Coinz.com

By Luc Cohen

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

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

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

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

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

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

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

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

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

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

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

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

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

By Tom Wilson, Elizabeth Howcroft and Hannah Lang

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

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

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

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

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

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

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

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

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

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

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

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

CRYPTO LENDING

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

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

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

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

‘GREY AREA’

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

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

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

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

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

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

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

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

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

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

By Tom Wilson, Elizabeth Howcroft and Hannah Lang

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

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

WHAT’S THE DEAL?

Crypto lending is essentially banking – for the crypto world.

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

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

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

HIGH RETURNS? SO CRYPTO LENDERS MUST BE POPULAR

They are.

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

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

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

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

IS THERE A CATCH?

There are several.

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

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

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

WHO ARE THE BIGGEST PLAYERS?

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

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

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

REGULATORS MUST BE WORRIED, THEN?

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

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

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

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

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

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

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

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

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

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

(Reporting by David Milliken; Editing by Alistair Smout)

By Elizabeth Howcroft

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

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

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

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

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

(Reporting by Elizabeth Howcroft; editing by Tom Wilson)

By Julie Gordon

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

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

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

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

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

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

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

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

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

By Gary McWilliams

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Anshuman Daga

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

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

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

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

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

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

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

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

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

($1 = 1.3762 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Sam Holmes)

By Pete Schroeder

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

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

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

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

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

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

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

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

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

By Huw Jones

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

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Huw Jones. Editing by Jane Merriman)

By Medha Singh and Lisa Pauline Mattackal

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

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

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

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

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

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

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

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

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

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

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

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

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

STILL IN THE RED

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Scott DiSavino; Editing by David Gregorio)

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

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

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

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

SINGAPORE (Reuters) – Wealth managers in Asia are holding back from offering digital assets to investors despite soaring demand due to a lack of understanding of these assets, according to an industry survey by consulting firm Accenture published on Monday.

Global banks have been cautiously moving into crypto for several years, some building it within existing operations and others setting up new businesses.

“Currently, 52 percent of affluent investors in Asia hold digital assets of some sort. Accenture’s research indicates this could reach 73 percent by the end of 2022,” Accenture said on Monday.

“Digital assets represent 7% of surveyed investors’ portfolios — making it the fifth-largest asset class in Asia — more than they allocate to foreign currencies, commodities or collectables. Yet two-thirds of wealth management firms have no plans to offer digital assets,” Accenture said.

The findings were part of Accenture’s report on the future of Asia’s wealth management industry based on two surveys – one of about 3,200 investors and another of more than 500 financial advisors at wealth management firms in Asia. The surveys were done in December 2021 and January 2022.

“For wealth management firms, digital assets are a $54 billion revenue opportunity – that most are ignoring,” Accenture said.

“Among firms’ barriers to action are a lack of belief in (and understanding of) digital assets, a wait-and-see mindset, and – given that launching a digital asset proposition is operationally complex – choosing to prioritize other initiatives,” it said.

Southeast Asia’s biggest bank DBS Group launched a standalone cryptocurrency trading platform in December 2020 offering corporate investors and accredited investors crypto trading services for many digital assets.

Last month, Nomura Holdings said it will create a digital asset company this year allowing institutional investors to trade products linked to cryptocurrencies, among others.

(Reporting by Anshuman Daga; Editing by Emelia Sithole-Matarise)

(Reuters) – More than 46,000 people reported losing over $1 billion in cryptocurrency scams since the start of 2021, the Federal Trade Commission (FTC) said in a report on Friday.

Nearly half the people who reported losing digital currencies in a scam said it started with an ad, post or a message on a social media platform, according to the FTC. (https://bit.ly/3x2NRQx)

The craze for cryptocurrencies was at a fever pitch last year with bitcoin hitting a record high of $69,000 in November.

Reports point to social media and crypto as a combustible combination for fraud, the agency said, adding that about $575 million of all losses related to digital currency frauds were about “bogus investment opportunities”.

Nearly four out of every ten dollars lost in a fraud originating on social media was lost in crypto, far more than any other payment method, with Instagram, Facebook, WhatsApp and Telegram being the top social media platforms in such cases, according to the report.

The average reported loss for an individual was $2,600 and bitcoin, tether and ether were the top cryptocurrencies that people used to pay scammers, the FTC said.

(Reporting by Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)

(Reuters) – Better regulation of the fast-growing world of crypto assets is needed not to keep rich people from losing money but for the sake of everyone else, Federal Reserve Governor Christopher Waller said on Friday.

“The main issue in crypto-asset regulation isn’t how to protect sophisticated crypto-investors; it’s how to protect the rest of us,” Waller said in remarks prepared for delivery to the SNB-CIF Conference on Cryptoassets and Financial Innovation in Zurich.

In particular, he said, the aim of regulation would be “to protect society from the often-irresistible pressure to socialize the losses of investors with limited resources, and to limit the spread of financial stress.”

In the last five years crypto assets have proliferated from a niche market valued at around $14 billion to a $3 trillion industry.

Several high-profile collapses in the crypto world recently have prompted calls for better guardrails for what’s essentially an unregulated market. One reason: their popularity. A recent Fed survey showed about 12% of U.S. adults used or held cryptocurrency in the past year, mostly for investment purposes. Other surveys suggest the number of crypto-users is even higher.

In March President Joe Biden directed the Treasury and other agencies to start looking at how best to regulate the industry, even as central banks around the world – including the Fed – look into the possibility of creating a central-bank-backed digital currency.

Waller is among those at the Fed who say they don’t see a reason for issuing a central bank digital currency that would compete with privately backed digital currencies.

On Friday he laid out his reasoning for why those privately backed currencies do need better oversight, despite arguments from inside the industry that the markets are better left to their own devices so as to foster more innovation.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

By Hannah Lang

(Reuters) – Coinbase Global Inc will extend its hiring freeze for the foreseeable future and rescind a number of accepted offers in order to deal with current macroeconomic conditions, the company said in a blog post on Thursday.

Coinbase earlier froze hiring for two weeks as fears of rising interest rates rocked the cryptocurrency market. Now, the crypto exchange says it will pause hiring “for as long as this macro environment requires.”

“We always knew crypto would be volatile, but that volatility alongside larger economic factors may test the company, and us personally, in new ways,” said L.J. Brock, Coinbase’s chief people officer, in the blog post.

Shares of Coinbase were flat following the news in after-hours trading. The company’s stock is down more than 75% since its market debut last year through a direct listing.

Coinbase last month reported a 35% slump in total revenue to $1.17 billion for the three months ended March 31, missing analyst expectations and weighing on investor sentiment.

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

By Hannah Lang

(Reuters) – The U.S. CFTC filed a federal lawsuit in New York on Tuesday accusing Gemini Trust Co of making false and misleading statements concerning a bitcoin futures contract the firm was pursuing in 2017.

The agency contends that Gemini, a crypto exchange led by Cameron and Tyler Winklevoss, violated federal laws governing commodities, and is seeking civil fines and other remedies.

Gemini officials “knew or reasonably should have known that the statements and information conveyed or omitted” by the company were false or misleading with respect to how a proposed bitcoin futures contract could be susceptible to manipulation, according the filing.

“We have an eight year track-record of asking for permission, not forgiveness, and always doing the right thing. We look forward to definitively proving this in court,” Gemini said in a statement.

The CFTC did not immediately respond to a request for comment.

The CFTC filing noted that Gemini’s proposed bitcoin futures contract was particularly significant because it was to be one of the first digital asset futures contracts listed on a designated contract market.

In December 2017, a Gemini bitcoin futures contract began trading on the Cboe Futures Exchange under the ticker symbol “XBT,” although it was not immediately clear if the CFTC’s lawsuit referenced this contract in particular.

(Reporting by Hannah Lang in Washington; Editing by Chris Reese and Richard Chang)

By Howard Schneider

NEW YORK (Reuters) – Digital money, a curiosity just a few years ago, is emerging as an intense concern among central banks with the potential to erode the power of monetary policy, and even in the best of worlds likely to make control of interest rates more difficult, according to new Federal Reserve and other research.

A New York Fed symposium this week laid out the puzzle central bankers face in dealing with emerging digital technologies that range from new ways to process payments to new asset categories like cryptocurrencies and stablecoins.

There are benefits seen in the underlying technology, including better transaction speed, lower cost, and easier accessibility to banking services, and even with recent crashes and volatility it is assumed it will keep advancing. Ignore it, in other words, and systems developed by upstart private companies could capture larger shares of finance and make “central bank cash” less relevant – diminishing central bank control over interest rates.

Create a substitute in the form of a central bank digital currency, and new instabilities could emerge – including the potential for a digital dollar or euro to replace conventional bank deposits and compete with money market funds and other key financial instruments. In a crisis, the process could mimic a bank run, leave the system starved for liquidity, and force the Fed, for example, to either ramp up lending to commercial banks or beef up its own holdings of Treasury bonds and similar securities to keep the system stable.

Banks losing deposits would have to compete for fresh ones and “depending on the intensity…the general level of short-term interest rates…could rise” as a result, concluded a Fed paper this week outlining possible outcomes should the U.S. central bank adopt a digital currency at the retail level, open to households. “A retail CBDC could magnify financial sector stress, forcing the Federal Reserve to provide more liquidity to banks through existing tools…The Federal Reserve’s longer-term footprint in certain asset markets, such as in U.S. Treasuries, could become more pronounced.”

The Fed is debating whether to develop a digital currency, as are most central banks around the world. A decision has not been made, and officials say it would take congressional approval to move forward.

The point of tension may seem far off since the market value of cryptocurrencies and stablecoins remains a small slice of the financial system. But payments processors, such as PayPal and Apple Pay, are growing fast, and at the start of this year handled transactions on the scale of major credit card companies. Among cryptocurrencies and stablecoins, it was noted at the New York conference, some of the arrangements involve exotic lending schemes – credit creation – that, if expanded, could entail larger risks.

“What if the central bank no longer has money that is relevant either at the retail or the wholesale levels? In that case the central bank could start losing traction,” in its monetary policy, Eswar Prasad, a Cornell University professor and author of the recent book “The Future of Money” on the topic, said on the sidelines of the conference.

“In some countries it is becoming a problem today. China, increasingly India or Sweden – the use of central bank money in retail payments has plunged to basically nothing” as private payments providers have stepped in.

STAKES ARE HIGH

The implications of central bank digital currencies for monetary policy is just one part of a broader look by institutions like the Fed at how emerging technologies will change the financial system. As those technologies have become more prominent, the implications for financial stability and the risks posed to individual investors have become a higher priority for research and regulation.

In the United States, President Joe Biden, citing the growth in crypto assets over five years from $14 billion to $3 trillion as of November, issued an executive order in March detailing the Treasury and other agencies to start looking at how best to regulate the industry.

Given the stakes, central banks around the world are quickly moving off the sidelines.

A Bank for International Settlements survey published last month of 81 central banks in countries that account for nearly all global economic output found more than 90% were exploring the idea of a central bank digital currency.

More than a quarter are either actively developing a digital currency or running pilot programs, a share that nearly doubled from 2020 to 2021. The explosion of electronic payments as well as crypto investment during the pandemic is accelerating the work, respondents said, with about 60% of banks saying that the use of cash is in decline.

Adoption may not necessarily be disruptive.

In a published presentation to the New York Fed conference, Andrew Hauser, executive director for markets at the Bank of England, said that “while the technology for any future CBDC may be new…the use of the central bank balance sheet to provide state-backed transactional money…is one of the oldest functions of central banks.”

But it may be coming fast.

“The innovation occurring in money and payments has the potential to alter the existing…monetary system upon which current monetary policy implementation frameworks are designed,” said Lorie Logan, executive vice president of the New York Fed and recently named to head the Dallas Fed. “How things evolve from here is uncertain, and the impact of these innovations could be revolutionary, or more evolutionary.”

(Reporting by Howard Schneider; Editing by Andrea Ricci)