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How Binance’s plan to buy FTX unfolded in a matter of days

By Hannah Lang

(Reuters) – Crypto exchange Binance signed a nonbinding agreement on Tuesday to acquire rival crypto exchange FTX, in a dramatic move that capped off a series of back-and-forth salvos between the CEOs of both companies.

Here are the key developments in the longstanding relationship between Binance and FTX:

* December 2019: Binance invested an undisclosed amount in FTX, which was then a derivatives exchange, CoinDesk reported. Binance also purchased long positions in FTT, FTX’s native crypto token.

* July 2021: Binance announced that it was selling its stake in FTX, Fortune reported. As part of that exit, Binance received the equivalent of $2.1 billion in Binance’s stablecoin and FTT, according to Binance CEO Changpeng Zhao.

* Nov. 2: Crypto news website CoinDesk reported on a leaked balance sheet from Alameda Research, FTX CEO Sam Bankman-Fried’s crypto trading firm, which maintains close ties with FTX.

* According to CoinDesk’s report, $3.66 billion of Alameda’s $14.6 billion in assets are held in “unlocked” FTT. Reuters was unable to independently verify the accuracy of the report or the origin of the leaked balance sheet. Still, investors quickly noticed that Alameda’s finances appeared to be heavily dependent on FTT, and FTT’s value was in turn heavily dependent on purchases from FTX, the token’s largest buyer.

* Nov. 6, 9:32 a.m. ET: Alameda CEO Caroline Ellison said in a tweet that the “balance sheet info which has been circulating recently” showed only a subset of Alameda’s corporate entities. The firm has more than $10 billion in assets that are not reflected in the CoinDesk report, she said.

* Nov. 6, 10:47 a.m. ET: Concern escalated on Sunday when Zhao tweeted that Binance would liquidate its holdings of FTT “due to recent revelations that have come to light,” although he did not specify which revelations he was referring to or how much of the token Binance held.

* Nov 7: In a series of tweets on Monday, Bankman-Fried asserted that “a competitor is trying to go after us with false rumors.”

“FTX is fine. Assets are fine,” he said.

He tagged Zhao in a later tweet, saying “I’d love it, @cz_binance, if we could work together for the ecosystem.”

* Nov. 8: In the 72 hours leading up to Tuesday morning, FTX had seen around $6 billion of withdrawals, according to a message to staff sent by Bankman-Fried that was seen by Reuters. Also on Tuesday morning, Bankman-Fried wrote that withdrawals are effectively paused.

Shortly after 11 a.m. ET, Bankman-Fried tweeted that FTX had “come to an agreement on a strategic transaction with Binance for FTX.com,” and that while teams were working on clearing the backlog of withdrawal requests, all assets would be covered 1:1.

Zhao tweeted that there is “a significant liquidity crunch” at FTX and, in order to protect users, Binance signed a nonbinding letter of intent to acquire FTX.com, which does not include FTX’s U.S. entity.

(Reporting by Hannah Lang in Washington; Editing by Matthew Lewis)

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U.S. changes sanction reasons on virtual currency service Tornado Cash

WASHINGTON (Reuters) – The U.S. Treasury has broadened its justification for sanctioning virtual currency mixing service Tornado Cash on allegations it supports North Korea, despite criticism from users that the Treasury is targeting a service and not an organization.

In a press release, the Treasury said its Office of Foreign Asset Control had “delisted and simultaneously redesignated” the service, changing its justification from the allegation that it supported North Korean hackers to the allegation that it supported the North Korean regime more generally.

The move – which a Treasury representative said reflected the service’s support for the North Korean government – still leaves Americans unable to send and receive money through the service.

The ban on Tornado Cash was first imposed in August on the grounds that the Ethereum coin mixing service – which can be and has been used to obscure the proceeds of cybercrime – was being used by hackers such as North Korea’s notorious Lazarus Group to launder stolen funds.

But the move had proven controversial in part because some argued that Tornado Cash was less an organization than a set of software. In a lawsuit filed this year, six Texan users of Tornado Cash said that Treasury officials had overstepped their jurisdiction by effectively blocking access to computer code.

“Tornado Cash is not a person, entity, or organization. It is a decentralized, open source software project that restores some privacy for Ethereum users,” the lawsuit said.

Cryptocurrency trading platform Coinbase backed the lawsuit, arguing in a blog post that the government had gone too far “by sanctioning an entire technology instead of specific individuals.”

What impact the redesignation might have on the lawsuit, if any, was not immediately clear.

Treasury also announced sanctions on two employees of North Korea’s state airline Air Koryo.

(Reporting by Raphael Satter; Editing by Josie Kao)

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Crypto exchange FTX saw $6 billion in withdrawals in 72 hours – CEO message to staff

By Angus Berwick

(Reuters) – Crypto exchange FTX saw around $6 billion of withdrawals in the 72 hours before Tuesday morning, according to a message to staff sent by its CEO Sam Bankman-Fried that was seen by Reuters.

The boss of major rival Binance said on Tuesday it has signed a non-binding agreement to buy FTX’s non-U.S. unit, FTX.com, to help cover a “liquidity crunch” at FTX.

“On an average day, we have tens of millions of dollars of net in/outflows. Things were mostly average until this weekend, a few days ago,” Bankman-Fried wrote in a message to staff sent on Tuesday morning.

“In the last 72 hours, we’ve had roughly $6b of net withdrawals from FTX.”

Withdrawals at FTX.com are “effectively paused”, he wrote, adding that would be resolved in “the near future”.

FTX did not immediately respond to a request for comment.

(Reporting by Angus Berwick in New York and Tom Wilson in London; Editing by Jan Harvey)

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Binance to acquire FTX unit to help with “liquidity crunch” – CEO

(Reuters) – Binance Chief Executive Changpeng Zhao said on Tuesday the company had signed a non-binding agreement to buy rival FTX’s unit, FTX.com, to help cover a “liquidity crunch” at the cryptocurrency exchange.

(Reporting by Niket Nishant in Bengaluru; Editing by Arun Koyyur)

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U.S. lays claim to $1 billion in bitcoin stolen from Silk Road

NEW YORK (Reuters) – The United States is seeking a forfeiture order for more than $1 billion in Bitcoin that was stolen from the Silk Road online marketplace in 2012, federal prosecutors in Manhattan said on Monday.

In the second largest seizure in Department of Justice history, law enforcement seized the 50,000 Bitcoin during a November 2021 search of the Gainesville, Georgia, home of James Zhong.

Zhong on Friday pleaded guilty to wire fraud that tricked Silk Road’s processing system into releasing the funds into his accounts.

The Bitcoin was at the time worth more than $3 billion, but the value of the cryptocurrency has since lost about two-thirds of its value.

Silk Road was seized by the U.S. government in 2013, when officials described the underground website as a massive illegal drug- and money-laundering marketplace.

The website’s creator Ross Ulbricht was convicted in 2015 of seven counts of enabling illegal drug sales via bitcoin. He was sentenced to life in prison, and lost an attempted appeal in 2017.

(Reporting by Luc Cohen in New York; editing by Barbara Lewis)

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Exclusive-Crypto exchange Binance helped Iranian firms trade $8 billion despite sanctions

By Angus Berwick and Tom Wilson

LONDON (Reuters) – Crypto giant Binance has processed Iranian transactions with a value of $8 billion since 2018 despite U.S. sanctions intended to cut Iran off from the global financial system, blockchain data show.

Almost all the funds, some $7.8 billion, flowed between Binance and Iran’s largest crypto exchange, Nobitex, according to a review of data from leading U.S. blockchain researcher Chainalysis. Nobitex offers guidance on its website on how to skirt sanctions.

Three-quarters of the Iranian funds that passed through Binance were in a relatively low-profile cryptocurrency called Tron that gives users an option to conceal their identities. In a blog post last year, Nobitex encouraged clients to use Tron – a mid-tier token – to trade anonymously without “endangering assets due to sanctions.”

The scale of Binance’s Iranian crypto flows – and the fact that they are continuing – has not been previously reported.

The new findings come as the U.S. Justice Department is pursuing an investigation into possible violations of money-laundering rules by Binance, which dominates the $1 trillion crypto industry, with over 120 million users. The transactions put the company at risk of falling afoul of U.S. prohibitions on doing business with Iran, lawyers and trade-sanctions experts said.

In July, Reuters revealed that Binance continued to serve clients in Iran and that the exchange’s popularity in the Islamic republic was known inside the company. It was one of a series of Reuters investigations into Binance’s troubled history with financial regulatory compliance. The day of that article’s publication, Binance said in a blog post that it follows international sanctions rules on Iran and blocks access to the platform to anyone based there. The exchange’s billionaire founder, Changpeng Zhao, tweeted: “Binance banned Iranian users after sanctions, 7 got missed/found a workaround, they were banned later anyways.”

Binance didn’t answer detailed questions about the new transactions uncovered by Reuters. In a statement, spokesperson Patrick Hillmann said, “Binance.com is not a U.S. company, unlike other platforms that have exposure to these same U.S. sanctioned entities. However, we have taken proactive steps to limit our exposure to the Iranian marketplace,” working with industry partners and internal tools.

Binance declines to give details of the location or the entity behind its Binance.com exchange.

Nobitex didn’t respond to questions for this article. Nor did the Tron Network, based in the British Virgin Islands, and its founder Justin Sun.

In August 2021, Binance announced that customers would no longer be able to open accounts and use its services without identification. But since then, the exchange has processed almost $1.05 billion in trades directly from Nobitex and other Iranian exchanges, according to the Chainalysis data, which runs to November of this year. Since Zhao’s tweet in July, Binance has processed around $80 million in Iranian trades.

Hillmann said in the Binance statement that the company requires full “Know Your Customer” checks for all users “and residents of Iran are prohibited from opening or maintaining an account. We are continually updating processes and technology as we learn about new risks and potential exposures. As a result of these efforts, including real-time transaction monitoring in coordination with external vendors, between June of 2021 and November of 2022, Binance’s exposure to Iranian-linked entities has seen an exponential decline.”

The data reviewed by Reuters show that in total some $2.95 billion in crypto moved directly between Iranian exchanges and Binance since 2018.

A further $5 billion in crypto moved between Iranian exchanges and Binance through layers of intermediaries, the data also reveal. Regulators say such “indirect” flows should be a red flag to crypto exchanges – an indicator of possible money laundering and sanctions evasion. Crypto users seeking to cover their tracks often use sophisticated techniques to create complex chains of crypto transfers.

Nobitex advises its 4 million customers on its website to avoid “the direct transfer” of crypto between Iranian and foreign crypto platforms to “maintain security.”

Binance spokesperson Hillmann told Reuters in June, in relation to the exchange’s indirect exposure to illicit funds, that “what’s important to note is not where the funds come from – as crypto deposits cannot be blocked – but what we do after the funds are deposited.” He said Binance uses transaction monitoring and risk assessments to “ensure that any illegal funds are tracked, frozen, recovered and/or returned to their rightful owner.”

In addition to the Tron token, the remainder of the Iranian transactions were in major cryptocurrencies bitcoin, ether, tether and XRP, and a smaller token, litecoin.

Binance is the biggest market for trading Tron, according to industry data. Some other major exchanges, including U.S.-regulated Coinbase and Gemini, do not list the token.

Until recently, Tron has largely flown under the radar of cryptocurrency trackers. Market leader Chainalysis, used by U.S. government agencies, only began fully supporting the tracing of Tron this May, according to an email Chainalysis sent to a client.

The Tron dataset details over 1.15 million direct transfers between Binance and Nobitex since April 2020, when the first Tron flows were recorded. The data include wallet addresses and a unique identification number for each transaction.

Reuters obtained the Tron figures, along with further datasets covering the other crypto tokens, from three firms with access to Chainalysis’ Reactor investigation software. Reuters cross-checked each company’s figures. A fourth firm also confirmed some of the figures on direct transfers based on a separate dataset compiled using different software.

Reuters is making available here the data for direct transactions since August 20, 2021, amounting to around $1 billion.

The total volume of Iranian transactions flowing through Binance is far greater than through any other exchange, the data show. After Binance, the next most popular exchange for Nobitex users since 2018 was Seychelles-based KuCoin, which processed $820 million in direct and indirect transactions.

KuCoin and six other Iranian exchanges in the dataset– CoinNik Market, Iranicard, Rabex, Wallex, Sarmayex and Tether Land – did not respond to requests for comment.

Graphic: Binance’s Iranian connection Binance’s Iranian connection – https://graphics.reuters.com/FINTECH-CRYPTO/BINANCE-IRAN/movakmzjgva/chart.png

SANCTIONS RISK

Binance has grown explosively since its launch in 2017. The company extended its reach from crypto last month by investing $500 million in Tesla boss Elon Musk’s buyout of Twitter.

The main focus of the U.S. Justice Department investigation is whether Binance violated U.S. anti-money laundering laws. As part of the case, ongoing since 2018, the department is also investigating Binance for possible criminal sanctions violations in connection with Iran, three people with knowledge of the probe said. In late 2020, the department sought records from Binance on its compliance programme, including any documents related to the transfer of crypto funds for people or entities in countries including Iran.

The Justice Department declined to comment.

The U.S. government reimposed sanctions in 2018 on Iran that had been suspended three years earlier as part of Iran’s nuclear deal with world powers. The West and the United Nations have targeted Tehran since 1979 with sanctions over its nuclear programme, along with alleged human rights violations and support for terrorism.

Six lawyers and sanctions experts said the Iranian transactions documented by Reuters put Binance at risk of U.S. “secondary” sanctions, designed to prevent non-U.S. firms from doing business with sanctioned entities or helping Iranians evade the American trade embargo. Secondary sanctions can choke off a company’s access to the U.S. financial system.

Binance could also be exposed to direct “primary” sanctions if the company has what the U.S. Treasury Department calls a “nexus to the United States,” the lawyers and experts said. Such links can include any U.S.-incorporated entities, or transactions processed through the U.S. financial system or using the dollar, they said. Treasury didn’t respond to a request for comment.

In 2019, Britain’s Standard Chartered agreed to pay almost $930 million to U.S. authorities for criminal sanctions violations that included moving around $240 million via U.S. financial institutions for Iranian customers. Standard Chartered accepted responsibility for the violations. French bank BNP Paribas in 2014 agreed to plead guilty to violating U.S. sanctions on countries including Iran and to pay $8.9 billion. Both banks committed to improving their controls.

Binance says it does not accept customers in the United States. American clients are instead directed to a separate exchange called Binance.US, run by a U.S. company which since 2019 has been registered with the Treasury as a money-service business.

Binance CEO Zhao has described Binance.US as a “fully independent entity.” Reuters reported in October that he in fact controlled the U.S. exchange and directed its management from abroad. A Binance adviser, in a message to executives in 2018, described the U.S. operation as a “de facto subsidiary.”

In a blog post after that article, Zhao reaffirmed that Binance.US “operates independently from Binance.com.”

The vast majority of the $8 billion in Iranian crypto transactions identified by Reuters involved the main Binance exchange. But Binance.US also processed crypto transactions worth $1.5 million from Iranian exchanges Nobitex, Wallex and Tether Land, the Chainalysis data show.

U.S. entities that violate the Iran sanctions can face criminal fines of up to $1 million per violation. People involved can face jail terms of up to 20 years. This October, the Treasury fined Seattle-based crypto exchange Bittrex $24 million for violating sanctions on Iran and other countries by processing crypto transactions worth over $260 million. Bittrex said at the time it was “pleased to have fully resolved” the matter.

Contacted for this article, a Binance.US spokesperson said Reuters’ figures for its transactions with the Iranian exchanges were not accurate and that including “direct as well as indirect transactional data from Chainalysis both conflates and inflates the volume you cite.” The spokesperson didn’t provide an alternative figure.

Binance.US “adheres to all applicable U.S. rules governing digital asset exchanges” and only permits trading by entities that have completed a “rigorous screening process,” the spokesperson said.

Nobitex and the other Iranian crypto exchanges haven’t been sanctioned by the United States. Reuters did not find evidence that sanctioned Iranian individuals, companies or organisations used Binance or Binance.US.

Graphic: Binance and Nobitex – https://graphics.reuters.com/FINTECH-CRYPTO/BINANCE-IRAN/lgvdkmgzapo/chart.png

“THE BEST OPTION”

Nobitex, the largest Iranian exchange, launched in 2017. Its co-founder and CEO, Amirhosein Rad, did a doctorate in philosophy and chemical engineering at Iran’s Sharif University of Technology, his LinkedIn profile shows. Rad didn’t comment for this article.

Nobitex’s aim, stated on its LinkedIn page earlier this year, is to allow Iranians to invest in crypto despite “the shadow of sanctions.” As sanctions have hit Iran’s ability to do business with the outside world, crypto has grown popular there for cross-border commerce. The exchange said it serves as a “safe bridge between 3.5 million Iranians and the world of cryptocurrencies.”

Nobitex said in its 2021 annual report that it processes 70% of Iranian crypto transactions. The exchange has recommended that its clients use Binance in multiple posts on its website and social media channels, as recently as this year.

Nobitex users began moving bitcoin through Binance in April 2018, the Chainalysis data show.

In a trading guide on Nobitex’s website, first published in 2019 and updated this October, Nobitex advised users to open accounts to convert their Iranian rials into crypto and then make transfers to a foreign exchange such as Binance, which it called the “most reliable.” Subsequent posts in 2020 said that “for us Iranians, Binance is still the best option” and that Binance “causes fewer problems for Iranian users.”

Noting the risk posed by U.S. sanctions, Nobitex’s public terms of use recommend customers avoid the “direct transfer” of crypto from Nobitex to Binance and instead create multiple digital wallets to move funds in separate stages.

The volume of Tron transactions between Nobitex and Binance surged from August 2020, the Chainalysis data showed.

That same month, Tron’s founder, Sun, said on Twitter the digital coin had enabled a new feature that allowed traders to mask their identities. Sun wrote that the feature, known as zk-SNARK, would “protect user data with the strongest privacy protection in the industry.”

An article published in a Justice Department journal last year said the feature allows the development of “anonymity enhanced cryptocurrencies” that attract criminals “like sharks to chum” as they “seek out privacy to conceal their conduct.”

Nobitex recommended that users open digital wallets with Binance to buy Tron due to its “high security.” A Nobitex blog post in July 2021 said zk-SNARK was key to keeping those sending and receiving crypto “hidden.”

Nobitex customers remained able to use Binance to trade Tron and other crypto tokens after Binance tightened its checks on clients on August 20, 2021, according to the data. Binance processed direct transactions from Nobitex totalling over $1 billion between that date and November of this year, far outstripping any other international exchange, it showed. As recently as this October, $20 million in Tron flowed directly between Binance and Nobitex, the data show.

Iranians sanctioned by the U.S. Treasury for cyberattacks and ransomware activity have used Nobitex, a Chainalysis report in September said. Between 2015 and 2022, the digital wallets of sanctioned Iranians received over $230,000 in bitcoin ransomware funds, Chainalysis said, with most of the crypto sent to Nobitex.

The Treasury said the same month that the sanctioned Iranians were all affiliated with the Islamic Revolutionary Guard Corps, a powerful faction that controls a business empire as well as elite armed and intelligence forces in Iran. Iranian authorities did not respond to a request for comment. The Iranian Foreign Ministry has called U.S. sanctions “unilateral, illegal and cruel.”

((reporting by Angus Berwick and Tom Wilson; additional reporting by Michelle Nichols at the United Nations and Bozorgmehr Sharafedin in London; editing by Janet McBride))

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Santander to block UK transfers to crypto exchanges in 2023

By Elizabeth Howcroft

LONDON (Reuters) – Santander will block UK customers from sending real-time payments to cryptocurrency exchanges next year as part of measures to protect customers from scams, the bank said in an emailed statement on Friday.

At an unspecified point during 2023, the bank will introduce a block on all real-time payments to cryptocurrency exchanges made via telephone banking and in-branch payments, as well as online and mobile banking.

From Nov. 15 this year, the bank will join other UK retail banks in limiting customer transfers to cryptocurrency exchanges. Santander customers will face limits of 1,000 pounds ($1,123) per transaction and 3,000 pounds in total in any rolling 30-day period, for transfers to crypto exchanges via mobile and online banking.

Customers will still be able to receive payouts from crypto exchanges into their accounts.

Regulators around the world have warned of the risks of scams and fraud in the largely unregulated world of crypto trading.

Santander has seen a “large increase” in UK customers becoming victims of cryptocurrency fraud in recent months, a notice on its website said.

“Keeping our customers safe from cryptocurrency scams is a top priority,” a Santander spokesperson said.

“We intend to further protect customers by blocking all faster payments we identify to cryptocurrency exchanges from Santander accounts – this will be implemented during the course of 2023.”

Faster Payments is the infrastructure which facilitates real-time bank transfers for most UK bank accounts. Pay UK, which owns Faster Payments, did not immediately respond to a request for comment.

Santander said it would continue to block all transfers to the crypto exchange Binance, a policy introduced in July 2021 following a warning from Britain’s financial regulator about the exchange.

Binance did not immediately respond to a request for comment.

Last year, Britain’s Natwest Group capped the daily amount customers can send to cryptocurrency exchanges.

($1 = 0.8903 pounds)

(Reporting by Elizabeth Howcroft; Editing by Kirsten Donovan)

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PayPal shares tumble after forecast cut, spending slowdown warning

By Manya Saini and Niket Nishant

(Reuters) – PayPal Holdings shares dropped nearly 6% in morning trade on Friday after the digital payments heavyweight lowered its annual revenue forecast, warning of a bleak holiday quarter as consumers cut back on discretionary spends.

Decades-high inflation has hit the purchasing power of consumers who also have to contend with the threat of a looming recession.

“Consumers have been trading down from high-end, expensive to more affordable brands while also spending more on non-discretionary products,” Wedbush analyst Moshe Katri told Reuters.

PayPal said lower- and middle-income households had started reducing non-essential spending, as they grapple with higher prices of food, energy and gas.

The company’s cautious comments point to its higher exposure and sensitivity to discretionary spending, Katri said.

“Given a challenging macro environment, slowing e-commerce trends and an unpredictable holiday shopping season, we are being appropriately prudent in our Q4 revenue guide,” Chief Executive Daniel Schulman said in a call with analysts.

The San Jose, California-based company on Thursday cut its 2022 adjusted revenue growth outlook to 10% from 11% forecast earlier, while also forecasting bleak e-commerce growth in the fourth quarter.

That was in line with commentary from the National Retail Federation (NRF), which earlier this week forecast holiday sales, including e-commerce, to grow at a slower pace this year even as retailers offer steep discounts to attract shoppers and clear out excess inventory.

Graphic: PayPal logs revenue growth but pace moderates – https://graphics.reuters.com/PAYPAL-STOCKS/zdpxdyeojpx/chart.png

“E-commerce remains in precarious territory with trends deteriorating through the quarter and an uncertain backdrop, increasing the possibility that not much improvement may materialize next year,” KBW analysts wrote in a note and slashed the price target on the stock to $95 from $115.

Graphic: U.S. holiday sales for 2022 expected to slow – https://graphics.reuters.com/PAYPAL-STOCKS/egvbyngykpq/chart.png

At least 11 other brokerages including J.P. Morgan, Wedbush and Jefferies lowered their price targets after results.

(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Vinay Dwivedi)

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NY Fed official: Digital dollar could speed foreign exchange settlement

By Michael S. Derby

(Reuters) – A top Federal Reserve Bank of New York official said on Friday that the bank sees promise in using a central bank digital dollar to speed up settlement time in foreign exchange markets.

Michelle Neal, who is head of the bank’s Markets Group, did not say anything involving a central bank digital currency, or CBDC, was imminent. But she explained that research efforts at the bank identified how this type of money could benefit a key part of the financial system.

Foreign exchange spot transactions “are critical in the context of cross-border payments, and serve as a building block for longer, more complex transactions,” Neal said in the text of remarks to be given before a conference in Singapore. She noted that settlement of these trades take about two days, “which leaves some room for improvement.”

According to the research effort, a Fed digital dollar, used in a wholesale capacity, and the technology to record transactions “results in instant and atomic settlement.”

Neal said the research work “indicated that settlement could occur in fewer than 10 seconds on average and that horizontal scaling was possible.”

The Fed has been exploring for some time how it can launch a fully digital dollar that some have referred to as Fedcoin. Fed leaders have said that any launch of such an asset would need the support of elected leaders.

Some central bankers have questioned whether a CBDC for the U.S. is even needed at all.

(Reporting by Michael S. Derby; Editing by Kim Coghill)

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Coinbase reports third-quarter loss as volumes drop

(Reuters) – U.S. cryptocurrency exchange Coinbase Global Inc on Thursday reported a third-quarter loss as high inflation, rising interest rates and geopolitical tensions weakened demand for risky assets, sapping trading volumes for digital currencies like bitcoin.

Coinbase said it had a net loss of $544.6 million for the three months ended Sept. 30, or $2.43 per diluted share, compared with a profit of $406.1 million, or $1.62 per diluted share, a year earlier.

(Reporting by John McCrank in New York; editing by Jonathan Oatis)

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Dollar regains strength as Powell dashes hope of a Fed pause

By Herbert Lash and Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar regained some strength on Wednesday after Federal Reserve Chair Jerome Powell said it was premature to discuss a pause in its hiking of interest rates to battle rising consumer prices, as there is “no sense that inflation is coming down.”

The Fed, as markets had expected, raised its key lending rate by 75 basis points for the fourth straight time after a two-day meeting of policy-makers.

Markets initially read the Fed’s statement at the end of the meeting as dovish and a signal that future rate increases to tame high inflation could be made in smaller increments.

GRAPHIC: Fed delivers another big hike https://graphics.reuters.com/USA-FED/dwpkdgydxvm/chart.png

Yet Powell made clear at the press conference after the statement that a mistake in not tightening monetary policy enough would risk dealing with entrenched inflation.

“If you undertighten, it is a year or two down the road you realize you haven’t got inflation under control,” he said.

A change in pace in rate hikes could come at the Fed’s next meeting in December, Powell said. But he cautioned extensive uncertainty remains about how high rates need to go and that they could end up higher than policymakers previously thought.

“There are still a lot of missing pieces in terms of Fed policy and where the dollar goes from here because we’re going to have a pair of jobs reports and inflation surveys before we next hear from the Fed,” said Joe Manimbo, senior market analyst at Convera in Washington.

Equities and other risk assets at first rose after the Fed statement was released, but stocks on Wall Street closed sharply lower after Powell spoke, as hopes the Fed would ease its hiking campaign quickly dissipated.

“We have not seen a pivot, a pivot is looking further over the horizon,” Manimbo said.

“The near-term outlook calls for the dollar staying strong and resilient because even if the Fed is nearing the finish line for rate hikes, it’s not expected to pivot to rate cuts for a very long time yet,” he said.

The euro initially rose against the dollar but later turned lower, down 0.5% at $0.9825. The Japanese yen strengthened 0.31% versus the greenback at 147.79 per dollar.0.3

The Fed’s battle against inflation running at four-decade highs has unleashed the most aggressive hiking campaign in more than a decade.

Future markets were divided on how high the Fed will increase rates at its next meeting on Dec. 13-14. The CME Group’s FedWatch tool showed a 56.8% probability of a 50 basis point increase, and a 43.2% chance of a 75 bps increase.

Growing expectations that the Fed would dial down the aggressiveness of its rate hikes have weighed on the dollar in recent weeks.

GRAPHIC: Dollar rally https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdgqaepm/Pasted%20image%201667323078707.png

Sterling fell, last down 0.82% on the day at $1.1389. The Bank of England on Thursday also is expected to announce a 75-basis-point rate increase.

The yen has slipped about 22% against the dollar this year, leading traders to be on alert for a possible intervention.

Japanese authorities are widely considered to have intervened in FX markets several times since September to pull the yen back from 32-year lows.

Japan’s currency interventions have been stealth operations in order to maximize the effects of its forays into the market, Finance Minister Shunichi Suzuki said on Tuesday, after the government spent a record $43 billion supporting the yen last month.

(Reporting by Herbert Lash, additional reporting by Saqib Iqbal Ahmed in New York and Joice Alves in London; Editing by Mark Potter, Alex Richardson, Leslie Adler, William Maclean)

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France, Singapore, Switzerland jointly test central bank digital currencies

LONDON (Reuters) – France, Singapore and Switzerland have launched a joint trial of their experimental central bank digital currencies (CBDCs) in the first cross-regional trial of its kind.

The project, which will run for around six months, will use what are known as automated market makers (AMM) for the cross-border exchange of “hypothetical” Swiss franc, euro and Singapore dollar CBDCs.

AMM protocols are designed to combine pooled liquidity with algorithms to determine the prices between two or more digitally tokenised assets such as currencies.

They are seen as having the potential to be the backbone of the financial market infrastructure needed for digital currencies to be traded between countries.

Cecilia Skingsley, at the Bank for International Settlements central bank umbrella group overseeing the project, which aims to deliver proof of concept by the middle of next year, said it marked the first collaboration across regions and that she expected more to follow.

Around 90% of the world’s central banks are either using, trialling or looking into CBDCs.

Most don’t want to be left behind by the advances of bitcoin and other cryptocurrencies, but are grappling with the complexities they bring, such wariness about the degree of control they could hand to governments.

(Reporting by Marc Jones; editing by Barbara Lewis)

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Binance CEO sees no threat to crypto from central banks’ digital currencies

By Sergio Goncalves and Catarina Demony

LISBON (Reuters) – Plans by central banks to launch digital currencies are not a threat to other cryptocurrencies as they would validate blockchain technology and build trust among sceptics, the CEO of the world’s largest crypto exchange, Binance, said on Wednesday.

Most major central banks, including the U.S. Federal Reserve, the Bank of England and the European Central Bank, are studying the potential launch of a digital version of their currencies, dubbed CBDC.

“Is it (CBDC) a threat to Binance or other crypto-currencies? I don’t think so. I very much think that the more we have, the better,” Changpeng Zhao told a news conference during Europe’s largest tech conference, the Web Summit, in Lisbon.

He said the blockchain technology behind cryptocurrencies should be available for CBDC and adopted by governments.

“It will validate the blockchain concept, so that anybody who still has concerns about the technology, will say: ‘OK, our government is using the technology now’,” Zhao said.

“So, all those things are good,” he said, adding that CBDC would still be different from native crypto as “cryptocurrency is a deflationary asset”.

Still, he said, recently cryptocurrency has been highly correlated with the stock market, with both assets correcting sharply as central banks hike interest rates to control record inflation.

“In theory they should be inversely correlated, but today they go the same way, mainly because most of the people who trade on crypto (assets) also trade stocks,” he said.

“When the Fed raises interest rates, and the stock market crashes, they want more cash, so they sell crypto. This is because the user base is still very highly correlated,” he said.

(Reporting by Sergio Goncalves and Catarina Demony; editing by Andrei Khalip and Elaine Hardcastle)

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Robinhood, Coinbase find sanctuary in interest income amid market rout

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)

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Binance CEO says support for free speech is reason he invested in Twitter

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)

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U.S. dollar falls as investors see slower pace of Fed hikes from December

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)

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Cryptoverse: Bitcoin wants to break its bond with stocks

(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)

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Grocery retailer Pick n Pay to start accepting cryptocurrency payments

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)

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Ransomware hackers hit Australian defence communications platform

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)

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Apollo holds crypto for clients as it expands in digital assets

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)