Categories
News

SEC’s Gensler says CFTC authority over stablecoins should be bolstered

WASHINGTON (Reuters) – The U.S. Congress should give the Commodity Futures Trading Commission more powers to police cryptocurrency stablecoins to reduce risks to the financial system, Securities and Exchange Commission Chair Gary Gensler said on Friday.

Stablecoins are usually pegged to the U.S. dollar and are primarily used to facilitate trading in other digital assets.

With around $150 billion in market capitalization, stablecoins have many similarities to money market funds, and need to be regulated accordingly, Gensler said at a conference held by Georgetown University’s Psaros Center for Financial Markets and Policy in Washington.

While the CFTC has anti-fraud and anti-manipulation regulatory authorities over firms that issue dollar-backed stablecoins, they do not have “actual plenary authority to write rules around the exchanges,” Gensler said.

“I think the CFTC could have greater authorities. They currently do not have direct regulatory authorities over the underlying non-security tokens,” he said.

The vast majority of cryptocurrencies, including so-called algorithmic stablecoins, are securities, and fall under the SEC’s authority, while a handful are not, Gensler said.

In March, TerraUSD, an algorithm-based, rather than asset-pegged, stablecoin, blew up spectacularly, pushing another major stablecoin, Tether, below its dollar peg and sending ripples through the global cryptocurrency market.

The Financial Stability Oversight Council, a U.S. regulatory panel comprising top financial regulators, earlier this month recommended that Congress pass legislation addressing the risks digital assets pose to the financial system, including bills to bolster oversight of crypto spot markets and stablecoins.

It remains unclear when Congress might pass crypto-related legislation, although several bills have been introduced to address stablecoins and digital commodities regulation.

(Reporting by John McCrank; Editing by Paul Simao)

Categories
News

OCC’s Hsu: Bank-fintech partnerships ‘here to stay,’ while crypto hogging ‘brain space’

By Pete Schroeder and Hannah Lang

WASHINGTON (Reuters) – A leading U.S. bank regulator said his caution over banks partnering with fintechs is not meant to stifle those arrangements, but rather reflects his concern that firms must adequately gauge their risks.

Michael Hsu, the acting Comptroller of the Currency, also told Reuters in an interview that policymakers may be devoting too much time and energy to thinking about cryptocurrency, at the expense of figuring out the best way to police other types of financial technology.

“Look, bank-fintech partnerships, they’re here to stay. I’m not trying to do away with them,” Hsu said on Wednesday. “This is the future, so let’s do the future right.”

BANKING ON FINTECH

In remarks last month that raised eyebrows across the financial services industry, Hsu said that the Office of the Comptroller of the Currency had observed partnerships between banks and fintechs growing at “exponential rates,” and which were increasingly becoming more complex.

“My strong sense is that this process, if left to its own devices, is likely to accelerate and expand until there is a severe problem or even a crisis,” Hsu said at the time.

House Republicans criticized Hsu’s comments in a letter sent to the OCC head on Tuesday, contending that the technological innovation enabled by bank-fintech partnerships has allowed banks to reach underserved customers.

Hsu explained on Wednesday that his concern over banks and fintechs joining forces is the possibility that responsibilities for monitoring risk can become muddied when multiple firms, sometimes with different incentives, share responsibilities.

“When everything is done within a bank, we know exactly who is accountable when things break,” he said. “When you start chopping these things up … and the business models are different, that’s when risk can get lost.”

Hsu said the proper regulatory approach to fintech partnerships remains unclear, as agencies work to get a handle on the various issues at play and then determine what authorities to use.

OVERWEIGHT CRYPTO

On cryptocurrency, Hsu said he was actually worried policymakers in Congress and regulators are overextending themselves to the detriment of other areas.

“We’re spending too much time on crypto,” he said. “It’s interesting, it has thorny issues… but relative to other technology and banking issues, I think we’re now kind of overweight crypto.”

The rapid rise of crypto and related products like stablecoins has occupied the attention of numerous government agencies, including the OCC, the Securities and Exchange Commission and the Treasury Department, and has even been the focus of an executive order from President Joe Biden.

In Congress, lawmakers are juggling multiple measures to establish some sort of regulatory framework for cryptocurrency.

But Hsu cautioned that with so many policymakers focused on this one facet of emerging financial technology issues, other matters more relevant for banks may be neglected.

“Crypto is just occupying a lot of brain space for an awful lot of people, both on [Capitol] Hill and the regulatory community,” he said. “The persistence of the occupation of brain space, it’s starting to worry me now that we’re not spending that time and attention on some other things.”

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

Categories
News

Tether says it has completely eliminated commercial paper from reserves

(Reuters) – Tether, the world’s largest stablecoin by market value, says it has has completely eliminated commercial paper from its reserves and has replaced those investments with U.S. Treasury bills.

Tether eliminated $30 billion of commercial paper without any losses, according to a company blog post.

In August, Tether reported that it had reserves worth $66.4 billion as of the end of June, down from $82.4 billion at the end of March.

Tether has said that it would aim to release monthly reports on the status of its reserves by the end of the year.

(Reporting by Hannah Lang in Washington)

Categories
News

China’s digital currency passes 100 billion yuan in spending – PBOC

SHANGHAI (Reuters) – Transactions using China’s digital yuan surpassed 100 billion yuan ($13.9 billion) as of Aug. 31, China’s central bank said on Wednesday, as the country continues its roll-out of a central bank digital currency.

The spending involved 360 million transactions in pilot areas in 15 provinces and municipalities, the People’s Bank of China (PBOC) said, adding that more than 5.6 million merchants could now accept payments with the digital currency.

China is at the fore of a global race to develop central bank digital currencies, although adoption is still in the early stages. Transactions using e-CNY rose from 87.6 billion yuan by the end of 2021, the PBOC said.

Pilot regions offered nearly 30 rounds of e-CNY subsidies in 2022, including $4.5 million in free digital cash in Shanghai in May, to stimulate consumption, fight the pandemic and promote low-carbon transport, the PBOC said.

The central bank also took part in the cross-border multiple Central Bank Digital Currency (mCBDC) Bridge trial developed by the Bank of International Settlements and conducted tests to connect with Hong Kong’s local digital payment system, it said.

The e-CNY has so far been used mainly for domestic retail payments, but will be promoted for use in corporate and personal business, as well as in finance, taxation, and government affairs, the bank said.

It also vowed to connect the e-CNY system with the traditional digital payment system, dominated by Alibaba Group’s Alipay and Tencent Holding’s WeChat Pay, to make it more convenient for consumers and merchants.

(Reporting by Jason Xue and Brenda Goh; editing by Richard Pullin)

Categories
News

U.S. dollar soars to new 24-year high versus yen; sterling rebounds

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The dollar climbed to a fresh 24-year peak versus the yen on Wednesday, holding above levels that prompted intervention by Japanese officials last month, while sterling rose after a sharp fall in the previous session as investors pondered the Bank of England’s next steps.

The greenback pared gains after minutes from the last Federal Reserve meeting showed some dovish undertones. Several participants noted the importance of calibrating the pace of further tightening to mitigate the risk on the U.S. economy, the minutes said. The Fed though remained committed to raising interest rates in order to bring down inflation.

“Maybe there is a bit of hope within the minutes that basically officials are weighing the risk of going too hard or going too high on hiking,” said Juan Perez, director of trading at Monex USA in Washington.

“That’s not the number one concern right now. Number one concern continues to be inflation.”

The pound, on the other hand, rose following a drop to a two-week low versus the dollar and euro late on Tuesday, after the Financial Times reported that the BoE has signaled privately to lenders it is prepared to prolong its bond purchases.

Data showing U.S. producer prices increased more than expected in September, further boosted the dollar against the yen. The producer price index for final demand rebounded 0.4%, above the forecast for a 0.2% rise. In the 12 months through September, the PPI increased 8.5% after advancing 8.7% in August.

In the wake of the U.S. PPI data, the greenback rose as high as 146.98 yen, its strongest since August 1998. It was last up 0.7% at 146.85, marking a fifth straight session of gains.

Japan staged its first yen-buying intervention since 1998 on Sept. 22, when the dollar was at 145.90 yen.

“This just reaffirmed that the BoJ (Bank of Japan) did not defend a particular level, but was addressing volatility,” said Marc Chandler, chief market strategist, at Bannockburn Global Forex in New York, adding that the three-month yen volatility was lower on Wednesday than when Japan intervened last month.

Three-month implied volatility on the yen was 11.9% , compared with a high of 13.26% on Sept. 22 when Japan stepped in to prop up the Japanese unit.

Officials have reiterated they stand ready to take appropriate steps to counter excessive currency moves, though whether they wish to defend particular levels is less clear.

Yields outside Japan have been pushed higher by spillover from the turmoil in Britain’s bond market.

Long-dated gilt yields jumped again, with the 20-year hitting a 14-year high a day after BoE Governor Andrew Bailey reiterated late Tuesday that the central bank would end its emergency bond-buying programme on Friday, telling pension fund managers to finish rebalancing their positions by then.[GB/]

Sterling fell to a two week low of $1.0925 after Bailey’s remarks, which were reiterated by a central bank spokesperson on Wednesday. The currency later rebounded to stand 1.2% higher at $1.1083, after the FT report which said the BoE had suggested to private lenders that it was open to extending its bond purchases.

Against the euro, the pound gained. In afternoon trading, the euro was down 1.2% at 87.40 pence.

Elsewhere, the euro remained under pressure, down 0.1% at $0.9696.

The risk-sensitive Australian dollar sank to a 2 1/2-year low of US$0.6236, and was last flat at US$0.6274.

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

Currency bid prices at 3:12PM (1912 GMT)

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

Previous Change

Session

Dollar index 113.2800 113.3400 -0.04% 18.416% +113.5900 +113.0200

Euro/Dollar $0.9699 $0.9706 -0.07% -14.68% +$0.9735 +$0.9668

Dollar/Yen 146.8800 145.8650 +0.73% +27.63% +146.9550 +145.6000

Euro/Yen 142.47 141.58 +0.63% +9.32% +142.6300 +141.4500

Dollar/Swiss 0.9978 0.9959 +0.23% +9.43% +1.0004 +0.9932

Sterling/Dollar $1.1092 $1.0961 +1.22% -17.96% +$1.1132 +$1.0925

Dollar/Canadian 1.3812 1.3795 +0.13% +9.25% +1.3830 +1.3762

Aussie/Dollar $0.6274 $0.6273 +0.03% -13.67% +$0.6298 +$0.6236

Euro/Swiss 0.9678 0.9677 +0.01% -6.66% +0.9690 +0.9644

Euro/Sterling 0.8744 0.8847 -1.16% +4.10% +0.8867 +0.8729

NZ $0.5604 $0.5582 +0.42% -18.10% +$0.5632 +$0.5561

Dollar/Dollar

Dollar/Norway 10.7725 10.7445 +0.14% +22.14% +10.7980 +10.6415

Euro/Norway 10.4468 10.4347 +0.12% +4.33% +10.4696 +10.3665

Dollar/Sweden 11.3402 11.3577 -0.19% +25.75% +11.3961 +11.3051

Euro/Sweden 10.9994 11.0203 -0.19% +7.43% +11.0385 +10.9822

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Amruta Khandekar in Bengalaru, Alun John in London, Kevin Buckland in Tokyo, Georgina Lee in Hong Kong, and Vidya Ranganathan in Singapore; Editing by Paul Simao and Nick Zieminski)

Categories
News

Banks face heightened risks from crypto firm deposits –Fed’s Barr

(Reuters) – Banks that accept deposits from cryptocurrency companies should be aware of increased liquidity risks, particularly if firms are highly interconnected with other digital asset businesses, said Michael Barr, the Federal Reserve’s vice chair of supervision, on Wednesday.

Barr said the Fed is working with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp to warn that banks could experience deposit fluctuations linked to broader crypto market developments.

“The recent volatility in crypto markets has demonstrated the extent of centralization and interconnectedness among crypto-asset companies, which contributes to amplified stress,” he said.

“While banks were not directly exposed to losses from these events, these episodes have highlighted potential risks for banking organizations.”

Read more:

EXPLAINER-EU agrees rulebook for ‘Wild West’ crypto markets

(Reporting by Hannah Lang in Washington; Editing by Lisa Shumaker)

Categories
News

Crypto.com chooses Paris for European headquarters

(Reuters) – Cryptocurrency platform Crypto.com will set up its European regional headquarters in Paris, the Singapore-based company said on Wednesday.

The firm will invest 150 million euros ($145.7 million) in France to support the establishment of its market operations, it said in a statement, adding it will hire local talent in the fields of compliance, business development and product.

The cryptocurrency exchange platform, which has more than 50 million users worldwide, received regulatory approval by the French market authority last month, allowing it to offer products and services to customers in France.

Crypto.com also got regulatory approval in the United Kingdom and Italy earlier this year.

In May, cryptocurrency exchange Binance said it had registered with France’s market regulator, with Binance France’s general manager David Prinçay adding it was now seeking a formal licence to open a regional headquarters in France.

($1 = 1.0299 euros)

(Reporting by Elena Vardon, Editing by Louise Heavens)

Categories
News

Crypto firm 21Shares lists bitcoin ETP on Nasdaq Dubai

By Yousef Saba

DUBAI (Reuters) – Crypto investment products firm 21.co said on Wednesday its subsidiary 21Shares AG has listed a bitcoin exchange-traded product on Nasdaq Dubai, making it the Middle East’s first physically-backed bitcoin ETP.

The 21Shares Bitcoin ETP trades, under the ticker ABTC, in the same way as the 21Shares Bitcoin ETP in Europe, 21.co said in a statement.

Dubai has ambitions to become a global cryptocurrency hub and has attracted big industry players to set up shop like Binance, which went on a UAE hiring spree this year and is helping to shape the Middle East commercial hub’s virtual assets regulations.

Following the Dubai listing, 21Shares has 46 listed products in seven countries, 21.co added.

Swiss-based 21.co last month raised $25 million in a funding round that valued it at $2 billion, which it said made it “Switzerland’s largest crypto unicorn”.

The crypto market has suffered a rout that has forced some of its biggest players to lay off thousands of employees to cut costs.

But Sherif El-Haddad, appointed 21Shares head of Middle East in August, was upbeat, saying cryptocurrencies were “fast becoming the asset of the future for investors and wealth managers around the world”.

The Middle East and North Africa is the world’s fastest-growing cryptocurrency region, where the volume of crypto received jumped 48% in the year to June, blockchain researcher Chainalysis said in a report last week.

Hany Rashwan, CEO and co-founder of 21Shares, said in the statement the company “will continue to support the Middle East’s ambitions to become a global crypto hub”.

(Reporting by Yousef Saba; editing by Barbara Lewis)

Categories
News

Grayscale says U.S. SEC set bar too high for Bitcoin funds

By Jody Godoy

(Reuters) – Grayscale Investments said in a court filing Tuesday that the U.S. Securities and Exchange Commission set the bar too high for spot bitcoin exchange-traded funds, which have so far not been approved for listing on U.S. exchanges.

Grayscale sued the regulator in June, after the SEC denied its bid to convert its Grayscale Bitcoin Trust, the world’s largest bitcoin fund, into an ETF for listing on Intercontinental Exchange Inc’s NYSE Arca exchange.

The regulator had said that the proposal did not meet standards designed to prevent fraudulent practices and protect investors.

The SEC has rejected over a dozen spot bitcoin ETF applications, and approved several bitcoin futures-based ETFs. The rejections have focused on applicants’ lack of surveillance-sharing agreements with regulated markets relating to the spot funds’ underlying assets. Such agreements entail sharing trade data and other information to allow the exchange to detect manipulation.

Grayscale argued in the court filing that the SEC had not applied its standards evenly to spot bitcoin ETFs and bitcoin futures-based ETFs, even though both types of funds are both fundamentally tied to the price of bitcoin.

“There is only one reasonable conclusion to draw: the Commission is treating spot bitcoin ETPs with special harshness based on its opinion about bitcoin’s merits as compared to other types of investments,” the company said in the filing.

There is no spot bitcoin market that the SEC considers to be regulated, Grayscale said. But the NYSE Arca had entered a surveillance-sharing agreement with the Chicago Mercantile Exchange, where bitcoin futures trade, it said.

Since the SEC deemed other agreements with CME sufficient to prevent fraud in bitcoin futures-based ETFs, the same should apply to bitcoin spot ETFs since both types of fund rely on the price of bitcoin, Grayscale said.

Grayscale also argued the SEC acted outside its authority by not accepting other means of mitigating fraud risk.

(Reporting by Jody Godoy in New York; Editing by David Gregorio)

Categories
News

Britain cannot ‘sit out’ digital pound indefinitely, says City minister

By Huw Jones

LONDON (Reuters) – Britain’s financial services minister said on Tuesday that a lengthy delay in issuing a digital pound would create problems for finance and the economy.

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

“There are some very broad geopolitical concerns if the UK sits out indefinitely the ability to issue its own digital currency. Others will,” newly appointed City minister Andrew Griffith told parliament’s treasury select committee.

The Bank of International Settlements, a forum for central banks, said in June that central bank digital currencies are needed to modernise finance and ensure Big Tech does not take control of money.

Around 90% of the world’s central banks are now using, trialling or looking into digital currencies, worried about being left behind by private-sector bitcoin and other cryptocurrencies used for making payments.

“If the counterfactual is that either private enterprises or states come forward with their equivalent currencies, and the UK, either the government or the Bank of England, have no play in that domain at all, then you could end up with some quite difficult consequences in terms of macroeconomic policy, but also the ability to regulate individual transactions,” Griffith said.

Rishi Sunak, who was finance minister at the time, last year asked the BoE to look at the case for a new “Britcoin” or digital pound.

(Reporting by Huw Jones; Editing by Cynthia Osterman)

Categories
News

Crypto exchange Bittrex fined $53 million by U.S. Treasury Dept

(Reuters) – The U.S. Treasury Department said on Tuesday that cryptocurrency exchange Bittrex Inc was fined about $53 million to settle “apparent violations” of U.S. sanctions on certain countries and anti-money laundering laws.

The fines of more than $24 million and $29 million were announced by the Office of Foreign Assets Control (OFAC) and the Financial Crimes Enforcement Network (FinCEN), respectively.

The OFAC alleged that Bittrex failed to prevent people located in the sanctioned jurisdictions of Ukraine’s Crimea region, Cuba, Iran, Sudan, and Syria from using its platform between March 2014 and December 2017.

The FinCEN said its investigation found that from February 2014 through December 2018, Bittrex failed to maintain an effective anti-money laundering program.

“Bittrex’s AML program failed to appropriately address the risks associated with the products and services it offered, including anonymity-enhanced cryptocurrencies,” it added.

Cryptocurrencies and other digital assets have soared in popularity over recent years and are getting increasingly intertwined with the regulated financial system, saddling policymakers with monitoring risks in a largely unregulated sector.

Bittrex did not immediately respond to a Reuters request for comment on the fines.

(Reporting by Manya Saini in Bengaluru; Editing by Anil D’Silva)

Categories
News

BNY Mellon to offer crypto services

(Reuters) – Bank of New York Mellon Corp is adding cryptocurrencies to assets that it holds as a custody manager, as it looks to attract a diverse set of investors and traders by tapping into the popularity of bitcoins and ethers.

Trading in cryptocurrencies has skyrocketed worldwide, drawing many traditional institutions to an asset that was previously shunned by Wall Street due to its wild swings and increased scrutiny.

Nasdaq Inc and BlackRock Inc have already rolled out custody platforms for their clients, as they look to gain foothold in a market dominated by traditional players like Coinbase Inc and Binance.

BNY formed an enterprise Digital Assets Unit in 2021 to develop solutions for digital asset technology, and tapped tapped digital asset technology companies Fireblocks and Chainalysis, it said in a statement on Tuesday.

The 238-year-old bank won the approval of New York’s financial regulator earlier this fall and is the first of the eight systemically important U.S. banks to store digital currencies and allow customers to use one custody platform for both its traditional and crypto holdings, the Wall Street Journal reported earlier on Tuesday.

(Reporting by Mehnaz Yasmin and Manya Saini in Bengaluru; Editing by Anil D’Silva)

Categories
News

Cryptoverse: Hack jitters push bitcoin investors back to the future

By Hannah Lang

(Reuters) – It’s not easy being a crypto investor.

They’ve seen the value of their holdings drop like a brick this year, and now many are stewing over the safety of their crypto cash after a series of heists that’s seen around $2 billion spirited away by hackers.

Enter the ghost of technology’s past.

Hardware wallets – old-school physical devices similar to USB drives that stash crypto holdings offline – might seem a throwback to a more innocent digital age, but they’re proving to be a popular response to a cutting-edge conundrum.

The global hardware wallet market, valued at $245 million in 2021, is expected to swell to over $1.7 billion by 2030, according to market research firm Straits Research.

It’s being fueled by a steady stream of cyber robberies that, according to researcher Chainalysis, has seen thieves steal $1.9 billion in crypto in the first seven months of the year, an increase of 60% from a year earlier. Much of this was stolen directly from blockchains or “hot” online wallets.

It’s not only hacks making investors edgy. Others lost access to their crypto when major lenders such as Celsius Network and Voyager Digital collapsed in July.

“We have definitely seen increased interest in hardware wallets, and in general self-custody, post-several issues,” said Adam Lowe, chief product and innovation officer at U.S.-based CompoSecure, one of several hardware wallet makers seeking to capitalize on a rush for safety.

“The day of or day after those events, we would see very significant (sales) lifts.”

There’s no such thing as a free crypto lunch, though: While hot wallets are convenient and allow for quick trading, hardware wallets typically don’t appeal to first-time investors, who often buy cryptocurrencies on big exchanges and might choose to keep their assets on those platforms, where they can simply log in with a username and password.

BLOWING HOT AND COLD

Although hot wallets are usually free and offer quick access to crypto, they can be vulnerable to hacks. In August, nearly 8,000 crypto wallets on the Solana blockchain were hit by hackers who made off with more than $5 million in crypto.

“Users are strongly encouraged to use hardware wallets,” Solana said at the time.

France’s Ledger, another hardware wallet maker, said it saw a spike in sales after the Solana wallets heist.

“We do see significant uptick in user-based interest in some of these situations of stress in the markets,” aid Alex Zinder, global head of Ledger Enterprise.

Most hardware wallets connect to a mobile app, where the owners of the digital keys needed to access their crypto keys can control their funds. Some use “Secure Enclave” technology, a security feature used to store sensitive data.

Josef Tětek, bitcoin analyst at Czech-based hardware wallet company Trezor, says he expects better phone interaction with cold storage wallets in the future, to serve investors in places like South America and Africa, where it’s more common for users to have mobile phones than personal computers.

Yet companies in this ballooning market might be advised to make hay while the sun shines.

One long-term question is whether phone makers will want to get in on the action, said Stan Miroshnik, co-founder and partner at 10T Holdings, which led Ledger’s $380 million Series C funding round last year.

“One question, I think, for the industry and where it’s going and in part what will drive consumer adoption, is what if every iPhone has a built-in Secure Enclave hardware wallet?”

(Reporting by Hannah Lang in Washington; Editing by Tom Wilson and Pravin Char)

Categories
News

Regulators propose first global rules before ‘crypto winter’ thaw

By Huw Jones

LONDON (Reuters) – Cryptoasset companies should set aside capital like banks when undertaking similar activities, regulators proposed on Tuesday in their first global rules as a “crypto winter” wiped $2 trillion off the sector, leaving investors nursing losses.

The Financial Stability Board (FSB), which coordinates financial rulemaking among Group of 20 Economies (G20), made nine recommendations for members to apply.

Currently, the sector is largely unregulated in most countries, having to only comply with rules for safeguarding against money laundering and terrorist financing as regulators warn investors they risk losing every penny.

Klaas Knot, the Dutch central bank president who chairs the FSB, said the “crypto winter” or recent sharp pullback in cryptocurrencies, has reinforced the board’s assessment of existing structural vulnerabilities.

The FSB has said crypto, which has a combined value of about $935 billion versus $3 trillion at their peak in November last year, are not big enough to threaten financial stability, but rules were needed to regulate a likely recovery.

“Concerns about the risks they pose to financial stability are therefore likely to come back to the fore sooner rather than later,” Knot said in a letter to G20 finance ministers meeting in Washington this week.

FSB recommends putting in place a framework for oversight, and managing risks and data at crypto firms, and having plans in place for a smooth shutting down of cryptoasset firms in trouble.

“Several crypto-asset lenders failed during the recent market turmoil as a result of vulnerability to runs, thin capitalisation, concentrated exposures to risky entities, and risky trading and business ventures,” the FSB said.

The proposals seek cross-border consistency to regulating crypto-assets, particularly as the European Union finalises groundbreaking rules to regulate the sector from 2024.

The underlying principle is that the same activity should be regulated in the same way, whether undertaken by a cryptoasset company, bank or payments provider, and that crypto firms may need to separate some functions to ensure this, the FSB said.

The proposals have been put out to public consultation until Dec. 15, before being finalised by mid-2023, when FSB members would be expected to fast-track their implementation.

The FSB also reviewed its guidance on regulating stablecoins, a type of cryptocurrency usually backed by a currency like the dollar or assets.

The crash of the dollar-backed Terra stablecoin in May highlighted the high risk of loss and potential fragility of stablecoins that lack a stabilisation mechanism, the FSB said.

The watchdog said that most existing stablecoins don’t meet its guidance and it proposed revisions to the guidance include strengthening governance and stabilisation mechanisms of stablecoins, and clarifying and strengthening redemption rights.

(Reporting by Huw Jones; editing by David Evans)

Categories
News

Fear driving China’s tech manipulation poses threat to all -UK spy chief

LONDON (Reuters) – China is using its financial and scientific muscle to manipulate technologies in a manner that risks global security, Britain’s top cyber spy will say on Tuesday, warning that Beijing’s actions could represent “a huge threat to us all.”

In a speech, Jeremy Fleming, director of the GCHQ spy agency, will say that the Chinese leadership was seeking to use technologies such as digital currencies and its Beidou satellite navigation network to tighten its grip over its citizens at home, while spreading its influence abroad.

“They seek to secure their advantage through scale and through control,” Fleming will say in the annual security lecture at the Royal United Services Institute think tank, according to extracts released by his office.

“This means they see opportunities to control the Chinese people rather than looking for ways to support and unleash their citizens’ potential. They see nations as either potential adversaries or potential client states, to be threatened, bribed, or coerced.”

The remarks are Fleming’s latest public warnings about Beijing’s behaviour and aspirations. Last year, he said the West faced a battle to ensure China did not dominate important emerging technologies such as artificial intelligence, synthetic biology and genetics.

Fleming will say the Chinese leadership was driven by a fear of their own citizens, of freedom of speech, of free trade and open technological standards and alliances, “the whole open, democratic order and the international rules-based system.”

That fear combined with China’s strength was driving it “into actions that could represent a huge threat to us all,” he will say.

China has previously described similar accusations from Western governments as being groundless and politically motivated smears.

Fleming will also highlight technologies where he says China is seeking to gain leverage, such as its development of a centralised, digital currency to allow it to monitor the transactions of users, as well as to possibly evade the sort of sanctions Russia has faced since its invasion of Ukraine.

He will also point to Beidou, China’s answer to the U.S.-owned GPS navigation system.

“Many believe that China is building a powerful anti-satellite capability, with a doctrine of denying other nations access to space in the event of a conflict,” he will say. “And there are fears the technology could be used to track individuals.”

(Reporting by Michael Holden in London; Editing by Matthew Lewis)

Categories
News

EU watchdog trying to understand UK bond market moves

By Huw Jones

LONDON (Reuters) – The European Union’s securities watchdog has asked Britain about recent extreme moves in UK government bond yields and is monitoring for “spillovers” into the bloc, its chair Verena Ross said on Monday.

UK finance minister Kwasi Kwarteng last month triggered a bond market rout with plans for unfunded tax cuts. Pension funds struggled to meet margin calls on derivatives linked to investment funds listed in EU states Ireland and Luxembourg.

“We are obviously in close touch with the UK authorities to understand the market developments that are currently happening,” Ross, chair of the European Securities and Markets Authority (ESMA), told reporters.

“I think we saw very initially some reaction also in the European markets.”

The UK bond market rout showed how developments can quickly have quite a significant impact and spillover from one market sector to another, Ross said.

“That is something that we address together with national authorities, obviously watching very carefully,” Ross said.

The Bank of England took additional steps on Monday to ease concerns about the expiry of its programme to calm turmoil in the UK government bond market.

Ross was outlining ESMA supervisory priorities for coming years, which will include helping the bloc implement it’s new rules for cryptoassets from 2024, and cracking down on ‘greenwashing’ or companies downplaying their impact on the environment and how climate change will affect their botton line.

(Reporting by Huw Jones; Editing by Mark Heinrich, Kirsten Donovan)

Categories
News

Binance-linked blockchain hit by $570 million crypto hack

By Elizabeth Howcroft

LONDON (Reuters) – A blockchain linked to Binance, the world’s largest crypto exchange, has been hit by a $570 million hack, a Binance spokesperson said on Friday, the latest in a series of hacks to hit the crypto sector this year.

Binance CEO Changpeng Zhao said in a tweet that tokens were stolen from a blockchain “bridge” used in the BNB Chain, known until February as Binance Smart Chain.

Blockchain bridges are tools used to transfer cryptocurrencies between different applications. Criminals have increasingly targeted them, with some $2 billion stolen in 13 different hacks, mostly this year, researcher Chainalysis said in August.

The hackers stole around $100 million worth of crypto, Zhao said in his tweet. BNB Chain later said in a blog post that a total of 2 million of the BNB cryptocurrency – worth around $570 million – was withdrawn by the hacker.

The majority of the BNB remained in the hacker’s digital wallet address, while about $100 million worth was “unrecovered,” the Binance spokesperson said by email.

BNB Chain supports BNB, formerly known as Binance Coin, which is the world’s fifth-largest token with a market value of over $45 billion, according to data site CoinGecko.

Elliptic, a London-based crypto blockchain researcher, told Reuters that the hacker had minted 2 million new BNB tokens before transferring most of the funds to other cryptocurrencies including Tether and USD Coin.

BNB Chain suspended its blockchain for several hours before resuming at around 0630 GMT, it said in a tweet.

BNB Chain was “able to stop the incident from spreading” by contacting the blockchain’s “validators,” – entities or individuals who verify blockchain transactions, it said in its blog post. There are 44 validators across several different time zones, it added without elaborating.

BNB Chain, described by Binance as a “community-driven, open-sourced and decentralized ecosystem,” said it would introduce a new “governance mechanism” to counter future hacks, as well as expand the number of validators.

In March, hackers stole around $615 million from a blockchain bridge called Ronin Bridge, in one of the largest crypto heists on record, ter linked by the United States to North Korean hackers.

(Reporting by Elizabeth Howcroft; Editing by Tom Wilson, Ana Nicolaci da Costa and Louise Heavens)

Categories
News

EU crypto rules set to cap dollar-pegged stablecoins

By Huw Jones and Elizabeth Howcroft

LONDON (Reuters) – European Union rules to regulate crypto assets will curb the market share of non-euro denominated stablecoins from 2024, potentially limiting EU competitiveness, industry representatives have said.

Ambassadors for the 27 EU states on Wednesday gave their approval to a deal on the new Markets in Crypto Assets Regulation (MiCA) thrashed out in June with the European Parliament.

To become law, the Parliament must vote on the rules, something which is expected to happen in December or early 2023.

The ambassadors also published a full text of the deal, revealing details such as that stablecoins not denominated in the euro will be limited to 1 million transactions and 200 million euros ($196 million) in transaction value when marketed in the euro zone.

A joint letter by crypto industry groups Blockchain for Europe and the Digital Euro Association said that the world’s three largest stablecoins – Tether, USD Coin and Binance USD – account for 75% of crypto trade volumes and already exceed the transaction-count and volume limits set out in the EU rules.

Anto Paroian, CEO of cryptocurrency hedge fund ARK36, said the curb “will likely limit the EU’s competitiveness and innovation potential”.

The European Crypto Initiative, a Brussels-based crypto lobbying group, said in a statement the outcome could be “burdensome”.

But it said a more favourable approach to euro-denominated stablecoins was likely to emerge after “initial fears for the EU’s financial stability and monetary sovereignty”.

Stablecoins are a type of cryptocurrency designed to maintain a constant value, usually via a 1:1 peg with a fiat currency.

“If the directive’s current wording does not change, it will significantly restrict the use of dollar-denominated stablecoins such as USD Coin, Tether, and Binance US,” Fabian Astic, Global Head of DeFi and Digital Assets at Moody’s Investors Service, said.

Stefan Berger, a member of the European Parliament who helped to negotiate the final deal, told Reuters: “Indeed, this might increase the euro-pegged stablecoins, which is a welcome development.”

Tether’s dollar-pegged coin is the world’s third largest cryptocurrency, with a market cap of $68 billion, compared to$202 million for the euro-pegged version, CoinGecko data shows.

($1 = 1.0202 euros)

(Reporting by Huw Jones and Elizabeth Howcroft, editing by Barbara Lewis)

Categories
News

India’s RBI to soon commence pilot project of digital rupee

MUMBAI (Reuters) – The Reserve Bank of India will soon commence limited pilot launches of a central bank backed digital rupee for specific use cases, it said in a concept paper released on Friday.

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

Use cases are being examined for an e-rupee in a way that there is minimal or no disruption to the financial system, the RBI added.

In February, the Indian government had said that a digital rupee will be launched during the course of this financial year.

The discussion around a central bank led digital currency has gained traction across a number of countries as cryptocurrencies became popular.

“It is the responsibility of central bank to provide its citizens with a risk free central bank digital money which will provide the users the same experience of dealing in currency in digital form, without any risks associated with private cryptocurrencies,” the RBI said.

The bank also indicated that it may consider both retail and wholesale digital currency, saying there is merit in both.

In its wholesale form, a digital currency could make settlement systems more efficient and secure, said RBI, while a retail e-rupee would offer safer means of digital payment for citizens.

The digital rupee seeks to replicate the features of cash and hence would not pay out interest, unlike bank deposits. It would also provide “reasonable anonymity for small value transactions akin to anonymity associated with physical cash,” the RBI said.

The RBI could consider a “token-based” retail central bank digital currency (CBDC) since they are comparable to cash, while a wholesale CBDC could be “account-based.”

Further, the e-rupee could be issued via banks as intermediaries, the RBI said. The central bank remains open to different technology options, it added.

The results of the pilot projects will be incorporated into the final design, according to the concept paper.

“A CBDC is aimed to complement, rather than replace, current forms of money and is envisaged to provide an additional payment avenue to users, not to replace the existing payment systems,” the bank said.

(Reporting by Ira Dugal; Editing by Saumyadeb Chakrabarty and Dhanya Ann Thoppil)

Categories
News

MENA emerges as world’s fastest-growing crypto adopter -study

By Yousef Saba

DUBAI (Reuters) – The Middle East and North Africa are the world’s fastest-growing cryptocurrency markets, with the volume of crypto received in the region jumping 48% in the year to June, blockchain researcher Chainalysis said in a report on Wednesday.

While the MENA region is one of the smallest crypto markets, its growth to $566 billion received in cryptocurrency between July 2021 and June 2022 shows adoption is rising rapidly.

(GRAPHIC: MENA countries by growth in crypto transaction volume, July 2020-June 2021 vs July 2021-June 2022 – https://fingfx.thomsonreuters.com/gfx/mkt/mopanxwllva/Mideast%20crypto%20growth.png)

Latin America saw the second biggest growth in the same period, at 40%. North America was next at 36% growth, followed closely by Central and Southern Asia and Oceania at 35% growth, Chainalysis said.

Three MENA countries are among the top 30 in Chainalysis’ 2022 Global Crypto Adoption Index, with Turkey in 12th place, Egypt taking the 14th spot and Morocco 24th.

“In Turkey and Egypt, fluctuating cryptocurrency prices have coincided with rapid fiat (traditional) currency devaluations, strengthening the appeal of crypto for savings preservation,” Chainalysis said.

The Turkish lira has weakened nearly 30% this year to new record-lows, after losing 44% of its value last year amid a currency crisis triggered by rate cuts.

Turkey tops the MENA region in terms of value of crypto received by far, having received $192 billion worth of crypto in the year to end-June, though only saw 10.5% year-on-year growth.

Egypt’s currency has also lost about a quarter of its value against the dollar at the start of the year.

“Remittance payments account for about 8% of Egypt’s GDP, and the country’s national bank has already begun a project to build a crypto-based remittance corridor between Egypt and the UAE, where many Egyptian natives work,” Chainalysis said.

The six countries of the Gulf Cooperation Council “seldom make it to the top of our grassroots crypto adoption index, as it weighs countries by purchasing power parity per capita, which favours poorer nations,” Chainalysis said.

GRAPHIC: MENA countries by crypto value received, July 2021 to June 2022 – https://fingfx.thomsonreuters.com/gfx/mkt/xmpjozbrovr/Mideast%20crypto%20adoption.png)

“Nevertheless, their role in the crypto ecosystem should not be underestimated. Saudi Arabia, for example, is the third-largest crypto market in all of MENA, and UAE is fifth.”

Afghanistan, which was 20th in Chainalysis’ adoption index last year, has tumbled to the bottom of the list as Taliban authorities have “equated crypto to gambling,” which is forbidden in Islam, Chainalysis said.

From November 2021 to now, Afghanistan-based users received less than $80,000 in crypto a month on average from $68 million a month on average before the Taliban’s takeover, Chainalysis said.

(Reporting by Yousef Saba. Editing by Jane Merriman)