Tag: Cryptocurrencies

By Huw Jones

LONDON (Reuters) – The European Union’s securities watchdog has begun preparations for increased scrutiny of crypto transactions after the bloc agreed groundbreaking rules to regulate what it called a “Wild West” sector, a public tender document showed.

While cryptoasset firms will be licensed by national regulators in the 27-country bloc, the European Securities and Markets Authority (ESMA) will monitor the bigger players.

ESMA put out a public procurement request on Tuesday to suppliers of trading data on crypto transactions, including spot trades and derivatives.

It excludes transactions from blockchain or the distributed ledger technology which underpins cryptocurrencies like bitcoin.

“The coverage should encompass all major exchanges and crypto assets so that it provides a fair representation of the crypto market landscape,” ESMA said in its notice.

Regulators use transactions data to spot abuses in markets, find out who is on each side of a transaction, and look for risky build ups of positions which could undermine orderly markets.

“Data should be available with daily frequency and include access to order books where to see spreads and liquidity across exchanges and trading pairs (in fiat and crypto),” it said.

The contract is worth a maximum of 100,000 euros.

(Reporting by Huw Jones; Editing by Kim Coghill)

By Jonathan Stempel

(Reuters) – A U.S. judge on Tuesday granted a request by prosecutors to dismiss fraud counts against a former Uber Technologies Inc security chief also charged with covering up a 2016 data hack affecting 57 million passengers and drivers.

U.S. District Judge James Donato in San Francisco dismissed the three wire fraud charges against Joseph Sullivan.

Prosecutors had requested the dismissal in a court filing last Wednesday, without explaining why, after a different judge ruled on June 28 they could pursue the charges.

Sullivan still faces two charges: obstructing a U.S. Federal Trade Commission proceeding, and failing to report a felony.

The office of U.S. Attorney Stephanie Hinds in San Francisco declined to comment. Lawyers for Sullivan did not immediately respond to requests for comment.

Sullivan is believed to be the first corporate information security officer criminally charged with concealing a hacking.

Prosecutors said he tried to conceal the hacking from passengers, drivers and the FTC by arranging to pay the hackers $100,000 in bitcoin, and having them sign nondisclosure agreements that falsely stated they had not stolen data.

Sullivan was also accused of withholding information from Uber officials who could have disclosed the breach to the FTC, which had been evaluating the San Francisco-based company’s data security following a 2014 breach.

While letting the fraud charges proceed, U.S. District Judge William Orrick nevertheless said prosecutors could not contend that Sullivan owed a duty to Uber drivers to reveal the hacking.

Orrick still oversees the case. Donato was the judge on duty to handle the dismissal request.

Uber fired Sullivan after learning the extent of the breach. In September 2018, the company paid $148 million to settle claims by the 50 U.S. states and Washington, D.C. that it was too slow to reveal the hacking.

(Reporting by Jonathan Stempel in New York; Editing by Lincoln Feast)

(Reuters) – New York State’s financial regulator has fined the crypto arm of Robinhood Markets Inc $30 million for alleged violations of anti-money-laundering, cybersecurity and consumer protection rules.

The New York State Department of Financial Services (NYDFS) said on Tuesday that Robinhood Crypto did not devote sufficient resources to address compliance and cybersecurity risks.

The online trading app has been at the center of several regulatory probes, including those sparked by last year’s frenzy in meme stocks.

“We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final,” Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood, said on Tuesday.

The company has made “significant progress” in building its legal, compliance and cybersecurity programs, Crumpton added.

As part of the settlement, Robinhood Crypto would also be required to retain an independent consultant to evaluate its compliance practices, the NYDFS said.

(Reporting by Niket Nishant in Bengaluru; Editing by Aditya Soni)

By Elizabeth Howcroft

LONDON (Reuters) – U.S. crypto firm Nomad has been hit by a $190 million theft, blockchain researchers said on Tuesday, the latest such heist to hit the digital asset sector this year.

Nomad said in a tweet that it was “aware of the incident” and was currently investigating, without giving further details or the value of the theft.

Crypto analytics firm PeckShield told Reuters $190 million worth of users’ cryptocurrencies were stolen, including ether and the stablecoin USDC. Other blockchain researchers put the figure at over $150 million.

San Francisco-based Nomad did not immediately respond to a request for comment.

The company, which last week raised $22 million from investors including major U.S. exchange Coinbase Global, makes software that connects different blockchains – the digital ledgers that underpin most cryptocurrencies.

The heist targeted Nomad’s “bridge” – a tool which allows users to transfer tokens between blockchains.

Blockchain bridges have increasingly become the target of thefts, which have long plagued the crypto sector. Over $1 billion has been stolen from bridges so far in 2022, according to London-based blockchain analytics firm Elliptic.

In June, U.S. crypto firm Harmony said that thieves stole around $100 million worth of tokens from its Horizon bridge product.

In March, hackers stole around $615 million worth of cryptocurrency from Ronin Bridge, used to transfer crypto in and out of the game Axie Infinity. The United States linked North Korean hackers to the theft.

Nomad described itself as “security-first” business which would keep users’ funds safe.

(Reporting by Elizabeth Howcroft; editing by Tom Wilson and Christina Fincher)

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – It’s been a good month for bitcoin – and we haven’t said that for a while.

After months of freefall, it jumped more than 17% in July, its best performance since October. Ether rose 57%, its strongest monthly gain since January 2021.

The rally was in step with gains of riskier assets such as stocks as investors bet that economic weakness could deter the Fed from aggressively tightening monetary policy.

Bitcoin’s 40-day correlation to the tech-focused Nasdaq now stands at 0.90 – up from 0.41 in January – where 1 means their prices move in perfect lockstep.

The leading cryptocurrency has been consistently positively correlated with the Nasdaq since late November, unlike in previous years where it would routinely turn negative, meaning they moved in opposite directions.

Itai Avneri, deputy CEO at cryptocurrency trading platform INX, described July’s convergence as “good news”.

“It means institutional investors are looking at bitcoin like any other asset,” he said. “When the market turns – and it will turn – these institutions will come back and invest in crypto.”

Gains were not limited to bitcoin, as the value of the global cryptocurrency market crept back above $1.15 trillion last month, adding over $255 billion since the end of June, CoinGecko data showed.

Assets under management in digital asset investment products rose 16.9% to $25.9 billion in July, reversing June’s decline of 36.8%, according to research firm CryptoCompare.

However, trading has been thin – indicating plenty of investors gauge it’s too early to turn bullish in a deeply uncertain macro backdrop with inflation rampant, and America and Europe staring down the barrel of a recession, not to mention the implosion of some big crypto players.

Average daily volumes across all digital asset investment products fell by 44.6% to $122 million, the lowest since September 2020, CryptoCompare found.

“On a medium-term horizon, we’re bearish (on crypto) despite the current bounce, this aligns with our stance on equities,” researchers at MacroHive wrote on Friday, citing inflation, recession risks and rate hikes.

Bitcoin correlation with Nasdaq: https://tmsnrt.rs/3d0Goex

A LONG WAY FROM $60,000

Bitcoin is currently trading at $23,336, consolidating around the $24,000 mark after touching that level last week.

It will likely continue to trade in a tight range of around $20,000, plus or minus 10% to 15%, until there is more clarity over the economy’s trajectory, according to Chris Terry, vice-president at lending platform SmartFi.

“We could be in this stalled market for weeks and weeks.”

On the flip side, if the United States enters a prolonged recessionary period and the Fed is forced to cut interest rates, bitcoin could benefit, said Russell Starr, CEO of Valour, which creates exchange-traded products for digital assets.

“You’re going to have to see another quarter of recession before you see a resumption back up to the lofty $60,000 levels,” he said.

For investors who dove into crypto during its surge at the height of pandemic-era easy monetary policy, the next several months could be quite bumpy, according to Adrian Kenny, senior sales trader at GlobalBlock.

“There is still an undoubtedly considerable mountain to climb in terms of ‘normality’ or the hopes of a return to the highs of 2021 anytime soon.”

Crypto crash: https://tmsnrt.rs/3zNwFB9

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

By Kanishka Singh

WASHINGTON (Reuters) – The Securities and Exchange Commission said on Monday it charged 11 people for their roles in creating and promoting a fraudulent crypto pyramid and Ponzi scheme that raised over $300 million from retail investors worldwide, including in the United States.

Those charged included the four founders of the scheme named Forsage. They were last known to be living in Russia, the Republic of Georgia, and Indonesia, the SEC said in a statement.

The charged individuals could not immediately be reached for comment.

According to the SEC’s complaint, the scheme’s website was launched in January 2020 and allowed millions of retail investors to enter into transactions via smart contracts. It allegedly operated as a pyramid scheme for more than two years, in which investors earned profits by recruiting others into the scheme, the SEC said.

Forsage also allegedly used assets from new investors to pay earlier investors in a typical Ponzi structure, the SEC complaint added.

“Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, acting chief of the SEC’s Crypto Assets and Cyber unit. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”

Without admitting or denying the allegations, two of the defendants agreed to settle the charges and one of them agreed to pay penalties, the SEC said.

(Reporting by Kanishka Singh in Washington; Editing by Bernadette Baum)

By Huw Jones

LONDON (Reuters) – Britain’s financial watchdog finalised tougher rules on Monday for advertising high risk products, such as peer-to-peer loans and the mini-bonds sold by investment firm London Capital & Finance (LCF), whose collapse led to a government bailout of investors.

The Financial Conduct Authority (FCA) said firms approving and issuing marketing material must have “appropriate expertise” and conduct better checks for ensuring that customers understood the risks involved.

“Firms also need to use clearer and more prominent risk warnings and certain incentives to invest, such as ‘refer a friend bonuses’, are now banned,” the FCA said in a statement, referring to giveaways for customers who introduce new clients.

The FCA wants to make it harder to sell high risk products, which also include other types of speculative illiquid securities, unlisted equity and debt, crowdfunding, and unregulated collective investment schemes.

“This follows concerns that a significant number of people who invest in high-risk products do not view losing money as a risk of investing and invest without understanding the risks involved,” the FCA said in a statement.

These investments came under the spotlight after LCF collapsed in 2019, leaving 11,600 investors in mini-bonds facing losses of up to 237 million pounds.

An independent report said the FCA had failed to supervise LCF properly, triggering a revamp to become a more “assertive” watchdog. Last week it said it would impose a tougher “consumer duty” on firms to crack down on mis-selling.

The new rules, being rolled out over six months, will not apply to cryptoassets until a law has been approved to bring the sector under the regulatory net, the FCA said.

The FCA and Bank of England have repeatedly warned that investors in crypto must be ready to lose every penny.

“Where we see products being marketed that don’t contain the right risk warnings or are unclear, unfair or misleading, we will act,” said Sarah Pritchard, the FCA’s executive director for markets.

The watchdog also launched a public consultation on widening the range of retail investors who can invest in long term asset funds.

(Reporting by Huw Jones)

(Reuters) – Bitcoin rose 3.36% to $24,584.24 at 1707 GMT on Saturday, adding $798.93 to its previous close.

Bitcoin, the world’s biggest, best-known cryptocurrency, is up 39.7% from the year’s low of $17,592.78, hit on June 18.

Ether, the coin linked to the ethereum blockchain network,rose 0.61 % to $1,734.08 on Saturday, adding $10.46 to its previous close.

(Reporting by Rhea Binoy in Bengaluru; editing by Jonathan Oatis)

(Reuters) – People can pay for a slushie with crypto in the streets of “Bitcoin Valley,” a project in the Honduran tourist enclave of Santa Lucia through which the country has entered the digital currency trend.

The small town in the mountains, 20 minutes from the capital Tegucigalpa, has become a bitcoin city.

Owners of businesses big and small in Santa Lucia are adapting to handle cryptocurrencies as payment, hoping to attract more tourism.

“It will open more opportunities and attract more people who want to use this currency,” said Cesar Andino, manager of Los Robles shopping square.

The “Bitcoin Valley” project targets 60 businesses to initially get trained and adopt cryptocurrencies to market their products and services, expecting to spread these practices to more enterprises and nearby areas.

The initiative was jointly developed by the Blockchain Honduras organization, the Guatemalan cryptocurrency exchange consortium Coincaex, the Technological University of Honduras and Santa Lucia’s municipality.

Ruben Carbajal Velazquez, professor at the Technological University, said “Santa Lucia’s community will be educated to use and manage cryptocurrencies, implementing them in different businesses in the region and generating crypto-tourism.”

While some Latin American countries are exploring cryptocurrencies’ potential, there are risks.

In September 2021, El Salvador adopted bitcoin as legal tender having its own ‘Bitcoin Beach’ in the surfing hotspot town of El Zonte.

The Central American country’s bet on bitcoin was hampered by the crypto market downturn and skepticism from multilateral lenders and ratings agencies. Its publicly disclosed holdings of $105 million are now worth about $57 million.

To deal with volatility, the Honduran “Bitcoin Valley” will “enable merchants to receive instant payments in the local currency, eliminating cryptocurrencies fluctuation risks,” said Leonardo Paguada, founder of the Block Chain Honduras organization.

Critics of bitcoin’s expansion have warned that these kind of operations may fuel money laundering and financial instability while enhancing the digital gap, as poorer parts of society may struggle to access the technology.

(Reporting by Rodolfo Penaroja and Aida Pelaez-Fernandez; Editing by David Gregorio)

WASHINGTON (Reuters) – A U.S. banking regulator is urging banks dealing with cryptocurrency companies that they need to make sure customers know which of their funds will be insured by the government in case of collapse, and which have no safety net.

The Federal Deposit Insurance Corporation (FDIC) said Friday it is concerned consumers may be confused about how safe their money may be when placed in crypto assets, particularly in cases where firms offer a mix of uninsured crypto products alongside insured bank deposit products.

In a new advisory, the FDIC said banks need to make sure any crypto firms they partner with do not overstate the reach of deposit insurance. The push comes as broad turmoil in the crypto market has led to the collapse of some high-profile firms, including one regulators publicly chastised yesterday for overstating deposit insurance coverage.

“Inaccurate representations about deposit insurance by non-banks, including crypto companies, may confuse the non-bank’s customers and cause those customers to mistakenly believe they are protected against any type of loss,” the FDIC advisory stated.

On Thursday, the FDIC and Federal Reserve issued a cease and desist order against now-bankrupt crypto firm Voyager Digital, charging the company misled customers to believe funds invested in the brokerage would be guaranteed by the government.

Specifically, the FDIC said banks need to make clear to the public that deposit insurance only covers insured banks in case of collapse, and that protection does not extend to the failure of any nonbank partners, which can include crypto custodians, exchanges, and wallet providers.

(Reporting by Pete Schroeder; Editing by David Holmes)

By Lisa Pauline Mattackal

(Reuters) – Investors and policymakers should welcome the Federal Reserve’s changing tack to provide less definitive signals on forward guidance, even as markets scramble to guess the U.S. central bank’s next policy moves, two former Fed officials said.

“The kind of guidance we’ve seen in the past … creates an expectation that’s unrealistic,” Dennis Lockhart, former president of the Atlanta Federal Reserve, told the Reuters Global Markets Forum (GMF) on Thursday.

“I think it’s better to embrace the uncertainty and understand that (the Fed) is navigating and figuring it out as they go along,” he said.

Jeremy Stein, a former member of the Fed’s Board of Governors, told GMF that overly specific guidance limits the central bank’s flexibility at a time when the trajectory of inflation and economic growth remains uncertain.

“The big question is how far are we going to have to (hike interest rates) in a year? We don’t really know. Giving the market a false sense of certainty doesn’t really help,” said Stein, currently a professor at Harvard University.

After the Fed raised interest rates by 75 basis points on Wednesday, Chair Jerome Powell avoided signaling the size of subsequent rate hikes. Other central banks have similarly emphasised a meeting-by-meeting “data-driven” approach.

Market focus on the “next meeting” often risks missing the more important angle of how high rates will head in the long-term, and their impact on financial conditions, Stein said.

Lockhart believes that while the probability is low, a 100-basis-point rate hike is on the table at the Fed’s September meeting. Both he and Stein were sceptical about inflation waning quickly.

Unemployment skyrocketed during the Great Financial Crisis in 2008 along with a fairly limited decline in price rises, Stein said, adding that a replay of this scenario could test the Fed’s resolve to bring inflation back near their 2% target.

(Join GMF, a chat room hosted on Refinitiv Messenger: https://refini.tv/33uoFoQ https://refini.tv/33uoFoQ))

(Reporting by Lisa Pauline Mattackal in Bengaluru; Additional reporting by Nishara Pathikkal in Bengaluru; Editing by Divya Chowdhury and Kim Coghill)

By Hannah Lang

(Reuters) – Cryptocurrencies have been hard hit by fears interest rate hikes will end the era of cheap money, with the world’s largest digital asset, bitcoin, down more than 56% from this year’s high. Several crypto companies have filed for bankruptcy or have been forced to look for emergency capital infusions.

THREE ARROWS CAPITAL

Singapore-based crypto hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy on July 1.

Once a formidable player in the digital asset space, the downfall of 3AC appeared to stem from the firm’s bet on the Terra ecosystem, which was behind failed stablecoin terraUSD. That token lost nearly all of its value in May, shaving almost half a trillion dollars off the crypto market.

High-leveraged, 3AC was unable to meet margin calls from counterparties it had borrowed from. Consequently, crypto lenders BlockFi and Genesis Trading liquidated their positions with the firm. According to court filings, 3AC’s creditors claim they are owed more than $2.8 billion.

CELSIUS NETWORK

New Jersey-based crypto lender Celsius suspended withdrawals on June 12 and a month later filed for Chapter 11 bankruptcy, listing a $1.19 billion deficit on its balance sheet. It had been valued at $3.25 billion in a funding round in October.

Celsius stumbled on complex investments in the wholesale digital asset market. The company had attracted retail investors by promising annual returns as high as 18.6%, but struggled to meet redemptions as crypto prices slumped.

In its first bankruptcy hearing, Celsius lawyers said that its bitcoin mining operations could provide a way for the company to repay customers.

Meanwhile, several state regulators are investigating Celsius’ decision to suspend customer withdrawals, Reuters reported.

VOYAGER

Crypto lender Voyager Digital, also based in New Jersey, had been a rising crypto star, reaching a $3.74 billion market cap last year. But the collapse of 3AC dealt a major blow to Voyager, which was heavily exposed to the hedge fund. Voyager has filed claims of more than $650 million against 3AC.

Voyager filed for Chapter 11 bankruptcy on July 6, reporting that it had $110 million worth of cash and crypto assets on hand. Since then, the U.S. Federal Deposit Insurance Corp has confirmed that it is probing Voyager’s marketing of deposit accounts for cryptocurrency purchases, which the company had advertised as being FDIC-insured.

Crypto exchange FTX and Alameda Research, both founded by billionaire Sam Bankman-Fried, offered to purchase all of Voyager’s digital assets and loans, except its loans to 3AC, and enable Voyager customers to withdraw their assets from an FTX account. However, Voyager rebuffed that offer in a court filing as a “low-ball bid.”

VAULD

Singapore-based crypto lender Vauld on July 8 filed with a Singapore court for protection against its creditors, after suspending withdrawals days earlier. The company owes $402 million to its creditors, according to a report from The Block.

Vauld is backed by billionaire investor Peter Thiel’s Valar Ventures, Pantera Capital and Coinbase Ventures.

In a July 11 blog post, Vauld said it is discussing a possible sale to London-based crypto lender Nexo while at the same time exploring potential restructuring options.

BLOCKFI

Facing an increase in withdrawals and a hit from 3AC, crypto lender BlockFi signed a deal July 1 with FTX that provides BlockFi with a $400 million revolving credit facility, and includes an option that enables FTX to buy the company for up to $240 million.

BlockFi was hard hit by the crypto crash, and implemented multiple cost-cutting measures in June, including slashing its headcount by 20% and cutting executive compensation. The company was valued at $3 billion in a funding round last year.

(Reporting by Hannah Lang in Washington; Editing by Michelle Price and Lisa Shumaker)

By Huw Jones and Elizabeth Howcroft

LONDON (Reuters) – Britain should create a new category of private property law for digital assets like cryptocurrencies which are being used to make payments or represent other assets, independent body the Law Commission proposed on Thursday.

Authorities around the world are taking steps to regulate the crypto asset sector, which has grown rapidly and been labelled a “Wild West” by European Union lawmakers.

Cryptocurrencies, such as bitcoin, surged in price in 2020 and 2021, but have fallen sharply this year. NFTs – blockchain-based assets which represent digital files such as images, have also proliferated rapidly.

Rishi Sunak said in April, when he was finance minister, that he wanted to make Britain a global hub for crypto asset technology. He asked the Law Commission to review whether current laws can accommodate digital assets.

The Commission said on Thursday many digital assets, such as non-fungible tokens or NFTs, do not fit easily into current private property law.

“Our proposals aim to create a strong legal framework that offers greater consistency and protection for users and promotes an environment that is able to encourage further technological innovation,” said Sarah Green, the Law Commissioner for commercial and common law.

The Commission proposed adding a third “data objects” category to the existing “things in possession”, or tangible assets like gold, and “things in action”, such as debt or shares in a company, categories of personal property.

To come under the new category, a digital asset must be composed of electronic data and meet other criteria, such as only being used by one person at a time, the Commission proposed in a paper put out to public consultation.

“Property rights matter because, unlike, say, contractual rights, they can be asserted against anyone, not just the other person to the contract,” said Jason Rix, counsel and commercial litigation lawyer at Allen & Overy law firm.

Last week Britain set out a draft law giving its regulators powers over the use of stablecoins in payments, with a further consultation on regulating other types of crypto assets due later this year.

(Reporting by Huw Jones and Elizabeth Howcroft, editing by Jane Merriman and Frank Jack Daniel)

(Reuters) – Bitcoin rose 6.85% to $22,717.05 at 22:05 GMT on Wednesday, adding $1,457.27 to its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is up 29.1% from the year’s low of $17,592.78 on June 18.

Ether, the coin linked to the ethereum blockchain network, rose 11.39% to $1,614.99 on Wednesday, adding $165.15 to its previous close.

(Reporting by Akanksha Khushi in Bengaluru; Editing by Chris Reese)

(Reuters) – Cryptocurrency exchange Kraken is under federal investigation for potential violation of U.S. sanctions by allowing users in Iran and elsewhere to buy and sell digital tokens, the New York Times reported, citing five people with knowledge of the matter.

The U.S. Treasury Department’s Office of Foreign Assets Control has been investigating Kraken since 2019 and is expected to impose a fine, according to the report. (https://nyti.ms/3PBTVaN)

Kraken said it does not comment on specific discussions with regulators.

Privately held Kraken is the latest cryptocurrency company to come under regulatory scrutiny, as the rapidly growing industry gets caught in the crosshairs of the federal government.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Anil D’Silva)

(Reuters) – The U.S. Securities and Exchange Commission (SEC) is investigating whether Coinbase Global Inc improperly let Americans trade digital assets that should have been registered as securities, Bloomberg News reported on Monday.

A Coinbase spokesperson told Reuters the company does not list securities on its platform, while the regulator declined to comment on the report.

The company’s legal head Paul Grewal said Coinbase will engage with the SEC on the matter. “We are confident that our rigorous diligence process — a process the SEC has already reviewed — keeps securities off our platform,” Grewal said.

The SEC’s scrutiny has increased ever since the crypto trading platform expanded the number of tokens in which it offers trading, Bloomberg report said, citing two sources. (https://bloom.bg/3OyXrBk)

The probe by the SEC’s enforcement unit predates its investigation into an alleged insider trading scheme that was revealed last week.

In the first insider trading case involving cryptocurrency, U.S. prosecutors had charged Ishan Wahi, a former product manager at Coinbase, for sharing confidential information about forthcoming announcements of new cryptocurrency assets that Coinbase would allow users to trade through its exchange.

In related civil charges, the regulator alleged that Wahi’s brother Nikhil Wahi and their friend Sameer Ramani purchased and sold at least 25 crypto assets for a profit, nine of which the agency identified as securities.

The SEC had declined to confirm at the time whether it would pursue action against Coinbase for listing the tokens deemed securities in the complaint.

The cryptocurrency platform has previously asked the regulator to develop rules that work for digital asset securities.

(Reporting by Jaiveer Shekhawat, Jahnavi Nidumolu and Nivedita Hazra in Bengaluru; Editing by Sherry Jacob-Phillips and Arun Koyyur)

By Tom Wilson, Medha Singh and Lisa Pauline Mattackal

(Reuters) – It’s not all doom and gloom.

Even as the crypto sector shivers in the bleak winter, venture capitalists are pouring money into digital currency and blockchain startups at a pace that’s set to outstrip last year’s record.

In the first half of the year, VCs bet $17.5 billion on such firms, according to data from PitchBook. That puts investment on course to top the record $26.9 billion raised last year, a warmer and happier time for bitcoin and co.

“The current market conditions – I don’t think they faze investors,” said Roderik van der Graf, founder of Hong Kong investment firm Lemniscap, which focuses on crypto and blockchain. “The capital available is massive.”

VC funds offer financing to young companies they believe have strong growth prospects. The data suggests a solid faith in the future of crypto and blockchain tech, despite a bruising six months for the industry.

A double whammy of macroeconomic headwinds and blow-ups at major projects this year have seen bitcoin plummet about 65% from its November record of $69,000, with the overall value of the crypto market tumbling by two-thirds to $1 trillion.

Companies have shuddered as prices fall, with major U.S. exchange Coinbase Global and NFT platform OpenSea among those to lay off hundreds of workers.

Yet some VCs are shrugging off the gloom, with many deploying substantial war chests as their faith in the underlying tech behind crypto coins remains strong.

Though not all investors are so bullish in the face of the crypto carnage, not by any means.

David Siemer, CEO of California crypto management firm Wave Financial, said there were signs of a pullback from the sky-high valuations of crypto firms last year.

“This will get a lot worse – we’re a couple of months into this cycle. In the last cycle the pain for those looking for funding was about 12 months.”

(Graphics: https://graphics.reuters.com/FINTECH-CRYPTO/WEEKLY/lbvgnedljpq/chart.png)

AMERICAN HOTSPOT

North America, long the hotspot for VC deals, has again been the focus of activity with about $11.4 billion in the six months to June, versus $15.6 billion for the whole of last year.

The numbers contrast with general VC activity in United States, where deals fell to $144.2 billion in the first half from $158.2 billion in the same period last year as macro conditions and market turmoil chill investment.

Rumi Morales, director of investments at Digital Currency Group, a major American VC, said the data reflected increasingly robust faith in the crypto and blockchain sector.

“There used to be existential risk being in the space – that the whole industry was just going to go away, it was all a dream. That is not the case anymore.”

Adoption of crypto as an investment tool mushroomed last year, with the use of blockchain also gaining ground – even if the revolutionary changes from the technology promised to industries such as finance and commodities remain elusive.

Among the mega U.S. crypto deals in 2022: $400 million raised by the U.S. arm of crypto exchange FTX in January; a $450 million fundraising round by blockchain developer ConsenSys in March; and $400 million raised by stablecoin issuer Circle a month later.

Activity is strong in Europe too, with $2.2 billion of VC investment in the first half of the year.

Lisbon-based Fedi, an app designed to help people receive, hold and spend bitcoin, said this month it had raised $4.2 million in seed financing.

“Within seven days we had all of the investment commitments,” Obi Nwosu, one of its founders, told Reuters. “And within less than a month and a half we had the initial fundraise target in the bank. Done.”

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

(Reuters) – Tesla Inc has increased its capital spending plan by $1 billion, the electric automaker said in a regulatory filing on Monday that also disclosed a second subpoena related to Chief Executive Elon Musk’s go-private tweets in 2018.

The company now expects to spend between $6 billion and $8 billion this year and each of the next two years, up from its previous expenditure plan of $5 billion-$7 billion, as it looks to ramp up production at its new facilities in Texas and Berlin.

Musk had last month said the factories are “losing billions of dollars” as they struggle to raise output due to a shortage of batteries and China port issues.

Meanwhile, the latest subpoena by the U.S. Securities and Exchange Commission (SEC) on June 13, has sought information about compliance with Musk’s settlement with the regulator in 2018.

Musk had settled a lawsuit by the SEC over his go-private tweets by agreeing to let the company’s lawyers pre-approve tweets with material information about the company.

The company said it will cooperate with the government authorities. The SEC declined to comment. The regulator had first subpoenaed Tesla in November related to the settlement.

The world’s richest person, who calls himself a “free speech absolutist”, had in March said his “funding secured” tweet was truthful, likening himself to rapper Eminem in seeking to throw out his 2018 agreement with the SEC.

In June, he also appealed a judge’s refusal to end the agreement.

The latest subpoena comes as Musk prepares for a legal showdown in October with Twitter for dropping his $44-billion offer to buy the social media company.

In June, the regulator had questioned Musk over a tweet in which he raised doubts over his acquisition of Twitter due to concerns over the number of fake users and spam accounts.

Separately, Tesla’s filing said it converted about 75% of its bitcoin holdings into fiat currency, gaining $64 million in the process, while recording an impairment charge of $170 million in the first six months of 2022.

As of June 30, the fair market value of its digital assets was worth $222 million, it said in the filing. (https://bit.ly/3S1k4Bq)

(Reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur)

(Reuters) – Bankrupt crypto lender Voyager Digital said a recent joint proposal from FTX and Alameda Ventures was a “low-ball bid dressed up as a white knight rescue” and alleged the plan would disrupt its bankruptcy process.

Under the partial bailout plan announced on Friday, crypto trading firm Alameda would purchase all of Voyager’s digital assets and digital asset loans, except the loans to bankrupt crypto hedge fund Three Arrows Capital.

Voyager’s customers could then receive some of those funds if they chose to open an account with crypto exchange FTX. Such customers could either withdraw the cash balance immediately or use it to make purchases on FTX’s platform.

Voyager, in a court filing dated July 24, said the proposal was “designed to generate publicity for itself rather than value for Voyager’s customers”.

“We submitted what we think is a generous proposal – we aren’t taking fees on this, just letting customers get their remaining assets back promptly,” Sam Bankman-Fried, the founder of FTX and Alameda, said in an emailed statement.

“It appears that Voyager’s consultants are attempting to stall out the process, increasing their fees,” Bankman-Fried added.

Voyager did not respond to a request seeking additional comment.

The company filed for Chapter 11 bankruptcy earlier this month. In June, it had signed an agreement with Alameda for a revolving line of credit.

(Reporting by Niket Nishant in Bengaluru; Editing by Maju Samuel)

BANGKOK (Reuters) – Thailand’s Securities and Exchange Commission said on Monday it was working with law enforcement to look into potential losses among the public after the crypto exchange Zipmex temporarily suspended withdrawals last week.

The SEC said in a statement it was asking impacted users of Zipmex to submit information via an online forum on how they had been affected by the problems at the platform.

The Southeast Asia-focused crypto exchange, which operates in Thailand, Indonesia, Singapore and Australia, suspended withdrawals last Wednesday.

Withdrawals resumed on the same the evening in Thailand and later on in other countries, except for transfers from one investment product, which the company later said had exposure worth $53 million in crypto lenders, Babel Finance and Celsius.

Celsius and Babel Finance are among several crypto players that have fallen into difficulties in recent months.

A Zipmex spokesperson said it was fully complying with SEC requests and has been actively speaking to government agencies.

The announcement comes as crypto trading in Thailand has slowed and after Thai lender SCB X Pcl said https://classic.set.or.th/set/pdfnews.do?newsId=16572373881420&sequence=2022082576 it was extending the due diligence period for its $537 million acquisition of Thai crypto exchange, Butkub.

Zipmex is the latest crypto firm to be face difficulties following a sharp sell off in markets that started in May with the collapse of two paired tokens, Luna and TerraUSD.

Zipmex holds a digital asset exchange and a digital asset broker license, the SEC website https://www.sec.or.th/en/pages/shortcut/digitalasset.aspx shows. At the weekend, the company said in a Facebook post https://www.facebook.com/zipmexasia/posts/pfbid0mwHXPYA2oMRgeRJvNLmDUvVinSDqywW1J6eSUAuR7ZNbZWgS8HC9TNp5rsSoxthyl it was exploring a deal with an “interested party.”

(Reporting by Chayut Setboonsarng; Editing by Ed Davies)