Tag: Cryptocurrencies

By John McCrank

(Reuters) – Cboe Global Markets Inc on Thursday said it is in discussions with several market participants, including retail brokers and market makers, about taking strategic stakes in its recently acquired digital asset exchange, ErisX, which will be renamed Cboe Digital.

Cboe said the potential equity partners include Robinhood Markets Inc, Interactive Brokers, Virtu Financial, Jane Street, Jump Crypto, Optiver, DRW, and tastytrade, which is owned by IG Group.

Chicago-based Cboe said the “soon to be formalized” equity partners will join planned commercial partner firms in supporting ErisX, including Fidelity Digital Assets, Galaxy Digital, NYDIG and Webull.

“ErisX was founded with the mission of bringing transparent, well-regulated markets for digital assets and we are excited to further accelerate on this vision with growing support from our partner firms,” said Cboe Chief Executive Officer Ed Tilly.

Cboe closed the acquisition of U.S.-based digital asset spot market operator Eris Digital Holdings (ErisX) in May, which also included a regulated futures exchange and a regulated clearinghouse, as the cornerstone of its new Cboe Digital business.

Last month, Cboe said it took a $460 million writedown on its ErisX purchase due to the plunge in the price of cryptocurrencies.

Cboe announced its intention to acquire ErisX on Oct. 20, when the price of bitcoin topped $67,000. Since then, digital asset prices have plummeted, with bitcoin currently trading in a range of around $20,000 to $25,000.

(Reporting by John McCrank; Editing by Mark Potter)

By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar edged back from a near two-decade peak against a basket of major currencies on Thursday as investors awaited a speech by Federal Reserve Chair Jerome Powell the following day for fresh clues on the path for monetary policy.

Gains for Australia’s dollar, a liquid proxy for trading China’s economic outlook, outpaced developed-market peers as it tracked a stronger yuan.

The South Korean won rose after the central bank raised its inflation forecast, pointing to further policy tightening ahead.

The U.S. dollar index, which measures the greenback against six counterparts, eased 0.19% to 108.42, but remained not far from its highest since September 2002 at 109.29, touched in mid-July.

Investors have been bracing for the Fed to double down on its commitment to crushing inflation at its annual gathering in Jackson Hole, Wyoming.

Money markets have pared back expectations that the U.S. central bank could tilt to a slower pace of rate hikes following a chorus of hawkish Fed commentary in recent weeks, and currently lay 58.5% odds on another super-sized 75 basis-point rate hike next month versus 41.5% probability of a half point increase.

“Expectations of a hawkish message from FOMC Chair Powell at Jackson Hole will likely keep upward pressure on the USD,” Commonwealth Bank of Australia analyst Kristina Clifton wrote in a client note.

“However, there is a risk that the speech is deemed not hawkish enough and that we see some retracement in the USD.” 

The dollar retreated 0.25% to 136.78 yen, from this week’s one-month high of 137.705.

The euro edged 0.18% higher to $0.99865, after sliding to a 20-year low of $0.99005 on Tuesday.

The single currency has been hurt by growth concerns as the region faces an energy crisis, with investors on edge before Russia halts gas supplies through the main Nord Stream 1 pipeline for three days from Wednesday for unscheduled maintenance.

Sterling gained 0.2% to $1.1815, after dipping to the lowest since March 2020 on Tuesday at $1.1718.

The Australian dollar rallied 0.59% to $0.69475, up from a more than one-month low of $0.6856 earlier in the week.

That’s as China’s yuan rebounded from a two-year low, helped by firmer-than-expected official guidance, which traders took as a sign authorities are becoming increasingly uncomfortable with rapid losses in the currency.

“In terms of the sharp AUD bounce today, an obvious catalyst appears to be the bounce in CNH on the stronger than expected fixing,” said Sean Callow, a strategist at Westpac in Sydney.

“The positive equity mood in much of the region does help the Aussie in the background.”

New Zealand’s kiwi lagged its Antipodean peer with a 0.35% rise to $0.6212, hampered by data showing a decline in local retail sales early in the session. It was at a one-month low of $0.6157 on Monday.

Against the Korean won, the dollar lost 0.27% to 1,336.96 after the Bank of Korea raised rates by a quarter point, as expected, but also upgraded this year’s inflation forecast to 5.2% from 4.5%, which would be the fastest rate since 1998, and next year’s to 3.7% from 2.9%.

(Reporting by Kevin Buckland; Editing by Christopher Cushing and Kim Coghill)

By Elizabeth Howcroft

LONDON (Reuters) – Thieves stole over $100 million worth of non-fungible tokens in the year to July, blockchain research firm Elliptic said on Wednesday, as the fast-emerging digital asset became a new front in crypto’s hacking problem.

NFTs are blockchain-based assets that represent digital files such as images, video or text.

The market surged in 2021 as crypto-rich speculators spent billions of dollars on the assets, hoping to profit as prices rose. But since cryptocurrency prices crashed in May and June this year, NFT prices and sales volumes have plunged.

Scams remain rife in the NFT market even as it declines, with July seeing the highest number of NFTs reported stolen on record, London-based Elliptic said in a report.

Security compromises via social media have surged, accounting for 23% of NFT thefts in 2022, it said.

Thieves received on averaged $300,000 per scam, Elliptic said. The true scale of NFT thefts is likely to be even higher, given that not all crimes are publicly reported, it added.

Hacks and scams have long plagued the crypto industry, while regulators around the world are increasingly concerned about the use of crypto assets in cyber crime.

Elliptic put the amount of money-laundering in NFT-based platforms at just $8 million. But almost $329 million worth of funds in the NFT market came from services such as so-called cryptocurrency mixers, which are designed to hide the funds’ origin, Elliptic said.

One such mixer, Tornado Cash, was used for laundering just over half of the proceeds of NFT scams, Elliptic said, before it was sanctioned by the United States this month.

“There is a growing threat to NFT-based services from sanctioned entities and state-sponsored exploits,” Elliptic said, citing a $540 million theft in April which U.S. officials have linked to North Korea’s Lazarus Group.

(Reporting by Elizabeth Howcroft; editing by Jason Neely)

By Jonathan Stempel

NEW YORK (Reuters) – Celsius Network LLC on Tuesday sued a former investment manager, accusing him of losing or stealing tens of millions of dollars in assets before the crypto lender went bankrupt last month.

In a complaint filed in Manhattan bankruptcy court, Celsius accused Jason Stone and his company KeyFi Inc of “gross negligence” and “extraordinarily inept” crypto investing, after Stone falsely portrayed himself as a pioneer in the field.

Celsius said Stone proved “incapable” of deploying coins profitably, causing “many tens of millions of dollars” in losses.

It said he then misappropriated assets to buy hundreds of non-fungible tokens (“NFTs”) that he stored out of reach, and covered his tracks by using Tornado Cash, a crypto “mixer” that the U.S. Treasury Department sanctioned on Aug. 8 because it might help launder cybercrime proceeds.

Tuesday’s lawsuit was filed six weeks after KeyFi sued Celsius in a New York state court in Manhattan.

It claimed that Celsius ran a Ponzi scheme, mismanaged customer deposits, failed to hedge investments, and cheated Stone out of potentially hundreds of millions of dollars of compensation.

Stone worked with Celsius for about seven months ending in March 2021, court papers show.

In an emailed statement, Stone’s lawyer Kyle Roche said KeyFi’s compensation, including NFTs, had been authorized by Celsius Chief Executive Alex Mashinsky.

“Celsius’s most recent filing is an attempt to rewrite history and use KeyFi and Mr. Stone as a scapegoat for their organizational incompetence,” Roche said.

Both lawsuits seek to recoup sums that each side believes the other owes, plus compensatory and punitive damages.

Celsius, based in Hoboken, New Jersey, filed for Chapter 11 protection from creditors on July 13, one month after freezing withdrawals and transfers for its 1.7 million customers because of “extreme” market conditions.

The cases are Celsius Network Ltd et al v Stone et al, U.S. Bankruptcy Court, Southern District of New York, No. 22-ap-01139; and KeyFi Inc v. Celsius Network Ltd et al, New York State Supreme Court, New York County, No. 652367/2022.

(Reporting by Jonathan Stempel in New York; Editing by David Gregorio)

By Lisa Pauline Mattackal

(Reuters) – The DeFi dream is shaken. And stirred.

The grand crypto project has declined in 2022: total user funds deposited in decentralized finance has shrunk to about $61 billion from over $170 billion at the start of the year, according to figures from data aggregator Defi Llama.

In a fresh jolt, the U.S. Treasury has sanctioned one of the industry’s biggest “mixers”, tools that pool and scramble crypto from thousands of addresses to boost anonymity, saying it was used by hackers to launder their gains.

The U.S. intervention this month has forced many DeFi projects to block cash from wallets linked to the Ethereum-based mixer, Tornado Cash, representing a blow to those devotees who dream of a brave new world free of central authority.

“The motion has set back DeFi in its ability to be decentralized and operate in a censorship resistant way,” said Katie Talati, director of research at digital asset manager Arca.

Indeed, the market impact could be significant, given the growing role of mixers, whose proponents argue they serve a legitimate use in creating privacy and say specific users should be targeted by authorities rather than an entire code.

The average usage of such services over a 30-day period hit an all-time high of $51.8 million in late April, roughly double the level a year before, according to a Chainalysis study in July, before declining with the broader crypto market.

“This makes sense given that the timing coincides with DeFi’s increasing prominence within the overall cryptocurrency ecosystem,” Chainalysis researchers wrote.

Tornado Cash didn’t respond to a request for comment on the sanctions.

LOCKED AND CODED

Aave and Uniswap, two of the most popular DeFi platforms that blocked wallets linked to Tornado, have seen user funds, or total value locked (TVL), drop since the sanctions were imposed – $6.4 billion from over $6.9 billion for Aave, and $5.7 billon from $6.5 billion for Uniswap, according to Defi Llama.

This may not be all due to Tornado, as most cryptocurrencies have suffered heavy losses in the past week and the DeFi sector has seen little change in activity – for example, Uniswap says its weekly trading volumes have remained fairly steady at around $8 billion.

“TVL has decreased, but at the same time the price of tokens has decreased,” said Max Krupyshev, CEO of payments provider CoinsPaid. “People didn’t pull money out so much as the value of their investments went down.”

Aave and Uniswap also didn’t respond to requests for comment on mixers.

Graphic: Mixture troubles – https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/zdpxozwzlvx/chart.png

BIG CATS PROWL?

While DeFi players may face tough decisions on whether to pull back from mixers, some watchers spy a potential upside for the market should the U.S. measures encourage traditional institutional investors to join the fray.

“Larger institutions may see the sanctions as a step towards legitimacy, potentially giving them more comfort in engaging with or investing in Ethereum and other digital assets,” analysts at digital asset manager Grayscale wrote.

In the immediate future, though, little is certain.

“Illicit” addresses identified by data firm Chainalysis accounted for 23% of funds sent to mixers in 2022, rising from 12% in 2021. As for Tornado Cash specifically, analytics firm Elliptic reported that at least $1.54 billion in criminal proceeds were laundered through the platform.

Arca’s Talati thinks we haven’t seen the end of crackdowns on mixers.

“Tornado Cash is one of the ones that’s been around the longest,” she said. “This isn’t the last thing we’re going to see.”

(Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Pravin Char)

SYDNEY (Reuters) – Australia said on Monday it would do a virtual stocktake of the country’s cryptocurrency holdings, the first signal from the new centre-left government that it plans to regulate the $1 trillion sector.

Treasurer Jim Chalmers said that his department would undertake “token mapping”, or cataloging the types and uses of digital currency owned within the country, as a first step to identifying which cryptocurrency assets to regulate, and how.

Australia would be the first country in the world to conduct such an exercise, he added in a statement.

“With the increasingly widespread proliferation of crypto assets, to the extent that crypto advertisements can be seen plastered all over big sporting events, we need to make sure customers engaging with crypto are adequately informed and protected,” Chalmers said.

Australia has wrestled for years with the question of how to regulate cryptocurrency – money that is regulated by decentralised computer networks, rather than central banks.

Calls for intervention have increased since 2020 when COVID-19 stimulus payments and home working prompted a surge in the sector’s popularity.

Last year, a Senate inquiry under the previous conservative government recommended wide-ranging regulations to protect cryptocurrency owners, but that administration lost an election this May before any new laws were put in place.

The Australian Securities and Investments Commission has also said it wants the sector regulated, citing its research that found 44% of retail investors held cryptocurrency in late 2021.

Chalmers, the treasurer, did not specify any planned regulations on Monday, but said the token mapping exercise would be “the first step in a reform agenda”.

(Reporting by Byron Kaye; Editing by Jamie Freed)

WASHINGTON (Reuters) – A U.S. bank regulator ordered crypto exchange FTX on Friday to halt “false and misleading” claims it had made about whether funds at the company are insured by the government.

The Federal Deposit Insurance Corporation said a July tweet by Brett Harrison, head of FTX’s U.S. operations, contained misleading claims that FTX funds and stocks purchased through FTX were FDIC insured, and ordered the company to remove any misleading language from its social media accounts and websites.

(Reporting by Pete Schroeder; Editing by Chris Reese)

By Elizabeth Howcroft and Samuel Indyk

LONDON (Reuters) – Tether, one of the world’s largest stablecoins by market value, said on Friday it had reserves worth $66.4 billion at the end of June, down from $82.4 billion at the end of March.

The reserves statement on Tether’s website comes a day after it said it had switched to accountancy firm BDO Italia to certify its reserves and that it would aim to release monthly reports by the end of the year.

Stablecoins are a type of cryptocurrency designed to keep constant value, such as a 1:1 U.S. dollar peg. They are widely used in cryptocurrency trading to move funds between different cryptocurrencies or into regular cash.

Financial regulators worldwide have warned that stablecoins could pose a risk to wider financial stability, with Britain among major economies looking to regulate the sector.

Tether says its coin maintains its value by holding dollar-denominated reserves to match or exceed the value of Tether coins in circulation.

Tether’s $66.4 billion reserve assets exceed its $66.2 billion liabilities, BDO Italia said in the statement.

Holdings of U.S. Treasury bills fell to $28.9 billion in the second quarter, the statement said, a $10.3 billion drop from the $39.2 billion it held in the first quarter.

Commercial paper and certificates of deposit were down to $8.4 billion, showing an $11.7 billion drop.

In July, Tether said that it had slashed its commercial paper holdings as part of a plan to reduce exposure to riskier assets.

Tether CTO Paolo Ardoino also said that the company will have cut its commercial paper holdings to $200 million by the end of August, and to zero by the end of October.

(Reporting by Elizabeth Howcroft; Editing by Edmund Blair and Alexander Smith)

By Joice Alves

LONDON (Reuters) – The U.S. dollar index surged on Friday and was on track for its biggest weekly gain since April 2020 on safe-haven demand, as investors worried about a further economic slowdown after Federal Reserve officials reiterated the need for higher rates.

The dollar index rose 0.5% to 108.01, its highest since July 15. The gauge is on track for a 2.2% rally this week, which would be its best weekly performance in more than two years.

Sterling tumbled 1% to $1.1839 on the day and was set for its biggest weekly decline against the dollar since September 2020, as worries around Britain’s economic slowdown intensified.

The euro, down 0.4% to $1.0053, was on course to decline 2% since last Friday, which would be its worst week since July 8.

“The U.S. dollar is again on the front foot this morning supported by another round of hawkish Fed speak … the overall tone of Fed officials suggests that the Fed still has a lot of work to do to contain inflation,” said Jane Foley, head of FX strategy at Rabobank in London.

St. Louis Fed President James Bullard, San Francisco Fed colleague Mary Daly and Kansas City Fed President Esther George all said continuing to hike rates in a bid to fight inflation would be reasonable.

Weakening Chinese data this week and an energy crisis in Europe are raising fears of further economic slowdown, which have also hit European currencies and supported safe-haven flows, Foley added. “We expect another break below parity,” she said. [FRX/]

British consumer sentiment in August fell to its lowest since at least 1974, a survey showed, as households feel “a sense of exasperation” about soaring costs as inflation hit double digits.

INFLATION WORRIES

Official data also showed Britain borrowed more than expected in July, underscoring the challenge facing the country’s next prime minister over how to provide more support to consumers.

Money markets now expect the Bank of England to raise interest rates to almost 4% by March. [IRPR]

European Central Bank board member Isabel Schnabel fueled inflation worries by saying consumer prices could still accelerate in the short term.

Yet despite the Fed chorus on the need for higher rates, the odds of another supersized 75 basis point hike next month have receded to 45% in money markets.

Fed Chair Jerome Powell will update the market on his views at the annual Jackson Hole symposium on Aug. 25-27.

Against Asian currencies, the greenback was up 0.8% to 137.02 yen, after touching its highest since July 27. China’s yuan slipped to its lowest since September 2020 at 6.8168 per dollar in onshore trading after the central bank set a much-weakened midpoint guidance, with traders expecting further downside due to an economic slowdown.

In cryptocurrencies, bitcoin fell 8.7% to $21,437. Ether was down 7.75% to $1,700.

“Weakness has seeped into the crypto sphere as speculators retreated from highly risky assets amid expectation that higher interest rates were set to linger for much longer,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

(Reporting by Joice Alves; Additional reporting by Bansari Mayur Kamdar; Editing by Shri Navaratnam and David Holmes)

SINGAPORE (Reuters) – Cryptocurrencies fell sharply on Friday, with sudden selling dragging bitcoin to a three-week low.

The reason for the drop was not immediately clear. Bitcoin fell as much as 7.7% to $21,404 over a few minutes during the European morning. It recovered slightly and last stood at $22,047. Ether was last down 5% at $1,753.

(Reporting by Tom Westbrook; Editing by Toby Chopra)

By Elizabeth Howcroft

LONDON (Reuters) – Tether, the world’s largest stablecoin, said on Thursday it had appointed accounting firm BDO Italia to vouch for its asset reserves, and would look to increase the frequency of publishing its reserves reports to monthly from quarterly.

Stablecoins are a type of cryptocurrency designed to keep constant value, such as a 1:1 U.S. dollar peg. They are widely used to move funds between different cryptocurrencies or into regular cash.

Tether says its coin maintains its value by holding dollar-denominated reserves to match or exceed the value of Tether coins in circulation. These reserves have long been the subject of scrutiny which sharpened after crypto markets’ sell-off in May following stablecoin TerraUSD’s collapse.

Tether, run by a British Virgin Islands company, has in recent years published reports in which accountancy firms attest to the size of its reserves. The reserves totalled $82.4 billion as of March 31, of which $39 billion was in U.S. Treasuries.

The most recent two reports were by a Cayman Islands firm, MHA Cayman. Before that, Tether used another Cayman Islands firm, Moore Cayman, its website shows.

BDO Italia is an audit and assurance company based in Italy, an independent member firm of BDO International Limited. Tether management includes at least two executives from Italy.

Tether said in a statement that it started working with BDO Italia in July, adding the relationship is “the next step in the company’s path towards a complete audit”.

“The utility of Tether has grown beyond being just a tool for quickly moving in and out of trading positions, and therefore it is mission-critical for us to scale alongside the peer-to-peer and payments markets,” chief technology officer, Paolo Ardoino said in the statement.

(Reporting by Elizabeth Howcroft, editing by Sinead Cruise and Emelia Sithole-Matarise)

By Huw Jones

LONDON (Reuters) – The European Central Bank (ECB) said on Wednesday it would harmonise how banks offer cryptoassets to ensure they have enough capital and expertise in a sector some European Union lawmakers have described as the Wild West.

Several crypto companies like Binance and Crypto.com have been authorised in EU countries such as Italy, France, Spain, Greece or Germany after complying with national safeguards to combat money laundering and terrorist financing.

This comes ahead of pan-EU licensing rules from 2023 at the earliest.

The ECB said banks were also considering whether to get involved in the crypto sector, but that national rules diverged quite extensively.

“In Germany, certain crypto activities are subject to a banking licence requirement and to date, several banks have requested to be authorised to conduct these licensed activities,” the ECB said in a statement.

“It is in this context that the ECB is taking steps to harmonise the assessment of licensing requests.”

The ECB, which directly regulates top euro zone lenders such as Deutsche Bank, UniCredit and BNP Paribas, said it would examine if crypto activities were in line with a bank’s risk “profile”, which determines how much capital to hold.

The ECB will also check if a bank can identify and assess risks from cryptoassets and if board members and IT staff have “robust experience” in the sector.

“Importantly, working closely with national supervisors, the ECB will strive towards greater consistency in prudential assessments across national regimes,” the ECB added.

Global regulators at the Basel Committee in Switzerland are assessing whether there should be specific capital buffers for holdings of crypto assets at banks.

The EU is also reviewing its bank capital requirements law.

Ville Niinisto, a Green Party member of the European Parliament, has proposed an amendment that bank holdings of bitcoin and other cryptocurrencies not backed by assets should not exceed 1% of a bank’s core tier 1 measure of capital.

Such a cap would need the backing of the full parliament and EU states to become law, a lengthy process.

Niinisto has also proposed regulators should assess if bespoke capital requirements are needed for blockchain, which underpins cryptoassets.

(Reporting by Huw Jones; Editing by Mark Potter)

LONDON (Reuters) – Singapore-based cryptocurrency platform Crypto.com has registered with Britain’s financial services regulator, the company said in a statement on Wednesday.

Crypto.com joined the Financial Conduct Authority’s (FCA) register, which means it has approval to offer crypto asset services and products to customers in the United Kingdom.

The UK is a “strategically important market for us”, said Crypto.com CEO Kris Marszalek, citing an increase in crypto adoption in the country and the government’s agenda to make Britain a hub for crypto assets.

As authorities around the world are grappling with how to regulate the crypto sector, firms are racing to gain registration status with financial watchdogs.

The FCA has previously faced a backlash in the crypto sector after turning down registration applications from scores of crypto companies.

Crypto.com, which has 50 million customers globally, registered in South Korea last week and in Italy in July.

(Reporting by Elizabeth Howcroft, editing by Sinead Cruise)

By Pete Schroeder and Hannah Lang

WASHINGTON (Reuters) – The U.S. Federal Reserve on Tuesday issued additional guidance for banks considering activities involving cryptocurrencies, emphasizing that firms must notify the Fed beforehand and make sure whatever they do is legally permitted.

The Fed said in a statement that while cryptocurrencies could present “potential opportunities” to banks, firms needed to make sure they had systems in place beforehand to ensure the volatile assets did not threaten safety and soundness or consumer protections.

Banks should also notify the Fed before engaging in any crypto-related activities, and any banks that had already pursued crypto initiatives should also notify the Fed about their involvement in the digital asset space, the agency said.

The Fed also encouraged state member banks to alert their state regulator before getting involved in crypto activities.

The Fed said in the supervisory letter that banks supervised by the agency should take several steps before engaging in any crypto-related activities, including determining if existing laws dictated any particular filings and whether any activities under consideration were legally permissible.

Banks should also have adequate risk management systems and controls in place before getting involved in crypto to ensure that any endeavors were conducted in a safe and sound manner and were compliant with relevant consumer protection statutes, the Fed said.

The move comes just days after several Democratic senators led by Massachusetts Sen. Elizabeth Warren called on the U.S. Office of the Comptroller of the Currency (OCC) to rescind its previously issued guidance on crypto and replace it with “a comprehensive approach in coordination with other prudential regulators”.

Last year, U.S. banking regulators including the Fed and the OCC jointly said that they intended to clarify in 2022 what sort of activities banks could engage in involving crypto, including whether firms were able to hold digital assets on their balance sheet and facilitate crypto trades on behalf of customers.

(Reporting by Pete Schroeder and Hannah Lang in Washington; Editing by Chris Reese and Alex Richardson)

By Alun John

HONG KONG (Reuters) – The safe-haven U.S. dollar hit a three-week high on Tuesday after weak global economic data revived concerns of a global recession.

The dollar index <=USD>, which measures the greenback against six major peers, rose 0.4% to 106.94, its highest since July 27.

It has recovered all of the losses recorded last week when cooler-than-expected U.S. inflation data sent investors out of the dollar and back towards assets associated with higher risk.

Risk appetite on Tuesday was hurt by a dip in German investor sentiment, a day after China’s central bank on Monday unexpectedly cut a key interest rate to try to revive credit demand and support the COVID-hit economy after weak economic data releases for July. [nL4N2ZO0XF]

“The U.S. growth picture is still intact, but the overall global picture remains fragile, given concerns about China, and that has put a dampener on risk sentiment,” Sim Moh Siong, currency strategist at Bank of Singapore, said.

The euro <EUR=EBS> fell 0.35% to $1.0123, sterling <GBP=D3> shed 0.26% to $1.202, and the Australian dollar <AUD=D3> was down 0.25% at $0.7 having earlier retreated below that symbolic level.

Australia’s close trade ties with China mean its currency is sometimes treated by traders as a liquid proxy for China’s yuan.

The dollar also climbed versus the Japanese yen <JPY=EBS> up 0.8% to 13.47.

The Japanese currency, which is often affected by the difference between benchmark yields in the United States and Japan rallied sharply last week on the expectation that cooler inflation would mean a less aggressive pace of Fed tightening and so lower U.S. yields.

However in recent days, several Fed policymakers have spoken of the need for continued rate hikes.

“Fed officials have no choice but to sound tough in the face of a very, very tight labour market and far too high inflation,” Kit Juckes, the head of FX strategy at Societe Generale, wrote in a research note.

“It’s hard to build a compelling case to sell the dollar in that world.”

In crypto currencies, bitcoin <BTC=BTSP> was a fraction lower at $24,000. Ether <ETH=BTSP> was up slightly at $1,900.

(Reporting by Kevin Buckland and Alun John; Editing by Shri Navaratnam, Simon Cameron-Moore, Jan Harvey and Barbara Lewis)

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Losses arising from cryptocurrency hacks jumped nearly 60% in the first seven months of the year to $1.9 billion, propelled by a surge in funds stolen from decentralized finance (DeFi) protocols, according to a blog post from blockchain analysis firm Chainalysis released on Tuesday.

In the same period last year, stolen funds from hacking amounted to $1.2 billion.

DeFi applications, many of which run on the Ethereum blockchain, are financial platforms that enable crypto-denominated lending outside of traditional banks.

Chainalysis noted that the trend is not likely to reverse any time soon, given the $190 million hacking of cross-chain bridge Nomad and $5 million hacking of several Solana wallets already in the first week of August.

“DeFi protocols are uniquely vulnerable to hacking, as their open source code can be studied ad nauseum by cybercriminals looking for exploits and it’s possible that protocols’ incentives to reach the market and grow quickly lead to lapses in security best practices,” Chainalysis said in the blog.

Much of the funds stolen from DeFi protocols can be attributed to “bad actors” affiliated with North Korea, especially elite hacking units like Lazarus Group, the U.S. firm wrote.

Chainalysis estimates that so far this year, North Korea-affiliated groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols.

With respect to crypto scams, the blockchain intelligence firm saw a sharp 65% decline through July, in line with the slump in digital asset prices. Total scam revenue in the year to July was $1.6 billion, down 65% from around $4.46 billion in the same period last year.

Scammers may impersonate legitimate businesses and offer fraudulent crypto coins or tokens.

“Scams are down primarily because of the crypto downturn, but also because of the many law enforcement wins taken against scammers and the product solutions that exchanges can use to fight scamming,” said Kim Grauer, Chainalysis’ director of research, in an email to Reuters.

Crypto market capitalization late Thursday was at $1.1 trillion, according to CoinGecko, down more than 50% from around $2.35 trillion at the beginning of the year. Bitcoin so far this year has slumped roughly 48% in price and hovered between $20,000 to $24,000 in the last few months.

Since January 2022, scam-related proceeds have fallen in line with the price of bitcoin, Chainalysis said. Not only did proceeds from scams fall, but the cumulative number of individual transfers to scams in 2022 was the lowest in the past four years.

“Those numbers suggest that fewer people than ever are falling for cryptocurrency scams,” Chainalysis said in the report.

“One reason for this could be that with asset prices falling, cryptocurrency scams — which typically present themselves as passive crypto investing opportunities with enormous promised returns — are less enticing to potential victims.”

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – It looks like ethereum’s mega-upgrade is happening. Finally.

After years of delays, the “Merge” seems all but certain to take place in September, with the cryptography underlying the blockchain undergoing a radical shift to a system where the creation of new ether tokens becomes far less energy-intensive.

“It’s an exciting time for the ethereum ecosystem,” said Omar Syed, co-founder of smart contract platform Shardeum. “I think there will be drama surrounding the Merge, but I don’t think there will be any technical hiccups.”

Investors seem to agree, with ether outstripping big brother bitcoin.

Ether has seen six consecutive weeks of gains, pushing it up from a 1-1/2-year low of $880 in mid-June to levels closing in on $2,000, even though it’s way off its November 2021 peak of $4,868.79.

Bitcoin has paled in comparison, rebounding 37% from its June low to $24,116.

Ether is gnawing away at behemoth bitcoin’s market share: it now accounts for nearly a fifth – 19.7% – of the total crypto market capitalization of $1.14 trillion, up from less than 14.9% two months ago, according to CoinMarketCap. Bitcoin’s share has dropped to 40.2% from 44.9% in the same period.

“Crypto is still very tightly coupled, I think when the Merge successfully completes it could drive up the price of bitcoin as well,” said Alex Miller, CEO of Hiro, which builds developer tools to create applications for bitcoin.

If ethereum’s creators succeed, as is largely expected, it could be a game-changer for the blockchain, making it cheaper to mine and easy to adopt for fintech and other crypto apps.

Of course little is assured about the elusive transition, which has been delayed several times, with developers most recently axing plans to push the button in June, unnerving investors who began to fear it might never see the light of day.

The Merge is also is fraught with risk, and the fortunes of the roughly 122 million ether in circulation, worth about $232 billion, could be at stake should it fail.

If the upgrade doesn’t go well, it would “set the entire crypto world back five or 10 years,” Hiro’s Miller said.

Graphic: Ether recovers – https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/klvykwqwnvg/chart.png

‘DIFFICULTY BOMB’

The ethereum blockchain currently uses the energy-intensive proof-of work (PoW) method of validating blocks, wherein miners use massive amounts of power to quickly solve complex computational problems to win newly minted coins.

On a parallel chain, ethereum has been testing a proof-of-stake (PoS) system that only requires miners to “stake” their coins to validate transactions and create new blocks. It promises 99.95% reduction in the blockhain’s energy consumption and prepares it for faster transactions.

Not everyone’s happy about the imminent merger of the two systems – notably ether miners, whose expensive mining rigs will be rendered obsolete, and can’t be used for mining bitcoin either.

Ether mining has hitherto been more profitable than bitcoin mining. Ether miners made $18 billion in 2021 versus $17 billion for bitcoin miners, according to Arcane Research.

Some miners have decided to shift to mining the next best option, such as the tokens ethereum classic or ravencoin.

At least one miner has declared plans to resist and continue mining ethereum, raising the spectre of some people keeping the PoW chain running in its current form even after the merge, likely competing with the upgraded blockchain.

However, that option has perils.

Ethereum creators have designed a “difficulty bomb” to exponentially increase mining difficulty in order to discourage the PoW parallel chain after the Merge.

Moreover, both Tether and USDC – the largest stablecoins – have thrown their weight behind the Merge, reducing the likelihood of a wider adoption of the parallel PoW chain.

FROTHY FUTURES

“The likelihood of a long-lasting chain split of Ethereum following the Merge remains slim,” said Alex Thorn, head of firmwide research at Galaxy Digital.

Nonetheless, at least some investors are preparing for a hard fork, or a parallel PoW chain, positioning in the derivatives market indicates.

Ether futures were also trading at premium at $1,905 on the CME exchange, “reflecting expectations around a proof of work fork,” said Matthew Sigel, head of digital assets research at fund manager VanEck.

“But that gap is not so huge so as to think there is extreme froth,” he added.

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

By Joice Alves

LONDON (Reuters) – The safe-haven U.S. dollar rose on Monday after a new batch of disappointing Chinese data bolstered global recession worries, while the yuan weakened following a surprise key rate cut by the People’s Bank of China.

Chinese industrial output, retail sales and fixed-asset investment all fell short of analyst estimates in data published on Monday, as a nascent recovery from draconian COVID-19 lockdowns faltered.

“Of course, bad data from China also weighs on recession worries for the rest of the world,” said Ipek Ozkardeskaya, market strategist at Swissquote. That pushed down the euro against the greenback, she added.

The U.S. dollar index against six peers rose 0.6% to 106.3, consolidating near the middle of its range this month. The euro eased 0.6% against the dollar to $1.0191, after touching a one-week low.

The dollar was also supported by Federal Reserve policymakers’ hawkish comments in response to early signs that U.S. inflation may have peaked.

Richmond Fed President Thomas Barkin told CNBC on Friday that he would like to see inflation running at the Fed’s 2% target for “some time” before stopping rate hikes.

“The euro is slowly finding its way back down towards parity after the spike last week. It is too early for the Fed to take its foot off the brake, despite the drop in inflation,” said Jens Nærvig Pedersen, chief analyst, FX and rates strategy at DanskeBank. He maintained a bullish U.S. dollar view.

The onshore yuan eased to a two-week low of 6.7719 per dollar, compared with the previous close of 6.7430, after the People’s Bank of China unexpectedly lowered borrowing costs on medium-term policy loans and a short-term liquidity tool for the second time this year.

“Despite the warning of inflation risk and flush liquidity conditions, the dominant downside risks from the COVID spread and property-sector rout prompted the PBOC to cut rates to stimulate demand,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

The Australian and New Zealand dollars dropped by more than 1% after the data from China, a key trading partner.

Analysts will scour minutes of the Fed’s most recent meeting, due to be released on Wednesday, for more clues on policymakers’ thinking, while U.S. retail sales data on Friday will give some fresh insight on the economy’s health.

Money markets now price 47.5% odds of another 75 basis-point rate hike by the Federal Open Market Committee in September, versus a 52.5% probability of a slowing in the pace of tightening.

Last week, U.S. data fuelled investor hopes for less aggressive Fed tightening as it showed the first decline in import prices for seven months, following on the heels of statistics showing U.S. consumer and producer prices also cooling.

The euro has also been weighed down by Europe’s struggles with the war in Ukraine, the hunt for non-Russian energy sources and a hit to the German economy from scant rainfall.

Another European currency, the British pound also fell 0.55% against the dollar to $1.2068. [GBP/]

(Reporting by Joice Alves, additional reporting byt Kevin Buckland. Editing by Jacqueline Wong and Susan Fenton)