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By Josh Ye

HONG KONG (Reuters) – China lifted a nine-month freeze on gaming licences after companies, including industry leader Tencent, made major adjustments to their business practices and due to the ban’s economic fallout, industry sources and analysts said.

The watchdog of the $47 billion video games market, the world’s largest, stopped issuing publishing licenses, which are key to monetising games, in August following a crackdown that curbed game-playing time for minors. That freeze was lifted on Monday when 45 games were granted licences.

Sources and analysts said while the timing of the relaxation was unexpected, companies had bent over backwards after facing heavy criticism from authorities for being non-compliant.

“Regulations this time around are certainly the strictest they have been,” said Chenyu Cui, senior analyst at research firm Omdia, “Every company is scared of falling out of compliance.”

A source at a game studio of which Tencent Holdings is a major shareholder said it was requested by Tencent to remove English words from its game, avoid the colour red and scrap wordings such as “headshots” or “death” to be compliant.

And the studio also delayed the title’s international launch fearing that it could been seen as circumventing Chinese rules, the source said, declining to be named because he is not authorised to speak to media.

During a similar freeze on licences in 2018, some projects opted to release their games – including Tencent’s Bladed Fury and Iris.Fall – overseas, while waiting for the domestic situation to be resolved.

Tencent declined to comment.

China’s regulators have also been proactive in ensuring compliance in a sector state media once called “spiritual opium”.

Two sources said that during the suspension companies were still able to submit games for approval and received regular feedback on changes needed on their content or monetisation features.

In September, a state-backed gaming association organised a training programme for developers at which it emphasised that games had to highlight “a correct set of values” and could not contain any violent or religious elements, according to a memo seen by Reuters.

Daniel Ahmad, senior analyst at Niko Partners, said that over 5,000 game companies were now connected to the national anti-addiction system, numerous firms have made changes to in-game content and non-compliant ones have been investigated and fined by the relevant regulators.

“Concerns have been adequately addressed,” he said.

Tencent, smaller peer NetEase and over 200 other firms pledged in September to self-regulate to combat gaming addiction.

ECONOMIC HIT

While companies were getting their house in order, the worsening economic impact of the gaming crackdown could no longer be ignored by Beijing.

During the licence freeze, about 14,000 video gaming-related firms – including those involved in merchandising, advertising and publishing – shut, according to business registry firm Tianyancha.

Some highly anticipated projects have also been spiked, such as Lilith Games’ Eden Apocalypse. A representative said this was due to a change in the business’s direction.

Three gaming industry sources said many projects have been hit by a hiring freeze as they are under pressure to cut their size and budget.

Tencent, a big employer of fresh graduates, said during its results its hiring pace would slow, and Reuters has reported that it and other peers plan to cut jobs.

“They are doing this to protect jobs,” one industry executive told Reuters, referring to the lifting of the freeze and declining to be named as he was not permitted to speak to the media.

The game industry’s regulator, National Press and Public Administration, did not respond to a request for comment.

LOOKING OVERSEAS

Chinese gaming shares soared on Tuesday after the regulatory relaxation, with some analysts saying it showed the government’s commitment to the sector.

But some were also cautious, pointing out that only 45 games were approved this time, versus the 80 to 90 usually greenlighted once a month prior to the freeze.

And the landscape has changed completely, prompting some to diversify or to consider leaving the Chinese market altogether.

Small gaming firms in China are considering pivoting towards blockchain gaming in the West, even though it could mean abandoning the China market since Beijing bans unapproved cryptocurrencies, said Greg Pilarowski, head of law firm Pillar Legal.

“The current environment in China is very challenging for gaming companies,” Pilarowski said. “So a lot of folks are asking how they could get into blockchain games… because crypto and blockchain have been very profitable for many people in the US.”

(Reporting by Josh Ye; Editing by Brenda Goh and Muralikumar Anantharaman)

(Reuters) – Bitcoin dropped 5.3% to $39,881.02 at on Monday, down $2,231.58 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 17.3% from the year’s high of $48,234 on March 28.

Ether, the coin linked to the ethereum blockchain network, dipped 6.58 % to $2,991.51 on Monday, losing $210.86 from its previous close.

(Reporting by Maria Ponnezhath in Bengaluru; Editing by Leslie Adler)

(Reuters) – Elon Musk, Twitter Inc’s biggest shareholder, on Saturday suggested a raft of changes to the social media giant’s Twitter Blue premium subscription service, including slashing its price, banning advertising and giving an option to pay in the cryptocurrency dogecoin.

Musk, who disclosed a 9.2% stake in Twitter just days ago, was offered a seat on its board of directors, a move which made some Twitter employees panic over the future of its ability to moderate content.

Twitter Blue, launched in June 2021, is Twitter’s first subscription service and offers “exclusive access to premium features” on a monthly subscription basis, Twitter says. It is available in the United States, Canada, Australia and New Zealand.

In a Twitter post, the head of electric vehicle maker Tesla Inc suggested that users who sign up for Twitter Blue should pay significantly less than the current $2.99 a month, and should get an authentication checkmark as well as an option to pay in local currency.

“Price should probably be ~$2/month, but paid 12 months up front & account doesn’t get checkmark for 60 days (watch for credit card chargebacks) & suspended with no refund if used for scam/spam,” Musk said in a tweet.

“And no ads,” Musk suggested. “The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”

Musk also proposed an option to pay with dogecoin and asked Twitter users for their views.

Twitter declined to comment on Musk’s suggestions.

The company already lets people tip their favorite content creators using bitcoin. Twitter had said last year that it planned to support authentication for NFTs, or non-fungible tokens, which are digital assets such as images or videos that exist on a blockchain.

Musk also started a poll on his Twitter account – which has more than 81 million followers – asking whether the firm’s San Francisco headquarters should be converted to a homeless shelter as “no-one shows up (to work there)”. The poll got more 300,000 votes in an hour, with 90% answering yes.

(Reporting by Maria Ponnezhath in Bengaluru; Additional reporting by Jaiveer Singh Shekhawat; Editing by Kenneth Maxwell)

By Huw Jones

LONDON (Reuters) – The European Union on Friday targeted crypto wallets, banks, currencies and trusts in its fifth package of sanctions on Russia in a bid to close potential loopholes which could allow Russians to move money abroad.

Following Russia’s invasion of Ukraine on Feb. 24, EU-based crypto exchanges were already required to apply sanctions that bar transactions from targeted individuals, but there were concerns that loopholes remained.

The EU on Friday said it was extending the prohibition to deposits to crypto-wallets.

“This will contribute to closing potential loopholes,” the EU’s executive European Commission said in a statement.

Crypto wallets allow individuals to keep the password that gives them access to cryptocurrencies safe, and to send, receive and spend cryptocurrencies like bitcoin.

The EU said it is also banning the sale of banknotes and transferable securities, such as shares, denominated in any official currencies of EU member states to Russia and Belarus.

It also confirmed a full transaction ban on four Russian banks, including VTB, representing 23% of market share in the Russian banking sector.

The banks have already been cut off from the international bank messaging system SWIFT and will be now subject to an asset freeze to completely cut them off from EU markets, the bloc said.

There is also a ban on advising on trusts for wealthy Russians, to make it more difficult for them to store their wealth in the EU.

(Reporting by Huw Jones; Editing by Kirsten Donovan)

By Francesco Guarascio

(Reuters) – The European Union on Friday formally adopted its fifth package of sanctions against Russia since the country’s Feb. 24 invasion of Ukraine, including bans on the import of coal, wood, chemicals and other products.

The measures also prevent many Russian vessels and trucks from accessing the EU, further crippling trade, and will ban all transactions with four Russian banks, including VTB.

The ban on coal imports will be fully effective from the second week of August. No new contracts can be signed from Friday, when sanctions are to be published in the EU’s official journal.

Existing contracts will have to be terminated by the second week of August, meaning that Russia can continue to receive payments from the EU on coal exports until then.

“These latest sanctions were adopted following the atrocities committed by Russian armed forces in Bucha and other places under Russian occupation,” EU’s top diplomat, Josep Borrell, said in a statement.

The Kremlin has said that Western allegations Russian forces committed war crimes by executing civilians in the Ukrainian town of Bucha were a “monstrous forgery” aimed at denigrating the Russian army.

The coal ban alone is estimated by the Commission to be worth 8 billion euros a year in lost revenues for Russia. That is twice as big as the EU Commission’s head Ursula von der Leyen had said on Tuesday.

In addition to coal, the new EU sanctions ban imports from Russia of many other commodities and products, including wood, rubber, cement, fertilisers, high-end seafood, such as caviar, and spirits, such as vodka, for a total additional value estimated in 5.5 billion euros ($5.9 billion) a year.

The EU also restricted export to Russia of a number of products, including jet fuel, quantum computers, advanced semiconductors, high-end electronics, software, sensitive machinery and transportation equipment, for a total value of 10 billion euros a year.

The sanctions also forbid Russian companies from participating in public procurement in the EU and extend prohibitions in the use of crypto-currencies that are considered a potential means to circumvent sanctions.

The Commission said that another 217 people were added to the EU blacklist as part of the new sanctions package, meaning their assets in the EU will be frozen and they will be subject to travel bans in the EU.

Most of them are political leaders of the separatist regions of Luhansk and Donetsk, but the sanctions also hit top businessmen, politicians and military staff close to the Kremlin.

This brings close to 900 the number of people sanctioned by the EU since the start of Russia’s invasion of Ukraine, which Moscow calls a “special operation” to demilitarise and “denazify” the country.

(Reporting by Francesco Guarascio and Bart Meijer; editing by Philip Blenkinsop, Andrew Heavens and Nick Macfie)

By Elizabeth Howcroft

(Reuters) – Jarindr Thitadilaka says he made as much as $2,000 a month last year from his collection of digital pets, which he would breed and send into battle to win cryptocurrencies.

The 28-year-old from Bangkok was playing Axie Infinity, one of a new breed of blockchain-based online games, dubbed “play-to-earn”, which blend entertainment with financial speculation.

These games can make for lucrative businesses amid the hype around NFTs and virtual worlds, attracting millions of players plus billions of dollars from investors who see the games as a way to introduce more people to cryptocurrency.

In Axie Infinity, users buy virtual blob-like creatures with varying attributes as NFTs, or non-fungible tokens – digital assets whose owner is recorded on the blockchain – for anything from tens of dollars to hundreds of thousands.

Players can then use the pets to earn money by winning battles, as well as creating new pets, whose value depends on their rarity. The assets can be traded with other players on the platform, which says it has about 1.5 million daily users.

“It’s not just a game any more. It’s more like an ecosystem,” said Thitadilaka. “You can even call it a country, right?”

The dangers of this speculative ecosystem, and the largely unregulated crypto gaming industry, were brought into sudden focus last week when Axie Infinity was hit by a $615 million heist. Hackers targeted a part of the system used to transfer cryptocurrency in and out of the game.

Axie Infinity’s Vietnam-based owner, Sky Mavis, said it would reimburse the lost money through a combination of its own balance sheet funds and $150 million raised by investors including cryptocurrency exchange Binance and venture capital firm a16z.

Sky Mavis’ co-founder Aleksander Larsen told Reuters that if he could do things differently, he would have focused more on security when growing the game, which was launched in 2018.

“We were running 100 miles per hour, basically, to even get to this point,” he said. “The trade-offs we made maybe weren’t the ideal ones.”

The hack, one of the biggest crypto heists ever, shone a light on play-to-earn games, a young world largely unknown outside crypto and gaming circles, that’s becoming big business.

Players spent $4.9 billion on NFTs in games last year, according to market tracker DappRadar, representing around 3% of the global gaming industry. Although demand has cooled since a peak last November, gaming NFTs have still racked up $484 million in sales so far in 2022.

Investor interest in NFT-based games has also ballooned, with projects attracting $4 billion of venture capital funding last year, up from $80,000 in 2020, DappRadar said.

“There’s so many users who want to interact with the tech,” said Larsen, adding that Axie Infinity’s revenues exceeded $1.3 billion last year. “It’s like you found a new continent … like finding America all over again.”

Graphic: Monthly sales of gaming-related NFTs- https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrqnwqpm/Monthly%20sales%20of%20gaming-related%20NFTs.png

HAVES AND HAVE NOTS

Adding layers of complexity, unofficial financial networks have also emerged around these games, as some players leverage their coveted in-game possessions for further gain.

Thitadilaka in Thailand decided last July that he wanted make more money than he could by simply playing on his own, so he and his friends decided to form what’s known in gaming lingo as a “guild”. They allowed their NFTs to be used by people who wanted to play Axie Infinity for free, without investing in an asset, and took a cut of any winnings in return.

    This model is commonplace across play-to-earn games. Thitadilaka said his guild, GuildFi, grew into a network with 3,000 Axie Infinity players who split their earnings with the asset-owners 50:50.  Thitadilaka now runs GuildFi as a full-time job and the company has raised $146 million from investors.

Southeast Asian countries such as Thailand and the Philippines have emerged as some of the hottest global gaming hubs.

Teriz Pia, who is 25 and lives in Manila, quit her job as a pre-school teacher last June after her brother founded a play-to-earn gaming guild, Real Deal Guild.

Now she says she makes as much as $20,000 a month through her network of more than 300 players across multiple games, plus other crypto assets.

For Axie Infinity Pia lets her players keep 70%, while she takes a 30% cut. In another play-to-earn game, Pegaxy, where players buy and trade NFTs of virtual horses to compete in races to win crypto tokens, she splits it 60:40.

“I don’t call them workers. I just call them my friends, or my scholars,” she said. “The salary in the Philippines if you’re a teacher … I’m a college graduate, I’m an educator, but it’s not enough. I never imagined that I could earn this kind of money.”

But Pia cautioned that it was a dangerous business.

“There’s a lot of risk. When I’m investing in a new game … being a member of Real Deal Guild, we have a partnership team, we have researchers, but at the end of the day, it’s still crypto, it’s still a risk.”

One of the biggest play-to-earn networks, Yield Guild Games, said it had 10,000 Axie Infinity players as of the fourth quarter of 2021 who kept 70% of their earnings and had received $11.7 million in total.

Australian-based Corey Wilton, 25, founded Pegaxy, which he says has about 160,000 daily users. He estimates that 95% of users of play-to-earn games participate as “renters”, generating revenue without owning the assets, while 5% are asset owners.

‘HOW PEOPLE GET HURT’

Legal experts warn there is no safety net for players who effectively invest in risky assets, leaving them highly vulnerable should a project fail or the market for the assets dry up.

As global regulators seek to get to grips with cryptocurrencies themselves, there is little oversight of NFTs or the relatively niche offshoot of play-to-earn games, which typically use in-game crypto tokens that can then be cashed out into traditional money.

“Storing any value in projects like this is risky. The earning in play to earn, blockchain-based games is often through rewards paid in the native token of the project,” said David Lee, cryptocurrency associate at London-based law firm Fladgate.

“There are no guaranteed values of either the token or the in-game asset as their value is often determined by supply and demand in the market. This means there can be significant volatility in the price and, if the project becomes less popular or is abandoned, then there is a potential for the assets to become worthless.”

Yet advocates of these games say success is built upon a combination of factors such as skill, strategy and luck.

“There is definitely money to be made, but there is also money to be lost here,” Pegaxy’s Wilton added. “Play to earn should not be confused with charity, that’s how people get hurt.”

(Reporting by Elizabeth Howcroft in London; Editing by Pravin Char)

By Yimou Lee and Sarah Wu

TAIPEI (Reuters) – Taiwan’s spy catchers have launched probes into around 100 Chinese companies suspected of illegally poaching semiconductor engineers and other tech talent, a senior official at the island’s Investigation Bureau told Reuters.

That comes on top of seven prosecuted since the start of last year and includes 27 which have either been raided or whose owners have been summoned for questioning by the bureau, the official said.

Home to industry giant TSMC and accounting for 92% of the world’s most advanced semiconductor manufacturing capacity, Taiwan possesses what China needs – chip expertise in spades.

A global chip shortage and Beijing’s avowed goal of achieving self-reliance in advanced chips – more forcefully promoted by Chinese President Xi Jinping after a trade war with the former Trump administration – has only intensified the scramble for engineering talent.

Taiwan responded with the creation in December 2020 of a task force within the justice ministry’s Investigation Bureau – its main spy catching organisation – to tackle poaching.

Cases where it has taken action with raids or questioning represented “the tip of the iceberg”, the official said, asking to remain anonymous so that investigations are not impeded.

The Investigation Bureau said the official’s comments represented its views.

Heightened military pressure from China, which claims Taiwan as its territory, has only strengthened Taipei’s determination to protect its chip supremacy – an asset also strategically important to the United States as much of its chip manufacturing is outsourced to the island.

Last month the bureau conducted its biggest operation to date – a raid of eight companies aimed at countering what it said was “the Chinese Communist Party’s illegal activities of talent-poaching and secret-stealing”.

China’s Taiwan Affairs Office did not respond to a Reuters request for comment.

TRICKS EMPLOYED

It is not illegal per se for Chinese firms to hire Taiwanese engineers. Taiwanese law, however, prohibits Chinese investment in some parts of the semiconductor supply chain including chip design and requires reviews for other areas such as chip packaging, making it very difficult for Chinese chip firms to operate on the island legally.

Taiwanese engineers are also free to go to China, but many prefer the quality of life on the island, especially while COVID-19 restrictions make travel harder.

One case under investigation involves a firm that purports to be a Taiwanese data analysis company but which authorities believe is an arm of a Shanghai-based chip firm sending chip design blueprints to China, according to the official and another colleague who spoke with Reuters.

In mid-March, after nearly a year of surveillance, the bureau summoned the firm’s owner for questioning. The owner has since been released on bail, they said, declining to identify the company as charges have yet to be laid.

Other tricks employed include incorporating units in tax havens such as the Cayman Islands, making it harder to identify money inflows from China.

Beijing-based Starblaze Technology, an integrated circuit (IC) design house, has been accused of running an R&D centre in the tech hub of Hsinchu without approval. It allegedly conducted job interviews via Zoom and used a Hong Kong company to handle payroll and insurance, according to court documents reviewed by Reuters. The trial is ongoing.

Tongfu Microelectronics, a Chinese state-affiliated company, was accused of having an illegal office whose employees received salaries in U.S. dollars in offshore accounts wired via a Hong Kong-based subsidiary. The defendants were found guilty in January.

Starblaze and Tongfu did not respond to Reuters requests for comment.

THE MOST WANTED

Lucy Chen, vice president of Taipei-based Isaiah Research, says that last year Chinese chip firms came wooing with salary offers two to three times local levels. Among the most sought-after employees are IC designers, who can work remotely.

While it is difficult to compete on salary, local firms aim to provide more secure long-term career development and perks such daycare centres, massages and gyms on site, said an executive at a Hsinchu chip company, declining to be identified.

Those willing to be poached risk not finding work again at Taiwanese tech firms as well as public shaming. Several senior TSMC executives who went to work for SMIC in China have been branded as traitors in Taiwanese press.

Authorities are also working to increase penalties for poaching. Maximum prison sentences are set to be increased to three years from one year and maximum fines from $5,200 to $520,525.

In a related move, the government has proposed making the leaking of core chip technologies a breach of national security law.

But there are concerns that tougher rules might hinder President Tsai Ing-wen’s drive to build a supply chain spanning materials to chip manufacturing.

“What if we put off legitimate foreign investors and damage our national economy due to overly strict regulation?” said the Investigation Bureau senior official.

($1 = 28.6090 Taiwan dollars)

(Reporting by Yimou Lee and Sarah Wu; Additional reporting by Beijing newsroom; Editing by Edwina Gibbs)

By Gustavo Palencia

TEGUCIGALPA (Reuters) – A special economic zone on a tourist-centric island on Honduras’ Caribbean coast has adopted bitcoin and other cryptocurrencies as legal tender, officials of the zone said on Thursday.

Called “Honduras Prospera,” the special zone was established in 2020 to help encourage investment, and has administrative, fiscal and budgetary autonomy.

“Prospera’s flexible regulatory framework enables crypto-innovation and the use of Bitcoin by residents, businesses, and governments,” Honduras Prospera said in a statement.

The economic zone will also let municipalities, local governments and international firms issue bitcoin bonds from the area’s jurisdiction.

Honduras Prospera covers parts of the picturesque Roatan island as well as the city of La Ceiba on Honduras’ Atlantic Coast.

Neighboring country El Salvador adopted bitcoin as legal tender in September, the first country in the world to do so, although the roll-out was bumpy and mired in public skepticism.

In Honduras, the Central Bank has said it cannot vouch for cryptocurrency transactions.

“Any transaction carried out with this type of virtual asset falls under the responsibility and risk of the person carrying it out,” the bank said in a March statement sent in response to queries on Thursday.

(Reporting by Gustavo Palencia in Tegucigalpa; Writing by Valentine Hilaire; Editing by Matthew Lewis)

WASHINGTON (Reuters) – The U.S. Federal Deposit Insurance Corporation (FDIC) on Thursday said the thousands of banks it supervises should notify the regulator of any crypto-related activities they have or are planning.

Citing potential systemic risks from certain crypto assets and activities, the FDIC said any firm considering dabbling in crypto should tell the agency of its plans, and any institution already involved in such activities should “promptly” notify the FDIC, the regulator said in a statement.

“Crypto-related activities may pose significant safety and soundness risks, as well as financial stability and consumer protection concerns,” the FDIC said, noting evolving credit, liquidity, pricing and operational risks that are not yet fully understood.

The request comes as U.S. banking regulators reckon with the increasing popularity of cryptocurrencies. U.S. President Joe Biden last month told government agencies to assess the risks and benefits of various cryptocurrency issues, a move seen as a stark acknowledgement of the potential consequences of the growing importance of digital assets.

A disruption in crypto-asset transactions or activities could result in a “run” on a firm’s financial assets and consumers may be confused about crypto assets offered by, through or connection with their institutions, the FDIC said on Thursday.

Prior to jumping into a crypto-related activity, the FDIC-supervised institution should notify the regulator, providing details on the planned activity and proposed timeline. The agency said it plans to review the information for safety and soundness, financial stability and consumer protections.

(Reporting by Chris Prentice; editing by Bernard Orr)

By David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Thursday crypto asset regulations should support responsible innovation while managing risks, sticking to the contours of a recent White House executive order that was well-received by the crypto market.

In a speech on digital assets policy released by the Treasury, Yellen said that in many cases regulators already have authorities that can manage crypto risks and provide appropriate oversight of new types of intermediaries such as digital asset exchanges.

“Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy,” Yellen said in the excerpts of her speech to be delivered at American University in Washington.

“As banks and other traditional financial firms become more involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities,” she said.

Crypto regulation remains patchy and regulators are still figuring out the best way to oversee trading platforms and crypto services provided by banks, such as digital asset custody.

Some lawmakers want regulators to crack down on the industry due to volatility in crypto asset valuations, causing some market worries about onerous new rules. But the White House’s and Treasury’s message on supporting responsible innovation has assuaged some of those fears.

Biden’s executive order requires the Treasury and the Commerce Departments and other agencies to prepare reports on “the future of money” and the role cryptocurrencies will play.

Yellen also said that wherever possible crypto regulations should be “tech neutral” and guided by risks associated with services provided to households and businesses, not the underlying technology.

“For example, consumers, investors, and businesses should be protected from fraud and misleading statements regardless of whether assets are stored on a balance sheet or distributed ledger,” Yellen said. “Similarly, firms that hold customer assets should be required to ensure those assets are not lost, stolen, or used without the customer’s permission.”

(Reporting by David Lawder; Editing by Sam Holmes)

By David Lawder and Dan Burns

(Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday that Russia should be expelled from the Group of 20 major economies forum, and the United States will boycott “a number of G20 meetings” if Russian officials show up.

Her comments at a U.S. House Financial Services Committee hearing raised questions about the G20’s future role in the wake of Russia’s invasion of Ukraine.

Since 2008, the club has served as a key international forum for issues from COVID-19 relief to cross-border debt and also includes China, India, Saudi Arabia and other countries that have been reluctant to condemn Russia’s actions.

Yellen told lawmakers Russia’s invasion of Ukraine and the killings of civilians in Bucha “are reprehensible, represent an unacceptable affront to the rules-based global order, and will have enormous economic repercussions in Ukraine and beyond.”

The United States and its key allies have placed greater emphasis in recent months on the G7 grouping of industrial democracies, whose interests are more aligned, using G7 meetings to coordinate their response to Russia’s war in Ukraine.

Yellen said the Biden administration wants to push Russia out of active participation in major international institutions, but acknowledged it was unlikely that Russia could be expelled from the International Monetary Fund given its rules.

“President Biden’s made it clear, and I certainly agree with him, that it cannot be business as usual for Russia in any of the financial institutions,” Yellen said. “He’s asked that Russia be removed from the G20, and I’ve made clear to my colleagues in Indonesia that we will not be participating in a number of meetings if the Russians are there,” Yellen said.

Indonesia holds the presidency this year and will host a finance meeting in July and a leaders summit in November.

A Treasury spokesperson later said that Yellen was referring to an April 20 G20 finance ministers and central bank governors meeting on the sidelines of the IMF and World Bank Spring Meetings in Washington and associated deputies meetings.

The April finance meeting will be held both in-person and virtually and Russia’s participation is unclear at present.

Russia has said that President Vladimir Putin intends to attend the G20 summit in Bali this year and has received China’s backing to stay in the group.

Indonesia could not expel or “disinvite” any G20 members, including Russia, a government official familiar with the matter said, adding whether a country attended was up to that nation.

ENERGY FLEXIBILITY

Yellen’s testimony came as the Biden administration announced a new round of sanctions to punish Russia, including banning Americans from investing in Russia and locking Sberbank, Russia’s largest lender and holder of a third of its bank deposits, out of the U.S. financial system, along with other institutions.

But transactions allowing European allies to purchase Russian oil and natural gas were exempted through special Treasury licenses.

Yellen said that flexibility on Russian energy transactions was needed because many European countries “remain heavily dependent on Russian natural gas, as well as oil, and they are committed to making the transition away from that dependence as rapidly as possible.”

But she acknowledged that this would take time.

A complete ban on oil exports from Russia, the world’s third-largest producer after the United States and Saudi Arabia, would likely prompt “skyrocketing” prices that would hurt both the United States and Europe, Yellen said.

She added that she hoped that currently high prices would entice oil companies in the United States and elsewhere to ramp up production in the next six months, which, along with the Biden’s release of oil from the U.S. Strategic Petroleum Reserve, may allow for tougher restrictions on Russian oil.

CHINA WARNING

Yellen also issued a warning to China that Treasury was prepared to turn its sanctions tools against Beijing in the event of Chinese aggression against Taiwan, which China claims as a wayward province.

Asked if the United States would take such steps if Taiwan was threatened, she said: “Absolutely. I believe we’ve shown that we can. In the case of Russia, we threatened significant consequences. We’ve imposed significant consequences. And I think that you should not doubt our ability and resolve to do the same in other situations.”

(Reporting by David Lawder and Dan Burns; Additional reporting by Gayatri Suroyo in Jakarta; Editing by Andrea Ricci, Ed Davies)

(Reuters) – Meta Platforms Inc is readying plans to introduce virtual tokens and cryptocurrencies to its family of apps with an aim to use such virtual tokens for rewarding creators and lending and other financial services, the Financial Times reported on Wednesday.

The move, which is reported to be in its early stages, comes as Meta grows its focus on services centered around the metaverse, a virtual environment where people interact, work and play.

If implemented, it could also give Meta a new revenue channel and control over transactions in its suite of apps and services, which include Facebook, Instagram, WhatsApp and the Meta Quest virtual reality platform.

Meta’s cryptocurrencies, internally dubbed “Zuck Bucks”, are intended for the metaverse and may not be based on blockchain, the FT report said, citing people familiar with the matter.

Meta could introduce in-app tokens that would be centrally controlled by the company, the report said, and such tokens could be used to pay favorite creators on Instagram or reward people who make meaningful contributions in Facebook groups.

Meta did not immediately respond to a Reuters request for comment.

Mark Zuckerberg, chief executive officer of Meta, said last month that Instagram will introduce non-fungible tokens (NFTs) in the “near-term”.

Earlier this year, Meta joined the Crypto Open Patent Alliance (COPA), a group of companies led by Jack Dorsey’s Block Inc that has pledged to promote open access to cryptocurrency technologies.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Maju Samuel)

(Reuters) – The Russian ruble’s near complete recovery in recent weeks is not a signal that the Russian economy is weathering the sanctions Washington and its allies have imposed since Russia invaded Ukraine, U.S. Treasury Secretary Janet Yellen said on Wednesday.

The Russian economy is “reeling” from the sanctions imposed after the late February invasion, Yellen told the House Financial Services Committee. The market for rubles has become so distorted by actions of the Russian government and its central bank to limit capital outflows that “you should not infer anything” from the value of the ruble, which fell to a record low against the U.S. dollar immediately after the invasion but has since retraced most of those losses.

(Reporting By Dan Burns)

(Reuters) – Crypto exchange Binance.US said on Wednesday it had raised more than $200 million in a seed funding round at a pre-money valuation of $4.5 billion.

Launched in 2019, the company is operated by BAM Trading services, the U.S. partner of Binance, the world’s biggest crypto exchange by trading volume. Binance.US and Binance have a licensing agreement but operate as separate legal entities.

Binance.US said RRE Ventures, Foundation Capital, Original Capital, VanEck and Circle Ventures were among the investors that participated in the fundraise, which was its first external funding round.

It added that the funds would be used to invest in its spot trading platform and toward the development of new products and services.

Last month, Binance rejected calls for a blanket ban on all Russian users after Moscow invaded Ukraine.

Its decision last month to stay in Russia, which was a divergence from mainstream finance firms such as PayPal Holdings Ltd and Visa Inc, had irked the Ukrainian government.

Binance has also been trying to deepen links with the United Arab Emirates as the country tries to style itself as the world’s new digital assets hub.

The crypto industry continues to face the wrath of regulators internationally, who worry about how a meltdown in crypto assets, seen as highly volatile and opaque, will feed into the wider financial sector, leading to a global push for more regulation.

(Reporting by Niket Nishant in Bengaluru; Editing by Shounak Dasgupta and Amy Caren Daniel)

By Elizabeth Howcroft

LONDON (Reuters) – Crypto exchange Binance is leading investors’ contribution to a bailout of victims of a $615 million digital coin theft, the company targeted in the heist said on Wednesday.

The Vietnam-based company Sky Mavis, which runs the game Axie Infinity, said last week it had been hit by one of the largest crypto heists on record.

Sky Mavis said it would reimburse the lost money to users through a combination of its own balance sheet funds and $150 million raised by investors including cryptocurrency exchange Binance and venture capital firm a16z.

“Sky Mavis is committed to reimbursing all of our users’ lost funds and implementing rigorous internal security measures to prevent future attacks,” said Trung Nguyen, CEO of Sky Mavis.

Binance CEO Changpeng Zhao said “we strongly believe Sky Mavis will bring a lot of value and growth for the larger industry and we believe it’s necessary to support them as they work hard to resolve the recent incident.”

Binance and Sky Mavis did not put a figure on how much of the $150 million Binance would provide.

(Reporting by Elizabeth Howcroft; Editing by Mark Potter)

(This April 5 story removes reference to investment by venture capital firm M13 in paragraph 1 after the company clarifies)

By Lisa Pauline Mattackal

(Reuters) – Ethereum blockchain scaling platform Boba Network raised $45 million in its series A round, with participation from investors including Will Smith-led Dreamers VC, Paris Hilton and husband Carter Reum and cryptocurrency exchange Crypto.com, the company said on Tuesday.

The funding round gives Boba a valuation of $1.5 billion, with former football quarterback Joe Montana and crypto funds Hypersphere and Infinite Capital also making investments.

Boba allows users to develop decentralized apps on the ethereum blockchain with more features and at lower fees, and also transfer non-fungible tokens (NFTs) across ethereum’s different layers.

The company plans to use the funds to expand Web3 offerings and invest in projects built on its ecosystem, founder Alan Chiu said.

The market capitalization of Boba Network’s crypto token rose over 19% to $272.1 million after the announcement, while its price rose to $1.71 from $1.44, according to CoinMarketCap.

Ethereum’s “gas” fees, or the price of executing transactions, has risen steeply over the past few years as the blockchain became more popular, giving rise to platforms designed to reduce expenses and speed up transactions.

Venture capital firms have plowed money into blockchain technology startups with SoftBank’s Vision Fund 2 and Bain Capital Ventures among those who have launched crypto-focused funds or invested in blockchain tech companies since the start of 2022.

(Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Krishna Chandra Eluri)

By Hannah Lang

(Reuters) – Last week, a top U.S. banking regulator warned of growing risks as banks start to capitalize on the popularity of cryptocurrencies to offer related services to clients.

Here is how some of the biggest banks operating in the United States have gotten involved in crypto:

CUSTODY SERVICES

Bank of New York Mellon announced in February 2021 that it would hold, transfer and issue bitcoin for asset management clients, one of the first announcements of its kind for a major Wall Street bank. The launch is expected later this year.

Clients will be able to store bitcoin and ether, the two largest cryptocurrencies, in BNY Mellon crypto wallets, which will be created in partnership with crypto infrastructure company Fireblocks.

U.S. Bancorp went live in October with bitcoin custody services. Bitcoin company NYDIG is acting as a sub-custodian for the bank. The services are geared toward institutional investment managers with private funds.

State Street Corp in March said it intends to offer cryptocurrency custody services in partnership with crypto infrastructure platform Copper.co, although it cautioned that the offering was subject to regulatory approval.

Meanwhile, Deutsche Bank quietly revealed plans to develop a service to hold and trade cryptocurrencies for institutional investors in a 2020 report published by the World Economic Forum, adding it had already completed a proof of concept.

Also in 2020, BNP Paribas completed a proof of concept with crypto wallet provider Curv to develop a secure method to transfer tokenized securities. It said the development was a step toward creating an integrated custody solution for both traditional and digital assets.

Deutsche Bank and BNPP did not provide an update on these projects when contacted by Reuters.

WEALTH MANAGEMENT

A slew of big banks began offering wealth management clients exposure to crypto in 2021, with Morgan Stanley leading the pack. CNBC reported in March that Morgan Stanley was enabling access to three bitcoin funds for clients with at least $2 million in assets held at the bank.

In July, JPMorgan Chase & Co allowed its financial advisers to accept buy and sell orders from its wealth management clients for five cryptocurrency products, according to Business Insider.

Wells Fargo & Co also began offering its wealthy clients cryptocurrency exposure in the summer of 2021, as did State Street.

JP Morgan and Wells Fargo both registered private bitcoin funds in partnership with NYDIG in August.

Citigroup Inc’s wealth management unit created a digital assets group in June to facilitate investments in cryptocurrencies, stablecoins, non-fungible tokens and central bank digital currencies, according to media reports.

In March of this year, regulatory documents revealed that Goldman Sachs is offering wealthy clients access to an ethereum fund through crypto company Galaxy Digital.

TRADING

In March 2021, Goldman rebooted its cryptocurrency trading desk after mothballing it in 2019. That team, which sits within the bank’s Global Markets division, deals bitcoin futures and nondeliverable forwards, a derivative that allows the bank’s clients to take a view on bitcoin’s future price.

In March of this year, Goldman Sachs went a step further and became the first major U.S. bank to carry out an over-the-counter crypto trade in partnership with Galaxy Digital, a crypto-focused asset manager.

Bank of America in July 2021 green-lit trading bitcoin futures for certain clients through a partnership with CME Group Inc, according to a report https://www.coindesk.com/business/2021/07/16/bank-of-america-approves-bitcoin-futures-trading-for-some-clients-sources from CoinDesk. Bank of America declined to comment on the report, but said in a statement that it was “currently considering strategies related to cryptocurrency and other digital assets.”

Citigroup said last August the bank was considering offering bitcoin futures trading for some institutional clients, although media reports said the bank was awaiting regulatory approval. Citi had no immediate comment. IFR reported in December that Citi had recently cleared its first bitcoin futures trade through CME Group.

PNC Financial Services Group is also waiting for the OK from regulators to allow its customers to trade crypto.

RESEARCH COVERAGE

Banks are also plowing money into research.

Bank of America kicked off digital assets research coverage for clients in October.

Morgan Stanley stood up a new crypto research division in September, in what the bank said was a recognition of the “growing significance of cryptocurrencies … in global markets.”

Citigroup in November said it was looking to create this year 100 new roles focused on digital assets, including blockchain and digital currencies, at its institutional division.

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

By Katanga Johnson

WASHINGTON (Reuters) – Gary Gensler, the head of the U.S. securities regulator, said on Monday the agency is weighing how it could extend investor protections afforded to users of exchanges and alternative trading platforms to crypto trading platforms.

The expanded Securities and Exchange Commission (SEC) oversight would require the agency to register and regulate platforms on which the trading of securities and non-securities is “intertwined,” Gensler said in a virtual speech to an audience at the University of Pennsylvania, his alma mater.

The agency will also collaborate with the Commodity Futures Trading Commission–its sister market regulator–to scrutinize platforms that trade both crypto-based security tokens and commodity tokens, said Gensler, adding that a potential “segregation” of token custody between trading platform assets and customers’ assets would also be considered to help stave off theft.

“Any token that is a security must play by the same market integrity rulebook as other securities under our laws.”

(Reporting by Katanga Johnson in Washington)