BlockFi Emerges From Bankruptcy 🤪

GM. This is Degen Scoop. It’s Wednesday, here’s the scoop:

• BlockFi Emerges From Bankruptcy 🤪

• Bitcoin Funds Absorb Over $60M 🐖

• Senators Propose Proof of Reserves Bill 📜

• Whale Moves 🐋

• Threads You CAN’T Miss 🧵

BlockFi Establishes Bankruptcy Recovery Plan

BlockFi has successfully emerged from bankruptcy, with its recovery plan becoming effective as of October 24. This marks a crucial step in its return from the ashes, allowing it to start repaying creditors. While not all customers will be fully compensated just yet, many will be able to retrieve lost funds. BlockFi is actively pursuing the recovery of assets from bankrupt entities such as FTX, Alameda Research, and Three Arrow Capital through litigation.

Customers holding custodial wallets can now submit withdrawal requests, while interest-bearing account (BIA) and loan customers will get initial distributions in early 2024. The timing of subsequent distributions will depend on potential recoveries from entities like FTX. Meanwhile, BlockFi's recovery plan reflects a swift and efficient reorganization compared to other retail crypto companies. Always happy to hear that users will be made whole in what was once believed to be lost.

Crypto Funds Experience Over $60M in Inflows of New Capital

On Monday, publicly traded crypto funds globally experienced a substantial influx of over $61 million in new capital, representing more than 10% of total net deposits into crypto funds since the beginning of the year. Notably, the flow of funds was primarily from investors in Germany and Canada who are among the few globally that have access to spot Bitcoin ETFs. In contrast, U.S. investors, while having access to BTC-based investment options, are still awaiting approval for a physical Bitcoin ETF.

Germany's ETC Group received significant inflows of $24.3 million for its crypto products, and Canada's Purpose Investments, the first Bitcoin ETF provider globally, attracted $10.9 million in new capital. While funds like Grayscale (GBTC) and the ProShares Bitcoin Strategy ETF (BITO) provide exposure, they do not directly track Bitcoin's spot price. With Bitcoin held on exchanges at near record lows, there is the potential for a supply crunch.

Bipartisan Proof of Reserves Bill Proposed in US Senate

Senators Thom Tillis (R-NC) and John Hickenlooper (D-CO) have introduced the Proving Reserves of Others Funds (PROOF) Act, a bipartisan bill aimed at preventing incidents like the FTX collapse. The legislation proposes safeguards against unethical co-mingling of customer funds and mandates monthly proof-of-reserves (PoR) reports from neutral, third-party auditing firms. The bill sets baseline account standards for customer funds, requires proof of reserves and liabilities, and outlines civil penalties for offenses. Elizabeth Warren and other Democratic senators have been pushing for an Anti-Money Laundering Act, but proof-of-reserves is more transparent.

Proof-of-reserves, enabled by the computational properties of digital assets, is viewed as an industry best practice for transparency. Alex Thorn, Head of firmwide research for Galaxy Research, notes that while several bills are progressing in Congress, none specifically address recent industry issues like the PROOF Act does, and he remains optimistic that policymakers will recognize the technological benefits of digital assets in shaping future policy options.

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Notable Threads You May Have Missed:

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Conclusion

Touch grass, hit the gym, and don’t forget about what’s really important outside of magical internet coins.

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DISCLAIMER: This newsletter does not constitute financial advice. This is strictly educational and should not be used to make any financial decisions. Be responsible and do proper due diligence before aping.