Author: Reuters

By Nivedita Balu

(Reuters) – Coinbase Global Inc will cut about 1,100 jobs, or 18% of its workforce, the cryptocurrency exchange said on Tuesday, the latest company preparing to ride out a downturn in the cryptosphere.

The cryptocurrency market has been roiled by extreme volatility as investors dumped risky assets on fears that higher inflation readings would force the U.S. Federal Reserve to turn more aggressive in raising interest rates and tip the economy into a recession.

“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Chief Executive Officer Brian Armstrong said in a blogpost.

Bitcoin, the world’s largest cryptocurrency, tumbled as much as 14% on Monday after crypto lender Celsius Network froze withdrawals and transfers.

Armstrong said employees would receive an email informing them if they had been affected, without giving further details.

Coinbase had earlier this month said it would extend a hiring freeze and rescind a number of accepted offers to deal with current macroeconomic conditions.

The company’s shares fell about 5% in early trading, set to add to their roughly 80% tumble this year.

The crypto market meltdown has forced companies like BlockFi and Crypto.com to slash hundreds of jobs, while top firms including Meta Platforms and Intel Corp have also tapped the brakes on hiring.

Coinbase had ramped up hiring when the crypto market scaled new highs during the pandemic, growing headcount by nearly four times in just five quarters.

“This level of headcount growth over five quarters was too ambitious, especially given that the company has lived through a crypto winter and knows how regularly volatile this market can be,” KBW analyst Kyle Voigt said in a note to clients on Monday.

Coinbase expects to incur about $40 million to $45 million in total restructuring expenses, largely related to employee severance and other termination benefits.

(Reporting by Nivedita Balu and Chavi Mehta in Bengaluru; Editing by Amy Caren Daniel and Sriraj Kalluvila)

WASHINGTON (Reuters) – U.S. Securities and Exchange Commission (SEC) Gary Gensler said on Tuesday that investors should beware of promised returns from crypto lending platforms and products that seem “too good to be true.”

The Wall Street watchdog’s comments come a day after the world’s largest cryptocurrency fell 15% on Monday, its sharpest one-day drop since March 2020.

“We’ve seen again that lending platforms are operating a little like banks. They’re saying to investors ‘Give us your crypto. We’ll give you a big return 7% or 4.5% return.’ How does somebody offer (such large percentage of returns) in the market today and not give a lot of disclosure?” Gensler said during an industry event.

“I caution the public. If it seems too good to be true, it just may well be too good to be true.”

(Reporting by Katanga Johnson in Washington; Editing by Chizu Nomiyama)

By Huw Jones

LONDON (Reuters) – European Union financial services chief Mairead McGuinness on Tuesday urged the bloc’s lawmakers to agree on bank capital rules to keep the sector resilient as it emerges from the pandemic and markets fragment due to war in Ukraine.

The EU is approving a law to implement capital requirements agreed at the global Basel Committee of banking regulators, but intends to deviate from some of the Basel norms for exposures to residential real estate and unrated companies.

The European Central Bank, which regulates top euro zone lenders, has opposed the deviations, but McGuinness said they would be temporary to give banks time to increase capital levels, if need be, before they comply in full.

“Some say the temporary deviations should not be in or be permanent, and whether we can find a compromise I am not so sure,” she told the European Parliament, which has joint say with EU states on the draft law.

“We need to find a compromise to show the European banking system is strong and fit for the future. We are not shying away from implementation, but are giving our banks time to adjust and I think that is quite legitimate,” McGuinness said.

She also urged parliament’s economic affairs committee to reach a deal with EU states before the end of June on her draft law to regulate crypto markets.

The fall in crypto prices and problems at crypto companies like Celsius Network show the need for rules to protect consumers and keep markets stable, McGuinness said.

The EU is also split over her proposal to ban payment for order flow, or wholesale market makers paying brokers for stock orders, a step the United States is also considering.

A committee member urged McGuinness to go further and ban inducements across financial markets generally.

“When I listen to stakeholders, many of them would say do not ban inducements and perhaps the issue is around visibility and transparency. I am certain the status quo is not the way we should proceed,” McGuinness said.

(Reporting by Huw Jones; editing by Jason Neely)

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – The crypto market’s a hot mess, leaving many investors struggling to turn a buck. Enter the arbitrageurs.

Bitcoin and other cryptocurrencies have either been shackled to ranges or in decline since January, leaving your regular buy-and-hold investor with little option but to sell or to wait for the elusive rally.

One class of seasoned investors is faring better, though: the arbitrageurs, players such as hedge funds who thrive on exploiting price differences between different geographies and exchanges.

“In May when the market collapsed, we made money. We are up 40 basis points for the month,” said Anatoly Crachilov, co-founder and CEO of Nickel Digital Asset Management in London, referring to their arbitrage strategy.

“Arb trading” involves buying an asset in a cheaper venue and simultaneously selling it elsewhere where it’s quoted at a premium, in theory pocketing the difference while being neutral on the asset.

It’s certainly not for everyone, and requires the kind of access to multiple markets and exchanges, and often the algorithms, that only serious players like sophisticated hedge funds can secure to make it a profitable endeavour.

Yet for investors who meet the bar, it’s proving attractive.

Such “market neutral” funds have become the most common strategy among crypto hedge funds, making up nearly a third of all currently active crypto funds, according to PwC’s annual global crypto hedge fund report published last week.

K2 Trading Partners said its high-frequency trading crypto arbitrage fund, which is algorithmically driven, had returned about 1% this year through to the end of May, even as bitcoin slumped 31% in the same period.

Meanwhile Stack Funds’ long/short trading fund with exposure in liquid cryptocurrencies saw its single biggest monthly loss of about 30% in May, while its arbitrage-focused fund shed 0.2%.

YOUR FUNDS FROZEN

While arbitrage has long been a popular strategy in many markets, the young crypto sector lends itself to the approach as it boasts several hundred exchanges across a world with inconsistent regulation, according to participants.

Hugo Xavier, CEO of K2 Trading Partners, said arb trading benefited from a lack of interconnectivity among crypto exchanges: “That’s good because you have different prices and that creates arbitrage opportunities.”

For instance, bitcoin was trading at $27,493 on Coinbase on Monday, versus $28,067 on Bisq. Bitcoin is down 44% this year, and at December 2020 lows.

Yet market watchers also point to the possible pitfalls, including technical snafus on exchanges slowing or freezing-up transactions, potentially robbing arb traders of their edge. Some lightly regulated venues in smaller countries, which offer many good arb opportunities, pose extra risks.

“It’s normal for an exchange go offline,” Xavier added. “Your funds can be frozen for some reason.”

STRESS SITUATIONS

Price discrepancies have typically arisen because of the less experienced retail traders who make up the bulk of crypto trades, particularly in the derivatives market. And, while arbitrage strategies are direction-neutral, they tend to perform better when bullish markets attract more retail participation.

“Of course, you want to have retail traders on the same exchange that you are when you’re doing arbitration because you will have less smart money. When there’s a bullish market, retail volume comes back,” Xavier said.

“If the markets are moving sideways or going down, retail traders cool off. Opportunities are fewer because most of people there are market makers and they are efficient.”

Markus Thielen, chief investment officer at Singapore-based digital asset manager IDEG said that there had been a shift in recent months, with arbitrage opportunities mostly appearing during “market stress situations”.

“So the market structure has fundamentally changed on the arb side,” he said, adding their arb strategy generated returns of 2% in the last eight weeks.

Yet Katryna Hanush, director of business development at London-based crypto market maker Wintermute, said arb trading ultimately had a limited shelf life because inconsistent pricing across different exchanges was bad for investors.

“As more institutional players come into the space, the arb opportunities will be eliminated.”

(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)

SAN SALVADOR (Reuters) – El Salvador’s Finance Minister Alejandro Zelaya on Monday dismissed concerns that a sharp drop in the value of bitcoin could hurt the Central American nation’s fiscal health.

El Salvador last September became the first country to make bitcoin a legal tender, alongside the U.S. dollar, despite criticism by the International Monetary Fund and credit agencies.

“When they tell me that the fiscal risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile,” Zelaya said at a press conference. “The fiscal risk is extremely minimal.”

Since last September, El Salvador’s government has purchased 2,301 units of the cryptocurrency, which fell on Monday to its lowest value since 2020.

Zelaya cited an earlier estimate from Deutsche Welles that the country’s bitcoin portfolio had lost some $40 million in value.

“Forty million dollars does not even represent 0.5% of our national general budget,” he said.

Bitcoin’s value has dropped some 50% since it became legal tender in the country.

(Reporting by Nelson Renteria; Writing by Brendan O’Boyle; Editing by Richard Pullin)

(Reuters) – Bitcoin dropped 12.1% to $23,366 at 2002 GMT on Monday, losing $3,218.95 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 51.6% from the year’s high of $48,234 on March 28.

Ether, the coin linked to the ethereum blockchain network, dropped 13.62 % to $1,237.72 on Monday, losing $195.18 from its previous close.

(Reporting by Shubhendu Deshmukh in Bengaluru; Editing by Maju Samuel)

By Luc Cohen

NEW YORK (Reuters) – Binance U.S. and its CEO were sued on Monday by a U.S. investor who alleges the cryptocurrency exchange falsely marketed Terra USD as a safe asset ahead of the so-called stablecoin’s collapse in value last month.

Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar, and are popular as safe havens in times of turmoil in crypto markets. But Terra USD’s value plunged last month, breaking its 1:1 dollar peg and contributing to a tumble in other crypto assets like Bitcoin.

In the lawsuit against Binance and Chief Executive Brian Shroder, Utah resident Jeffrey Lockhart said Binance falsely advertised Terra USD as “safe” and backed by fiat currency, when in fact it was an unregistered security.

Lockhart said Binance’s failure to register with the U.S. government as a securities exchange limits disclosure about assets traded on the platform, harming investors.

“Binance U.S. profits from every trade, and therefore has a stark incentive to sell cryptoassets irrespective of their compliance with the securities laws,” Lockhart wrote in his lawsuit, filed in San Francisco federal court. “From Binance U.S.’s perspective, the less disclosure, the better.”

A Binance spokesperson said the exchange is registered with the Financial Crimes Enforcement Network (FinCEN) – a unit of the U.S. Treasury Department – and complies with all applicable regulations.

“These assertions are without merit and we will defend ourselves vigorously,” the spokesperson said in a statement, adding that the exchange will delist Terra USD, a decision made before the lawsuit was filed.

Lockhart is seeking to have himself and other investors who bought Terra on Binance registered as a class.

The lawsuit comes after a bipartisan group of U.S. Senators last week proposed legislation to have the Commodity Futures Trading Commission (CFTC), not the Securities and Exchange Commission (SEC), play the primary role in regulating crypto.

The CFTC is generally seen as friendlier toward cryptocurrencies, as the SEC has found crypto assets should be seen as securities.

Cryptocurrencies continued their slide on Monday, with Bitcoin touching an 18-month low and No. 2 token ether tumbling as much as 18%.

(The story corrects paragraph 6 to note FinCEN is a unit of the U.S. Treasury Department, not a financial industry self-regulation group)

(Reporting by Luc Cohen in New York; Editing by Noeleen Walder and David Evans)

By Tom Wilson, Elizabeth Howcroft and Hannah Lang

LONDON (Reuters) – Bitcoin slumped 14% on Monday after major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers citing “extreme” conditions, in the latest sign of the financial market downturn hitting the cryptosphere.

The Celsius move triggered a slide across cryptocurrencies, with their value dropping below $1 trillion on Monday for the first time since January 2021, dragged down by bitcoin, the largest token.

New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.

After Celsius’s announcement, bitcoin touched an 18-month low of $22,725, before rebounding slightly to around $23,924. No.2 token ether dropped as much as 18% to $1,176, its lowest since January 2021.

“It’s still an uncomfortable moment, and there’s some contagion risk around crypto more broadly,” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.

Crypto markets have dived in the past few weeks as rising interest rates and surging inflation prompted investors to ditch riskier assets across financial markets.

Markets extended a sell off on Monday after U.S. inflation data on Friday, which showed the largest price increase since 1981, prompting investors to raise their bets on Federal Reserve rate hikes.[MKTS/GLOB]

Cryptocurrency investors have also been rattled by the collapse of the terraUSD and luna tokens in May which was shortly followed by Tether, the world’s largest stablecoin, briefly breaking its 1:1 peg with the dollar.

In a blog post on Monday, Tether said that while it has invested in Celsius, its lending activity with the crypto platform has “always been overcollateralized” and has no impact on Tether’s reserves. The token was last trading flat at $1.

Also on Monday, BlockFi, another crypto lending platform, said it was reducing its staff by about 20% due to “dramatic shift in macroeconomic conditions worldwide.” BlockFi said that it has no exposure to Celsius and has “never worked with them”.

Bitcoin, which surged in 2020 and 2021, is down around 50% so far this year. Ethereum is down more than 67% this year.

Celsius CEO Alex Mashinsky and Celsius did not immediately respond to Reuters requests for comment.

CRYPTO LENDING

Celsius says on its website that customers who transfer their crypto to its platform can earn an annual return of up to 18.6%. The website urges customers to “Earn high. Borrow low”.

In a blog post on Sunday evening, the company said it had frozen withdrawals, as well as transfers between accounts, “to stabilise liquidity and operations while we take steps to preserve and protect assets.”

“We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations,” the company said.

Celsius’s Token, which crypto borrowers and lenders on its platform could earn interest on or pay interest in, has fallen about 97% in the last 12 months, from $7 to around 20 cents, based on CoinGecko data.

‘GREY AREA’

Crypto lending products have surged in popularity and many companies have launched offerings within the last year.

That has sparked concerns among regulators, especially in the United States, who are worried about investor protections and systemic risks from unregulated lending products.

Celsius and crypto firms that offer services similar to banks are in a “grey area” of regulations, said Matthew Nyman at CMS law firm. “They’re not subject to any clear regulation that requires disclosure” over their assets.

Celsius raised $750 million in funding last year from investors, including Canada’s second-largest pension fund Caisse de Dépôt et Placement du Québec. Celsius was valued at the time at $3.25 billion.

As of May 17, Celsius had $11.8 billion in assets, its website said, down by more than half from October, and had processed a total of $8.2 billion worth of loans.

Mashinsky, the CEO, was quoted in October last year saying Celsius had more than $25 billion in assets.

Rival crypto lender Nexo said on Monday it had offered to buy Celsius’ outstanding assets.

“We reached out to Celsius Sunday morning to discuss the acquisition of its collateralised loan portfolio. So far, Celsius has chosen not to engage,” said Nexo co-founder Antoni Trenchev.

Celsius did not immediately respond to a request for comment on Nexo’s offer.

(Reporting by Tom Wilson and Elizabeth Howcroft in London and Hannah Lang in Washington; additional reporting by Abinaya Vijayaraghavan in Bengaluru and Alun John in Hong Kong; Editing by Bradley Perrett, Jane Merriman and David Evans)

By Tom Wilson, Elizabeth Howcroft and Hannah Lang

LONDON (Reuters) – Major U.S. cryptocurrency lending company Celsius Network froze withdrawals and transfers on Monday, citing “extreme” market conditions, sparking a sell-off across crypto markets.

Here’s what you need to know about crypto lending – a corner of the digital asset market that has boomed over the last two years during soaring interest in cryptocurrencies.

WHAT’S THE DEAL?

Crypto lending is essentially banking – for the crypto world.

Just as customers at traditional banks earn interest on their savings in dollars or pounds, crypto users that deposit their bitcoin or ether at crypto lenders also earn money, usually in cryptocurrency.

While savings at traditional banks offer paltry returns due to historically low interest rates, crypto lenders offer much higher returns – at the very top end as much as 20%, though rates depend on the tokens being deposited.

Crypto lenders make money by lending – also for a fee, typically between 5%-10% – digital tokens to investors or crypto companies, who might use the tokens for speculation, hedging or as working capital. The lenders profit from the spread between the interest they pay on deposits and that charged on loans.

HIGH RETURNS? SO CRYPTO LENDERS MUST BE POPULAR

They are.

Crypto lending has boomed over the past two years, along as decentralised finance, or “DeFi,” platforms. DeFi and crypto lending both tout a vision of financial services where lenders and borrowers bypass the traditional financial firms that act as gatekeepers for loans or other products.

The sites say they are easier to access than banks, too, with prospective clients facing less paperwork when lending or borrowing crypto.

The total value of crypto at DeFi sites soared to a record $110 billion in November, up fivefold from a year earlier and reflecting record highs for bitcoin, according to industry site DeFi Pulse.

Traditional investors and venture capital firms, from Canada’s second-biggest pension fund Caisse de Depot et Placement du Quebec to Bain Capital Ventures, have backed crypto lending platforms.

IS THERE A CATCH?

There are several.

Unlike traditional regulated banks, crypto lenders aren’t overseen by financial regulators – so there are few rules on the capital they must hold, or transparency over their reserves.

That means that customers who hold their crypto at the platforms could lose access to their funds – as happened with Celsius on Monday.

Crypto lenders also face other risks, from volatility in crypto markets than can hit the value of savings to tech failures and hacks.

WHO ARE THE BIGGEST PLAYERS?

New Jersey-based Celsius is among them, with over $11 billion assets in its platform.

Other major lenders are also based in the United States. New York-based Genesis originated loans of $44.3 billion in the first quarter, with $14.6 billion in active loans as of March.

Other big names include U.S. lender BlockFi, which has some $10 billion of assets under management, and London-based Nexo, which has $12 billion.

REGULATORS MUST BE WORRIED, THEN?

Crypto lenders are in the sights of U.S. securities watchdogs and state regulators, who say that interest-bearing products are unregistered securities.

In February, BlockFi agreed to pay $100 million in a landmark settlement with the U.S. SEC and state authorities over its yield product.

Those same state regulators issued a similar cease and desist order to Celsius in September, calling its Earn product an unregistered security.

More widely, DeFi is throwing up risks for investors as it evolves to mirror traditional markets, a global body for securities regulators said in March, including a lack of disclosure of products and systems, patchy reliability and problems operating at scale.

(Reporting by Tom Wilson and Elizabeth Howcroft in London and Hannah Lang in Washington; editing by David Evans)

LONDON (Reuters) – Bitcoin’s slump on Monday after major U.S. crypto lending company Celsius Network froze withdrawals should remind investors that most crypto-assets have no intrinsic value, Bank of England Governor Andrew Bailey said.

“If you want to invest in these assets, okay, but be prepared to lose all your money,” Bailey told the British parliament’s Public Accounts Committee.

“People may still want to buy them because they have extrinsic value … people value things for personal reasons. But they don’t have intrinsic value. This morning we have seen another blow-up in a crypto exchange.”

Bailey has long expressed his doubts about crypto-assets, and was speaking in response to a question about how regulators’ duty to protect consumers could clash with the government’s wish for them to promote financial-sector innovation and competition.

The Celsius move triggered a slide across cryptocurrencies, with their value dropping below $1 trillion on Monday for the first time since January 2021, dragged down by a 12% fall in the largest token bitcoin.

(Reporting by David Milliken; Editing by Alistair Smout)

By Elizabeth Howcroft

LONDON (Reuters) – The value of the cryptocurrency market on Monday fell below $1 trillion for the first time since January 2021, according to data site CoinMarketCap, reaching as low as $926 billion.

The global cryptocurrency market peaked at $2.9 trillion in November 2021, but it has faltered so far this year. It has lost $1 trillion in value in the last two months alone as investors ditched riskier assets in the face of high inflation and fears that interest rate raises by central banks will hamper growth.

The largest cryptocurrency, bitcoin, was down more than 10% on the day, falling to an 18-month low of $23,750. It is down by around 50% so far this year. Smaller coin ether fell over 15% to $1,210.

“As inflation proves to be an even trickier opponent to beat than expected, Bitcoin and Ether are continuing to get a severe bruising in the ring,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“They are prime victims of the flight away from risky assets as investors fret about spiralling consumer prices around the world.”

(Reporting by Elizabeth Howcroft; editing by Tom Wilson)

By Julie Gordon

OTTAWA (Reuters) – The number of Canadians who own cryptoassets is growing rapidly and efforts to regulate the sector need to start keeping pace, a senior Bank of Canada official said, noting many people may not understand the risk of investing in products like bitcoin.

The issue is growing more pressing as cryptoassets become integrated into Canada’s financial system, increasing the risk that crypto shocks – like the recent price plunge – could end up hitting the broader financial system.

“This is an area that is still small, but it’s growing really rapidly. And it is largely unregulated,” Bank of Canada Senior Deputy Governor Carolyn Rogers told Reuters in an interview on Thursday. “We don’t want to wait until it gets a lot larger before we bring regulatory controls in place.”

The value of the global cryptoasset market soared from $200 billion in early 2020 to $3 trillion at its peak, the Bank of Canada said in a report this week. The share of Canadians who own bitcoin more than doubled to 13% in 2021 from 5% in 2020.

“Like any asset that’s jumping around in price, people see an opportunity for quick gains,” said Rogers. “Our concern is they may not understand the risks. They may not even understand that it’s not a regulated area.”

Indeed, cryptocurrency prices plunged in recent months as appetites for high-risk assets soured, exposing some investors to significant financial losses.

The industry needs to be regulated, said Rogers, but the challenge is sorting out just how that will be done.

“These are somewhat like banking assets, somewhat like capital markets,” she said. “One of the challenges is to figure out how do they fit in the current regime, and if they don’t fit, how do we adjust the regime so that they will fit.”

(Reporting by Julie Gordon in Ottawa; Editing by Matthew Lewis)

By Gary McWilliams

HOUSTON (Reuters) – Cryptocurrency developers and U.S. lawmakers are moving toward putting the Commodity Futures Trading Commission in charge of regulating digital currencies, said CFTC Commissioner Summer Mersinger.

The designation would expand the CFTC’s mandate to oversee agricultural, energy and financial options markets and pave the way for the agency to regulate other digital assets such as non-fungible tokens, or NFTs.

Separately, the CFTC is considering how carbon trading markets operate, with a view toward their use in hedging and risk management.

Mersinger, one of five commissioners on the independent board that oversees commodity and financial futures markets, was speaking on Tuesday on the sidelines of the Reuters Commodities Trading USA conference in Houston.

Major crypto companies have backed the CFTC and on Tuesday U.S. senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, filed a bill that would make CFTC the industry’s main overseer.

“You’re seeing the industry coalesce around the CFTC becoming the primary regulator,” said Mersinger.

Lawmakers have not decided which agency would oversee cryptocurrencies but the proposed Lummis-Gillibrand bill offers a starting point for Congressional debate.

The CFTC has begun its own review of a potential role over cryptocurrencies, with staff looking for opportunities in areas such as spot-market crypto trading “where we could have some expanded role making,” Mersinger said. She cautioned that the agency historically has not regulated spot markets and its reviews are preliminary.

“We’re still a strong regulator but our registrants have a lot of flexibility,” she said. “They have been very interested in that approach versus the top-down way of some other financial regulators,” she said.

Carbon trading is another area where the CFTC has an interest. Its regulation now is largely policed by industry groups and voluntary on the part of participants.

“We have interest in that space but we don’t regulate that space,” Mersinger said. One consideration is what changes may be needed for the voluntary markets to work properly, she added.

In 2020, when U.S. oil futures prices turned negative for the first time on fears of a lack of physical storage amid collapsing demand, CFTC issued an advisory warning of the risks that not enough people took seriously, she said.

One lesson it learned was that there was a need for broader inter-agency collaboration and discussion of contract settlement terms with the exchanges and traders, she said.

“At the end of the day, storage wasn’t as big an issue” as feared, but it was not well communicated, she said.

(Reporting by Gary McWilliams and Arathy Somasekhar; Editing by Richard Chang)

NEW YORK (Reuters) – Trading firms Citadel Securities and Virtu Financial Inc are collaborating on a cryptocurrency trading “eco-system” that will enable retail brokerages to offer crypto-executions to their customers, according to a source with direct knowledge of the matter.

The consortium of firms behind the project includes venture capital firms Sequoia Capital and Paradigm, as well as a few retail brokerages, the source said.

The project, which was first reported by CoinDesk, is still very early in its development, the source said.

Bloomberg reported the firms were developing a crypto offering with help from Fidelity Investments and Charles Schwab Corp that would widen access to digital assets, citing people familiar with the matter.

Schwab told Reuters on Tuesday it had made a minority, passive strategic investment in a new digital asset venture.

“We recognize that there is considerable interest in cryptocurrencies … and will consider introducing direct access to cryptocurrencies when there is further regulatory clarity,” Schwab said in a statement.

The product, still in its early development, could be available late this year or early next, the Bloomberg report said.

(Reporting by John McCrank; Additional reporting by Praveen Paramasivam in Bengaluru; Editing by Chris Reese and Shinjini Ganguli)

By Anshuman Daga

SINGAPORE (Reuters) – Singapore-based private securities platform ADDX said it has become the first financial firm in the city-state to recognise cryptocurrency in their assessment of assets of high-net worth clients.

The move underscores the growing acceptance of digital currencies among financial services firms as they seek to tap a wide array of investors.

ADDX, whose backers include Singapore Exchange, said in a statement on Wednesday that it would recognise only cryptocurrencies with a higher market value and would apply discount rates when valuing these assets.

“Cryptocurrencies are here to stay. They no longer exist only on the fringes of wealth and investment conversations,” said ADDX CEO Oi-Yee Choo.

“With a large minority of investors owning crypto, it is reasonable for these digital assets to be recognised as a part of one’s portfolio – not unlike any other assets that can be valued in the marketplace, such as real estate or equity,” Choo said.

Under Singapore’s regulations, individuals need to have at least S$300,000 ($217,991.57) of income from the past 12 months, S$1 million in net financial assets or S$2 million in net personal assets to qualify as accredited investors.

ADDX said it will accept crypto assets only in the category of net personal assets and will apply a 50% discount rate for bitcoin or ether when calculating the value of these holdings and a 10% discount for USDC stable coin.

Cryptocurrencies – once seen as a niche asset for risk-hungry investors – became more popular during the COVID-19 pandemic. While bitcoin’s value has recently fallen, the overall crypto market is still valued at $1.2 trillion.

“In time to come, we are likely to enable customers to fund their investment wallets with cryptocurrencies and to convert their assets between fiat currencies and crypto,” said Choo.

($1 = 1.3762 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Sam Holmes)

By Pete Schroeder

WASHINGTON (Reuters) – A bipartisan pair of U.S. senators unveiled a bill on Tuesday that would establish new rules for cryptocurrency, and hand the bulk of their oversight to the Commodity Futures Trading Commission (CFTC).

The bill, introduced by Republican Senator Cynthia Lummis, one of Congress’ most vocal cryptocurrency advocates, and Democratic Senator Kirsten Gillibrand, marks one of the most ambitious efforts yet by lawmakers to place clear guard rails around rapidly growing and controversial cryptocurrency markets.

The measure would stipulate that the CFTC, not the Securities and Exchange Commission, play the primary role in regulating crypto products, most of which the senators said operate more like commodities than securities. The smaller CFTC is generally seen as a friendlier regulator for cryptocurrency, as the SEC has typically found that crypto products must adhere to a host of securities requirements.

The bill is not expected to become law in the current session of Congress, with the midterm elections just months away, but its framework could serve as a starting point for future debates about how best to oversee those markets.

“We expect this bill will be the starting point for debate next year regardless of which party controls the House or the Senate,” wrote Jaret Seiberg, an analyst with Cowen Washington Research Group. “What does matter is that there is a bipartisan effort to bring crypto into the existing regulatory regime even if the details are likely to change.”

The senators said the bill is aimed at providing certainty and clarity to crypto markets, alongside consumer protections.

Among other items, the bill would establish new rules for “stablecoins,” which are tokens intended to have their value pegged to a traditional asset like the U.S. dollar. Those products have been under significant pressure lately after a crash in the value of a high-profile stablecoin, TerraUSD.

The new bill would require stablecoin issuers to maintain high-quality liquid assets equal to the value of all outstanding stablecoins, and public disclosures of those holdings.

(Reporting by Pete Schroeder in Washington; Editing by Matthew Lewis)

By Huw Jones

LONDON (Reuters) – Britain will begin live testing of crypto blockchain technology for traditional market activities such as trading and settlement of stocks and bonds next year as part of a drive to become a global “crypto hub”, the finance ministry said on Tuesday.

Gwyneth Nurse, the ministry’s director general for financial services, said the use of distributed ledger technology (DLT), which underpins cryptoassets, is a key priority for making financial market infrastructure more innovative and efficient for users.

Britain will launch a financial market infrastructure “sandbox” next year for testing DLT projects under control of regulators, Nurse said, a model UK regulators pioneered for nurturing fintech firms. A sandbox is a testing environment for projects involving real customers.

In financial markets, the trading of stocks, bonds and other assets traditionally involves three distinct activities of trading, clearing and settlement. Using DLT could change this and allow financial assets such as bonds or stocks to be issued in hours rather than days or weeks.

“The government may also want to test how trading and settlement might be brought together,” Nurse told the annual IDX derivatives conference in London.

“A sandbox will allow to test new regulatory best practices and make permanent changes to ensure market users benefit.”

The sandbox will be introduced, along with regulation for stablecoins – cryptocurrencies backed by traditional financial assets, under a new financial services bill before parliament this year.

Industry officials told Reuters last month that a digital currency will be needed to reap the full benefits of DLT in market infrastructure.

The finance ministry and Bank of England are jointly assessing a digital pound with a further public consultation later this year, Nurse said.

But a digital pound would not be available until the second half of the next decade even if a decision is taken to go ahead with a so-called central bank digital currency or CBDC – which other central banks are also looking at – Nurse said.

The European Union is finalising its own sandbox for markets and new rules for crypto markets.

“The EU is making a lot of progress,” said Julia Kolbe, Head of Markets Policy, Government & Regulatory Advocacy at Deutsche Bank.

(Reporting by Huw Jones. Editing by Jane Merriman)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – As the crypto winter creeps into June, the first signs of a thaw are emerging.

Some investors are now betting that bitcoin is bottoming out, judging by the money heading into listed cryptocurrency funds, which represent just a slice of the market yet are popular among institutional and retail players alike.

Overall flows into such funds turned positive last month, with a weekly average inflow of $66.5 million, a reversal from a dismal April when they saw a weekly average outflow of $49.6 million, according to data provider CryptoCompare.

“It’s largely institutional, and to a degree retail investors, recognizing that the pain is already endured, and we’re closer to the bottom than we are to the top,” said Ben McMillan, chief investment officer of Arizona-based IDX Digital Assets.

“If you’re getting into crypto at these levels, a little near-term volatility could be worth a long-term payoff,” he added. “A lot of institutional investors are starting to look at crypto as a source of longer-term growth potential.”

It’s hard to know whether the tentative flows will last, though, or if the nascent trend will be replicated across the wider market.

Many people will also think twice before piling into the market again, having been mightily clobbered as crypto was buffeted by worries over global monetary tightening and rising inflation. Bitcoin has lost roughly half its value since a November peak, it is down by a third in 2022 and has been languishing at around $30,000 for a month.

The data from funds nonetheless indicate some investors are returning to crypto, albeit into the perceived safety of exchange-traded products (ETP) with their promise of greater liquidity and security.

The assets under management of several bitcoin-futures ETFs have risen in the past week, according to Kraken Intelligence. The assets of the ProShares Bitcoin Strategy ETF’s have grown 6%, while those of the Global X Blockchain & Bitcoin Strategy ETF and VanEck Bitcoin Strategy ETF have climbed over 3%.

BY comparison, ProShares’ bitcoin fund saw outflows of over $127 million in April.

The bullish trend has extended into June, with global bitcoin ETP holdings jumping to an all-time high of 205,008 bitcoin in the first two days of the month, Norway-based crypto research firm Arcane Research found.

“This is a promising sign for what’s to come,” said Arcane analyst Vetle Lunde.

In an indication investors are being selective and cautious, only bitcoin funds have received inflows while funds focused on ethereum and other crypto still experienced outflows.

STILL IN THE RED

But let’s not forget, while the fortunes of some funds may potentially be turning up, most have posted poor returns this year as the crypto market has tanked.

U.S. digital assets funds have lost 46% on average so far in 2022, posting losses of 22% in May, according to Morningstar.

All listed digital asset investment products tracked by CryptoCompare lost money in May, with the worst performer being Grayscale’s Digital Large Cap Fund product, with a 38.5% fall.

“Bitcoin has been rangebound in concert with the broader market activity of late, investors are looking for a bottom and are uncertain where that is,” said Jack McDonald, CEO of PolySign, which specializes in digital asset custody solutions for institutional investors.

Shares of the Grayscale Bitcoin Trust one of the biggest bitcoin funds with over $19 billion in assets, are trading at a 29% discount to net asset value, around its steepest discount since inception and indicative of low demand for the product.

And despite the pick up in May, many market watchers expect inflows to crypto funds to remain subdued until macroeconomic and regulatory risks become more clear.

“We’re waiting for a high conviction bid to come back into the markets,” added McMillan at IDX. “There’s still a lot of wood to chop on the macro front.”

(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)

(Reuters) – The New York State Legislature has passed a bill that would impose a two-year moratorium on the use of fossil-fuel power plants to provide energy to miners of cryptocurrencies like Bitcoin, but the governor has yet to sign it.

Cryptocurrency mining requires a lot of electricity to power computer systems that compete to solve mathematical puzzles to validate blockchain transactions. The miner who solves the puzzle first is rewarded with cryptocurrency.

The State Assembly passed the bill in April and the Senate passed it late last week. Officials at the Governor’s office did not comment on Monday when asked whether she would sign bill.

The bill is part of the state’s effort to reduce statewide greenhouse gas emissions by 85% by 2050.

Cryptocurrency mining operations “are an expanding industry in the State of New York” that “will greatly increase the amount of energy usage” in the state, according to the bill.

To prevent cryptocurrency mining from increasing greenhouse gas emissions, the bill would impose a moratorium on air permit issuance and renewal for an electric generating facility that utilizes a carbon-based fuel and provides energy used by crytocurrency mining operations.

(Reporting by Scott DiSavino; Editing by David Gregorio)

(Reuters) – Bitcoin rose 5.2% to $31,441.76 at 2000 GMT on Monday, adding $1,552.78 to its previous close.

The world’s biggest and best-known cryptocurrency is down 34.8% from the year’s high of $48,234 on March 28.

Ether, the coin linked to the ethereum blockchain network, rose 3.17% to $1,862.14 on Monday, adding $57.16 to its previous close.

(Reporting by Sneha Bhowmik in Bengaluru; Editing by Shinjini Ganguli)