Coinz.com

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)

By Marc Jones

LONDON (Reuters) – Financial messaging system SWIFT has laid out its blueprint for a global central bank digital currency (CBDC) network following an 8-month experiment on different technologies and currencies.

The trial, which involved France and Germany’s national central banks as well as global lenders like HSBC, Standard Chartered and UBS, looked at how CBDCs could be used internationally and even converted into fiat money if needed.

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

SWIFT’s head of innovation Nick Kerigan said its trial, which will be followed by more advanced testing over the next year, resembled a bicycle wheel where 14 central and commercial banks in total connected spoke-like into its main hub.

The idea is that once scaled-up, banks may need only one main global connection, rather than thousands if they were to set up connections with each counterpart individually.

“We believe that the number of connections needed is much fewer,” Kerigan said. “Therefore, you are likely to have fewer breaks (in the chain) and you are likely to achieve greater efficiency.”

The trial also tested different underlying CBDC technologies known as Distributed Ledger Technologies. The use of various technologies has also been raised as a potential hurdle for rapid global adoption.

There was a separate trial too carried out alongside Citi, clearing house Clearstream and Northern Trust on ‘tokenised’ assets – traditional assets like stocks and bonds transformed into digital tokens that can then be issued and traded in real-time.

Some countries such as the Bahamas and Nigeria already have CBDC’s up and running. China is well advanced with real-life trials of an e-yuan, while central bank umbrella group, the Bank for International Settlements, has also been running cross-border trials.

SWIFT’s main advantage though is that its existing network is already usable in over 200 countries and connects more than 11,500 banks and funds.

The Belgium-based firm has gone from being virtually unknown outside banking circles to a household name this year after it cut most of Russia’s banks off from its network as part of the West’s sanctions for the country’s invasion of Ukraine.

Kerigan said that kind of move could also happen in a new CBDC system, but doubted whether it would stop countries joining one.

“Ultimately what most central banks are looking to do is to provide us with a CBDC for the people, the businesses and the organisations in their jurisdiction.”

“So a solution that’s fast and efficient and that gains access to as many other countries as possible would seem to be an attractive one.”

(Reporting by Marc Jones; Editing by Ana Nicolaci da Costa)

(Reuters) – Celsius Network’s co-founder and chief strategy officer Daniel Leon has stepped down, the bankrupt crypto lender said on Tuesday, joining a wave of executive departures from beleaguered digital asset companies.

The announcement comes a week after chief executive officer Alex Mashinsky’s resignation. Leon’s departure was first reported by CNBC.

Hoboken, New Jersey-based Celsius filed for Chapter 11 bankruptcy in July, a month after freezing withdrawals citing extreme market conditions.

Lenders such as Celsius boomed in lockstep with the surge in popularity of major cryptocurrencies like Bitcoin, as they offered interest rates much higher than traditional banks and easy access to loans.

However, the collapse of digital tokens terraUSD and luna, coupled with a tough macroeconomic environment, tested their business model and eroded customers’ optimism.

Voyager Digital Ltd, another major U.S. crypto lender, also filed for bankruptcy in July.

(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)

By Caroline Valetkevitch

NEW YORK (Reuters) – The dollar slid against most major currencies on Tuesday as the yield on the benchmark U.S. 10-year Treasury fell after Australia’s central bank surprised investors with a smaller-than-expected interest rate hike, with the euro climbing more than 1%.

The Australian dollar was down 0.2% at $0.6503, dragged down after the move by the Reserve Bank of Australia, which said rates had increased substantially in a short period.

The euro was last up 1.6% at $0.9978, recovering from its 20-year low of $0.9528 on Sept. 26, while sterling shot up 1.2% to $1.1456, off a record low of $1.0327 also hit Sept. 26.

A calmer British government bond market was a relief for the pound after recent government-inspired turmoil. In a statement on Monday, the Bank of England reaffirmed its willingness to buy long-dated gilts and the head of Britain’s debt management office, overseeing the bond market, told Reuters in an interview the market was resilient.

The moves in the dollar and yields appear to partially reflect market participants’ views on the outlook for rates, some strategists said. Investors are hoping that recent economic growth concerns may be enough to force the Federal Reserve and other central banks to become less aggressive in their fight against inflation. At the same time, stocks were rallying.

“We’re seeing a drop in interest rate expectations across the financial markets on the basis of Reserve Bank of Australia’s surprise smaller-than-expected hike,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“That has sort of had a canary in the coal mine effect from market participants globally. People are ratcheting down what they expect from the Federal Reserve and other central banks and that’s really compelling a drive out of the dollar and into risk sensitive assets.”

Also, economic data showed job openings in the United States fell to 10.053 million in August, the most in nearly 2-1/2 years.

“It’s a much more-drastic-than-expected drawdown in the number of job openings, and that is what we would expect to see if the Fed were nearing the end of their tightening trajectory,” Schamotta said.

The yield on 10-year Treasury notes was down 6.6 basis points to 3.585%.

The Fed’s aggressive push to raise rates and the recent steady climb in Treasury yields have helped support the dollar’s sharp gains this year.

Investors were still closely watching China’s yuan, with Chinese authorities having come out in recent weeks with maneuvers to slow its slide. But on Tuesday, the dollar fell against the offshore yuan. The dollar was last down 0.9% at 7.0383 and hit a session low late of 7.0332.

Elsewhere, the dollar was down 0.4% against the Japanese yen at 144.03 yen, keeping below 145 after briefly popping above that level on Monday for the first time since Japanese authorities intervened to support their currency on Sept. 22.

Japanese finance minister Shunichi Suzuki repeated on Monday that authorities stand ready for “decisive” steps in the foreign exchange market if “sharp and one-sided” yen moves persisted.

(Additional reporting by Kevin Buckland in Toyko and Alun John in London; Editing by Chizu Nomiyama, Andrea Ricci and Jonathan Oatis)

By Hannah Lang and Michelle Price

WASHINGTON (Reuters) – Banks’ cryptocurrency projects have been upended by U.S. Securities and Exchange Commission (SEC) accounting guidance that would make it too capital-intensive for lenders to hold crypto tokens on behalf of clients, according to more than half a dozen people with knowledge of the matter.  

A slew of lenders including U.S. Bancorp, Goldman Sachs Group Inc, JPMorgan Chase & Co, BNY Mellon, Wells Fargo & Co, Deutsche Bank, BNP Paribas and State Street Corp offer or are working on crypto products and services for clients in a bid to tap in to the $1 trillion crypto market, according to their public statements and media reports.

But on March 31, the SEC said public companies that hold crypto assets on behalf of clients or others must account for them as liabilities on their balance sheets due to their technological, legal and regulatory risks.

While the guidance applies to all public companies, it is especially problematic for banks because their strict capital rules, overseen by bank regulators, require them to hold cash against balance sheet liabilities. The SEC did not consult the banking regulators when issuing the guidance, according to four of the people.

The SEC’s move complicates banks’ efforts to jump on the digital asset bandwagon, and could keep them on the sidelines even as they report increased demand from clients looking to access the burgeoning market.

“This has thrown a huge wrench in the mix,” one of the sources said. Lenders building out crypto offerings have had “to cease moving forward with those plans pending any kind of further action from the SEC and the banking regulatory agencies,” they added.

Custody banks State Street and BNY Mellon, which have been building digital asset offerings, are among those whose projects have been disrupted, according to three people with knowledge of the matter.

While the accounting guidance does not stop State Street from offering crypto custody services, it would make doing so uneconomical, said Nadine Chakar, head of State Street Digital. “We do have an issue with the premise of doing that, because these are not our assets. This should not be on our balance sheet,” said Chakar.

A spokesperson for BNY Mellon declined to comment on the status of its crypto custody project. “BNY Mellon believes digital assets are here to stay, and increasingly becoming part of the mainstream of finance,” he added.

When asked about the SEC guidance, a U.S. Bancorp spokesperson said it is still servicing existing clients for which it offers bitcoin custody services. “However, we are pausing intake of additional clients in this service as we evaluate the evolving regulatory environment.”

One executive at a European bank looking to launch crypto custody services said it would now be prohibitively costly for the bank to do so in the United States due to the SEC guidance.

Spokespeople for the SEC and the other banks declined to comment.

The problems the SEC guidance is causing for banks, which have not previously been reported, underscore the broader challenges lenders face in trying to capitalize upon the growing crypto market amid ongoing regulatory confusion and skepticism.

“We’ve heard from a wide variety of stakeholders, banks among them, about how challenging this new staff accounting bulletin would be for them to be able to enter in to the space of custodying crypto assets,” U.S. Representative Trey Hollingsworth, who sent SEC Chair Gary Gensler a letter in July expressing concern about the guidance, said in an interview.

“This edict came down without guidance, without input, without feedback, without conversation being had with industry.”

CAPITAL PUNISHMENT?

As the cryptocurrency market ballooned in 2020, financial institutions were eager to cash in. Despite the crypto market contracting significantly this year, lenders still see an opportunity for their services.

Offering to hold clients’ digital assets appeared the safest way to enter the market. Banks commonly offer custody for a variety of financial instruments and have generally not been required to reflect them on their balance sheet, unless they are commingled with the bank’s own assets.

The SEC guidance departed from that practice. At a conference last week, the SEC’s acting chief accountant said that custodied crypto assets present “unique” risks which meet the definition of a liability under U.S. accounting standards.

In a June letter to bank regulators, however, the Securities Industry and Financial Markets Association, American Bankers Association and the Bank Policy Institute said such risks are already mitigated by strict bank supervision and rules.

Factoring in planned international Basel capital rules, the guidance could cost more than $1 of capital for every $1 of digital assets held, the groups estimated, meaning crypto custody “effectively would be prohibited.”

The SEC guidance also appears to apply where lenders outsource the custody function to a third party, such as Anchorage Digital, the sources said.

Diogo Mónica, president of Anchorage Digital, said the capital cost was “completely unsupportable” and that “every single bank” Anchorage works with is now waiting on regulators before proceeding to work with Anchorage on crypto custody solutions.

Industry groups have been lobbying the SEC to carve banks out of the guidance, according to four of the sources and industry letters, although the agency appears unpersuaded, one of those people said. Some lenders, instead, are seeking individual exemptions, two people said.

The industry is also lobbying the banking regulators to issue guidance that would neutralize the capital impact of the SEC guidance, although changing capital rules would be a major undertaking which looks unlikely in the short term, the people said.

The Federal Reserve, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp declined to comment.

(Reporting by Hannah Lang and Michelle Price in Washington; Additional reporting by Pete Schroeder in Washington; Editing by Matthew Lewis)

By Pete Schroeder and Michelle Price

WASHINGTON (Reuters) – An aggressive regulator is critical to maintaining the United States as the “gold standard” for capital markets, U.S. Securities and Exchange Commission (SEC) chair Gary Gensler will tell the U.S. Senate Banking Committee on Thursday.

Gensler will appear before the panel for its regular oversight duties, but the hearing comes at a time of Republican frustration over his agenda. They claim he has overstepped his authority with a broad assault on U.S. capital markets and adopted a hostile stance toward the financial industry.

Republican representative Tom Emmer told Reuters in July that, under Gensler, the SEC had “politicized rulemaking and discouraged good faith cooperation.”

But in prepared testimony released ahead of the hearing, Gensler insisted his new rules are critical to the predominant status of U.S. markets.

“As markets have evolved, our rules have continued to evolve as well,” he said. “I think we should do everything we can to maintain and enhance that gold standard of our capital markets.”

CLIMATE RULE CONCERNS

Republicans are especially concerned about a draft SEC rule requiring public companies to disclose climate-related risks, including greenhouse gas emissions. Corporate groups say it is onerous and exceeds the agency’s authority.

Gensler is likely to be grilled on the climate rule, especially in light of a recent Supreme Court decision to curb the Environmental Protection Agency’s power, which some legal experts say undermines the SEC’s authority on the rule.

But Gensler said the rule would provide needed clarity and consistency to an issue important to investors and being disclosed by some companies under disparate frameworks.

CRYPTOCURRENCY CRITICISMS

Republicans will also pressure Gensler on what some see as his increasingly hawkish stance on cryptocurrency oversight, said Isaac Boltansky, director of policy research for brokerage BTIG.

Gensler made headlines last week when he said crypto companies may need multiple SEC registrations and split their operations into separate legal entities.

Senator Pat Toomey, the senior Republican on the committee criticized Gensler’s approach in July.

“What is the SEC doing now to help ensure the crypto community gets the regulatory clarity it has repeatedly asked for? They deserve answers now, not later.”

In his prepared testimony, Gensler said such “disaggregation” could enhance investor protections and guard against conflicts of interest. He added that SEC staff was working with traditional market intermediaries interested in entering the crypto market, and urged Congress to not inadvertently undermine existing investor protections while crafting cryptocurrency legislation.

U.S.-CHINA AUDIT DEAL

Gensler also struck a cautious tone on a recent deal between U.S. and Chinese officials on auditing U.S.-listed Chinese firms, noting the accord is meaningful only if U.S. officials actually are permitted to fully investigate Chinese auditors.

If not, roughly 200 companies would still face the prospect of trading restrictions in the United States, he warned.

“There was a fair amount of fanfare after the agreement in August, but there are still some real questions about how the agreement will work and some understandable skepticism on Capitol Hill about its prospects for success,” said Boltansky.

(Reporting by Michelle Price and Pete Schroeder; Editing by Josie Kao)

By Elizabeth Howcroft and Hannah Lang

(Reuters) – Ethereum, the blockchain that underpins the world’s second-largest crypto token ether, on Thursday underwent a major software upgrade that slashes the amount of energy needed to create new coins and carry out transactions.

Here’s what you need to know about the “Merge” as the shift is known.

WHAT IS ETHEREUM?

Like other blockchains, Ethereum is essentially a digital database shared across a network of computers. It records ownership of the cryptocurrency ether, and other Ethereum-based digital assets such as non-fungible tokens.

Proponents say Ethereum will form the backbone of much of the widely hyped but still unrealised “Web3” vision of an internet where crypto takes centre stage in applications and commerce.

SO WHAT IS THE MERGE?

The “Merge” is a change to the way Ethereum processes transactions and how new ether tokens are created.

It involved the Ethereum blockchain combining with a new separate blockchain. The new system, known as “proof-of-stake”, slashes the Ethereum blockchain’s energy consumption by 99.9%, developers say.

Most blockchains, including bitcoin’s, devour large amounts of energy, sparking criticism from some investors and environmentalists.

The Ethereum Foundation, a prominent non-profit organisation that says it supports Ethereum, says the upgrade will pave the way for further blockchain updates that will facilitate cheaper transactions.

HOW BIG OF A DEAL IS THIS?

Ethereum backers say the Merge is a monumental moment for the $1 trillion crypto sector.

Proponents believe the Merge will make Ethereum more favourable compared to arch-rival bitcoin – the world’s top cryptocurrency – in terms of price and usability.

That could see Ethereum applications become more widely used.

Some investors are betting the change will be significant for the price of ether, which has gained more than 50% since the end of June, compared to bitcoin’s minimal gains.

Ether’s price showed little reaction to the Merge’s completion on Thursday, trading at around $1,624.

PROOF-OF-STAKE? SOUNDS TECHNICAL

It is. But it’s also important.

There are different ways transactions on the blockchain – the software that underpins most crypto – can be verified. In the “proof-of-work” system previously used by Ethereum, new transactions were checked by crypto miners.

Miners used powerful computers that solved complex maths puzzles and updated the blockchain, earning new crypto tokens. While this made records on the blockchain secure, it was highly energy-intensive.

In the “proof-of-stake” system, ether owners will lock up set amounts of their coins to check new records on the blockchain, earning new coins on top of their “staked” crypto.

SOUNDS LIKE A NO-BRAINER, RIGHT?

Maybe. While Ethereum developers say the “proof-of-stake” model has safeguards to ward off hackers, others say criminals could attack the blockchain under the new system.

If a single entity accumulated the majority of ether staked to validate new transactions, they could alter the blockchain and steal tokens. Crypto experts also say there is a risk that technical glitches could mar the Merge, and that scammers could take advantage of confusion to steal tokens.

It may also become easier for developers to build programmes on the Ethereum network, potentially boosting adoption. Still, those updates are likely months, if not years, away.

(Reporting by Hannah Lang in Washington and Elizabeth Howcroft, editing by Tom Wilson, Chizu Nomiyama and Jason Neely)

(Reuters) – A major software upgrade to the Ethereum blockchain aimed at drastically reducing its energy usage has been completed, Vitalik Buterin, Ethereum inventor and co-founder tweeted on Thursday. The upgrade, known as the “Merge”, will change how transactions on the Ethereum blockchain occur and how ether tokens, the second-largest crypto coin after bitcoin, are created. Under the change, Ethereum will move from a “proof of work” system, in which energy-hungry computers validate transactions by solving complex maths problems, to a “proof of stake” system, where individuals and companies act as validators, using their ether as collateral, to win newly created tokens.

(Reporting by Tom Wilson and Maria Ponnezhath in Bengaluru; editing by Jason Neely)

By Caroline Valetkevitch and Alun John

NEW YORK/LONDON (Reuters) – The yen was up more than 1% against the dollar on Wednesday after the Bank of Japan conducted a rate check in possible preparation for currency intervention, with the Japanese currency strengthening more in the wake of U.S. producer prices data.

In a rate check, central bank officials call up dealers and ask for the price of buying or selling yen. However, actually intervening to support the currency would be a larger step.

Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been “rapid and one-sided”, adding that yen-buying currency intervention was among the government’s options should such moves continue.

“Most market participants are on pins and needles awaiting whether or not we’re going to get any sort of intervention from the ministry of finance in Japan,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.

“It’s one of those things where we’ve seen comments so many times about the fact that they’re watching and monitoring the yen. The fact that they did a rate check overnight kind of indicates we’re in greater proximity toward intervention. But just intervention by itself we don’t think is going to be all that successful outside of an immediate knee-jerk reaction.”

The recent sharp gains in the dollar versus the yen have been tied to the hawkish stance from the Federal Reserve in raising interest rates to control inflation. The dollar hit a 24-year peak against the yen last week.

The dollar fell 1% against the yen right after news of the rate check. Nikkei website reported the rate check, citing unidentified sources, and Reuters later confirmed it with a market source. The dollar was last down 1.4% at 142.67 yen, hitting a session low of 142.6 in the wake of the PPI data.

The dollar index, which tracks the currency against six main peers, was down 0.3% on Wednesday at 109.55, a day after registering its largest daily percentage gain since March 2020 on an unexpected rise in the U.S. consumer price index (CPI).

On Wednesday, data showed producer prices fell for second straight month in August, while it also showed underlying producer inflation rising moderately last month.

Financial markets now have fully priced in an interest rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, according to the CME’s Fedwatch tool.

As inflation is a small concern in Japan, authorities are keeping yields on Japanese government bonds pinned down to help with the economic recovery. [JP/T]

In contrast, the two-year U.S. Treasury yield, a bellwether for interest rate expectations, rose another 3.2 basis points to 3.788% after jumping 18.5 bps on Tuesday following the consumer price data.

The euro was up 0.1% against the dollar at $0.9979.

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

Currency bid prices at 10:42AM (1442 GMT)

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

Previous Change

Session

Dollar index

109.5500 109.8300 -0.25% 14.517% +109.9300 +109.2700

Euro/Dollar

$0.9979 $0.9968 +0.11% +0.00% +$1.0024 +$0.9956

Dollar/Yen

142.6700 144.6200 -1.35% +0.00% +144.9550 +142.5800

Euro/Yen

142.36 144.08 -1.19% +0.00% +144.4700 +142.3000

Dollar/Swiss

0.9609 0.9619 -0.10% +0.00% +0.9631 +0.9591

Sterling/Dollar

$1.1565 $1.1494 +0.61% +0.00% +$1.1578 +$1.1480

Dollar/Canadian

1.3159 1.3175 -0.11% +0.00% +1.3206 +1.3149

Aussie/Dollar

$0.6742 $0.6733 +0.14% +0.00% +$0.6748 +$0.6705

Euro/Swiss

0.9588 0.9583 +0.05% +0.00% +0.9628 +0.9582

Euro/Sterling

0.8628 0.8674 -0.53% +0.00% +0.8684 +0.8629

NZ

Dollar/Dollar $0.6012 $0.6000 +0.08% +0.00% +$0.6013 +$0.5978

Dollar/Norway

10.1000 10.1125 +0.10% +0.00% +10.1460 +10.0710

Euro/Norway

10.0806 10.0641 +0.16% +0.00% +10.1251 +10.0577

Dollar/Sweden

10.6880 10.6882 +0.09% +0.00% +10.7160 +10.6211

Euro/Sweden

10.6662 10.6570 +0.09% +0.00% +10.6779 +10.6369

(Reporting by Caroline Valetkevitch in New York and Alun John in London and Kevin Buckland; Editing by Kim Coghill, Edmund Klamann, Toby Chopra, Mark Heinrich and Jonathan Oatis)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – For years, ether could barely dream of challenging its big brother bitcoin. Now, its ambitions may be becoming more realistic.

The second-biggest cryptocurrency is taking market share from bitcoin ahead of an all-important “Merge” software upgrade that could sharply reduce the energy usage of its Ethereum blockchain, should the developers pull it off in coming days.

Bitcoin’s dominance, or its share of the crypto market’s market value, has slipped to 39.1% from this year’s peak of 47.5% in mid-June, according to data platform CoinMarketCap. Ether, on the other hand, has climbed to 20.5% from 16%.

The upstart is still a long way from overtaking bitcoin as the No.1 cryptocurrency, a reversal known to aficionados as “the flippening”. It’s made up ground, though; in January 2021, bitcoin reigned supreme at 72%, while ether occupied a slender 10%.

As for price, one ether is now worth 0.082 bitcoin, near December 2021 highs and sharply above the 2022 low of 0.049 in June.

“People are now viewing Ethereum as essentially a safe asset because they’ve seen the success of the network, they think it’s not going anywhere,” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.

“There’s a permanency to how Ethereum is perceived in the crypto ecosystem.”

Graphic: Bitcoin dominance wanes: https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/zdvxomazgpx/chart.png

CAPRICIOUS CRYPTO

The Merge, expected to take place on Thursday after several delays, could lead to wider use of the blockchain, potentially boosting ether’s price – although nothing is certain in a capricious crypto market.

Ethereum forms the backbone of much of the “Web3” vision of an internet where crypto takes centre stage, powering applications involving crypto offshoots such as decentralised finance and non-fungible tokens – although this much-hyped dream is still unrealised.

Bitcoin and ether have both nearly halved this year on concerns about supersized interest rate hikes from central banks. Nonetheless, investors seem to like the look of the Merge, with ether up over 65% since the end of June. Bitcoin has barely budged in the same period.

“We’re going to see (ether’s) attractiveness to some investors who are concerned about energy consumption,” said Doug Schwenk, CEO of Digital Asset Research, although he cautioned that ether was still a long way behind bitcoin.

THE KING IS STRONG

The diminishing bitcoin dominance in crypto’s current bear market is a departure from previous market cycles when investors sold lesser tokens – “altcoins” – in favor of the more liquid and reliable bitcoin.

Dethroning the king is no easy feat, though.

Bitcoin is still by far the most well-known cryptocurrency. Mainstream investors who have dipped their toes in the crypto market since 2020 have tended to turn first to bitcoin, as the most liquid and widely-traded token.

Its market cap of $427 billion is still more than double Ether’s $210 billion, and market participants firmly believe the original digital coin remains the gold standard in crypto due to its limited supply.

Some market players say bitcoin’s grip on the crypto crown is still strong, even if it has to accept other contenders. For example, Hugo Xavier, CEO of K2 Trading Partners, said its dominance could improve to 50%-60% range if the crypto market turns bullish but it is unlikely to touch 70% again.

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

LONDON (Reuters) – The global Basel Committee of banking regulators will complete work on “robust” rules for how banks must set aside capital to cover cryptoassets on their books, the committee’s oversight body said on Tuesday.

“On cryptoassets, members reiterated the importance of designing a robust and prudent regulatory framework for banks’ exposures to cryptoassets that promotes responsible innovation while preserving financial stability,” the Group of Central Bank Governors and Heads of Supervision (GHOS) said in a statement.

“The GHOS tasked the Committee with finalising such a framework around the end of this year.”

(Reporting by Huw Jones; Editing by Alison Williams)

NEW YORK (Reuters) – The brother of a former Coinbase Global Inc product manager pleaded guilty on Monday to a wire fraud conspiracy charge in what U.S. prosecutors have called the first insider trading case involving cryptocurrency.

Nikhil Wahi said in a virtual court hearing before U.S. District Judge Loretta Preska that he made trades based on confidential Coinbase information.

Prosecutors say Ishan Wahi, the former product manager, shared confidential information with his brother and their friend Sameer Ramani about forthcoming announcements of new digital assets that Coinbase would allow users to trade.

Ishan Wahi has pleaded not guilty. Ramani, who was also charged, is at large.

(Reporting by Luc Cohen in New York; Editing by Bernadette Baum)

By Elizabeth Howcroft

LONDON (Reuters) – A long-awaited software upgrade to the Ethereum blockchain aimed at slashing its huge energy consumption is expected this week, a move proponents say may widen the technology’s use and support the price of the ether token.

The upgrade, known as the “Merge,” will mark a radical change to how transactions on the Ethereum blockchain occur and ether tokens are created. The new system will consume 99.95% less energy, according to the Ethereum Foundation https://ethereum.org/en/upgrades/merge/, a body which acts as a spokesperson for the network.

The exact timing for the Merge is unknown, but Google and other sites tracking the blockchain were on Monday predicting it would take place in the early hours of Thursday. The Ethereum Foundation has said it will take place on Sept. 10-20. The event has been delayed several times previously.

If successful, Ethereum will move from a “proof of work” system – in which energy-hungry computers validate transactions by solving complex mathematical problems – to a “proof of stake” protocol, in which individuals and companies act as validators, using their ether as collateral, in a bid to win fresh tokens.

Ether is the second-largest cryptocurrency after bitcoin, with a market capitalisation of around $200 billion, according to data site CoinGecko. There are around 1 million to 1.5 million transactions per day on the Ethereum blockchain, compared to Bitcoin’s 200,000 to 300,000, according to CoinMetrics data.

Crypto prices plunged earlier this year as a broader downturn in financial markets prompted investors to ditch risky assets. Ether has risen around 65% since the end of June ahead of the Merge, while bitcoin has seen little change.

“This is a very material development in the overall evolution plan for Ethereum,” said James Malcolm, head of FX strategy at UBS. Still, he said, it may not necessarily impact the price of ether as the Merge is already priced in.

ENERGY-SAVING?

The high energy use of crypto and blockchain tech has drawn criticism from some investors and environmentalists. A single transaction on Ethereum currently requires as much power as an average U.S. household uses in a week, according to researcher Digiconomist https://digiconomist.net/ethereum-energy-consumption.

To proponents, the energy-saving upgrade represents a major step forward in the race to become the world’s top blockchain.

Ethereum has become the blockchain of choice for various functions in the world of decentralised finance, including smart contracts and projects involving tokens representing traditional assets such as stocks and bonds.

Ethereum backers say the tech will form the basis of a new financial system, in which money and assets can be traded in the form of crypto tokens without the need for providers of traditional financial services.

Others see it as a cornerstone of so-called “Web3,” a hyped but still unrealised iteration of the internet where blockchain and crypto assets take centre stage.

Still, ether has so far seen limited mainstream adoption as a means of payment, with trading by far the most popular use.

(Reporting by Elizabeth Howcroft; editing by Tom Wilson and Louise Heavens)

(Reuters) – The U.S. securities regulator will set up two new offices to deal with filings related to crypto assets and the life sciences sector, the agency said on Friday.

The “Office of Crypto Assets” and the “Office of Industrial Applications and Services” will join seven existing offices under the Securities and Exchange Commission (SEC) department which handles corporate disclosure filings.

“As a result of recent growth in the crypto asset and the life sciences industries, we saw a need to provide greater and more specialized support,” Renee Jones, director of the Division of Corporation Finance, said in a statement.

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.

2022 has seen a sharp drop in crypto demand though, as global risk sentiment was walloped by the Ukraine crisis, aggressive monetary policy tightening and decades-high inflation.

Allegations of money laundering against some crypto firms as well as consumer data violations in the United States, the biggest market for digital assets, have also affected demand.

(Reporting by Manya Saini in Bengaluru; Editing by Devika Syamnath)

By Mehnaz Yasmin

(Reuters) – FTX Ventures plans to scoop up a 30% stake in SkyBridge Capital, the companies said, making it the latest in a flurry of deals by cryptocurrency’s white knight Sam Bankman-Fried.

Financial terms of the deal were not disclosed by the companies.

SkyBridge, the alternative investment firm led by Anthony Scaramucci, will use a portion of the proceeds from the deal to deploy $40 million in cryptocurrency investments to hold on its balance sheet as a long-term investment, according to a joint statement by the companies.

The news was first reported by CNBC earlier in the day.

“I don’t think that Sam Bankman-Fried’s recent movement is an altruistic gesture,” said Richard Gardner, chief executive officer of Modulus Global, a software provider to big-ticket Wall Street clients.

“Some investors may see this as a turnaround for the industry, but I think it is more of a life jacket than a lifeboat.”

The cryptocurrency sector found a savior in Bankman-Fried, 30, who threw several lifelines to digital asset platforms as cryptocurrency prices cratered this year.

The head of one of the largest cryptocurrency exchanges had said in July that he and his company still have a “few billion” on hand to shore up struggling firms that could further destabilize the digital asset industry.

His crypto trading arm, Alameda Research, provided $200 million in cash, a stablecoin revolving credit facility and a facility of bitcoin to Voyager Digital before it went bankrupt, while FTX had handed another $400 million revolving credit facility to BlockFi with an option to buy it for up to $240 million.

In January, FTX unveiled FTX Ventures, a $2 billion venture capital fund focused on digital asset investments, which it has since drawn on to help bail out firms that are lacking liquidity, but not assets.

(This story corrects last name to “Gardner”, not “Garner” in paragraph 5)

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Maju Samuel)

SINGAPORE (Reuters) – Bitcoin surged past the $20,000 barrier and was potentially heading for its best day in six months on Friday as the U.S. dollar fell broadly and markets found reasons to be cheerful at the end of a dour week.

Bitcoin, the biggest cryptocurrency by market value, rose more than 9% to $21,254, a two-week high. If it holds, the daily percentage gain would be the largest since late February.

Ether, the second-biggest, rose more than 5% to hit a three-week peak at $1,746. Bitcoin had been as low as $18,540 on Wednesday.

Market participants said there was no particular trigger for the gains beyond a broad upbeat mood in evidence across asset classes on Friday, led by a drop in the safe-haven dollar and reinforced by positive moves in global shares. [MKTS/GLOB]

Marcus Sotiriou a market analyst at GlobalBlock attributed Bitcoin’s climb to optimism that the United States could report another decline in inflation next week.

Such a decline would typically be expected to support assets like cryptocurrencies that do well when markets have an optimistic tone.

If cryptocurrencies can hold their gains until Sunday’s close, Bitcoin could log a second weekly rise in a row, and its best week in about a month.

Ether’s weekend volatility may be heightened by a looming software upgrade known as the “merge”, due sometime between Sept. 10 and 20, with the exact timing uncertain.

The shift will radically change how transactions are processed and is supposed to slash energy consumption. Some exchanges plan to pause deposits and withdrawals while the upgrade occurs.

(Reporting by Tom Westbrook in Singpaore, additional reporting by Alun John in London; Editing by Mark Potter and Jane Merriman)

By Hannah Lang

(Reuters) – Ethereum, the blockchain that underpins the world’s second-largest crypto token ether, will soon undergo a major software upgrade that promises to slash the amount of energy needed to create new coins and carry out transactions.

Here’s what you need to know about the “Merge,” as the shift is known.

SO WHAT IS THE MERGE?

The Ethereum blockchain is due to merge with a separate blockchain, radically changing the way it processes transactions and how new ether tokens are created.

The new system, known as “proof-of-stake,” will slash the Ethereum blockchain’s energy consumption by 99.9%, developers say. Most blockchains, including bitcoin’s, devour large amounts of energy, sparking criticism from some investors and environmentalists.

The Ethereum Foundation, a prominent non-profit organization that says it supports Ethereum, says the upgrade will pave the way for further blockchain updates that will facilitate cheaper transactions. High costs and slow transaction times are currently two of the main issues users have with the Ethereum network.

AND WHEN’S IT HAPPENING?

Very soon. The merge is scheduled for completion between Sept. 10 and 20, though the exact timing is uncertain. Independent estimates point to Sept. 15 as the likely date.

Major crypto exchanges, including Coinbase Global and Binance, have said they will pause ether deposits and withdrawals during the merge. Users won’t need to do anything with their funds or digital wallets as part of the upgrade, they say.

HOW BIG OF A DEAL IS THIS?

Ethereum backers say the Merge is a monumental moment for the $1 trillion crypto sector.

Proponents believe the Merge will make Ethereum more favourable compared to arch-rival bitcoin – the world’s top cryptocurrency – in terms of price and usability.

That could see Ethereum applications become more widely used. Investors are betting the change will be significant for the price of ether, which has gained more than 50% since the end of June, compared to a slight loss for bitcoin.

PROOF-OF-STAKE? SOUNDS TECHNICAL

It is. But it’s also important.

There are different ways transactions on the blockchain – the software that underpins most crypto – can be verified. In the “proof-of-work” system currently used by Ethereum, new transactions are checked by crypto miners.

Miners use powerful computers that solve complex maths puzzles and update the blockchain, earning new crypto tokens. While this makes records on the blockchain secure, it’s highly energy-intensive.

In the “proof-of-stake” system, ether owners will lock up set amounts of their coins to check new records on the blockchain, earning new coins on top of their “staked” crypto.

SOUNDS LIKE A NO-BRAINER, RIGHT?

Maybe. While Ethereum developers say the proof-of-stake model has safeguards to ward off hackers, others say criminals could attack the blockchain under the new system.

If a single entity accumulated the majority of ether staked to validate new transactions, they could alter the blockchain and steal tokens. Crypto experts also say there is a risk that technical glitches could mar the Merge, and that scammers could take advantage of confusion to steal tokens.

It may also become easier for developers to build programs on the Ethereum network, potentially boosting adoption. Still, those updates are likely months, if not years, away.

(Reporting by Hannah Lang in Washington; editing by Tom Wilson and)

By Michelle Price

WASHINGTON (Reuters) – Companies that help facilitate transactions in the cryptocurrency market should register with the U.S. Securities and Exchange Commission (SEC) just like other market intermediaries, the agency’s chair said on Thursday.

Gary Gensler said intermediaries in the crypto market provide a range of functions regulated by the SEC, including operating as an exchange, broker dealer, clearing agent and custodian, and should be registered accordingly.

“If you fall into any of these buckets, come in, talk to us, and register,” Gensler told an audience of attorneys in Washington, D.C., reiterating that the vast majority of crypto tokens qualify as securities and are captured by relevant laws.

“The commingling of the various functions within crypto intermediaries creates inherent conflicts of interest and risks for investors,” he added.

While Gensler has previously said crypto lenders fall under the SEC’s purview, his comments provide more detail on other crypto market actors the SEC believes fall within its jurisdiction.

The comments will likely spook crypto market participants who had hoped to avoid the costly requirements typically associated with SEC registration, including disclosures, risk management controls and capital and liquidity minimums, although it remains to be seen if such firms will voluntarily comply.

Gensler said he has asked SEC staff to work with crypto intermediaries to ensure they register each of their functions, which could involve splitting them out into separate legal entities to mitigate conflicts of interest.

He added, however, that the SEC may need to be flexible in applying existing disclosure requirements, noting tailored product disclosures exist elsewhere under the SEC’s regime.

(Reporting by Michelle Price; Additional reporting by Hannah Lang; Editing by Josie Kao)

(Reuters) – The United States has seized over $30 million in cryptocurrency stolen by North Korean-linked hackers Lazarus from the popular online game Axie Infinity, crypto intelligence firm Chainalysis said on Thursday.

The company said in a blog post it played a role in the recovery with U.S. law enforcement and other crypto organizations, without naming them, in the first ever recovery of stolen cryptocurrency by a North Korea hacking group.

Chainalysis and North Korea’s mission to the United Nations did not immediately respond to requests for comment. The FBI did not immediately respond to a request for comment.

The seizures represent about 10% of the total funds stolen in March from Ronin Network, a sidechain built for the play-to-earn game Axie Infinity, Chainalysis said.

Ronin said in March hackers stole about $615 million in cryptocurrency.

“We estimate that so far in 2022, North Korea-linked groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols,” Chainalysis said. He was referring to decentralized finance protocols, an umbrella term for financial services offered on public blockchains.

The U.S Department of Treasury in May sanctioned virtual currency mixer Blender, saying it was used in the laundering process for the Axie Infinity heist.

The Treasury Department in April also linked Lazarus to the attack.

(Reporting by Rachna Dhanrajani in Bengaluru; Editing by Richard Chang)

(Reuters) – Crypto exchange Coinbase on Thursday said it was funding a lawsuit against the U.S. Treasury Department to block sanctions barring Americans from Tornado Cash, a virtual currency mixer accused of helping hackers launder proceeds for cybercrimes.

The Treasury Department imposed sanctions on Tornado Cash last month over allegations they had laundered more than $7 billion worth of virtual currency. Some of those proceeds went to North Korean government-backed hackers, the department says.

Tornado Cash did not comment on the sanctions when they were imposed on Aug. 8 and representatives for the platform were not immediately reachable. Coinbase CEO Brian Armstrong said the Treasury Department had gone too far “by sanctioning an entire technology instead of specific individuals.”

Armstrong added: “[There] are legitimate applications for this type of technology and as a result of these sanctions, many innocent users now have their funds trapped and have lost access to a critical privacy tool.”

Armstrong said Coinbase was funding the lawsuit, which he said was brought by six people. The New York Times reported that the lawsuit was filed on Thursday in federal court in the Western District of Texas.

The Treasury Department did not immediately respond to a request for comment.

(Reporting by Rami Ayyub; Editing by Susan Heavey and Mark Porter)