Coinz.com

By Pete Schroeder

WASHINGTON (Reuters) – Michael Barr, the second person nominated by Democratic President Joe Biden to be the Federal Reserve’s Wall Street cop, will appear before the Senate on Thursday to make the case for why he should take on the central bank’s sweeping regulatory portfolio.

Barr, a former Treasury Department senior official under President Barack Obama, looks to be well-positioned to win Senate confirmation after receiving early support from key moderates and progressive Democrats in the evenly divided chamber. He will testify before the Senate Banking Committee at 10 a.m. ET (1400 GMT).

In his prepared testimony, Barr said he would work to ensure the financial system is resilient, operates fairly, and allows room for innovation with “clear rules of the road.”

He is in a stronger position than Sarah Bloom Raskin, Biden’s first nominee for Fed supervision vice chair, who withdrew her nomination after Democrat Joe Manchin refused to back her.

Barr, currently a law professor, has already drawn support from moderate Democrats, including Manchin, and progressives anxious to ramp up scrutiny of Wall Street after what they say was regulatory easing under Republicans. At Treasury, Barr was a central figure in the drafting of the 2010 Dodd-Frank financial reform law, which established a range of safeguards following the 2008 financial crisis.

“This is going to be a far easier, simpler and faster hearing than we saw last time,” said Isaac Boltansky, director of policy research for brokerage BTIG, adding that Barr should be confirmed by August.

Barr would fill the remaining vacancy on the Fed board and take on a broad agenda that is likely to include revisiting rules that were eased under his predecessor, Randal Quarles, and taking steps to address climate change risk, fintechs and cryptocurrencies.

Raskin withdrew her nomination after Manchin, who represents coal-producing West Virginia, opposed her because she had called for financial regulators to more aggressively police climate change risks. The decision effectively ended her nomination.

But Manchin announced Tuesday he would back Barr. In the progressive wing, Elizabeth Warren, a prominent big-bank critic, said in April that she supported Barr.

Progressives have changed their tune on Barr after opposing him last year for comptroller of the currency, another top regulatory post. They wanted a more liberal pick, saying his work in the private sector, as well as his resistance to some stricter Dodd-Frank proposals, were marks against him.

However, after progressives’ preferred candidates, including Raskin and Saule Omarova, a previous Biden pick for comptroller of the currency, flopped amid resistance from moderate Democrats, they are now eager to simply fill key posts.

The Fed’s regulatory work, for example, has slowed with no fulltime supervision chief.

“The Fed urgently needs a vice chair on board who can guard against risks to financial stability,” said Carter Dougherty, a spokesman for advocacy group Americans for Financial Reform.

If confirmed, Barr will also join 18 other Fed policymakers in setting the course of monetary policy as the central bank battles to bring down 40-year-high inflation. Barr’s views on monetary policy are not well known, but so far policymakers have been unanimous in pivoting to a more aggressive stance as price pressures have persisted. Barr noted in his prepared testimony that he would be “strongly committed” to bringing down inflation if confirmed.

(Reporting by Pete Schroeder and Lindsay Dunsmuir; Editing by Michelle Price and Leslie Adler)

By Hannah Lang

WASHINGTON (Reuters) – The cryptocurrency industry is scrambling to respond to U.S. lawmakers’ concerns about stablecoins following the collapse of TerraUSD, which wiped billions off the cryptocurrency market.

The Blockchain Association and the Chamber of Digital Commerce, which represent some of the most influential crypto companies, say they have been fielding a flurry of questions from Capitol Hill since TerraUSD, known as “UST,” broke its peg last week and crashed 90%.

Stablecoins are cryptocurrencies that try to maintain a constant exchange rate with fiat currencies. The $163 billion space is dominated by tokens that are pegged to the U.S. dollar, like Tether and USD Coin, by holding reserves in traditional dollar assets. Some stablecoins, like UST, however, use a complex algorithmic process to create the peg.

Capitol Hill lawmakers have been quizzing lobbyists on the structure of UST, seeking to determine whether its collapse was preventable and if other stablecoins could suffer the same fate.

Lobbyists are urging lawmakers not to crack down too hard on the gamut of stablecoins.

“The one thing we’ve been cautioning to the Hill is that we don’t want to accidentally throw the baby out with the bathwater, because stablecoins we think are a really critical piece of the crypto ecosystem going forward,” said Kristin Smith, executive director of the Blockchain Association.

As the cryptocurrency market has exploded, reaching $3 trillion in November, the scrutiny of policymakers has increased.

In response, the crypto industry has beefed up its presence in Washington, spending $9 million on lobbying in 2021, according to Public Citizen. The Blockchain Association and Chamber of Digital Commerce spent $900,000 and $426,663, respectively, while crypto giants Coinbase Global Inc and Ripple Labs forked out $1.5 million and $1.1 million respectively.

REGULATORY GRAY AREA

The industry’s growing influence will be tested as it tries to contain the fallout from the UST and broader crypto market crash, which shrank from $1.98 trillion to $1.3 trillion in just six weeks due to investor fears over rising interest rates.

There are currently a handful of draft stablecoin bills floating around Congress. While analysts say the chances of Congress passing any of those this year is slim with lawmakers focused on the midterm elections, recent crypto market gyrations have caused many lawmakers to take notice.

“There are a lot of people in Congress that are interested in coming up with a regulatory framework to prevent something like this from happening again,” said Smith.

Cryptocurrencies fall into a regulatory gray area.

President Joe Biden’s administration has largely focused on rules for dollar-backed stablecoins. A November Treasury Department-led report recommended Congress regulate stablecoin issuers like insured depository institutions, but it did not cover algorithmic stablecoins.

Lobbyists have had to quickly change tack and educate lawmakers on the differences, they say.

“All of the recent legislative proposals have been fiat-backed,” said Cody Carbone, policy director at the Chamber of Digital Commerce. “We thought we did pretty well in educating because we stayed within that scope, and now we’re going to have to broaden that.”

While the group’s members do not currently operate algorithmic stablecoins, the chamber is crafting talking points to explain how they work, said Carbone.

Regulators have warned that U.S.-dollar stablecoins could be susceptible to runs if users lose confidence, a fear that appeared to partially play out last week: after UST broke its peg, Tether, the largest stablecoin, briefly broke its peg too.

“This is essentially a call to action, because not all monies are created equal, and what one believes to be stable may actually not be stable,” said Jonathan Dharmapalan, CEO of eCurrency, a digital currency technology provider.

While the Blockchain Association’s Smith agreed legislation was not imminent, the UST problem “certainly heightens that need,” she said.

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

By Jihoon Lee and Cynthia Kim

SEOUL (Reuters) – Reckoning they have little to lose with prices so ridiculously low, South Korean speculators in recent days have piled into Luna, a cryptocurrency that lost 99.99% of its value last week after its paired stablecoin TerraUSD collapsed.

Both tokens are affiliated with Terra, a blockchain platform co-founded by Korean developer Do Kwon and, according to blockchain analytics firm Elliptic, investors in them have lost around $42 billion.

Luna had been one of the world’s most popular cryptocurrencies and its downfall, alongside TerraUSD, caused mayhem across the crypto spectrum globally, with bitcoin losing around a quarter of its value between May 9-12.

Worth nearly $100 in late April, Luna is now trading at a fraction of one cent – so low that there has been a rush of buying from speculators betting that it will stage a miraculous recovery, with some clinging to the belief that it is just too big to be allowed to fail.

“Luna was once a major coin of top-ten market capitalisation, so they will do whatever it takes to revive it,” one hopeful investor wrote in a blog on South Korea’s internet platform Naver, without saying who “they” could be.

The blogger said he had bought 300,000 Luna over the weekend at 0.33 won ($0.0003) each, using an international crypto exchange.

As the sudden resurgence of buying crossed its radar, South Korea’s Financial Services Commission warned people on Tuesday against investing in Luna.

The number of investors in the failed cryptocurrency rose more than 50% in just over two days at South Korea’s major exchanges to stand at 280,000 as of May 15, according to a source at the FSC who, as is customary for South Korean bureaucrats, declined to be named.

The buying mostly came from domestic speculators, though there were some inflows from abroad, the source said.

The window for speculation is limited as Bithumb and Upbit, two of South Korea’s largest exchanges, said they will suspend trading support for Luna on May 27 and May 20, respectively, while another, Coinone, has halted deposits in the crypto-currency ahead of a possible de-listing on May 25.

The buying has had little affect on the token’s price. It has spent the past week flopping between one-hundredth and four-hundredths of a cent.

But the propensity of South Koreans, particularly the younger ones, to invest in volatile and risky assets from stocks to cryptocurrencies has worried regulators.

Their earlier enthusiasm had helped put Luna and TerraUSD among the world’s ten largest cryptocurrencies ranked by market cap.

But things fell apart on May 10, when TerraUSD’s 1:1 peg to the dollar was shattered. On Wednesday it traded at around 10 cents.

Unlike most other major stablecoins which are backed by other assets, TerraUSD’s value is derived by complex algorithmic processes, linked to its paired token Luna, which is free floating.

Under the system, one TerraUSD token could be swapped for $1 of Luna, and vice versa, and once swapped the coins would be destroyed.

If TerraUSD fell below $1, traders were incentivised to buy the stablecoin to swap it for $1 worth of Luna, and so reduce the supply of TerraUSD’s and push its price back to $1.

That was the theory, but the market proved the premise wrong.

As the market imploded, hundreds of outraged retail investors flooded social media with tales of woe, with some of them asking Kwon to compensate their losses.

Kwon, last week, announced plans to change the system so TerraUSD will backed by reserves in future, but it is unclear whether this plan is achievable.

There is little the government can do to protect investors as cryptocurrency trading takes place outside its regulatory sphere.

($1 = 1,273.9300 won)

(Reporting by Jihoon Lee and Cynthia Kim; Editing by Alun John and Simon Cameron-Moore)

By Nelson Renteria, Sarah Kinosian and Rodrigo Campos

SAN SALVADOR/NEW YORK (Reuters) – El Salvador’s big bet on bitcoin, which the Central American nation has been buying since September, has soured in recent weeks as a cryptocurrency rout shaved over a third of the value of the government’s holdings, Reuters calculations show.

Under populist President Nayib Bukele, a vocal cheerleader for the currency, El Salvador went all-in on bitcoin, not just becoming the world’s first country to adopt it as a legal tender but also sketching out plans for a volcano-powered crypto mining hub and plans to issue the first sovereign bond linked to the coin.

With global borrowing costs on the rise and a big debt repayment on the horizon, El Salvador has other fiscal headaches than the impact of the currency’s swoon. But the crypto slump has also closed some potential off-ramps from the crisis, including the now-postponed bitcoin bond.

“The government’s financial problems are not because of bitcoin, but they have gotten worse because of bitcoin,” said Ricardo Castaneda, senior economist and country coordinator for El Salvador and Honduras at think tank Central American Institute for Fiscal Studies (ICEFI). For the government, he said, “bitcoin ceased to be a solution and has become part of the problem.”

Bitcoin has fallen 45% since El Salvador officially adopted it in early September, and 26% from its May high as crypto assets have been swept up in a risk-off investing environment.

The combined market value of all cryptocurrencies recently fell to $1.2 trillion, less than half of where it was last November, based on data from CoinMarketCap.

El Salvador’s debt stood at $24.4 billion as of December, from $19.8 billion at end-2019, after the Bukele administration allocated millions of dollars to deal with the COVID-19 pandemic and its economic effects over the past couple of years.

The International Monetary Fund estimates that the current account deficit for its remittance and external financing-reliant economy will hover near $2 billion through 2025.

But adopting bitcoin set the country at loggerheads with multilateral lenders like the IMF, from which Finance Minister Alejandro Zelaya said https://www.reuters.com/article/us-el-salvador-economy-exclusive/exclusive-el-salvador-seeks-imf-funding-sees-golden-opportunity-for-economy-says-finance-minister-idUSKBN2AW1GV last year the government was seeking $1.3 billion.

The fund has recommended that El Salvador ditch bitcoin altogether. Any deal for a credit line would have to address risks including “those related to the adoption of bitcoin as legal tender as well as risks related to economic governance,” an IMF official said on Wednesday.

Ratings agencies have warned bitcoin adoption could facilitate money laundering, and importantly, the bitcoin risk has given bond investors another reason to demand higher returns

As of Wednesday, they were seeking a record-high premium of 2,445 basis points over U.S. Treasuries.

Bukele’s moves to centralize power, from removing all the top judges on the country’s supreme court to muscling through authorization to seek immediate re-election despite constitutional term limits, have helped drive the risk premium higher.

“If there isn’t potential for bitcoin-growth dividends or innovative bitcoin-financing, then the Bukele administration will have to prioritize spending priorities and identify financing options,” according to Siobhan Morden, head of Latin America Fixed Income Strategy at Amherst Pierpont.

Reuters calculations of a $36 million paper loss in bitcoin, enough to make at least some of those coupon payments, is based on Bukele’s tweets and an estimate of prices on the purchase dates. The government has spent some $104.2 million on 2,301 coins now worth just $67.9 million using Wednesday’s volume weighted average price.

The country has to service $329 million in interest due on its international bonds this year as well as $800 million in a bond set to mature in January.

ICEFI’s Castaneda listed financing options including the Central American and Latin American development banks – CABEI and CAF, respectively – as possible patches for financing the $800 million payment due in January. Another option, he said, is to nationalize the country’s pension fund to cover the fiscal deficit – which could be done by transferring the public’s savings to a government account.

A debt restructuring for El Salvador is “inevitable” if the country continues with the “current policy mix,” said Polina Kurdyavko, head of emerging markets at BlueBay Asset Management. “Debt in El Salvador could be sustainable with the right (IMF) program. But they have to act now.”

The country’s finance minister, Zelaya, declined to comment for this story.

Salvadoran bonds trade between 43.5 cents and 34 cents on the dollar except for the January maturity at 75 cents, reflecting cautious optimism that the country could make that payment.

The cost to insure investors against a Salvadoran sovereign default over the next five years on Wednesday hit its highest level since 2020, according to S&P Global data.

(Reporting by Nelson Renteria in San Salvador, Sarah Kinosian in Mexico City and Rodrigo Campos in New York; Additional reporting by Jorgelina do Rosario in London; Editing by Christian Plumb and Matthew Lewis)

By Rachel Savage and Promit Mukherjee

LONDON/JOHANNESBURG (Reuters) – A digital rand in South Africa could cut the high cost of cross-border payments for banks but its introduction is still a few years away, a senior central bank official said.

However, regulation of crypto assets is in the offing and might come into force within nine to 15 months, South African Reserve Bank (SARB) Deputy Governor Kuben Naidoo told Reuters in an interview.

It costs 13% of a transaction to remit money from South Africa to another country, more than double the average of the Group of 20 (G20) leading global economies, according to a 2021 World Bank report.

Sending money to South Africa costs 6.2%.

Some countries are planning to introduce e-versions of traditional currency, known as central bank digital currencies (CBDCs) and are studying how the underlying technology could be used.

China’s digital yuan project is the most advanced among large economies, though central banks from the euro zone to the United States are in varying stages of research into CBDCs.

Last year, Nigeria’s central bank introduced an eNaira for use by ordinary citizens.

South Africa has conducted small-scale experiments with a wholesale CBDC and participated in a cross-border pilot with the central banks of Malaysia, Australia and Singapore.

The next stage is for regulators to test the digital rand at a bigger scale and develop rules for its use.

“We’re still learning, we’re still experimenting,” Naidoo said.

Meanwhile, Naidoo said the South African Reserve Bank wants regulation of crypto assets to prevent theft, money laundering and undermining of monetary policy and hopes it will be in place in the next 15 months.

“If crypto assets were to become a very ubiquitous currency, you could undermine the authority of the central bank,” he said.

(Reporting by Rachel Savage and Promit Mukherjee; Editing by Lisa Shumaker)

LONDON (Reuters) – Investors in crypto currencies should expect more difficult times ahead as tightening financial conditions around the world stoke appetite for safer assets, Bank of England Deputy Governor Jon Cunliffe said on Tuesday.

Asked at a Wall Street Journal conference if rising interest rates would ramp up pressure on crypto currencies, Cunliffe said: “Yes, I think as this process continues, as (quantitative tightening) starts in the U.S. … I think we’ll see a move out of risky assets.”

Cunliffe added that the conflict in Ukraine also had the potential to cause a renewed flight to safer assets.

“When there’s a move out of risky assets, you would expect the most speculative assets to be the ones most affected,” Cunliffe said.

Bitcoin, the world’s largest cryptocurrency, fell as low as $25,401 on Thursday, its lowest since Dec. 2020. It hit a record high of $69,000 in November.

(Reporting by Andy Bruce; Editing by Alistair Smout)

PARIS (Reuters) – The regulation of crypto-assets is likely to be discussed at a meeting of Group of Seven finance chiefs this week in Germany, French central bank head Francois Villeroy de Galhau said on Tuesday.

“What happened in the recent past is a wake-up call for the urgent need for global regulation,” Villeroy told an emerging markets conference in Paris, referring to recent turbulence in crypto-asset markets.

“Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably … discuss these issues among many others at the G7 meeting in Germany this week,” he added.

(Reporting by Leigh Thomas; Editing by Edmund Blair)

By Medha Singh, Lisa Pauline Mattackal and Alun John

(Reuters) – Stablecoins, the safe and strait-laced cousins of crypto, are looking distinctly dicey.

Tether, USDC and others lost their prized pegs to the dollar last week in a bout of market mayhem that shook faith in these coins that were designed to sidestep crypto volatility. But was it an isolated outburst, or are they losing their soul?

Major stablecoins swung between roughly $0.95 and $1.02 last week, according to data provider Coinmarketcap, after having maintained their peg to within a cent previously in 2022.

It’s not the first time they’ve hit the wobbles, though.

Both Tether and USDC – the two largest – have experienced less publicised bouts of volatility in previous years, at times rising to as much as $1.01 in 2021 and falling to around 97 cents in 2020, according to Coinmarketcap.

Last week was nonetheless the most volatile in the history of this class of cryptocurrency, according to Morgan Stanley.

“Stablecoins are the closest that we’ll get in the crypto space to a systemically important asset and any impact on the value of one or several stablecoins is liable to impact the system as a whole,” said Hagen Rooke, a financial regulation partner at law firm Reed Smith in Singapore.

“As things stand, stablecoins are very lightly regulated, which is strange because if you break down at how a centralised stablecoin works, it is basically the same as a bank deposit.”

Stablecoins are pegged to the value of mainstream assets such as the dollar to boost confidence, and are the main medium for moving funds between cryptocurrencies or into regular cash.

“The economy is completely shifting to being internet-based and always on, but the financial system isn’t. So you need a stablecoin to have the dollars that can move at the speed of the economy, of the fastest parts of the economy,” said Chad Cascarilla, CEO of Paxos, a leading stablecoin.

The market turmoil last week was triggered by the spectacular collapse of TerraUSD, an outlier because its peg to the dollar was supposed to be maintained by a complex algorithmically driven mechanism rather than by reserves of dollars or other assets, as is typical for stablecoins.

TerraUSD’s woes contributed to a slide in crypto markets that saw over $357 billion or 21.7% of digital asset market capitalization wiped out week-on-week, according to research from crypto exchange Kraken.

Yet there may be winners and losers from such upheaval, even among stablecoins.

Tether’s market value has declined to $75.6 billion from $83 billion last Monday, before the dollar decoupling, while that of USDC has climbed to $51 billion from $48 billion, according to Coinmarketcap.

“There’s more confidence with USDC because of the likes of the institutions that are holding USDC reserves for them, like BlackRock for example,” said Marcus Sotiriou, analyst at UK-based digital asset broker GlobalBlock.

Meanwhile Rooke and others see more regulation on the way.

“Stablecoins are low-hanging fruit, and I think we’re going to see some policy for them,” said Michelle Bond, CEO of the Association for Digital Asset Markets.

“There are a number of different issues – what are the permissible reserves? Who can issue a stablecoin? How should an issuer and the reserved be audited? What kind of disclosures are made to consumers?”

(Reporting by Medha Singh, Lisa Pauline Mattackal and Alun John; Editing by Pravin Char)

By Makiko Yamazaki

TOKYO (Reuters) – Nomura Holdings Inc said it is targeting an up to 90% jump in core pretax income in three years as Japan’s biggest brokerage and investment bank plans to beef up advisory services in pursuit of revenue less vulnerable to market swings.

“We will work to expand businesses with stable revenue amid extremely high market volatility,” Chief Executive Kentaro Okuda told a meeting with investors on Tuesday.

Setting out guidance in a mid-term presentation, Nomura said it would aim for annual pretax income of 350 billion yen to 390 billion yen ($2.7 billion to $3.0 billion) for its three core divisions in the year to March-end 2025.

That would compare with the 205.2 billion yen the three divisions posted for the year through March 2022.

The averages of estimates from three analysts surveyed by Refinitiv put Nomura’s company-wide pretax profit at 286.1 billion yen in the year ending March 2025 and 324.4 billion yen in the following year.

Enhancing stable revenue sources has been critical for Nomura, which has had a troubled history in attempts to expand globally with occasional major financial hits, including a $2.9 billion loss from the collapse of U.S. investment fund Archegos.

One of its growth drivers is the advisory business in global investment banking, particularly for sustainability-related deals driven by Nomura Greentech, a merger-and-acquisition advisor in clean technology. Nomura hopes to beef up advisory revenue by more than 50% over the next three years.

“We are now steering our business to focus on ESG,” Okuda said at a subsequent news conference, referring to environmental, social and governance issues.

It also plans to boost wealth management businesses in Asia.

NEW DIGITAL ASSET COMPANY

Nomura also said it will create a digital asset company this year allowing institutional investors to trade products linked to cryptocurrencies, stablecoins, decentralized finance and non-fungible tokens.

It said it wants to build a platform that can compete with crypto-native firms and operate across the crypto industry offering market-making for digital assets, providing investors with yield-generating crypto products and quantitative trading strategies, as well as operating a venture capital arm.

It will add 100 employees by 2024.

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

Singapore’s DBS Group Holdings Ltd in 2020 launched a standalone cryptocurrency trading platform offering corporate investors and accredited investors crypto trading services for several digital assets.

($1 = 128.9100 yen)

(Reporting by Makiko Yamazaki; Additional reporting by John Alun and Anshuman Daga; Editing by Muralikumar Anantharaman and Christopher Cushing)

By John McCrank

(Reuters) – Cryptocurrency assets are highly speculative and investors in them need more protections or they could lose trust in the markets, Gary Gensler, chair of the U.S. Securities and Exchange Commission, said on Monday.

Generally, people who buy cryptocurrencies do not get the disclosures they get when they make other asset purchases around things like whether the trading platform they are using is actually trading against them, or whether they actually own the assets they store in digital wallets, Gensler said.

“We have this basic bargain: You the investing public can make your choices about the risk you take, but there is supposed to be full and fair disclosure, and people are not supposed to lie to you,” he said at the Financial Industry Regulatory Authority’s annual conference in Washington.

His comments came after last week’s spectacular collapse of TerraUSD, a so-called stablecoin that lost its 1-to-1 dollar peg.

The token’s crash sent cryptocurrencies tumbling, a slide that resumed on Monday, as bitcoin erased the gains it had eked out over the weekend to trade under $30,000, far below its Nov. 10 record of $69,000.

While crypto markets are thought of as decentralized, the reality is that most activity occurs on a handful of trading platforms, which, along with token issuers, need to work with the SEC to improve industry rules and disclosures, Gensler said.

He pointed to basic market principles like, “anti-fraud, anti-manipulation, making sure there’s not front-running, making sure an order book is actually real and not made up.”

The SEC will continue to be “a cop on the beat,” while working with the Commodity Futures Trading Commission to ensure all cryptocurrencies are covered, Gensler said.

“There’s a lot to be done here, and in the meantime the investing public is not that well protected,” he said.

(Reporting by John McCrank; editing by Jonathan Oatis)

By David Randall and Carolina Mandl

NEW YORK (Reuters) – Jupiter Asset Management, Azora Capital LP and billionaire Jon Yarbrough’s family office were among funds that sold all of their stakes in cryptocurrency company Coinbase Global Inc before the company fell nearly 30% to record lows in early May, according to filings released on Monday.

But over the same period – the quarter ended March 31 – Cathie Wood’s ARK Innovation fund continued to add to its position in Coinbase, the filings showed.

Coinbase, the largest crypto exchange in the United States, tumbled after the company missed earnings estimates and reported declining trading volumes as the value of bitcoin fell near 17-month lows. Shares of the company fell 3.6% on Monday and are now down 74% for the year to date.

Jupiter Asset Management sold 73,441 shares of the company in the quarter that ended March 31, while Azora Capital sold 43,290 shares and Yarbrough Capital sold 16,968, according to securities filings.

Tiger Global, meanwhile, cut its stake by approximately 70%, leaving it with 836,597 shares in the company.

Securities filings known as 13-Fs are one of the few public ways to see what hedge funds and other institutional investors hold in their portfolios, though they are backward-looking and do not reveal current positions.

ARK Innovation, the ETF run by Wood, added slightly more than 1.5 million shares of Coinbase during the quarter, the most of any fund, according to securities filings. The fund owned slightly less than 7 million shares at the end of March. Shares of the company make up its 10th-largest position.

(Reporting by David Randall in New York; Editing by Matthew Lewis)

By Alun John

HONG KONG (Reuters) – An affiliate of the company behind collapsed stablecoin TerraUSD said on Monday it had spent the bulk of its reserves trying to defend its dollar peg last week, and would use the remainder to try to compensate some users who had lost out.

The token’s crash last week sent cryptocurrencies tumbling, a slide which resumed on Monday, as bitcoin gave up the gains it had eked out over the weekend

The world’s largest cryptocurrency fell 5% to around $29,700 on Monday in Asian trade, sliding alongside stocks because of worries about high inflation and rising interest rates.

Bitcoin has lost around one fifth of its value so far this month, as the spectacular collapse of TerraUSD, which is meant to be pegged 1:1 to the dollar but currently trading around 14 cents, roiled crypto markets.

Luna Foundation Guard (LFG), a Singapore-based non profit designed to defend TerraUSD, said on Twitter on Monday it would use its remaining assets to compensate remaining users of the so-called stablecoin, starting with the smallest holders, though it had yet to decide the best method of doing so.

The organisation had built up a large reserve including over 80,000 bitcoin and millions of dollars worth of other stablecoins to support TerraUSD, the majority of which it said it had spent trying to prop up the token last week.

LFG had initially pledged to raise a reserve $10 billion in bitcoin. The reserve was down to 313 bitcoin as well as other assets as of now, it tweeted.

REGULATORS EYE CRYPTO

The incident has drawn particular attention, including from financial regulators, to stablecoins and the role they play in the crypto system as a main medium for moving money between cryptocurrencies or for converting balances to fiat cash.

Bank of France Governor Francois Villeroy de Galhau told a conference crypto assets could disrupt the international financial system if they were not regulated and made interoperable in a consistent and appropriate manner across jurisdictions.

He pointed to stablecoins, which he said were somewhat misnamed, as among the sources of risk.

Speaking separately, Fabio Panetta, member of the executive board of the European Central Bank, also said on Monday that stablecoins were vulnerable to runs.

Tether, the world’s largest stablecoin, briefly lost its 1:1 peg on May 12, before recovering. Unlike TerraUSD, Tether is backed by reserves in traditional assets, according to its operating company.

On the same day, bitcoin dropped as far as $25,400, its lowest level since December 2020, but recovered to as high as $31,400 on Sunday.

Ether, the second-largest cryptocurrency, fell 5.6% to around $2,000 on Monday.

Regulators elsewhere are also concerned. The U.S. Federal Reserve warned last week that stablecoins were vulnerable to investor runs because they were backed by assets that could lose value or become illiquid in times of market stress.

(Reporting by Alun John; additional reporting by Medha Singh in Bengaluru; Editing by Bradley Perrett and Emelia Sithole-Matarise)

By Jamie McGeever

ORLANDO, Fla. (Reuters) – Being long dollars will no doubt become an overcrowded trade at some point and a reversal will ensue, but for hedge funds right now, there is no alternative.

Funds have amassed their biggest bet in six months that the dollar will strengthen against the world’s major currencies, and you can understand why.

From widening interest rate and yield spreads, favorable relative growth prospects, and safe-haven flows amid exploding equity- and crypto-fueled market volatility, there are many factors behind the greenback’s ascent to a 20-year peak.

The latest Commodity Futures Trading Commission data show that funds increased their net long dollar position against G10 currencies to $20.6 billion in the week to May 10 from $19.8 billion the week before.

That is the biggest net long position since early December last year. The bullishness is broad-based – funds are long dollars against all major currencies except the euro, and that short position is very small by historical standards.

A long position in an asset or security is effectively a bet that it will rise in value, and a short position is the opposite.

Graphic: CFTC dollar positions & dollar index https://fingfx.thomsonreuters.com/gfx/mkt/jnvwezgwlvw/USDCFTC.jpg

Graphic: CFTC net dollar position & dollar index https://fingfx.thomsonreuters.com/gfx/mkt/zgpomewrzpd/USDCFTC2.jpg

The dollar index, a measure of the greenback’s value against a basket of major currencies, rose above 104.00 on May 9 for the first time since December 2002, lifted by the Federal Reserve’s half-percentage-point rate hike and a pledge from Fed Chair Jerome Powell that further 50-basis-point moves are coming.

$6 BILLION BET AGAINST STERLING

Analysts at Goldman Sachs estimate that the dollar is over-valued by 18% but are cautious on calling for a correction, while analysts at Barclays note that the dollar looks stretched but raised their forecasts regardless.

“More expensive for longer,” Barclays wrote on Monday.

There’s a debate to be had about how much the Fed will ultimately tighten – the terminal rate implied by pricing on the Secured Overnight Financing Rate (SOFR) has fallen to 3% from almost 3.50% on May 4, the day of the Fed’s policy decision – but most observers believe it will still be significantly more aggressive than its peers.

For example, the Bank of England also raised rates again this month, but warned of recession risks and the possibility of double-digit inflation. This was not what sterling wanted to hear, and its downdraft accelerated sharply.

CFTC funds have consistently been short the pound since mid-November, apart from the week before Russia invaded Ukraine in February. They have been short every week since – that bet is now worth more than $6 billion – and on Friday sterling hit a two-year low of $1.2155.

Graphic: CFTC sterling positions https://fingfx.thomsonreuters.com/gfx/mkt/akvezrgajpr/CFTCGBP.jpg

The European Central Bank is steering markets towards a likely rate hike in July, but the hawkish noises are being utterly drowned out by recession alarm bells. The euro’s slide towards parity with the dollar is starting to worry ECB officials.

CFTC funds flipped back long euros in the latest week, a week-on-week position swing of almost $3 billion. But those longs will have been crushed by the currency’s slump to as low as $1.0350.

Derek Halpenny at MUFG reckons the euro’s 2017 low of $1.0340 is the last line of defense before $1.00 and the first time at parity since 2002. If hedge funds are thinking along the same lines, they may might be flipping to a net short euro position soon enough.

Related columns:

Stirring ingredients of 1985’s dollar-capping Plaza Accord (Reuters, May 11)

Sterling tailspin as BoE maps 10% inflation and recession (Reuters, May 6)

Fed fingers crossed for 1994 re-run as hiking path shortens (Reuters, May 5)

Fraying central bank consensus spurs dollar and market stress (Reuters, May 4)

(The opinions expressed here are those of the author, a columnist for Reuters)

(By Jamie McGeever; Graphics by Saikat Chatterjee, Joice Alves and Karen Brettell; Editing by Paul Simao)

FRANKFURT (Reuters) – The European Central Bank may kick off the development of its digital euro, an electronic version of banknotes and coins, by the end of next year, ECB board member Fabio Panetta said on Monday.

“Finally, at the end of 2023 we could decide to start a realisation phase to develop and test the appropriate technical solutions and business arrangements necessary to provide a digital euro,” Panetta said. “This phase could take three years.”

(Reporting By Francesco Canepa; Editing by Toby Chopra)

(Reuters) – Cryptocurrency exchange FTX’s founder has said that bitcoin has no future as a payments network and criticized the digital currency for its inefficiency and high environmental costs, the Financial Times reported on Monday.

Bitcoin, the world’s largest cryptocurrency, is created by a process called “proof of work” that requires computers to “mine” the currency by solving complex puzzles. Powering these computers needs large amounts of electricity.

An alternative to the system is called the “proof of stake” network, where participants can buy tokens that allow them to join the network. The more tokens they own, the more they can mine.

FTX Founder and Chief Executive Sam Bankman-Fried told FT that “proof of stake” networks would be required to evolve crypto as a payments network as they are cheaper and less power hungry.

Blockchain Ethereum, which houses the second-largest cryptocurrency ether, has been working to move to this energy-intensive network.

Bankman-Fried also said he didn’t believe bitcoin had to go as a cryptocurrency, and it may still have a future as “an asset, a commodity and a store of value” like gold, the report said.

Bitcoin touched its lowest since December 2020 last week after the collapse of TerraUSD, a so-called stablecoin.

FTX, which Bankman-Fried co-founded in 2019, was valued at $32 billion in a February funding round, and Bankman-Fried himself is worth $21 billion, according to Forbes.

(Reporting by Shubham Kalia in Bengaluru; editing by Uttaresh.V)

By Steve Scherer and Julie Gordon

OTTAWA (Reuters) – The front-runner to head Canada’s Conservatives and likely challenger to Liberal Prime Minister Justin Trudeau is staging a rare series of attacks on the central bank as inflation soars, in a strategy to win party leadership that could hurt his chances in a general election.

Since February, Pierre Poilievre, a bespectacled 42-year-old suburban Ottawa lawmaker dubbed “Skippy” for his youthful enthusiasm, has marched ahead in the Conservative leadership race by tapping into angst over pandemic restrictions and vaccine mandates.

Instead of targeting any of his five opponents in the leadership race, Poilievre (poh-LEE-ev) has made his attack of the central bank a cornerstone of his campaign as inflation surges to a three-decade high.

But his threat last week to fire Bank of Canada Governor Tiff Macklem if he wins a national election drew criticism from both inside and outside the party.

Former Bank of Canada Governor David Dodge said Poilievre’s onslaught may win him Conservative leadership but would not help him become prime minister.

“Is (Poilievre) damaging the central bank? I don’t think so,” Dodge told Reuters. “Is he damaging himself as a potential prime minister? Absolutely.”

A minister in former Prime Minister Stephen Harper’s government, Poilievre is tapping into Canada’s populist right by blaming “elites” and “gatekeepers” for high living costs while pledging to make Canada “the freest country on earth.”

While economists credit Bank of Canada’s record-low interest rates and aggressive bond-buying program for keeping the economy afloat during pandemic lockdowns, Poilievre says the central bank has become “Trudeau’s ATM” and blames the policies for hot inflation.

The bank has ended its bond-buying program and is in the process of raising rates to cool what it calls an “overheating” economy.

Poilievre declined to be interviewed for this story. The party contest will end with a vote in September, and the next federal election is due in 2025.

Among Conservative voters, 56.5% say they prefer Poilievre compared to 14% for centrist Jean Charest, his closest rival, according to an Ekos Research poll this month.

TRUMP POPULISTS

The attacks come at an awkward moment for the bank, and both Macklem and Senior Deputy Governor Carolyn Rogers have made rare concessions this month, saying high prices may be undermining public trust in the institution. Bank of Canada’s main mandate is to control inflation.

Frank Graves, president of pollster Ekos Research, said Poilievre “is nurturing exactly the same forces that (former U.S. President Donald) Trump nurtured.” Graves calls this voter pool “ordered populists” and says they share the same values on both sides of the border, including a “deep institutional mistrust.”

In February, when protesters railed against vaccine mandates and COVID-19 restrictions, paralyzing Ottawa for three weeks, Poilievre served them coffee and echoed their rage in parliament.

Similar to U.S. Senator Rand Paul’s past push to audit the Federal Reserve Board, Poilievre wants the Bank of Canada bond-buying program to be audited.

Derek Holt, head of capital markets economics at Scotiabank, said he viewed Poilievre’s attacks “as political rhetoric with low probability of policy changes.”

Politicians have taken aim at the Bank of Canada in the past, once in the late 1950s and early 60s, which ended with the bank’s policy-setting independence being enshrined in law, and again in the 1990s by former Liberal Jean Chretien.

Trudeau is defending the bank.

“Canada has one of the most respected central banks in the world, and it is so because of its independence from political actors and political interference,” Trudeau told Reuters in an exclusive interview this month.

Another Poilievre promise is to make Canada the “blockchain capital of the world,” saying alternative currencies like bitcoin will “let Canadians opt out of inflation.”

“That’s total nonsense,” Dodge said. “There is a global economic system … and you can’t sort of stand totally aside from that system.”

(Reporting by Steve Scherer and Julie Gordon in Ottawa; Editing by Richard Chang)

LAGOS (Reuters) – Nigeria’s markets regulator has published a set of regulations for digital assets, signalling Africa’s most populous country is trying to find a middle ground between an outright ban on crypto assets and their unregulated use.

Nigeria’s central bank last year banned banks and financial institutions from dealing in or facilitating transactions in digital currencies.

But the country’s young, tech-savvy population has eagerly adopted cryptocurrencies, for example using peer-to-peer trading offered by crypto exchanges to avoid the financial sector ban.

Nigeria’s Securities and Exchange Commission (SEC) published the “New Rules on Issuance, Offering Platforms and Custody of Digital Assets” on its website.

The 54-page document lays out registration requirements for digital assets offerings and custodians, and classifies the assets as securities regulated by the SEC.

A central bank spokesperson did not answer calls to his mobile phone.

The SEC said no digital assets exchange would be allowed to facilitate trading of assets unless it had received a “no objection” ruling from the commission.

A digital assets exchange will be required to pay 30 million naira ($72,289) as a registration fee, among other fees.

In October, Nigeria launched a digital currency, the eNaira, in the hope of expanding access to banking. Official digital currencies, unlike cryptocurrencies such as bitcoin, are backed and controlled by the central bank.

(Reporting by MacDonald Dzirutwe in Lagos and Camillus Eboh in Abuja; Editing by Mark Potter)

N’DJAMENA (Reuters) – Central Africa’s regional banking regulator sent out a reminder on Friday about its ban on the use of cryptocurrencies, weeks after the Central African Republic, a member state, made bitcoin legal tender.

The Banking Commission of Central Africa (COBAC) – which regulates the banking sector in the six-nation Central African CEMAC zone – said the prohibition was meant to ensure financial stability.

The announcement came as cryptocurrencies nursed large losses on Friday after the collapse of TerraUSD, a so-called stablecoin, rippled through markets.

The Central African Republic’s presidency announced on April 27 that bitcoin had been made legal tender, making it only the second country in the world to do so after El Salvador.

At the time, analysts and crypto experts said they were puzzled by the move in one of world’s poorest nations where internet use is low, conflict is widespread and electricity is unreliable.

The government has provided few details about its reasoning and could not immediately be reached for comment on Friday.

The banking commission held a special meeting on May 6 to examine the impact of cryptocurrencies in the zone, it said in the statement issued on Friday.

“In order to guarantee financial stability and preserve client deposits, COBAC recalled certain prohibitions related to the use of crypto-assets in CEMAC,” it said.

These include the holding of cryptocurrencies of any kind, the exchange, conversion or settlement of transactions relating to cryptocurrencies and a bar on them being used as a means of evaluating assets or liabilities, it said.

“COBAC has decided to take a number of measures aimed at setting up a system for identifying and reporting operations related to cryptocurrencies,” it added.

(Reporting by Mahamat Ramadane; Writing by Nellie Peyton; Editing by Bate Felix and Andrew Heavens)

By Alun John and Elizabeth Howcroft

SINGAPORE/HONG KONG/LONDON (Reuters) – Cryptocurrencies nursed large losses on Friday, with bitcoin just above $30,000 and set for a record losing streak after the collapse of TerraUSD, a so-called stablecoin, rippled through cryptocurrency markets.

Crypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, as tokens supposed to be pegged to the dollar have faltered.

Bitcoin, the largest cryptocurrency by total market value, managed to bounce in the Asia session and traded at $30,335 at 0843 GMT. It has staged something of a recovery from a 16-month low of around $25,400 reached on Thursday.

But it remains far below week-ago levels of around $40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.

“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.

“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilize.”

BEYOND BITCOIN

Crypto-related stocks have taken a pounding, with shares in broker Coinbase steadying overnight but still down by half in little more than a week.

In Asia, Hong Kong-listed Huobi Technology and BC Technology Group, which operate trading platforms and other crypto services, eyed weekly drops of more than 20%.

But broader financial markets have so far seen little knock-on effect from the cryptocurrency crash.

“Crypto is still tiny and crypto integration within broader financial markets is still infinitesimally small,” said James Malcolm, head of FX strategy at UBS.

“This idea that what goes on in crypto stays in crypto – that’s in many ways where we still are at the moment.”

STABLECOIN SQUEEZE

Selling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions with the squeeze on stablecoins.

Stablecoins are tokens pegged to the value of traditional assets, often the U.S. dollar, and are the main medium for moving money between cryptocurrencies or to convert balances to fiat cash.

Cryptocurrency markets were rocked this week by the collapse of TerraUSD (USDT), which broke its 1:1 peg to the dollar.

The coin’s complex stability mechanism, which involved balancing with a free-floating cryptocurrency called Luna, stopped working when Luna came under selling pressure. TerraUSD last traded around 15 cents, while Luna plunged close to zero.

Tether, the biggest stablecoin and one whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data, but was back at $1 on Friday.

“Over half of all bitcoin and ether traded on exchanges are versus a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”

Tether’s operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other money-market products.

But Tether is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation.

Ratings agency Fitch said in a note on Thursday that there could be “significant negative repercussions” for cryptocurrencies and digital finance if investors lose confidence in stablecoins.

“Many regulated financial entities have increased their exposure to cryptocurrencies, defi and other forms of digital finance in recent months, and some Fitch-rated issuers could be affected if crypto market volatility becomes severe,” it said.

However, Fitch said that weak links between crypto markets and regulated financial markets will limit the potential of crypto market volatility to cause wider financial instability.

(Reporting by Tom Westbrook and Alun John; Editing by Bradley Perrett and Emelia Sithole-Matarise)