the lowest in about 18 months after the freezing of withdrawals by the Celsius lending platform added to concern that systemic risk in the crypto ecosystem will accelerate the digital-asset market meltdown. From a report: The world's largest digital token tumbled as much as 17% to $22,603 -- its lowest since December 2020. Other cryptocurrencies also declined as a broader sell-off continued. The MVIS CryptoCompare Digital Assets 100 Index, which measures 100 of the top tokens, dropped as much as 17%. And the total market value, which topped $3 trillion in November, dropped below $1 trillion as of 10:54 a.m. New York time on Monday, according to CoinGecko. "The fundamentals to support stabilization and recovery just aren't there," said Steven McClurg, co-founder and CIO at crypto fund manager Valkyrie Investments. "Things can and likely will get worse before they get better."

Celsius Network, one of the biggest crypto lenders, told customers Sunday evening that it is pausing withdrawals, swap, and transfers between accounts in a move that has sparked discussions and prompted the price of the firm's token to take a 60% tumble in the past one hour to as low as 19 cents. From a report: "We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations," wrote Celsius, which counts stablecoin-issuer Tether International, growth equity fund WestCap Group and Canadian pension fund Caisse de Depot et Placement du Quebec among its investors. [...] Celsius, which was valued at $3.25 billion when it extended its "oversubscribed" Series B financing round to $750 million in November, allows users to deposit their Bitcoin, Ethereum and Tether and receive weekly interest payments. Depending on the time horizon and the token, the platform offers as much as 18% interest a year. On its website, Celsius says 1.7 million people call "Celsius their home for crypto."

The European Union is nearing an agreement on key legislation to regulate the cryptocurrency sector that would set common rules across the 27 member states, Bloomberg reported Friday, citing people familiar with the matter. From a report: France, which currently chairs the EU, and the European Parliament are optimistic about resolving remaining issues holding up the Markets in Crypto-Assets (MiCA) package and reaching a deal this month, according to the people. Negotiators are expected to meet on June 14 and June 30. MiCA, first presented in 2020, will put European regulators at the forefront of supervising cryptocurrencies by creating unified rules across the $17 trillion economy. Addressing issues such as investor protection and crypto's impact on financial stability has taken on added urgency after last month's collapse of the TerraUSD algorithmic stablecoin.

Member states and the parliament still disagree on several key aspects of MiCA. According to the people, areas of disagreement include:
Whether to include nonfungible tokens in the new set of rules
How to regulate significant stablecoins
Supervision of the largest crypto-asset service providers, or CASPs

Both sides are also discussing how to limit the use of stablecoins as a payment method by introducing a ceiling, in particular for transactions not denominated in euros, the people said, asking not to be identified discussing confidential information.

Nigerian Exchange, plans to start a blockchain-enabled exchange platform next year to deepen trade and lure young investors to the market. From a report: The move follows the introduction of regulations to guide trade in digital assets by the Nigerian Securities and Exchange Commission, and the growing interest to adopt the distributed-ledger technology by businesses and policy makers across the continent including in Kenya and South Africa. The exchange looks to deploy the blockchain technology in settlement of capital market transactions, Temi Popoola, the chief executive of Nigeria Exchange, said in an interview. "For a lot of young and upcoming Nigerians, that is the kind of technology they adopt and we want to see how we can deploy it to grow our market," Temi said. The plan is unfolding in the wake of a rout in cryptocurrency markets following the collapse of the Terra blockchain in May. Bitcoin has plunged more than 50% since reaching a record high last November.

Jack Dorsey's beef with Web3 has never been a secret. In his view, Web 3 -- blockchain boosters' dream of a censorship resistant, privacy-focused internet of the future -- has become just as problematic as the Web2 which preceded it. Now, he's out with an alternative. From a report: At CoinDesk's Consensus Festival here in Austin, TBD -- the bitcoin-focused subsidiary of Dorsey's Block (SQ) -- announced its new vision for a decentralized internet layer on Friday. Its name? Web5. TBD explained its pitch for Web5 in a statement shared with CoinDesk: "Identity and personal data have become the property of third parties. Web5 brings decentralized identity and data storage to individual's applications. It lets devs focus on creating delightful user experiences, while returning ownership of data and identity to individuals."

While the new project from TBD was announced Friday, it is still under open-source development and does not have an official release date. A play on the Web3 moniker embraced in other corners of the blockchain space, Web5 is built on the idea that incumbent "decentralized internet" contenders are going about things the wrong way. Appearing at a Consensus panel clad in a black and bitcoin-yellow track suit emblazoned with the numeral 5, TBD lead Mike Brock explained that Web5 -- in addition to being "two better than Web3" -- would beat out incumbent models by abandoning their blockchain-centric approaches to a censorship free, identity-focused web experience. "This is really a conversation about what technologies are built to purpose, and I don't think that renting block space, in all cases, is a really good idea for decentralized applications," Brock said. He continued: "I think what we're pushing forward with Web5 -- and I admit it's a provocative challenge to a lot of the assumptions about what it means to decentralize the internet -- really actually is back to basics. We already have technologies that effectively decentralize. I mean, bittorrent exists, Tor exists, [etc]." The full presentation is here.

A 29% rate hike for hydroelectric power in Chelan County, created specifically for cryptocurrency miners, went into effect on June 1. Decrypt reports: The miners used to pay a lower, high-density load rate for their electricity. Now they'll pay a newly-created cryptocurrency rate, known as Rate 36. Washington state accounted for about two-thirds of all hydroelectric power generated in the U.S. in 2020, according to the Energy Information Administration. The state's Grand Coulee Dam, located on the Columbia River in Grant and Okanogan counties, powers a 6,809-megawatt. The cheap and renewable hydropower has made Washington state a popular destination for Bitcoin miners too. Washington state accounted for 4% of the total U.S. hashrate in December, according to the Cambridge Centre for Alternative Finance. [...]

KPQ also reported that nearby Douglas County has stopped allowing new Bitcoin miners to set up operations there because they already consume 25% of the county's available energy. Still, the Chelan County rate hike won't ban crypto miners. For companies that have made substantial investments in their mining facilities, officials have approved transition plans to gradually increase energy rates over the next two years. "We need to have some sort of transition. That's important for business," PUD Commissioner Ann Congdon told the Wenatchee World on Tuesday. "I understand how businesses need that in order to plan."

Malachi Salcido, CEO of Salcido Enterprises, told the local news outlet that the new rate will force him to reconfigure his three Chelan County crypto mining facilities into data farms. He has four other crypto mining facilities, two in Douglas County and two in Grant County. Under the new pricing plan, Salcido can keep his Chelan facility on the lower, high-density energy rate if he processes data instead of mining crypto. The data processing uses the same amount of power as crypto mining, he told the Wenatchee World. "Do you really want to be in the business of regulating what kind of processing happens on servers in your territory," Salcido said.

An anonymous reader quotes a report from ZDNet: Lead researcher Alyssa Blackburn of Baylor and Rice, along with team-mates Christoph Huber, Yossi Eliaz, Muhammad S. Shamim, David Weisz, Goutham Seshadri, Kevin Kim, Shengqi Hang, and Erez Lieberman Aiden, used a technique called "address linking" to study the Bitcoin transactions in the first two years of its existence: January of 2009 to February of 2011. Their key discovery is that, in those first two years, "most Bitcoin was mined by only sixty-four agents [] collectively accounting for B2,676,800 (PV: $84 billion)." They are referring to the process of minting new coins by solving computer challenges. That number -- 64 people in total -- "is 1000-fold smaller than prior estimates of the size of the early Bitcoin community (75,000)," they observe. Those 64 people include some notable figures that have already become legends, such as Ross Ulbricht, known by the handle Dread Pirate Roberts. Ulbricht is the founder of Silk Road, a black-market operation that used Bitcoin for illicit means -- until it was shut down by the FBI.

For Blackburn and team, the point was to study the effects of people participating in game-theoretic situations as anonymous parties. Surprisingly, they found early insiders like Ulbricht could have exploited the relative paucity of participants by undermining Bitcoin to double-spend coins, but they did not. They acted "altruistically" to maintain the integrity of the system. That's intriguing, but a more pressing discovery is that addresses can be traced and identities can be revealed. To find out who was doing those early transactions, Blackburn and team had to reverse-engineer the entire premise of Bitcoin and of all crypto: anonymity.

As outlined in the original Bitcoin white paper by Satoshi Nakamoto, privacy was to be preserved by two means: anonymous public key use and creating new key pairs for every transaction [...]. Blackburn and team had to trace those key pairs to reveal early Bitcoin's transacting parties. To do so, they developed what they called a novel address-linking scheme. The scheme finds two patterns that point to users: one is the presence of recurring bits of code, and one is duplicate addresses for certain transactions. [...] The consequence of that, they write, is that it is possible to "follow the money" to expose any identity by following a chain of relatedness in a graph of addresses, starting from a known identity [...]. Further, they hypothesize that "many cryptocurrencies may be susceptible to follow-the-money attacks." Blackburn told The New York Times's Siobhan Roberts, "When you are encrypting private data and making it public, you cannot assume that it'll be private forever." As the team concludes in the report, "Drip-by-drip, information leakage erodes the once-impenetrable blocks, carving out a new landscape of socioeconomic data." The new paper, titled "Cooperation among an anonymous group, protected Bitcoin during failures of decentralization," has been posted on the researchers' server (PDF).

U.S. law enforcement have announced the takedown of SSNDOB, a notorious marketplace used for trading the personal information -- including Social Security numbers, or SSNs -- of millions of Americans. From a report: The operation was conducted by the FBI, the Internal Revenue Service (IRS), and the Department of Justice (DOJ), with help from the Cyprus Police, to seize four domains hosting the SSNDOB marketplace -- ssndob[dot]ws, ssndob[dot]vip, ssndob[dot]club, and blackjob[dot]biz. SSNDOB listed the personal information for approximately 24 million individuals in the United States, including names, dates of birth, SSNs, and credit card numbers, and generated more than $19 million in revenue, according to the DOJ. Chainalysis, a blockchain analysis company, reports separately that the marketplace has received nearly $22 million worth of Bitcoin across over 100,000 transactions since April 2015, though the marketplace is believed to have been active since at least 2013. These figures suggest that some users were buying personally identifiable information from the service in bulk, according to Chainalysis, which also uncovered a connection between SSNDOB and Joker's Stash, a large dark net market focused on stolen credit card information that shut down in January 2021.

PayPal announced on Tuesday that the service now "supports the native transfer of cryptocurrencies between PayPal and other wallets and exchanges." Decrypt reports: The ability to conduct external transfers on PayPal's crypto platform, an image of which can be seen below, will start rolling out to users today and be available to everyone in the U.S. in the next week or two. PayPal first launched its crypto offering in late 2020, allowing users to buy, sell, and hold four cryptocurrencies -- Bitcoin, Ethereum, Bitcoin Cash, and Litecoin -- but not to move the funds to external destinations like MetaMask, Coinbase, or hardware wallets.

The fact users now can do this is significant because PayPal, which also owns the popular app Venmo, is used by hundreds of millions of people across the world to move money, and is increasingly used by merchants as a payment platform. It's also notable that PayPal is not backing off its ambitious crypto plans despite a financial downturn that's seen the company's share price get battered in recent months.

A new report from the Department of Justice proposes more international cooperation among law enforcement agencies on the crypto and blockchain front. From a report: Information sharing and the harmonization of anti-money laundering and know-your-customer rules were also proposed in the DOJ report, which was developed in conjunction with other US agencies in the wake of the Biden White House's executive order on crypto. That EO was released in March. The report itself was drafted in response to that executive order. In the introduction, US Attorney General Merrick Garland wrote that "the growing use of digital assets in the global financial system has profound implications for investors, consumers, and businesses and increases the risk of crimes such as money laundering, ransomware, terrorist financing, fraud and theft, and sanctions evasion."

According to Bloomberg, the SEC is looking into whether Binance's initial coin offering of its Binance coin (BNB) token in 2017 was an unregistered security offering that should have been registered with the regulatory agency. CoinDesk reports: Without commenting on the details of the reported probe, a spokesperson for Binance told CoinDesk via email, "As the industry has grown at a rapid pace, we have been working very diligently to educate and assist law enforcement and regulators in the U.S. and internationally, while also adhering to new guidelines. We will continue to meet all requirements set by regulators." BNB was trading down 4% after news of the report came out.

The SEC is also investigating market-making companies owned or partially owned by Binance CEO Changpeng Zhao that do business with Binance.US, a U.S.-based affiliate of the global exchange, [...]. According to the report, one of the SEC's focuses is on whether Binance.US is wholly independent of the global exchange and whether employees may be involved in insider trading.

New York lawmakers have passed a bill that would temporarily ban new bitcoin mining operations. Early on Friday, state senators voted 36-27 to pass the legislation. It's now bound for the desk of Governor Kathy Hochul, who will sign it into law or veto the bill. The law would come into effect immediately after it's signed. From a report: An attempt to enact similar legislation last year hit a wall when the New York State Senate passed it but Assembly members did not. The latest bill passed the Assembly in April. The legislation seeks to establish a two-year moratorium on licenses for cryptocurrency mining operations that use power-hungry proof-of-work authentication methods for validating blockchain transactions. Right now, bitcoin and ethereum (the two largest cryptocurrencies) fall under that category, though the latter is shifting to a different setup. The moratorium only covers mining operations that run on carbon-based power sources. Any that harness entirely renewable energy sources or an alternative to proof of work that requires less power won't be affected. Existing operations and those already going through a permit renewal process won't be impacted either.

Billionaire bitcoiners Cameron and Tyler Winklevoss are laying off 10% of the workforce at Gemini, a first for the U.S.-based cryptocurrency exchange and custodian. CNBC reports: The twins announced in a blog post on Thursday morning that the industry is in a "contraction phase" known as "crypto winter," which has been "further compounded by the current macroeconomic and geopolitical turmoil." "We are not alone," the memo continued. Fellow crypto exchange Coinbase recently reported that revenue had fallen 27% from a year ago, as had overall usage.

Gemini -- which has been around since 2014 and is valued at $7.1 billion as of its last funding round -- has 1,033 people on its payroll, according to PitchBook, which translates to about 100 employees affected by today's layoffs. CNBC reached out to Gemini to ask for the exact figure, but the press team declined to comment beyond the blog post. As for next steps, Gemini has closed its physical offices today in order to protect employee privacy. Impacted team members will receive a calendar invite for individual conversations about separation packages and health care benefits. On Friday, remaining employees will take part in a "company-wide standup" to talk about its future.

The memo says that Gemini wants to focus only on products that are critical to its mission -- and team leaders will assess whether their teams are "right-sized" for the "current, turbulent market conditions that are likely to persist for some time." "Today is a tough day, but one that will make Gemini better over the long run," the brothers wrote in the staffwide memo.

Adam Neumann made his post-WeWork debut when Flowcarbon, a blockchain-based carbon credits company, announced that it has raised $70 million in its first round of funding. Neumann is both a founder and an investor in the startup. Reuters reports: The company aims to tap into the growing market for carbon credits companies buy to offset their greenhouse gas emissions as the world transitions to a low-carbon economy in the fight against climate change. Despite increasing demand, the market has drawn criticism for being fractured, opaque, hard to access and with question marks over the quality of some credits. To help fix this, Flowcarbon lets project developers sell their carbon credits through tokens, digital assets stored and traded using blockchain technology, allowing them to access cheaper funding and scale their projects more quickly.

"Our mission is to provide the financing necessary to scale projects that reduce or remove carbon from the atmosphere, in particular nature-based projects," said Chief Executive Dana Gibber. Nature-based projects could include those focused on reforestation, conservation or nature restoration. By "tokenizing," developers can access cheaper financing earlier in the life of their project by selling forward their credits, she said. Buyers, meanwhile, will have greater transparency over their holdings and a broader range of them can join in, including individuals, smaller companies and those in the crypto market.

The firm raised $32 million in the funding round led by Silicon Valley financiers Marc Andreessen and Ben Horowitz through their a16z crypto venture capital firm. Other investors included General Catalyst and Samsung Next. The balance was raised through the sale of a token - the Goddess Nature Token - backed by a parcel of certified carbon credits from nature-based projects over the last five years. More such tokens are planned with other parcels of credits. Further reading: WeWork Co-Founder Adam Neumann's New Crypto Project Sounds Like a Scam Within a Scam (Recode)

An anonymous reader quotes a report from BuzzFeed News: Actor and producer Seth Green was robbed of several NFTs this month after succumbing to a phishing scam that inadvertently threw a monkey wrench into the plan for his new animated series. The forthcoming show was developed from characters in Green's expansive NFT collection, but in light of the recent hack, the project's blatant crypto optimism has become a tragically ironic reminder of the industry's shadier side. On Saturday, Green teased a trailer for White Horse Tavern at the NFT conference VeeCon. A twee comedy, the show seems to be based on the question, "What if your friendly neighborhood bartender was Bored Ape Yacht Club #8398?" In an interview with entrepreneur and crypto hype man Gary Vaynerchuk, Green said he wanted to imagine a universe where "it doesn't matter what you look like, what only matters is your attitude."

Unfortunately for Green, what also matters is copyright law. And when the actor's NFT collection was pilfered by a scammer in early May, he lost the commercial rights to his show's cartoon protagonist, a scruffy Bored Ape named Fred Simian, whose likeness and usage rights now belong to someone else. "I bought that ape in July 2021, and have spent the last several months developing and exploiting the IP to make it into the star of this show," Green told Vaynerchuk. "Then days before -- his name is Fred by the way -- days before he's set to make his world debut, he's literally kidnapped." Green did not respond to a tweet from BuzzFeed News regarding the show.

On May 8, an anonymous scammer swiped four of Green's NFTs in a phishing scheme. Green mourned his "stolen" assets on Twitter, where he announced the losses of a Bored Ape, two Mutant Apes, and a Doodle, which were transferred out of Green's wallet after he unknowingly interacted with a phishing site. One of the Mutant Apes was flipped for $42,000, Motherboard reported. Transaction ledgers show the Bored Ape was also sold by the scammer to a pseudonymous collector known as "DarkWing84," who purchased it for more than $200,000. The NFT was then swiftly transferred to a collection called "GBE_Vault," which is where it currently sits. If the current owner "wanted to cause trouble for Seth Green they probably could, because that person becomes the holder" of the commercial usage rights, said Daniel Dubin, an intellectual property attorney at Alston & Bird LLP. [...] Seemingly aware of the problems his ape's new owner could cause, Green has spent the last several days tweeting at DarkWing84 in an attempt to reclaim the Bored Ape [...]. The NFT marketplace OpenSea said it has frozen the tokens and marked all four NFTs taken from Green with "suspicious activity" warnings.

"We do not have the power to freeze or delist NFTs that exist on decentralized blockchains; however, we do disable the ability to use OpenSea to buy or sell stolen items," said OpenSea spokesperson Allie Mack.