January 27, 2023
Welcome to this week's AtherXplorer, covering the latest in gaming, blockchain, and everything in between.
This week’s top picks include:
- Blockchain & Defi: Nexo Settles with SEC; SEC Charges Mango Markets Attacker…
- Gaming: Emergent Games to Launch Web3 MMO on ImmutableX; Amazon to Launch Gaming-Focused NFT Initiative
- Web3 & Metaverse: Pedigree Unleashes Virtual Fostering in Decentraland; South Korea Metaverse Replica of Seoul
- NFTs: Doodles NFT Launching Doodles 2 on Flow Blockchain; Firm Taps NFTs to Token-Gate Bars…
- Legal Landscape: NY Legislator Introduces Crypto Payments Bill; India to Push for Global Crypto Policy…
Blockchain & DeFi Developments
Nexo Settles with SEC, Will Pay $45 Million, and Kill Crypto Lending Product
It has been a tough week for Nexo Capital. On Sunday, Bulgarian authorities said they have evidence of Nexo customers using the platform for illegal activities, including laundering money, “tax offenses,” and financing terrorist activities. Claims the crypto lender denies.
Adding to Nexo’s headache, the Securities and Exchange Commission charged the crypto lending firm on Thursday with selling unregistered securities, saying the company failed to register with the SEC before offering its plainly named crypto lending product, “Earn Interest.”
In settling with the SEC, Nexo has agreed to cease offering the interest program and pay a $22.5 million penalty—plus an additional $22.5 million to settle with state regulators.
“We are not concerned with the labels put on offerings, but on their economic realities,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, reasserting in the announcement that crypto assets are not exempt from the federal securities laws.
“If you’re offering or selling products that constitute securities under well-established laws and legal precedent, then no matter what you call those products, you’re subject to those laws and we expect compliance,” Grewal added.
In its filing, the SEC says the Nexo “Earn Interest” product offering and sale did not qualify for an exemption from SEC registration, meaning Nexo was required to register its offer and sale and failed to do so.
“We charged Nexo with failing to register its retail crypto lending product before offering it to the public, bypassing essential disclosure requirements designed to protect investors,” said SEC Chair Gary Gensler in the SEC’s announcement. “Compliance with our time-tested public policies isn’t a choice.”
“Where crypto companies do not comply, we will continue to follow the facts and the law to hold them accountable,” Gensler continued.” In this case, among other actions, Nexo is ceasing its unregistered lending product as to all U.S. investors.”
SEC Charges Mango Markets Attacker With Manipulating Price of ‘Security’
The United States Securities and Exchange Commission (SEC) today charged Mango Markets attacker Avraham Eisenberg—who previously claimed responsibility for the scheme—with alleged fraud and market manipulation offenses related to his actions on the Solana-based decentralized exchange (DEX) in October 2022.
Eisenberg, a U.S. citizen, was arrested in Puerto Rico in December and will be transported to New York to face the various criminal and civil charges filed against him. He allegedly manipulated the platform’s markets to steal approximately $116 million worth of cryptocurrency.
He boasted of the initial attack on Twitter last October, describing it as a “highly profitable trading strategy.” Mango Markets had been temporarily rendered insolvent due to the strategy, which he said he executed with a team of users. He also defended the scheme during an appearance on the Unchained Podcast.
“I believe all of our actions were legal open market actions, using the protocol as designed,” Eisenberg tweeted in October, “even if the development team did not fully anticipate all the consequences of setting parameters the way they are.”
Eisenberg was previously charged by the U.S. Department of Justice in December, and then by the Commodity and Futures Trading Commission (CFTC) earlier this month.
The SEC claims that Eisenberg “violated numerous provisions of the federal securities laws, including certain anti-fraud and anti-market manipulation provisions,” per the filing.
Notably, the SEC alleges that the exchange’s MNGO governance token is a security—contentious branding that many crypto advocates would dispute. The SEC has ramped up its scrutiny on the crypto industry under current Chair Gary Gensler, who has said he believes that nearly all crypto assets qualify as securities.
“As our action shows, the SEC remains committed to rooting out market manipulation, regardless of the type of security involved,” said David Hirsch, the SEC’s chief of crypto assets and the cyber unit, in a press release.
Aave Community Voting to Deploy Version 3 on Ethereum
Decentralized non-custodial lending and borrowing protocol Aave is voting to execute its third iteration, or v3, on the Ethereum blockchain, a critical moment for the decentralized finance (DeFi) community hoping to benefit from v3’s focus on risk management and capital efficiency.
In the ongoing governance vote, all participating AAVE token holders have voted to activate the new iteration of Aave on Ethereum. Aave’s Twitter account is calling v3 the “most significant upgrade to the Aave Protocol” since it launched in January 2017.
That’s because Ethereum is Aave’s first and largest market for lending and borrowing crypto capital on-chain. Even so, Aave rolled out v3 on other chains including Optimism, Polygon, Arbitrum, and Avalanche before bringing it to the mothership.
Aimed at improving user experience, risk management, and capital efficiency, v3 on Ethereum comes as Aave leads the charge as the largest lender in the DeFi space, with $3.8 billion in total value locked (TVL) across the Ethereum ecosystem, per DeFiLlama.
The change is being hailed by other Ethereum DeFi players who plug into Aave’s protocol for liquidity.
Kasper Rasmussen, marketing lead for Lido, a major protocol in Ethereum DeFi that plugs into Aave, said v3 will improve the lending and borrowing markets for Lido’s staked ETH – one example of how v3 could shape the broader market.
“It’s a big step forward for the Ethereum DeFi space,” Rasmussen said.
Aave did not return a request to comment by press time.
New features, such as efficiency mode, or "eMode," will now come to Ethereum, but in a limited manner. For now, Aave’s v3 Ethereum market will only include the following pre-approved assets: wBTC, wETH, wstETH, USDC, DAI, LINK, and AAVE.
Not everything is changing instantly, however.
Games & Blockchain Gaming
Emergent Games to Launch Web3 MMO Resurgence on ImmutableX
Developer Emergent Games revealed today that it will launch its web3 survival MMO Resurgence on the ImmutableX platform. The new game, which follows humans trying to rebuild the world after the ecological collapse, plans to take advantage of the platform’s security, scaling solutions, and carbon-neutral environment, say the developers.
Ian Hambleton, Emergent’s CEO, said in a statement, “We spent a huge amount of time assessing options for our Blockchain partner, but ImmutableX was the standout choice. They provide all the tools and technology. Plus the support that a successful web3 games developer needs. Their razor focus on gaming makes a big difference for us and their commercial model suits our vision at Emergent Entertainment of Game First high-quality AAA games, frictionless onboarding, and hidden technology. We expect them to dominate Web3 gaming.”
Resurgence is about humans in cryosleep emerging 1,000 years after the fall of human civilization to reclaim Earth. Emergent launched an ARG last year as a prelude to Resurgence, which set up the characters and world. Emergent claims to offer players “full ownership of their in-game environment.” As such, it’s sold optional NFTs to be used as in-game assets, though Emergent has maintained its users don’t have to engage with NFTs if they don’t wish to.
Andrew Sorokovsky, VP of global business development at Immutable, added, “With over four centuries combined experience of building and publishing AAA games, the team at Emergent is uniquely positioned to bring a new level of quality to Web3 gaming. We’re thrilled to welcome Resurgence to the IMX ecosystem to deliver a compelling and uncompromising user experience.”
Amazon to Launch Gaming-Focused NFT Initiative
E-commerce giant Amazon is launching an NFT initiative focusing on blockchain gaming and related NFTs in the spring of 2023, according to a Blockworks report.
The initiative is still in the development stage, but the deadline for the launch is set as April, according to information from four anonymous individuals shared with Blockworks. One of the use cases will allow Amazon users to play blockchain-based games and claim free NFTs, one source claimed.
In recent months, Amazon executives leading the initiative reached out to at least one family office, according to Blockworks. Even though the plan was to do at least one NFT collection drop with an artist, it quickly evolved into what it is today.
One of the sources stated:
“We knew it was possible. But now it seems like it’s really happening. That’s going to affect the existing players in the space — if they execute and do this right and are smart about it.”
The new initiative will be launched on “Amazon proper,” even though Amazon’s popular web hosting platform — Amazon Web Services (AWS) — posted job ads for Web3 developers over the past few months.
Amazon launched its loyalty-based coins program in 2013, which continues to exist separately from the new NFT initiative.
On April 2022, Amazon CEO Andy Jassy joined CNBC’s Squawk Box. Jassy said that he expected the NFT market to grow further and that Amazon could add crypto payments.
“I expect that NFTs will continue to grow very significantly. We’re not probably close to adding crypto as a payment mechanism in our retail business. But I do believe over time you’ll see crypto become and it’s possible … it’s possible down the road,”
Mythical Games Acquires DMarket Blockchain Gaming Marketplace
Mythical Games, a publisher, and developer of blockchain games, said it has acquired DMarket, a marketplace for digital skins and non-fungible tokens for gamers.
And today, Los Angeles-based Mythical is launching its Mythical Marketplace 2.0, based on the tech built by Mythical and DMarket for its own marketplace, said John Linden, CEO of Mythical Games, in an interview with GamesBeat. The price of the deal wasn’t disclosed.
The new marketplace is built on Mythical’s new Layer 1 Ethereum Virtual Machine (EVM) blockchain and powered by the Mythos native ecosystem token, MYTH.
The acquisition is a significant milestone for Mythical Games, with DMarket’s tech facilitating the most advanced trading platform for digital assets. It makes Mythical the world’s second-largest processor of digital assets on a distributed ledger after the Ethereum mainnet, as of December, Linden said.
Mythical’s Marketplace 2.0 has fully integrated DMarket’s technology to feature its [principles of] blended payment gateway, featuring a powerful anti-money-laundering (AML) and anti-fraud protection system built on more than a decade of industry experience.
Marketplace 2.0 provides a frictionless user experience that enables peer-to-peer transactions and empowerment for gamers looking to participate in the play-and-own gaming economies of the future, the companies said. The Mythical chain has been live for six weeks, processing over two million transactions.
Web3 & Metaverse
Pedigree Unleashes Virtual Fostering in Decentraland to Find Real Dogs Homes
Pet food maker Pedigree is bringing furry friends to the metaverse in an effort to end real-world pet homelessness, the company said Wednesday.
While most metaverse experiences exist entirely in digital spaces, whether it be November’s Metaverse Music Festival or March’s Metaverse Fashion Week, Pedigree’s activation is focused on creating long-term impact outside of the metaverse.
The FOSTERVERSE activation will allow users to foster virtual dogs on the metaverse platform Decentraland. In order to participate, owners of virtual land in Decentraland can choose any available dog from the pet adoption site Adopt a Pet and upload avatars based on their photos to the platform.
Those who don’t own land in Decentraland can still interact with the virtual pets, including chatting with other users to learn more about real-world dogs, donating to the Pedigree Foundation to help other pets in need, or adopting their real-world counterparts.
According to a report from Shelter Animals Count, just over half of dogs in shelters are finding new homes these days. By giving users an opportunity to foster pets in a virtual space, the hope is that they might be more inclined to adopt a dog in real life.
Pedigree will also match up to $100,000 in donations to support the Pedigree Foundation, focusing on helping fund foster programs for shelters around the country. Beyond fostering a virtual dog, users can also flex FOSTERVERSE wearables on their avatars.
Pedigree isn’t alone in its efforts to use Web3 to raise awareness about pet homelessness. In April, blockchain firm Pawtocol created a crypto-backed pet fund to support shelter animals in being adopted.
South Korea Launches Metaverse Replica of Seoul
South Korea is bringing Seoul to the metaverse, launching a virtual replica of the capital city with a goal of improving its public services, Forkast reported Monday.
Known as Metaverse Seoul, the virtual world is estimated to be completed by 2026. The initial stage invites citizens to use avatars to get their tax questions answered, access youth counseling, find support for small businesses, and even read e-books.
In future stages, the virtual world will expand to real estate and foreign investor services, incorporating augmented reality to manage municipal infrastructure. It also plans to introduce blockchain technologies including cryptocurrency.
South Korea has been expanding its metaverse initiatives as a part of its “Digital New Deal” political initiative. In February 2022, the nation announced plans to earmark about $200 million to fund metaverse projects, giving out grants to universities and companies to help expand their technologies. The Bank of Korea also reportedly completed a test of central bank digital currencies in November.
South Korea isn’t the only country making substantial investments in the metaverse. In October, Japan’s Prime Minister, Fumio Kishida, laid out the country’s plans to invest in non-fungible tokens (NFT) and metaverse services.
The Metaverse Is Creating a New Virtual Marketplace for Retail Brands
Entrepreneurs are betting on the future of the metaverse and cannabis industries.
In the last decade, developments in government legislation have led to the legalization or decriminalization of cannabis in a number of countries, municipalities, and U.S. states, allowing users to fully appreciate the sacred plant in both recreational and medicinal settings. While cannabis remains classified as a Schedule 1 drug by the United States federal government, decades of protests, scientific research, and political lobbying have significantly reduced its stigma and opened the cannabis market for commercialization efforts.
Technologically, the rise of the metaverse has reinvigorated the impact of having a virtual presence. The internet and social media introduced the concept of a “virtual self” and with it, facilitated an unprecedented form of communication and interaction. The metaverse is expanding on this capability through the creation of virtual avatars that move through virtual environments created for their exploration and engagement.
Nestled between these two trends are the entrepreneurs who have envisioned a marriage of cannabis and technology. In this vision, virtual avatars roam metaverse worlds socializing with friends, checking out cannabis merchandise, attending virtual comedy clubs, and purchasing goods and services.
This integration could be the future of cannabis, and entrepreneurs are already betting on it.
Ethereum NFT Hit Doodles Will Launch Doodles 2 on Flow Blockchain
Doodles, a prominent Ethereum NFT project, has announced that its upcoming larger-scale Doodles 2 project will launch on Flow, a Web3 platform best known for sports NFT projects. Doodles 2 will feature millions of NFTs with customizable avatars, as well as limited-edition IRL drops tied to specific events and brand collaborations, which will be tradeable on the Gaia marketplace on Flow.
Porsche NFT Trading Volume Nears $5M Despite Launch Woes, Minting Halt
German luxury car manufacturer Porsche's nonfungible token (NFT) collection reached 2,839 Ether ($4.5 million) in total sales volume, according to data from NFTScan at the time of writing on Jan. 26. The collection had a floor price of 2.74 ETH and a high price of 9.18 ETH, with over 1,705 total sales.
Originally meant to have a total supply of 7,500 NFTs, Porsche abruptly halted the minting process on Jan. 25 after some users complained of high minting prices and lack of utility for NFT holders. The supply has since been reduced to 2,363. The NFTs originally had a minting price of 0.911 ETH — referencing the namesake “911” NFT collection — but many users complained that they wanted the price reduced to 0.0911 ETH instead.
Porsche announced an expansion of holder benefits, including access to the world of Porsche, co-creation of the future of Web3, exclusive physical capsule collection, the opportunity to attend exclusive experiences, and a private airdrop in March 2023. The Porsche NFTs were first unveiled in November 2022 and were created by Hamburg-based designer and 3D artist Patrick Vogel and his studio Alt/Shift.
“This project is an additional element of our digitalization strategy. We’ve made our commitment for the long haul and our Web3 team has the autonomy to develop innovations in this dimension as well. Innovation management at Porsche also sees potential in the purchasing experience, the metaverse, and the supply chain. Vehicle and sustainability issues are also being considered.”
Firm Taps NFTs to Token Gate Bars, Bathrooms at Mardi Gras
Finding a decent bathroom amid the chaos and revelry of Mardi Gras can be tricky. But this year, when you gotta go, at least one venue in New Orleans will be happy to let you use theirs—if you have the NFT pass.
Several perks offered as part of a new Mardi Gras-themed NFT collection coming later this week from New Orleans-based Web3 venture studio NieuxCo include food and drink as well as access to special events, private parties, exclusive performances, and restrooms along the parade route.
“Nieux Society members used this cutting-edge technology to create a collective vision for Mardi Gras while utilizing NFT technology to provide holders exclusive access, benefits, and an ongoing invitation to join us on our journey to help New Orleans’ realize her full creative potential,” Tim Williamson, Co-Founder and CEO of NieuxCo, said in a press release.
NieuxCo’s Mardi Gras-themed NFTs are a collection of 5,000 AI-generated digital collectibles.
Non-fungible tokens, or NFTs, are digital collectibles showing proof of digital assets' ownership, including videos, music, memberships, and physical items.
Creative uses of NFTs, such as access tokens to real-world experiences, are not new—although they have a mixed record. In August 2022, a New York restaurant proposed using NFTs to secure highly coveted reservations. Both diners and NFT fans widely mocked it.
Once news of the drop leaked on Crypto Twitter, the pitch became the butt of several jokes.
Other tweets were not so kind.
“I’m going to piss on the back of the building for free, and there is nothing they can do about it,” one account tweeted.
“$160 for a bathroom during parades LMFAO y’all just use your regular secret pee spot. This is a good money grab for tourists tho,” another wrote.
Twitch Co-Founder’s Gaming NFT Marketplace Expands to Polygon Network
Fractal, the platform for game-related non-fungible tokens (NFT) developed by Twitch co-founder Justin Kan, is expanding into the Polygon network to boost accessibility.
The platform launched on the Solana blockchain in December 2021 and raised $35 million in a seed round backed by Andreessen Horowitz, Solana Labs, Animoca, Coinbase Ventures, and others. It now hosts dozens of Web3 games, NFTs, and tournaments on its site and offers a suite of developer tools to help onboard new creators.
The company said in a press release that expanding into Polygon will help it "focus on user acquisition and provide the blockchain tooling and financial infrastructure necessary to spur successful game development." Its F Studio product suite will now offer a Polygon-based launchpad, marketplace, tournaments, developer SDK, game launcher, and sign-in with Fractal service.
In addition, Polygon Ventures, the company behind the Ethereum scaling system, will be making an unspecified "strategic investment" in Fractal to help expand its services. Thirty of Polygon's top games will work with Fractal on a campaign of tournaments and activations to lead up to the Game Developer Conference in March.
Inspired by Justin’s learnings from founding Twitch, Fractal’s mission has been to relentlessly support Web3 game developers with everything they need to build the future of gaming," said Robin Chan, co-founder of Fractal. "From user acquisition to blockchain tooling to financial infrastructure, we put the framework in place so they can focus on successful game development."
The move is another win for Polygon as it brings new projects and major companies into its ecosystem. Polygon's recent partnerships with Nike, Reddit, and Starbucks have all been successful, and the blockchain lured away one of Solana's top NFT projects, Y00ts, last month with a $3 million grant."
NFT Marketplace Blur Delays Native Token Launch
Blur, a blockchain-based NFT marketplace, has postponed the launch of its native token, BLUR, due to a decline in the cryptocurrency market.
The team was planning to launch BLUR on January 21, but the launch has been delayed. Blur made the announcement via Twitter, stating that the current market conditions were “not conducive” to a successful launch.
The team noted that the decision to delay the launch was “difficult” because the launch had been “months in the making,” but they felt it was the right decision in order to ensure the token launch was a success.
BLUR is a deflationary ERC-20 token that will be used as a medium of exchange on the platform. Blur allows users to create, buy, and sell unique NFTs. According to the team, the BLUR token is designed to “maximize liquidity and democratize access to the NFT market.”
In addition to the token launch, Blur has also announced that it is launching a new NFT marketplace. The marketplace will feature “premium” NFTs from renowned artists, designers, and brands. The team stated that the platform will be launching with “dozens” of high-quality NFTs from “prominent creators.”
The team has not yet announced a new date for the launch of the BLUR token.
Founders of Gemini-Owned NFT Marketplace Nifty Exchange Are Leaving the Company
The founders of Nifty Exchange, a non-fungible token (NFT) marketplace owned by Gemini, are leaving the company.
In a blog post announcing the move, Nifty Exchange's co-founders, William Hockey and Michael Oved, said they had decided to “step away from the company” and explore new opportunities.
The two said they were “incredibly proud” of the work they had done at Nifty Exchange, which they had founded in 2021. In December 2021, Gemini acquired Nifty Exchange as part of its foray into the NFT space.
The two said they had “built the team, designed the product, and secured the necessary partnerships to launch the first NFT marketplace powered by Gemini,” adding that they were “grateful for the opportunity to have been a part of this incredible journey.”
Nifty Exchange, which launched in April 2021, is an NFT marketplace focused on art, collectibles, and digital assets. It features a curated selection of NFTs from leading creators and brands, allowing users to buy and sell NFTs with ease.
The platform is powered by the Gemini dollar (GUSD), a stablecoin backed by the U.S. dollar. Users can also use the platform to create and offer their own NFTs.
Gemini said in a statement that it was “saddened” to see the co-founders go, but that it was “grateful for the incredible work they did to get us to this point.”
The company also said that it was “fully committed” to the success of the Nifty Exchange and that it was “looking forward to continuing to build the platform together as a team.”
National Policies & Legal Updates
New York Legislator Introduces Crypto Payments Bill For Fines, Taxes
A New York legislator has proposed a bill that would allow state and local governments to accept cryptocurrency payments for fines, taxes, and other fees.
The bill, which was introduced by Assembly Member Ron Kim, would create a framework for the acceptance of crypto payments by state and local governments in the state of New York. The bill would also allow those governments to convert any crypto payments received into U.S. dollars.
Kim said in a statement that the bill would “enable more people to engage with their government in a secure, transparent, and efficient way.” He noted that the use of cryptocurrency payments would be beneficial to both taxpayers and governments, as it would reduce transaction costs and time. He added that crypto payments would also make it easier for taxpayers to pay their taxes on time, as they would no longer have to worry about currency conversion costs.
Kim also said that the bill would help the state of New York “keep up with the times,” as more and more businesses and individuals are turning to crypto payments. He added that the bill would also help to create “greater financial inclusion” in the state.
The bill is currently being considered by the New York legislature. If passed, it would become the first of its kind in the United States.
Regulatory Clarity: Financial Watchdogs Could Not Be More Clear
As the cryptocurrency industry continues to grow, regulators around the world are paying close attention. In recent months, financial watchdogs have been taking a more active role in monitoring the burgeoning industry, issuing clear and concise guidance that sets a path forward for businesses and investors.
In the United States, the Securities and Exchange Commission (SEC) has issued a series of statements designed to provide clarity for the industry. In December 2021, the SEC released a statement outlining its views on cryptocurrency investment products, including exchange-traded funds (ETFs) and digital asset securities. The statement clarified that digital assets can be considered securities and that investment products based on these assets must therefore comply with the SEC’s regulations.
The SEC also released a statement on digital asset custody, which provides guidance on how funds and other entities should approach the custody of digital assets. The statement clarifies the need for proper recordkeeping, the safekeeping of private keys, and the use of qualified custodians.
The Commodity Futures Trading Commission (CFTC) has also taken a more active role in monitoring the cryptocurrency industry. In January 2022, the CFTC released a statement on the use of derivatives in the cryptocurrency market. The statement provided clarity on the use of derivatives to hedge against cryptocurrency price swings, as well as the use of futures and options to gain exposure to the crypto markets.
The Financial Action Task Force (FATF) has also issued guidance on the regulation of cryptocurrencies. The FATF’s guidance requires cryptocurrency businesses to comply with the same anti-money laundering (AML) and know-your-customer (KYC) regulations that are applied to traditional financial institutions.
The International Monetary Fund (IMF) has also released guidance on the regulation of cryptocurrencies. The IMF’s guidance focuses on the need for global coordination and harmonization of rules, as well as the need for countries to establish effective consumer protection measures.
Clear and concise statements from financial watchdogs around the world have provided much-needed clarity for the cryptocurrency industry. Businesses and investors alike now have a better understanding of the regulatory landscape and can move forward with greater confidence.
India to Push for Global Crypto Policy at G20 Summit
India is expected to push for a global crypto policy at the G20 Summit, which is scheduled to take place in April 2021.
According to local media reports, India’s finance ministry has prepared a draft of the proposed global crypto policy and is planning to present it to the G20 nations at the summit.
The policy reportedly seeks to establish a global regulatory framework for cryptocurrencies, as well as a mechanism for monitoring global transactions involving digital currencies.
The move comes as India’s central bank, the Reserve Bank of India (RBI), is preparing to issue its final regulations on cryptocurrencies. The RBI is expected to issue its regulations by April 2021.
The proposed policy is also in line with India’s recent statement that it is “open to exploring the use of blockchain technology proactively for ushering in the digital economy.”
The G20 Summit is expected to be attended by leaders from the world’s 20 largest economies, including the U.S., China, India, and Japan. G20 has previously discussed the need for global crypto regulations, but it has not yet reached an agreement on a unified framework.
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