Author: Reuters

By Niket Nishant and Manya Saini

(Reuters) – For U.S. online trading companies an often-overlooked financial metric could act as a bulwark against softening demand in the third quarter, according to analysts.

The U.S. Federal Reserve’s rate hikes are expected to drive up interest income for commission-free brokerage Robinhood Markets Inc and cryptocurrency exchange Coinbase Global Inc.

“While rates were low and crypto markets were hot, investors paid little attention to (interest income), but it is becoming an increasingly important driver for Coinbase’s revenue stream,” Barclays analysts wrote.

“The impact of higher rates will flow through earnings at a rate slightly better than previously forecast,” J.P. Morgan analysts said of Robinhood.

THE CONTEXT

Central banks around the world have been scrambling to cool the economy in an attempt to tame inflation, which despite several rate hikes this year, is still raging at levels not seen in four decades.

That has led to a stunning reversal in fortunes for lenders squeezed by near-zero interest rates last year.

Robinhood allows eligible customers to borrow money to purchase securities and charges an interest on the debt.

Analysts say the feature, called “margin investing”, can also be used to drive greater subscriptions to its premium Robinhood Gold as members can borrow money much more cheaply than the standard rate.

“We see Robinhood lifting rates to levels not that different from peers,” J.P. Morgan added.

On the other hand, Coinbase earns interest on reserves backing USD Coin (USDC), the second-biggest stablecoin by market capitalization, which it issues jointly with crypto firm Circle.

It also earns interest on bitcoin-backed loans it provides to customers.

Analysts expect net interest revenue at Robinhood to surge 65%, while Coinbase’s subscription and services revenue, which includes interest income, is estimated to grow 28%, according to IBES data at Refinitiv.

The companies are, however, also expected to report a decline in overall third-quarter revenue, as inflation-battered retail traders sought refuge in cash instead of betting on risky assets.

Robinhood is due to report third-quarter results after the bell on Wednesday, while Coinbase is set to follow on Thursday.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shounak Dasgupta)

By Catarina Demony and Sergio Goncalves

LISBON (Reuters) – The chief executive of Binance, the world’s largest crypto exchange, said he was “extremely supportive” of freedom of speech and that was the main reason why his company decided to invest $500 million into Elon Musk’s buyout of Twitter Inc.

Binance’s Changpeng Zhao, known as CZ, who is an active Twitter user with over 7 million followers, said there were “very strong reasons” why he invested in the platform.

“Number one is that we want to be extremely supportive of free speech,” Zhao said at the opening event of Europe’s largest tech conference, the Web Summit, in Lisbon, adding that Twitter is “where people express their opinions”.

“It is an important free speech platform – that’s the number one reason,” he added.

Musk’s Twitter takeover saga came to an end on Thursday when the deal officially closed after months of twists and turns in and outside the courtroom, and Musk immediately fired top executives at the platform.

It is unclear how actively involved co-investors like Binance could be in Twitter’s future as a minority investor, since Musk fully controls the board and decision-making in the now-private Twitter.

Most of his co-investors in the $44 billion deal are funds such as Sequoia Capital, Fidelity Management, Andreessen Horowitz and Brookfield. Binance said last week it is creating a team to work on how blockchain and crypto could be helpful to Twitter.

“I’m a heavy Twitter user,” Zhao said, adding Binance planned to be a long-term investor in the platform. “I want to invest in products that are important for our industry.”

Musk said on Tuesday Twitter would charge $8 for its Blue service, which includes its sought-after “verified” badge in his push to monetise the service and make the social media network less reliant on ads. Zhao said he supported the idea.

Asked about other ideas Musk has for the platform, Zhao said: “Elon Musk is a very hard guy to predict.”

(Reporting by Catarina Demony and Sergio Goncalves; Editing by Richard Pullin)

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The U.S. dollar slid against major currencies on Tuesday, on some expectation that the Federal Reserve will signal a slower pace of tightening at its upcoming meeting to assess the impact of its rate hikes on the economy.

Investors widely expect the Fed this week to raise its benchmark overnight interest rate by 75 basis points (bps) to a range of 3.75% to 4.00%, the fourth such increase in a row.

But for December, the fed funds futures market has priced in a 57% probability of a 50-bps increase amid suggestions from Fed officials of a potential slowdown in the tightening pace. That was down, however, from roughly a 70% chance last Friday.

“There is some optimism that there could be a change in the language following the FOMC (Federal Open Market Committee) meeting this week that would suggest a deceleration could come for the next time,” said Ivan Asensio, head of FX risk advisory at Silicon Valley Bank in San Francisco.

The Bank of England (BoE) is also meeting this week and expected to deliver a 75-bps increase as well. Traders then expect the BoE to slow down and raise rates by 50 bps in December.

In afternoon trading, the dollar fell 0.4% to 148.20 yen.

Sterling rose 0.1% to $1.1479 after dropping more than 1% on Monday. The euro edged lower to $0.9878.

The U.S. dollar index, which measures the greenback against six rivals, including the euro, sterling and yen, was slightly lower at 111.49.

The dollar index has surged more than 15% this year as the Fed has hiked rates hard, crushing other currencies and heaping pressure on the global economy.

Investors have therefore taken cheer from speeches and interviews by some Fed officials that have suggested the central bank could do smaller hikes after Wednesday’s meeting.

“Although the Fed may discuss downshifting at the December meeting, Powell will probably avoid pre-committing to such an action at this time,” said Joseph Kalish, chief global macro strategist at Ned Davis Research.

“He will reiterate the Fed will be data-dependent and will decide meeting by meeting.”

Markets were also reminded on Monday that global inflation remains stubbornly high when data showed euro zone prices surged by the most on record in the year through October.

The risk-sensitive Australian and New Zealand dollars rose from one-week lows amid the broad lift in market sentiment. The Aussie was little changed at US$0.6397, while the Kiwi dollar rose 0.5% to US$0.5840.

The Aussie earlier fell after the Reserve Bank of Australia decided to stick with a slower quarter-point pace for rate hikes despite a surprise jump in inflation to a 32-year high in the third quarter.

In other currencies, the Chinese yuan fell to a near 15-year low against the dollar on Tuesday, before paring its losses after the central bank fixed the official guidance rate on the weaker side of the key 7.2 per dollar level for the first time since 2008. The dollar was last down 0.5% against the offshore yuan at 7.3033.

========================================================

Currency bid prices at 3:16PM (1916 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 111.4800 111.5400 -0.04% 16.534% +111.7800 +110.7000

Euro/Dollar $0.9880 $0.9881 -0.01% -13.09% +$0.9954 +$0.9854

Dollar/Yen 148.2150 148.7500 -0.35% +28.76% +148.8200 +146.9900

Euro/Yen 146.47 146.99 -0.35% +12.39% +147.1200 +145.9900

Dollar/Swiss 0.9999 1.0022 -0.23% +9.61% +1.0020 +0.9917

Sterling/Dollar $1.1482 $1.1467 +0.13% -15.10% +$1.1565 +$1.1437

Dollar/Canadian 1.3620 1.3624 -0.02% +7.74% +1.3668 +1.3532

Aussie/Dollar $0.6398 $0.6397 +0.01% -11.99% +$0.6464 +$0.6377

Euro/Swiss 0.9880 0.9896 -0.16% -4.72% +0.9921 +0.9852

Euro/Sterling 0.8603 0.8619 -0.19% +2.42% +0.8624 +0.8597

NZ $0.5840 $0.5815 +0.46% -14.66% +$0.5902 +$0.5818

Dollar/Dollar

Dollar/Norway 10.3450 10.3970 -0.44% +17.50% +10.3895 +10.2370

Euro/Norway 10.2237 10.2741 -0.49% +2.11% +10.2885 +10.1696

Dollar/Sweden 11.0087 11.0227 -0.22% +22.08% +11.0741 +10.9165

Euro/Sweden 10.8786 10.9021 -0.22% +6.30% +10.9116 +10.8506

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Harry Robertson in London and Kevin Buckland in Sydney; Editing by Jan Harvey, Mark Potter and Mark Heinrich)

(Our weekly analysis of the wild world of cryptocurrencies. Repeats for additional subscribers)

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – After months of tears and tantrums, bitcoin wants to split up with stock markets.

The cryptocurrency, which has been closely correlated with tech stocks for much of its torrid 2022, is staging one of its strongest efforts yet to break away.

Its 30-day correlation with the Nasdaq slid to 0.26 last week, its level lowest since early January, where a measure of 1 indicates the two assets are moving in lock step.

The correlation, which shows the degree to which the two move in sync with each other over a 30-day period, has hovered above 0.75 for much of the year and at times has approached perfect unison – at 0.96 and 0.93 in May and September.

For some crypto backers, any bitcoin break-up from Big Tech is a sign of strength.

“The latter’s growth has been somewhat tapped out, and investors are looking for the next growth industry. Bitcoin and crypto is one of those ‘next’ growth industries,” said Santiago Portela, CEO of FITCHIN, a Web3 gaming ecosystem.

The nascent uncoupling does indeed coincide with a period of comparative calm and consolidation for the teenage cryptocurrency a year after it began its epic nosedive from the heady heights of $69,000 hit in November last year.

Bitcoin is hovering near one-month highs around $20,500 and rose over 5% last week, outperforming the Nasdaq’s 2% gain as dour quarterly results from Microsoft, Alphabet, Meta and Amazon weighed.

GRAPHIC – Bitcoin tests linkage with stocks

https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/xmpjkgeryvr/chart.png

HODLERS HOLDING OUT

The crypto winter has been cold and hard, though.

The total market cap for cryptocurrencies has shrunk by more than two-thirds to $984 billion from nearly $3 trillion in November 2021, according to CoinMarketCap.com.

Market participation has also dwindled, with the average daily trading volume of digital asset products falling to $61.3 million as of Oct. 25, far from the daily volumes of around $700 million seen last November, CryptoCompare data shows.

Nonetheless, months of persistent selling has failed to shake out the old hands, who are digging in despite a grim economic backdrop.

The dollar wealth held in bitcoins that haven’t been traded for three months or more is at an all-time-high, indicating accumulation by long-term holders or “HODLers”, according to blockchain data firm Glassnode. The name for that group of diehard crypto investors emerged years ago from a trader misspelling “hold” on an online forum.

Furthermore, a record 55,000 bitcoin were withdrawn from the largest exchange Binance on Oct. 26, according to analytics platform CryptoQuant showed, flows that typically signal coins are moving to wallets for longer-term storage.

“The holder base of BTC has changed drastically from being heavily weighted towards speculators, which largely came in in 2021, to the near cult-like ‘HODLer’ community which would not sell their BTC in almost any macro circumstance,” said Stéphane Ouellette, CEO at crypto derivatives provider FRNT Financial.

“The market is now looking to the Fed meeting next week for further confirmation of the risk asset/BTC correlation breakdown.”

NEXT FOR FICKLE BITCOIN?

Samuel Reid, CEO of consulting firm Geometric Energy Corporation said heavy outflows from exchanges could potentially indicate some large buyers were “sniffing out” the end of the bear market.

Yet it’s anyone’s guess whether fickle bitcoin will begin to rally, or slide anew, or if it will swiftly rebound to the embrace of technology stocks.

For the foreseeable future, macroeconomics remain the driver of a market that remains highly speculative in nature.

“The more speculative crypto is, the more it is tied to macro,” said Alex Miller, CEO of blockchain firm Hiro Systems.

“It comes back to, what are the use cases and what’s the productive capability of the asset? The more it’s being used for other things, the less it’ll be tied to macro.”

(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Additional reporting by Alun John in London; Editing by Vidya Ranganathan and Pravin Char)

JOHANNESBURG (Reuters) – One of South Africa’s largest grocery retailers Pick n Pay is expanding a pilot of adding cryptocurrency as a payment option to more stores after the successful completion of the first phase, it said on Tuesday.

The announcement came weeks after the Financial Sector Conduct Authority formally declared crypto assets as a financial product in South Africa, enabling them to be regulated and clearing the way for cryptocurrency to be a mainstream method of payment. 

“Increasingly cryptocurrency is being used by those under-served by traditional banking systems, or by those wanting to pay and exchange money in a cheaper and really convenient way. Many companies are responding to this by accepting Bitcoin,” Pick n Pay said in a statement.

The retailer ran the first phase of the pilot in 10 Western Cape province stores over the past five months with pre-selected testers. It has now extended it to a further 29 stores for testing with customers, with the intention to roll it out to all stores in the coming months, Pick n Pay said.

Pick n Pay has partnered with Electrum and CryptoConvert on its latest pilot. Electrum’s payment platform connects Cryptoconvert and Pick n Pay, letting customers pay with the Bitcoin Lightning technology at the till point, the company added.

“Crypto payments are still in their infancy in South Africa, but we are already seeing adoption in parts of our society that haven’t previously had access to traditional financial systems,” said Carel van Wyk, Founder of CryptoConvert, which allows merchants to accept crypto payments.

(Reporting by Nqobile Dludla, editing by Ed Osmond)

By Renju Jose

SYDNEY (Reuters) – Hackers have targeted a communications platform used by Australian military personnel and defence staff with a ransomware attack, authorities said on Monday, as the country battles a recent spike in cyberattacks across businesses.

The ForceNet service, one of the external providers that the defence department contracts to run one of its websites, has come under attack but so far no data have been compromised, Assistant Minister For Defence Matt Thistlethwaite said.

“I want to stress that this isn’t an attack or a breach on defence (technology) systems and entities,” Thistlethwaite told ABC Radio. “At this stage, there is no evidence that the data set has been breached, that’s the data that this company holds on behalf of defence”.

But some private information such as dates of birth and enlistment details of military personnel may have been stolen, the Australian Broadcasting Corp reported, citing an unidentified source with knowledge of the investigation.

Thistlethwaite said the government will view the incident “very seriously” and all defence personnel have been notified, with suggestions to consider changing their passwords.

A Defence department spokesperson told Reuters in an emailed statement the department was examining the contents of the impacted data set and what personal information it contained.

Ransom software works by encrypting victims’ data and hackers typically will offer the victim a key in return for cryptocurrency payments that can run into the hundreds of thousands or even millions of dollars.

Some of Australia’s biggest companies, including No. 2 telecoms company Optus, owned by Singapore Telecommunications Ltd, and the country’s biggest health insurer, Medibank Private Ltd, have had data hacked recently, likely exposing the details of millions of customers.

Technology experts said the country has become a target for cyber attacks just as a skills shortage leaves an understaffed, overworked cybersecurity workforce ill-equipped to stop it.

(Reporting by Renju Jose; Editing by Kenneth Maxwell)

By Hannah Lang

(Reuters) – Apollo Global Management Inc has begun holding cryptocurrency on behalf of its clients through a partnership with digital asset platform Anchorage Digital, in a major push by one of the world’s largest asset managers to bring crypto to institutional investors.

The move comes despite a rocky year for the crypto market, with bitcoin, the world’s largest digital asset, down more than 50% since the start of 2022, as investors have appeared jittery about decades-high inflation across the globe.

“It’s the validation of this incessant drumbeat that [crypto] is here to stay,” said Diogo Mónica, president of Anchorage Digital, a crypto firm that holds a national trust bank charter from the Office of the Comptroller of the Currency. “This is a very long-term horizon process and technology and that for the large institutions, it doesn’t really matter that there is volatility short term.”

Apollo, which declined to disclose what types of crypto assets it holds, said its relationship with Anchorage dates back to the middle of last year, when the firm first began exploring how best to safeguard its clients’ crypto assets. Apollo later participated in Anchorage’s Series D funding round, which was finalized in December 2021.

“As we explore creative ways to apply blockchain technology across Apollo’s business, we look forward to collaborating with Anchorage for the safekeeping of client assets,” said Adam Eling, chief operating officer of Apollo’s digital assets team.

Mónica said Anchorage is also engaged with discussions about how to potentially further expand its relationship with Apollo in the future.

In April, Apollo hired former JPMorgan Chase executive Christine Moy, who will lead digital asset strategy across the business, and play a key role in its investment decisions in crypto, blockchain and Web3, a decentralized version of the internet.

(Reporting by Hannah Lang in Washington; Editing by Lananh Nguyen and Diane Craft)

BENGALURU (Reuters) – The Reserve Bank of India (RBI) will launch the pilot for a central-bank-backed digital rupee for the wholesale segment on Nov. 1, it said on Monday, identifying nine banks, including top lender State Bank of India, to participate in the project.

The pilot’s use case will be to settle secondary market transactions in government securities, with the e-rupee expected to make the interbank market more efficient, the RBI said in a statement.

Settlements in central bank digital currency would reduce transaction costs, the RBI added.

Besides SBI, the pilot will include Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC, the RBI said.

The launch of the e-rupee for the retail segment is planned within a month in select locations, the RBI added.

The RBI has been exploring the pros and cons of a central bank digital currency for some time and is working towards a strategy to implement it in a phased manner, it said earlier this month.

The central bank’s plans for a currency in digital form comes amid its staunch opposition of cryptocurrencies.

(Reporting by Chris Thomas in Bengaluru; Editing by Savio D’Souza)

By Georgina Lee

HONG KONG (Reuters) – Hong Kong’s government has proposed allowing retail investors to trade in cryptocurrencies and crypto exchange-traded funds – a move it hopes will help it rebuild its fintech hub status.

The city, which previously proposed limiting crypto trade to professional investors, has seen planned rules for digital assets heavily criticised for stifling innovation, prompting a slew of start-ups to move to other markets such as Singapore and Dubai.

Authorities will start a consultation process on giving retail investors “a suitable degree of access” to virtual assets, Financial Secretary Paul Chan said in a keynote address broadcast to the Hong Kong Fintech Week conference.

“We want to make our policy stance clear to the global market, to demonstrate our determination to explore fintech with the global virtual asset community,” he said.

The government will also review property rights for tokenised assets and explore legalising so-called smart contracts – self-executing transactions whose results depend on pre-programmed inputs.

These moves are likely to pave the way for real estate security token offerings (STOs), industry players said. STOs are blockchain-based tokens that represent ownership interests or entitle holders to income or dividends generated from real assets.

The latest announcement could put Hong Kong’s rules on a par with those of Singapore, said Andy Mehan, chief compliance officer for APAC at U.S. crypto exchange Gemini.

“Industry participants want to see consistency in the global regulatory regime, otherwise there will be opportunities for bad actors to exploit loopholes in jurisdictions with less rigid laws,” he said.

While Singapore allows retail investors to trade in cryptocurrencies, its central bank has been discouraging the public from speculative trading in cryptocurrencies and brought in restrictions on the advertising of cryptocurrency services in public places. It is also proposing new measures.

Hong Kong’s latest move to legalise retail crypto trade would also set Hong Kong further apart from mainland China, which has a imposed a blanket ban on cryptocurrency trade.

“This is a positive move as it sends out a strong message that Hong Kong is taking a different approach in regulating its capital market,” said Adrian Wang, chief executive of crypto brokerage Metalpha.

($1 = 7.8492 Hong Kong dollars)

(This story has been refiled to correct the spelling of company name to Metalpha in last paragraph)

(Reporting by Georgina Lee; Additional reporting by Anshuman Daga; Editing by Vidya Ranganathan and Edwina Gibbs)

By Krystal Hu

(Reuters) – Binance, the world’s largest crypto exchange that has invested $500 million into Elon Musk’s buyout of Twitter Inc, is creating a team to work on how blockchain and crypto could be helpful to Twitter, the company’s spokesperson said on Friday. As one of Elon Musk’s equity co-investors to fund his $44 billion deal, Binance said it will brainstorm plans and strategies that could help Elon Musk run the platform.

The newly-formed team will explore how to build on-chain solutions to address Twitter’s issues including proliferation of bot accounts, a problem Musk has repeatedly complained about and almost reneged his offer on.

Musk’s Twitter takeover saga came to an end on Thursday when the deal officially closed after months of twists and turns in and outside the courtroom, and Musk immediately fired top chief executives at the social media platform.

Twitter had began to explore ways to incorporate blockchain technology under co-founder and former CEO Jack Dorsey, who has been a proponent of bitcoin.

In November 2021, Twitter launched an internal crypto team to build features that involve such technologies. The company introduced the ability for paid Twitter subscribers to use non-fungible tokens (NFTs) as their avatar photo.

In text messages with confidants that were released as part of the litigation with Twitter, Musk discussed the possibility of placing Twitter on the blockchain, though he later appeared to decide such a move would not work.

It’s unclear how actively involved co-investors like Binance could be in Twitter’s future as a minority investor, since Musk fully controls the board and decision-making in the now-private Twitter. Most of his co-investors are funds such as Sequoia Capital, Fidelity Management, Andreessen Horowitz and Brookfield. Binance’s Chief Executive Changpeng Zhao, known as CZ, is an active Twitter user with over 7 million followers on the platform.

(Reporting by Krystal Hu in New York, additional reporting by Sheila Dang in Dallas)

LONDON (Reuters) – Britain would have the power to regulate all cryptoassets under a proposal the UK financial services minister has added to a draft law before parliament that will almost certainly pass.

Andrew Griffith, re-appointed as City Minister on Thursday by Britain’s new Prime Minister Rishi Sunak, put forth the amendment to the financial services and markets bill, which parliament has begun approving.

The bill, as originally drafted, gives the Financial Conduct Authority powers to regulate stablecoins only, but the amendment broadens the remit to cover promotions for all cryptoassets.

“This new clause amends the Financial Services and Markets Act 2000 to clarify that the powers relating to financial promotion and regulated activities can be relied on to regulate cryptoassets and activities relating to cryptoassets,” the amendment says in a parliamentary document dated Thursday.

An amendment put forward by the government means it will almost certainly get passed into law.

It would put Britain more on par with the European Union’s markets in cryptoassets law which is now being finalised, seen as the world’s first comprehensive set of rules to regulate the emerging crypto sector.

Separately on Thursday, Bank of England Deputy Governor Sam Woods said the central bank is moving forward to create a regulatory framework for systemic stablecoins. This will allow both non-banks and BoE-regulated banks to innovate, and a public consultation paper on the new regime will be published next year, Woods said.

(Reporting by Huw Jones; Editing by Lisa Shumaker)

By Georgina Lee and Samuel Shen

HONG KONG/SHANGHAI (Reuters) – China’s digital yuan took the centre stage in the world’s largest cross-border central bank digital currency (CBDC) trial to date, a report showed, pointing to how Beijing is speeding up yuan globalization efforts amid rising geopolitical tensions.

    China’s digital currency, or e-CNY, was the most issued, and actively transacted token in the $22 million pilot that used CBDCs to settle cross-border trades, a Bank of International Settlement (BIS) report showed.

    The six-week test, which ended late last month, is part of m-Bridge – a project that pilots cross-border payments in digital currencies issued by central banks of China, Hong Kong, Thailand and United Arab Emirates.

    The successful completion of the large-scale testing comes amid rising global tensions.

    “Many countries around the world, including China, are wary of U.S. financial sanctions,” said G. Bin Zhao, senior economist at PwC China.

    “This provides a historic window for China to promote yuan internationalization as the U.S. weaponizes the dollar,” he said, adding that the e-CNY provides a shortcut.

    Russia was kicked out of the dollar system by the West following its February invasion of Ukraine which Moscow has called “special operations.”    

During the just-ended Communist Party Congress, Chinese President Xi Jinping pledged “reunification” with Taiwan, saying China does not “renounce the use of force”.

Washington has warned Beijing that the sanctions it coordinated against Russia should serve as a warning as to what to expect should Beijing move against self-ruled Taiwan.

    “The perceived threat from the U.S. … has made RMB globalization more of a necessity than luxury to ensure economic and financial security,” said Shuang Ding, chief economist, Greater China and North Asia at Standard Chartered (HK) Ltd.

    A yuan internationalisation tracker complied by Standard Chartered hit a new high in July, driven by strong issuance of yuan-denominated bonds in Hong Kong, latest data shows.

    To promote global use of the yuan, the PBOC in July upgraded a currency swap facility with Hong Kong to a permanent agreement, and in September, China agreed to set up a yuan clearing hub in Kazakhstan.

    In Russia, use of the yuan in global payments has surged since the western sanctions, and a growing number of Russian companies, including Rosneft, Rusal, and Polyus, have issued yuan bonds.

    GLOBAL AMBITION

    China is at the fore of a global race to develop CBDCs, and is ramping up domestic pilot schemes, mainly for retail payments.

    The PBOC’s participation in m-Bridge represents its ambition to eventually promote global, wholesale use of the e-CNY.

    A total of 11.8 million yuan ($1.64 million) worth of e-CNY was issued in the testing between Aug 15. and Sept. 23, and the Chinese currency was used in a total of 72 payment and foreign exchange transactions, far greater than the other three currencies each.

    China’s top five state banks, including Bank of China and China Construction Bank, participated in the pilot, settling the CBDCs on behalf of their corporate clients.

    The relatively high number of e-CNY issuances “could reflect greater demand for yuan-denominated transactions”, given the country’s high share of regional trade, the BIS Innovation Hub Hong Kong Centre said in the report.  

HEADWINDS   

    The m-Bridge project, launched jointly by the BIS innovation hub and the four participating central banks, aims eventually to build a common platform for efficient, low-cost digital payment to promote global trade.

    But China’s yuan internationalisation, digital or not, faces challenges amid a slowing economy ravaged by COVID flare-ups, and a property debt crisis.

    “Whether it’s the e-CNY or the yuan, at the end of the day, China’s national strength is the decisive factor,” PwC’s Zhao said.

    “The yuan or e-CNY would be widely accepted only with the endorsement of China’s solid economic development.”

    Another headwind is a slumping yuan, which has lost roughly 12% against the U.S. dollar this year.  

    “Sustained depreciation due to worsening fundamentals could weaken confidence in the currency,” Standard Chartered’s Ding said.

The yuan’s share as a global payments currency has climbed for five straight months, but remains low, standing at 2.44% in September, compared with 42.3% for the U.S. dollar, and 35.2% for the euro, according to SWIFT, the global financial messaging system.

($1 = 7.1952 Chinese yuan renminbi)

(Reporting by Georgina Lee and Samuel Shen; Editing by Kim Coghill)

By John McCrank

NEW YORK (Reuters) – The U.S. dollar sank more than 1% against a basket of peers on Wednesday as weakening economic data firmed views that the Federal Reserve will slow the pace of its rate hiking cycle, sending the euro back above parity with the greenback for the first time in a month.

At 3:15 p.m. EDT (1915 GMT), the dollar was down 1.118% at 109.7 against a basket of six currencies, its weakest since Sept. 20.

The dollar’s decline came as the benchmark 10-year U.S. Treasury yield continued its descent from last week’s multi-year high of 4.338%, and was last down four basis points at 4.0317%.

“Broad dollar weakness and further but milder declines in U.S. Treasury yields than yesterday appear to reflect wishful thinking toward a Fed pivot next week,” said Derek Holt, head of capital markets at Scotia Economics.

The aggressive pace of Fed tightening this year, aimed at taming stubbornly high inflation, has turbo-charged the dollar.

Traders and economists predict a fourth-straight 75 basis-point interest rate increase next Wednesday, but there is growing speculation that the central bank will slow to half a point in December.

The view that the Fed could begin to pivot in December was reinforced by data on Tuesday that showed U.S. home prices sank in August as surging mortgage rates sapped demand.

Data on Wednesday showed that sales of new U.S. single-family homes dropped in September and data for the prior month was revised lower, supporting the view that Fed rate increases are already working to tap the breaks on the world’s biggest economy.

The European common currency was up 1.11% at $1.0079, its highest since Sept. 13.

Sterling also hit its highest since Sept. 13, surging 1.33% to $1.1625, extending the previous day’s 1.6% gain when markets took succour from Rishi Sunak becoming Britain’s prime minister.

“Optimism that Rishi Sunak and his team will restore stability and credibility in the UK is overshadowing the very difficult economic situation that he has inherited,” said Fiona Cincotta, senior financial markets analyst at City Index.

Elsewhere, the Bank of Canada hiked interest rates by a smaller-than-expected 50 basis points and said future increases would be influenced by its assessment of how tighter policy was working to slow demand and ease inflation.

The Canadian dollar initially fell against the U.S. dollar after the Bank of Canada decision, which was the second consecutive reduction in the size of rate rises after a 100 basis-point move in July and 75 basis points last month, but then firmed up again. The loonie hit a three-week high of 1.35105 earlier in the day.

The dollar slumped 1.55% against China’s offshore yuan, while the onshore yuan finished the domestic trading session at 7.1825 per dollar, the strongest close since Oct. 12.

Market participants became cautious after major state-owned banks were spotted selling the dollar in the previous session to stabilise the market, traders said, wondering if the yuan has reached its peak weakness for the time being. [CNY/]

The dollar also fell against the Japanese yen, sliding 1.11% to 146.290.

Cryptocurrencies extended their sharp rallies from the day before. Bitcoin was 4.45% higher at $20,981.

(Reporting by John McCrank in New York and Alun John in London; Editing by Jamie Freed, David Holmes, Hugh Lawson and Marguerita Choy)

By Praveen Menon and Byron Kaye

SYDNEY (Reuters) – The cryptocurrency industry said on Wednesday it was disappointed with Australia’s decision to continue treating digital currencies as assets for tax purposes, and not as foreign currency.

The government said in its budget announcement on Tuesday it would introduce legislation to enshrine the treatment of digital currencies such as Bitcoin as an asset.

This means investors would pay capital gains tax on profit from selling crypto assets through exchanges and when they trade digital assets.

The legislation removes uncertainty following the decision by El Salvador to adopt Bitcoin as legal tender in September last year, the Australian government said in its budget announcement.

Australia said, however, government-issued digital currency, or central bank digital currency (CBDC), would be treated as foreign currency.

Around 90% of the world’s central banks are now using, trialling or looking into CBDCs. Most don’t want to be left behind by Bitcoin and other cryptocurrencies, but are grappling with technological complexities.

Mitchell Travers, a former cryptocurrency exchange operator and founder of blockchain consultant Soulbis, said the budget change was unclear and appeared at odds with government testing into the viability of a CBDC.

“It would be ill advised for the government to really take an enforcement approach to the taxation of crypto assets in its early stages, especially considering the fact that the Treasury is also investing in trying to migrate the traditional technology systems that back our financial system over towards digital assets,” Travers said.

“It would be an ironic dichotomy if they were to enforce the taxation of digital assets and then launch their own CBDC without clear definitions of what token equals what tax treatment.”

The crypto sector is largely unregulated in Australia and the Treasury said in August it would prioritise ‘token mapping’ work, which will help identify how crypto assets and related services should be regulated.

El Salvador, which adopted Bitcoin as legal tender last year, was left facing heavy economic losses from the huge drop in crypto prices.

“I think they are taking a snapshot in time and making an assessment for a long time around what happened in El Salvador and the price of bitcoin,” said Caroline Bowler, CEO of BTC Markets, an Australia based cryptocurrency exchange, adding Australia will be left behind by other counties that are taking a more open-minded approach.

“Europeans are going to be pulling ahead, the U.K. now has a prime minister who is familiar with central bank digital currencies,” Bowler said. “All these trading partners will be pulling ahead of Australia unless we are looking at proportional, responsible regulation.”

(Reporting by Praveen Menon and Byron Kaye; editing by Lincoln Feast)

By Chen Lin

SINGAPORE (Reuters) – Singapore’s central bank has put forward proposals for new regulatory measures on cryptocurrency trading and stablecoins, in a bid to reduce the risk of consumer harm from the volatility of the industry.

The measures published in two consultation papers on Wednesday include not allowing businesses to lend out cryptocurrencies owned by retail customers, and to ensure customer assets are segregated from their own assets.

Cryptocurrency trading businesses would also not be allowed to offer incentives to attract retail customers, nor accept credit card payments or provide financing to retail customers.

The Monetary Authority of Singapore (MAS) has said it discourages the public from speculative trading in cryptocurrencies and has already brought in restrictions on advertising of cryptocurrency services in public places.

“…Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them,” MAS said in a media release, adding that the proposed measures should help to reduce risks.

Apart from addressing money laundering, terrorism financing, technology and cyber risks, the MAS said it wanted to ensure regulated stablecoins had a high degree of value stability.

In the case of stablecoins that are pegged to a single currency (SCS) where the value in circulation exceeds S$5 million ($3.53 million), issuers must hold reserve assets in cash, cash equivalents or short-dated sovereign debt securities at least equivalent to 100% of the par value of the outstanding SCS in circulation. The assets must also be denominated in the same currency as the pegged currency.

All SCS issued in Singapore can be pegged only to the Singapore dollar or any Group of Ten (G10) currency, it said.

Banks in Singapore will be allowed to issue SCS and no additional reserve backing and prudential requirements will apply, the statement said.

Currently, only one stablecoin has been issued in Singapore.

The Asian financial hub had initially attracted major crypto businesses like Binance, but some left the city-state earlier this year and moved to the United Arab Emirates, citing strict regulatory curbs in Singapore.

It is unclear when the proposed measures might be brought in, but the public has been invited to give feedback by Dec.21.

($1 = 1.4160 Singapore dollars)

(Reporting by Chen Lin in Singapore; Editing by Ed Davies)

By David Shepardson

WASHINGTON (Reuters) – The U.S. Justice Department said on Tuesday it reached an agreement with Alphabet Inc’s Google resolving a dispute with the search engine giant over the loss of data responsive to a 2016 search warrant.

The government said it was a “first-of-its-kind resolution” that would result in Google reforming “its legal process compliance program to ensure timely and complete responses to legal process such as subpoenas and search warrants.”

“The department is committed to ensuring that electronic communications providers comply with court orders to protect and facilitate criminal investigations,” said Assistant Attorney General Kenneth Polite, who heads the Justice Department’s Criminal Division, saying it “demonstrates the department’s resolve in ensuring that technology companies, such as Google, provide prompt and complete responses to legal process to ensure public safety and bring offenders to justice.”

Google, which did not immediately comment, told a U.S. court it had spent over $90 million “on additional resources, systems, and staffing to implement legal process compliance program improvements.”

The Justice Department said an independent compliance professional will be hired to serve as an outside third-party related to Google’s compliance upgrades.

In 2016, the United States obtained a search warrant in California for data held at Google related to the investigation of the criminal cryptocurrency exchange BTC-e, the department said.

Later the U.S. Court of Appeals for the Second Circuit ruled search warrants issued under the Stored Communications Act (SCA) did not cover data stored outside of the United States.

In 2018, Congress clarified the SCA did cover U.S. providers chose to store overseas but the government said “in the intervening time, data responsive to the warrant was lost,” the Justice Department said.

Google will assemble reports and updates regarding the compliance program that will go to the government, the Google Compliance Steering Committee and Alphabet board committees.

(Reporting By David Shepardson and Eric Beech; Editing by David Gregorio)

By John McCrank

NEW YORK (Reuters) – Sterling rallied to a six-week high on Tuesday on improved risk sentiment as Rishi Sunak became Britain’s prime minister, while the dollar fell to a three-week low as weakening U.S. economic data cooled expectations on the pace of future U.S. rate hikes.

The potential for foreign exchange volatility is elevated this week, with central banks in the euro zone and Canada expected to hike rates by 75 basis points, and the Bank of Japan set to maintain ultra-low interest rates to support its fragile economy.

Rishi Sunak became Britain’s third prime minister in two months on Tuesday, tasked with tackling a mounting economic crisis and a warring political party.

Sterling surged to its strongest level since Sept. 15, and was last up 1.66% at $1.147, but currency strategists expect the pound’s climb to be short-lived.

“Beyond a brief honeymoon phase rally, I think the daunting road ahead for the UK economy is likely to cap sterling gains,” said Joe Manimbo, senior market analyst at Convera.

The U.S. dollar was broadly weaker amid signs that Federal Reserve rate hikes are slowing the world’s biggest economy. The greenback slid into negative territory after data showed that U.S. home prices sank in August as surging mortgage rates sapped demand.

“U.S. economic data is deteriorating and that is helping push down Treasury yields,” said Edward Moya, senior market analyst at Oanda. “If the data keeps on getting uglier, the December FOMC meeting debate might not be between a half point increase and 75 basis point hike, but with a quarter point rise and 50 basis-point boost.”

The Fed is expected to raise rates by 75 basis points for a fourth-straight time at its Nov. 1-2 meeting.

The dollar index, which measures the greenback against six major peers, was down 0.822% at 110.94 at 3:10 p.m. EDT (1910 GMT).

The euro strengthened to a 20-day high ahead of Thursday’s ECB meeting, where a three-quarter point hike is expected by the central bank as it seeks to rein in red-hot inflation.

The common currency was last up 0.87% at 0.99595.

“Warm weather is fueling (relative) optimism about the energy crisis, even if Germany’s IFO data is deep into recessionary territory,” said Kit Juckes, chief FX strategist at Societe General.

The Ifo Institute for Economic Research said Germany is heading into recession, forecasting that Europe’s biggest economy will contract by 0.6% in the fourth quarter.

YEN AND YUAN

The yen firmed against the dollar after suspected Bank of Japan (BOJ) intervention on Friday and Monday.

A retreat this week in long-term Treasury yields also helped support the Japanese currency. However, the policy background for yen weakness is likely to be put into stark relief in coming days, with the BOJ expected to stick to monetary stimulus on Friday.

At 147.96 yen, the dollar was down from a 32-year high against the Japanese currency of 151.94 on Friday, which appeared to trigger successive bouts of BOJ intervention.

Japan’s Ministry of Finance declined to comment on whether it had ordered interventions in recent days, though it did confirm action in September, which was the first yen-buying foray by Japanese authorities since 1998.

China’s currency, meanwhile, extended the weakness seen since Chinese leader Xi Jinping’s choice of leadership team at the twice-a-decade Communist Party Congress raised fears that growth will be sacrificed for ideology-driven policies.

The onshore yuan slid to its lowest in nearly 15 years on Tuesday after the central bank set the lowest mid-point since 2008. The offshore yuan dipped to a record low of 7.375 against the dollar.

(Reporting by John McCrank in New York and Joice Alves in London; Editing by David Goodman, Bernadette Baum and Nick Zieminski)

By Sheila Dang

(Reuters) – “Is Twitter dying?” billionaire Elon Musk mused in April, five days before offering to buy the social media platform.

The reality, according to internal Twitter research seen by Reuters, goes far beyond the handful of examples of celebrities ghosting their own accounts. Twitter is struggling to keep its most active users – who are vital to the business – engaged, underscoring a challenge faced by the Tesla Inc chief executive as he approaches a deadline to close his $44 billion deal to buy the company.

These “heavy tweeters” account for less than 10% of monthly overall users but generate 90% of all tweets and half of global revenue. Heavy tweeters have been in “absolute decline” since the pandemic began, a Twitter researcher wrote in an internal document titled “Where did the Tweeters Go?”

A “heavy tweeter” is defined as someone who logs in to Twitter six or seven days a week and tweets about three to four times a week, the document said.

The research also found a shift in interests over the past two years among Twitter’s most active English-speaking users that could make the platform less attractive to advertisers. 

Cryptocurrency and “not safe for work” (NSFW) content, which includes nudity and pornography, are the highest-growing topics of interest among English-speaking heavy users, the report found.

At the same time, interest in news, sports and entertainment is waning among those users. Tweets on those topics, which have helped Twitter burnish an image as the world’s “digital town square,” as Musk once called it, are also the most desirable for advertisers.

Twitter declined to specify how many of its tweets are in English or how much money it makes from English speakers. But the demographic is important to Twitter’s business, some analysts say.

The platform earned more ad revenue from the United States alone than all other markets combined in its fourth quarter, according to its investor letter, and most ads in the United States are likely targeting English-speaking users, said Jasmine Enberg, an analyst at Insider Intelligence.

Twitter’s study examined the number of heavy tweeters in English who displayed an interest in a topic, based on the accounts they followed, and how that number of users changed over the past two years.

Twitter was motivated to investigate “disturbing” trends among users that may have been masked by overall growth in daily active users and better understand the decline in the company’s most active users, the documents said. The study made no specific conclusions about why heavy users of the platform are declining.

Asked to comment on the internal documents’ findings, a Twitter spokesperson said on Monday: “We regularly conduct research on a wide variety of trends, which evolve based on what’s happening in the world. Our overall audience has continued to grow, reaching 238 million mDAU in Q2 2022,” the spokesperson said, using an acronym for monetizable daily active users.

‘NOT SAFE FOR WORK’ CONTENT

The number of heavy users interested in NSFW and cryptocurrency content grew, the research found.

Twitter is one of the few major social media platforms that permits nudity on its service, and the company has estimated that adult content constitutes 13% of Twitter, according to a separate internal slide presentation seen by Reuters. The presentation did not elaborate on how the figure was calculated.

Advertisers generally steer clear of controversy or nudity for fear of damaging their brands. Major advertisers including Dyson, PBS Kids and Forbes suspended advertising due to accounts that were soliciting child pornography on Twitter, Reuters reported in September.

In response to the September story, Twitter said it “has zero tolerance for child sexual exploitation” and was investing more resources into its work against such material.

Twitter’s most active English-speaking users were also increasingly interested in cryptocurrencies, reaching an all-time high in late 2021, the internal documents showed. But interest in the topic has declined since the crypto price crash in June, and the study noted cryptocurrencies may not be an area of growth in the future.

Current and former Twitter employees who spoke with Reuters said they feared Musk’s calls for less content moderation and his reported plans to gut the staff, which they said will exacerbate the deterioration of the quality of content.

‘DEVASTATING’ LOSSES

Topics that have traditionally made Twitter a popular platform for its millions of users are now in decline among the most active English-speaking users, the documents show.

Interest in world news, as well as liberal politics, showed spikes during major events such as the attack on the U.S. Capitol on Jan. 6, 2021. But the categories have since lost the highest number of heavy Twitter users and have shown no signs of recovery, the report said.

Twitter is also losing a “devastating” percentage of heavy users who are interested in fashion or celebrities such as the Kardashian family. These users are likely decamping to rival platforms like Meta Platforms Inc’s Instagram and ByteDance’s TikTok, a Twitter researcher wrote.

The study also expressed surprise about the decline in interest for e-sports and online streaming personalities, which were previously growing quickly across Twitter. “The big communities are now in decline,” the report said.

“It seems as though there is a significant discrepancy between what I might imagine are our company values and our growth patterns,” one Twitter researcher wrote.

(Reporting by Sheila Dang in Dallas; Editing by Kenneth Li and Matthew Lewis)

By Lisa Pauline Mattackal

(Reuters) – As a developed nation, you know your currency’s in a spot of bother when investors start to hedge with bitcoin.

After Britain’s brief Prime Minister Liz Truss unleashed her mini-budget on Sept. 23, filling financial markets with dread, a section of investors stampeded away from the pound and towards the cryptocurrency.

Trading volumes between bitcoin and the pound jumped 233% in September overall from the month before, according to data from research firm CryptoCompare, while trading between the cryptocurrency and a similarly battered euro also jumped 68%.

“It was the first time we’ve seen such a huge increase in (bitcoin) volumes for the currency of a developed country,” said Ed Hindi, chief investment officer at Tyr Capital.

On the Monday after the Friday budget shock, when the pound fell to its lowest-ever level against the dollar, trading volumes between sterling and bitcoin spiked to a daily record high of 846 million pounds ($955 million), according to market data firm Kaiko Research.

Meanwhile, bitcoin’s volatility is near the lowest it’s been all year. By contrast, volatility in safe-haven U.S. bonds is near its highest since March 2020, as measured by the ICE BofAML U.S. Bond Market Option Volatility Estimate Index.

In fact, over the past month of market ructions, U.S. Treasuries have been equally or more volatile than bitcoin, according to Refinitiv data. Both bitcoin and the U.S. 10-year note are now hovering at around 21, according to a measure of realized volatility, while at the start of September bitcoin volatility was more than double that of the bond, at 65 versus 31.

GRAPHIC – Bitcoin trading volume against the British pound

https://graphics.reuters.com/FINTECH-CRYPTO/gkvlwmwnkpb/chart.png

‘FLIGHT FROM CRISIS’

In bitcoin’s infancy, a key selling point was its potential protection against currency depreciation and inflation. That narrative began to break down as greater institutional adoption meant cryptocurrencies traded more in lockstep with traditional risky corners of financial markets.

So are investors ready to bet on bitcoin as a hedge again?

The pound volumes echoed similar instances of investors jumping into bitcoin when fiat money came under pressure, including in Russia and Ukraine this year.

Experts pointed to the comparative ease for small investors of buying bitcoin, rather than entering the gold or FX markets, as one factor behind the trend.

“Bitcoin has always been not as much as ‘flight to safety’ as a ‘flight from crisis’ asset, even though GBP is nowhere near as weak as the rouble,” added Ben McMillan, chief investment officer at IDX Digital Assets.

Some market participants said the flows from sterling were also driven by savvy traders taking advantage of arbitrage opportunities from changes in the price of bitcoin.

One bitcoin bought nearly 19,000 pounds on Sept. 27, its highest level in the last six weeks, versus around 17,000 pounds on 24 October.

PRICE OF BITCOIN

Bitcoin is no safe bet. Clearly.

The world’s largest cryptocurrency has tumbled over 58% this year, while the traditional safety plays of gold and U.S. bonds are down about 10% and 15% respectively, sterling has lost 16% and the S&P 500 has fallen more than 21%.

Bitcoin has stabilized somewhat in recent weeks, though, hovering roughly around the $19,000 mark.

Trading volumes between bitcoin and sterling have now fallen back to around the levels they were before the mini-budget, CryptoCompare analysts said, with the pound recovering ground after the UK government reversed its fiscal plans.

Some crypto watchers say the September surge was nonetheless a reflection of bitcoin’s enduring appeal as an asset outside mainstream finance.

“Large outflows from GBP into BTC imply investors see the value of having hard-capped, incorruptible, decentralized money as an alternative to currencies backed by central banks and governments,” said researchers at CoinShares.

($1 = 0.8856 pounds)

(Reporting by Lisa Pauline Mattackal in Bengaluru; Additional reporting by Alun John in London; Editing by Pravin Char)