Tag: Cryptocurrencies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

By Hannah Lang

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

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

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

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

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

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

By Hannah Lang

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

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

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

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

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

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

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

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

By Howard Schneider

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

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

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

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

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

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

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

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

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

STAKES ARE HIGH

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

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

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

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

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

Adoption may not necessarily be disruptive.

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

But it may be coming fast.

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

(Reporting by Howard Schneider; Editing by Andrea Ricci)

By Howard Schneider

NEW YORK (Reuters) – Innovations in digital payments and the potential adoption of a central bank digital currency could force central banks to overhaul how they conduct monetary policy, potentially increasing their balance sheets and the tools used to control interest rates, Lorie Logan, executive vice president of the New York Federal Reserve, said on Thursday.

Logan, who heads the market operations for the New York Fed, was speaking generically about the impact of digital innovations on all central banks, not on the implications of a central bank digital currency for the Fed. The ultimate impact, she said, would depend on how a digital offering is designed, how broadly it is offered to banks, firms or households, and whether it pays interest.

But she and other speakers at a Columbia University and New York Fed symposium agreed that central banks’ potential journey into the world of cryptocurrencies and stablecoins could prompt dramatic changes in how monetary policy is conducted, and pose challenges in keeping control of interest rates and setting the size of the central banks’ balance sheets.

“The innovation occurring in money and payments has the potential to alter the existing…monetary system upon which current monetary policy implementation frameworks are

designed,” said Logan, who will be taking over as president of the Dallas Federal Reserve this summer. “How things evolve from here is uncertain, and the impact of these innovations could be revolutionary, or more evolutionary.”

Most global central banks are at least exploring whether to establish their own version of a digital currency.

If those end up drawing deposits away from legacy banks, for example, it could force central banks to increase their own balance sheets to provide more liquidity to the system.

“In some circumstances, the balance sheet could need to adjust rapidly because of unexpected large shifts in liability demand,” she said.

“In an environment with new public and private digital currencies, liquidity backstops for traditional banks may become even more important,” she said, referring to traditional short-term lending tools that central banks offer to commercial banks and other financial institutions.

Digital currencies “could enhance market efficiency,” she said, “but it may also lead to swings in deposit flows” that could effect the short-term interest rates central banks try to control.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

By Alun John

HONG KONG (Reuters) – The dollar hit a three-week high against the yen in early trade on Thursday and held its gains against other majors, supported by this week’s advances in U.S. Treasury yields, which hit two-week peaks overnight.

The dollar rose as far as 130.23 yen, its highest since May 11, extending Wednesday’s 1.1% gain and heading back towards its 20-year peak of 131.34 hit in May.

The euro was at $1.0653, having fallen 0.81% to a 10-day low overnight, and sterling was at $1.247 after losing 0.96% on Wednesday. This left the dollar index on the front foot at 102.53.

“If you look at the equity market, at bonds, at dollars, it all sort of joins up,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

“In the last 48 hours or so we’ve seen a reversal in declines in U.S. Treasury yields – the 10 year is now back near 3% – equity markets have been struggling and the U.S. dollar strengthening. It’s almost a mirror image of what we saw last week, when there was talk of a possible pause in the tightening cycle.”

“Also I think the euro has pretty much done what it can do on the upside ahead of the ECB meeting next week, because a lot is priced in now,” he added.

The U.S. benchmark 10-year yield hit a two-week high of 2.951% on Wednesday after data showed U.S. manufacturing activity had picked up in May as demand for goods remained strong, which could allay fears of an imminent recession.

U.S. job openings also remained at high levels.

Yields have been rising as the U.S. Federal Reserve has raised interest rates quickly in an attempt to bring red hot inflation under control while hoping to avoid pushing the economy into recession.

This surge stopped last week after Atlanta Fed President Raphael Bostic raised the possibility of a pause in interest rate rises at the Fed’s September meeting, depending on the inflation situation and the economic impact of higher rates.

The 10-year yield was last at 2.9168%.

Traders are looking to more U.S. employment data due later Thursday and to Friday’s U.S. payroll data.

They are also starting to turn their minds towards next week’s European Central Bank (ECB) policy meeting, at which the central bank is expected to give more details about its plans for rate increases.

Elsewhere, the Australian dollar was a touch softer at $0.7161, and bitcoin was trading around $29,800, having fallen overnight, unable to sustain its push above $30,000 earlier in the week.

(Reporting by Alun John; Editing by Bradley Perrett)

By Jonathan Stempel

NEW YORK (Reuters) – U.S. prosecutors in Manhattan on Wednesday charged a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, with insider trading, the first such case involving digital assets.

Nathaniel Chastain, 31, of Manhattan, was accused of secretly buying 45 NFTs on 11 separate occasions based on confidential information that the tokens, or others by the same creator, would soon be featured on OpenSea’s home page.

Prosecutors said Chastain chose which NFTs to feature, and sold his NFTs shortly after they were featured, typically for two to five times what he paid.

In one instance, Chastain allegedly more than quadrupled his money by purchasing the NFT “Spectrum of a Ramenfication Theory” on Sept. 14, 2021, and selling it early the next morning.

Prosecutors said the scheme ran from June to September 2021, with Chastain transacting through anonymous digital currency wallets and accounts at OpenSea, also known as Ozone Networks Inc.

Chastain pleaded not guilty on Wednesday to wire fraud and money laundering charges, each carrying a maximum 20-year prison term, before U.S. Magistrate Judge Barbara Moses in Manhattan.

Bond was set at $100,000. Chastain’s lawyer did not immediately respond to requests for comment.

“NFTs might be new, but this type of criminal scheme is not,” U.S. Attorney Damian Williams in Manhattan said in a statement. “Today’s charges demonstrate the commitment of this office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”

Non-fungible tokens are unique digital assets, reflecting ownership of files such as artwork, other images, videos and text, and recorded on a blockchain.

The NFT market totaled about $40 billion in 2021, and more than $37 billion from January to April 2022 though transaction activity has been stabilizing, according to the blockchain data firm Chainalysis Inc.

“When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company,” OpenSea said in a statement about Chastain. “His behavior was in violation of our employee policies and in direct conflict with our core values and principles.”

(Reporting by Jonathan Stempel in New York; Additional reporting by Luc Cohen in New York; Editing by Richard Chang, Bernard Orr)

By Howard Schneider

NEW YORK (Reuters) – The development of digital currency and payments technologies could change how the Federal Reserve conducts monetary policy and the composition of its balance sheet, issues the central bank will need to work to understand, New York Fed President John Williams said Wednesday.

“Digital transformation could have implications for markets and for our interactions with counterparties, as well as how we carry out monetary policy,” Williams said in opening remarks to a research conference at Columbia University.

“The big question is what a world of digital currencies like stablecoins and (central bank digital currencies) would mean for the implementation of monetary policy. How will central banks anticipate and adapt?” Williams said.

The role of central banks “will always be to supply money and liquidity to bring stability to the economy and financial system,” he said. But “it’s critical that we understand how these transformations could affect the economy and the financial system, as well as monetary policy implementation.”

The Fed is debating whether to create its own version of a digital currency, and the administration of President Joe Biden is undertaking a broader discussion about the regulation of cryptocurrencies and related technologies like stablecoins.

Regardless of whether the Fed creates a digital dollar, the development of a network of private currencies, the growth in size of stablecoin and crypto markets, and the expansion of private payment options could have a profound impact on banks and the legacy financial system that central bank policy relies upon.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

LONDON (Reuters) – A central bank digital currency would not pose an excessive challenge for the Bank of England’s operations, Andrew Hauser, the BoE’s executive director for markets, said on Wednesday.

“By themselves, balance sheet considerations do not obviously present any ‘redline’ arguments against CBDC adoption, if that is the chosen way forward,” Hauser said in remarks ahead of a discussion hosted by the Federal Reserve Bank of New York.

“While the technologies for such currencies would be new, the use of the central bank balance sheet to provide state-backed transactional money is one of our most longstanding functions,” Hauser added.

(Reporting by David Milliken, Editing by Kylie MacLellan)

(Reuters) – Binance Labs, the venture capital arm of cryptocurrency exchange Binance, said on Wednesday it had raised $500 million for its investment fund focused on companies involved in the blockchain and Web3 spaces.

The fund is supported by investment firms DST Global Partners, Breyer Capital and Whampoa Group as well as by other private equity firms and family offices, the company said https://www.binance.com/en/blog/ecosystem/binance-labs-closes-$500m-investment-fund-to-boost-blockchain-web3-and-valuebuilding-technologies-421499824684903944.

Web3 is a somewhat vague term for a utopian version of the internet that is decentralized and is based on digital record-keeping technology blockchain, which also drives the platforms running cryptocurrencies such as bitcoin and ether.

Despite the fall in the prices of cryptocurrencies, big institutional investors have been trying to get involved more heavily in the space, with venture capital giant Andreessen Horowitz having raised billions for its crypto-focused funds.

The interest around cryptocurrencies has spilled over into blockchain and Web3, with high-profile investment companies such as Silver Lake and SoftBank also betting on the sector.

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

(This May 31 story corrects second paragraph to say Fidelity Digital Assets plans to fill 210 new positions, and not 110 as previously reported)

(Reuters) – Fidelity Investments’ digital assets arm will double down on hiring this year as it looks to beef up its resources to serve clients who want to invest in crypto assets that trade round the clock.

Fidelity Digital Assets, which currently employs nearly 200 people, is looking to fill 210 new positions in client services, technology and operations that would also focus on assets beyond bitcoin, a company spokesperson told Reuters on Tuesday.

“As the demand for digital assets continues to steadily grow and the marketplace evolves, we will continue to expand our hiring efforts,” Tom Jessop, president of Fidelity Digital Assets, said.

Last month, Fidelity Investments became the first major retirement plan provider to allow individuals to allocate part of their savings in bitcoin through their 401(k) investment plans.

News of the hiring comes weeks after cryptocurrencies suffered a major pullback following the collapse of stablecoin terraUSD. Stablecoins are digital tokens pegged to the value of traditional assets.

Bitcoin was last trading at $31,594, down more than half from its all-time high of $69,000 in November.

The digital currency market rout hasn’t deterred private investments, with Hong Kong-based crypto lender and asset manager Babel Finance raising $80 million at a $2 billion valuation last week, while venture capital giant Andreessen Horowitz raised $4.5 billion for its fourth cryptocurrency fund.

(Reporting by Medha Singh in Bengaluru; Additional reporting by Jamie McGeever; Editing by Shounak Dasgupta)

By Sarah N. Lynch

WASHINGTON (Reuters) – A New York couple accused of laundering $4.5 billion in cryptocurrency tied to the 2016 hack of digital currency exchange Bitfinex are still negotiating a possible plea deal while reviewing more than 1.1 gigabytes of evidence in the case, prosecutors said.

Ilya “Dutch” Lichtenstein, 34, and his wife, Heather Morgan, 32, the self-proclaimed “Crocodile of Wall Street,” were due to appear in a federal court in Washington this coming Friday.

But in a court filing on Monday, U.S. Memorial Day, federal prosecutors asked to postpone the hearing until Aug. 2, citing “discussions regarding possible resolutions of the case short of trial” and the need for the defendants to review “voluminous financial records” turned over by the government.

Lichtenstein and Morgan were arrested in February and accused in a criminal complaint of conspiring to launder 119,754 bitcoin stolen after a hacker in 2016 broke into Bitfinex and initiated more than 2,000 unauthorized transactions.

U.S. Justice Department officials said the transactions at the time were valued at $71 million in bitcoin, but with the rise in the currency’s value, the value reached $4.5 billion at the time of their arrest.

The couple had active public profiles, with Morgan known as rap singer “Razzlekhan,” a pseudonym that she said on her website referred to Genghis Khan “but with more pizzazz.”

A grand jury has yet to return an indictment against the pair, after prosecutors first signaled in March they had agreed to pause the Speedy Trial Act in order to discuss a possible plea deal.

Lichtenstein is being held in jail without bond, while Morgan was released to house arrest.

(Reporting by Sarah N. Lynch; Editing by Howard Goller)

By Huw Jones

LONDON (Reuters) – Global regulators said on Tuesday they will complete work by year end on how much capital banks should hold to cover cryptoassets on their books.

Last June the committee proposed that banks set aside enough capital to cover losses on any bitcoin holdings in full.

Certain tokenised traditional assets and stablecoins could, however, come under existing capital rules and be treated like bonds, loans, deposits or commodities.

Earlier this month TerraUSD, a stablecoin tied to the U.S. dollar, collapsed.

“Recent developments have further highlighted the importance of having a global minimum prudential framework to mitigate risks from cryptoassets,” the Basel Committee said in a statement.

“Building on the feedback received by external stakeholders, the Committee plans to publish another consultation paper over the coming month, with a view to finalising the prudential treatment around the end of this year.”

Countries which are members of Basel are committed to applying its agreed principles in their own national rules.

The committee also said it has agreed to a finalised set of principles for supervising climate-related financial risks at banks.

“The principles, which will be published in the coming weeks, seek to promote a principles-based approach to improving risk management and supervisory practices to mitigate climate-related financial risks,” Basel said.

The committee has also agreed that the euro zone is one domestic jurisdiction when it comes to calculating an extra capital buffer for large, globally systemic banks which are based there.

Treating their intra-euro zone exposures as domestic, which attracts lower capital charges than non-domestic exposures, should reduce the size of the extra capital buffer requirements for some euro zone lenders.

The European Central Bank, which regulates big euro zone lenders, said it was a step toward a more integrated banking sector in Europe and the creation of a truly domestic market.

Fitch Ratings said last December the change could see some banks like BNP Paribas drop out of the extra global buffer requirement altogether.

(Reporting by Huw Jones; editing by Jonathan Oatis)

LONDON (Reuters) – Sell in May? They certainly did, but rather than go away as the old stock market adage suggests, traders returned to aggressively buy the dip, causing some of the wildest monthly swings in recent times.

There was plenty of selling in the first half of the month across asset classes, driven by aggressive central banks, inflation and China’s lockdown policies. But markets subsequently started dialling back expectations of U.S. interest rate rises.

Now worries over rising prices are back at the forefront; on Tuesday, oil climbed above $123 per barrel and euro zone data showed record 8.1% inflation in May.

All that means “there will be a large degree of scepticism in the market that we have seen the bottom yet”, said Stuart Cole, chief macro strategist at Equiti Capital.

Below is a summary of how some major asset classes fared this month:

1/ MONEY MARKETS

U.S. 10-year Treasury yields are ending May near where they started, but in between was a rise to 3-1/2-year highs above 3.2%, a tumble to six-week lows, and then another rise on the last day of the month.

The moves are consistent with the ebb and flow of Fed rate hike expectations, which in early May implied U.S. interest rates would peak above 3.3%.

Growth fears and weak economic data trimmed that bet to around 2.9%, before oil’s surge and hawkish comments from Fed governor Christopher Waller pushed futures back above 3%.

Lack of visibility on interest rates and the economy will “continue to feed volatility,” said Francois Savary, cio of wealth manager Prime Partners. “Where the terminal rate is, still remains the key issue.”

Bets on the European Central Bank swung even more. Some 175 bps of rate hikes are priced for the coming year, versus 123 bps in early May, as policymakers signalled an exit from negative rates by September. (Graphic: cooling rate bets, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwegwxvo/cooling%20rate%20%20bets.JPG)

2/ V-SHAPED MONTH ON STOCKS

The MSCI’s global stocks benchmark had burnt nearly $5 trillion of value at its bottom on May 9 versus its peak during the month, plumbing its lowest in around 18 months.

From that point the index has rallied 8% as markets unwound the most aggressive Fed tightening bets. So the MSCI World index is set to end May with a small gain, returning to a market capitalisation north of $60 trillion.

The stock segment arguably most vulnerable to interest rate swings – U.S. tech – meanwhile plunged 15% in the first 20 days of the month, before rebounding 12%.

Goldman Sachs said a sustained rebound hinged on “additional clarity on how fast inflation decelerates from here, how monetary policy reacts, and the implications for the growth outlook.”

U.S. junk-rated corporate bonds too saw wild swings, with the risk premiums demanded by investors shooting as high as 494 bps, from 405 at the start of May. They are now back at 419 bps. (Graphic: MSCI AC World Market Cap, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxowjzlpx/MSCI%20AC%20World%20in%20May.PNG)

3/ EURO-DOLLAR DANCE

A hawkish ECB pivot infused fresh life into the euro, lifting it as much as 4% from five-year lows hit earlier this month.

However, while an imminent end to negative euro zone interest rates has knocked the U.S. dollar index off two-decade highs, investors are wary of screaming “peak dollar”, given the Fed shows no signs of slowing its policy tightening campaign.

And as the European Union prepares to slash Russian oil imports, the recession threat could return to haunt the euro. (Graphic: King dollar, https://fingfx.thomsonreuters.com/gfx/mkt/gdpzyejzyvw/King%20dollar.JPG)

4/ CRYPTO CRASH

Markets were rocked by the mid-May collapse of TerraUSD, a stablecoin which lost its 1:1 dollar peg triggering big falls in other crypto assets.

But unlike stocks, they have not witnessed any meaningful recovery.

On May 12, three days after the TerraUSD peg began to break, bitcoin fell to $25,401, its lowest since December 2020. The largest coin by market cap ended up shedding around 20% during the month, its biggest monthly loss in a year..

By the time TerraUSD collapsed, the total market cap of all cryptocurrencies had slipped as low as $1.14 trillion, according to CoinMarketCap. It stands now at $1.3 trillion, down around 25% this month and more than 56% below November’s peak of almost $3 trillion.

Holders of TerraUSD and its linked token, luna, endured losses of around $42 billion, blockchain analytics firm Elliptic estimates. (Graphic: Crypto v2, https://fingfx.thomsonreuters.com/gfx/mkt/znpneomddvl/Crypto%20chart%20v2.png)

5/ OIL DASH

On oil markets there was none of the yo-yoing other asset classes witnessed this month. Instead Brent crude futures marched to a sixth consecutive month of gains, the biggest rising streak in a decade, adding to the headaches of policymakers battling to rein in inflation.

Brent topped $124 per barrel on Tuesday, its highest since March 9, after European Union leaders agreed to slash oil imports from Russia by year-end.

Prices found further support as China announced an end to its COVID-19 lockdown, and will allow people in Shanghai to leave their homes and drive their cars from Wednesday. That will likely add to global energy demand, just as holiday season demand picks up in the Northern Hemisphere summer. (Graphic: brent crude, https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrnyryvm/brent%20crude.JPG)

(Reporting by Danilo Masoni, Sujata Rao, Saikat Chatterjee and Samuel Indyk; Additional reporting by Yoruk Bahceli; Editing by David Holmes)

By Huw Jones

LONDON (Reuters) – Britain’s finance ministry set out plans on Tuesday for adapting existing rules to deal for any major stablecoin collapses, such as with TerraUSD this month.

It is the latest sign of how regulators are trying to catch up with fast-moving developments in crypto markets which straddle national borders.

“Since the initial commitment to regulate certain types of stablecoins, events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” the ministry said.

Banks, insurers and mainstream payment companies must comply with rules which ensure their deposit accounts, policies or services can be transferred quickly to another provider if they go bust, to help avoid panic and contagion in markets.

Stablecoins, which play a pivotal role in crypto markets, are digital tokens pegged to the value of traditional assets, such as the U.S. dollar, and are seen as having a bigger role in payments.

The collapse of TerraUSD, a popular stablecoin which was the 10th largest cryptocurrency, triggered central bank concerns in a little-regulated sector.

“The failure of a systemic digital settlement asset firm could have a wide range of financial stability as well as consumer protection impacts,” the ministry said in a consultation paper https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079348/Stablecoin_FMISAR_Consultation.pdf.

“This could be both in terms of continuity of services critical to the operation of the economy and access of individuals to their funds or assets.”

While work continues on whether bespoke rules were needed for winding down failed stablecoins, existing rules for handling payment firm failures should be adapted, the ministry said.

It proposed amending the Financial Market Infrastructure Special Administration Regime, which would give the Bank of England powers to ensure continuity in stablecoin payment services during a crisis.

(Reporting by Huw Jones; Editing by David Holmes)

By Jamie McGeever

(Reuters) – If you assumed crypto was just a young person’s game, think again.

More people in the United States than ever before are turning to cryptocurrencies to help fund their retirement, it seems, even as the recent market carnage provides a stark reminder that this wild market is not for the faint-hearted.

Some 27% of Americans aged 18-60 – around 50 million people – have owned or traded crypto in the past six months, a poll published last week by crypto exchange KuCoin found.

Yet older folk are more devoted to the young asset class than the general population, according to the survey carried out at the end of March, with 28% of those aged 50 and above betting on crypto as part of their early retirement plans.

Their most popular for investing in crypto were that they saw it as the future of finance, they didn’t want to miss a hot trend, and they saw it as a way to diversify their portfolios. (See GRAPHIC)

The market turmoil of recent weeks has hushed talk earlier in 2022 that bitcoin and other crypto would win mainstream acceptance and be ushered into pension plans.

“If they (investors) want crypto, it should be a very small allocation of their portfolio, and they should be prepared to lose it,” said Erik Knutzen, chief investment officer for multi-asset class strategies at Neuberger Berman.

“We would not recommend it to everybody.”

Indeed bitcoin is trading at around $30,000, down 60% from a peak of $69,000 in November. And the market meltdown means many newcomers’ investments are deeply in the red.

Nonetheless, crypto investors and analysts are watching like hawks for any indication that bitcoin could bounce back.

JP Morgan’s Nikolaos Panigirtzoglou and his global strategy team said last week the crypto mayhem had soured investor sentiment so much that certain metrics signalled a “good entry point for long-term investors.”

Bitcoin funds, including exchange-traded funds (ETFs) saw the largest outflow since May 2021, JP Morgan said, adding that its position proxy for Chicago Mercantile Exchange bitcoin futures was approaching oversold territory.

Using a model based on the volatility ratio of bitcoin to gold, the team estimate “fair value” for bitcoin at $38,000. (Graphic: Crypto investor survey – KuCoin, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyebznpw/KUCOIN.jpg)

$100K OR MORE

The KuCoin poll comes a week after a survey of 11,000 adults by the Fed found that 12% of Americans dabbled in cryptocurrencies as an investment last year.

It did not break down participants by age, but found almost half of those holding crypto for an investment had an annual income of $100,000 or more, while almost a third had an income under $50,000.

If older investors are in the new crypto vanguard, though, has there been a rush from asset managers to meet this demand?

Fidelity Investments caused a stir in April when it announced individuals will soon be allowed to allocate part of their retirement savings in bitcoin through their 401(k) investment plans.

“Fidelity always operates and makes decisions with the highest level of integrity and an unwavering commitment to our customers, including those saving for retirement,” a Fidelity spokesperson told Reuters.

But if anecdotal evidence from a Reuters-hosted summit of investors and asset managers in New York last week is any guide, it may have the 401k crypto market to itself for a while yet.

The general consensus was that crypto is prohibitively volatile for retirement purposes. Unless you are a sophisticated investor, such as a hedge fund, or are prepared to swallow a hefty loss, then it is best to steer clear.

(Reporting by Jamie McGeever; Editing by Pravin Char)

(Reuters) – Bitcoin rose 7.93 % to $31,780.51 at 2200 GMT on Monday, up $2,334.8 from its previous close.

The world’s biggest and best-known cryptocurrency is up 25.1% from the year’s low of $25,401.05 on May 12.

Ether, the coin linked to the ethereum blockchain network, rose 9.8 % to $1,989.38 on Monday, adding $177.54 to its previous close.

(Reporting by Ann Maria Shibu in Bengaluru; Editing by David Gregorio)

SHANGHAI (Reuters) – China is using the digital yuan to stimulate consumption in its pandemic-hit economy, with more e-CNY applications expected in future to boost transparency and effectiveness of government policies.

The southern city of Shenzhen started distributing 30 million yuan ($4.50 million) worth of free digital cash on Monday to revive consumption and aid businesses. It comes days after Xiong’an New Area in northern Hebei province, launched a similar campaign to hand out 50 million yuan worth of e-CNY “red packets” as gifts.

China is at the fore of a global race to develop central bank digital currencies. Issuing e-CNY subsidies can both aid consumption and further promote use of the electronic yuan.

Transactions using e-CNY totalled 87.6 billion yuan at the end of 2021, with 261 million individual e-wallets opened, according to the central bank.

“Previously, when the government issued subsidies, there could be certain obstacles before the money reaches the recipients,” said G. Bin Zhao, senior economist at PwC China.

“With e-CNY, the cash directly lands into your hands,” boosting transparency, he said.

Zhao added that in the future, the government can use e-CNY for pension payments, fiscal subsidies and even infrastructure spending.

Xia Chun, chief economist at wealth manager Yintech Investment Holdings, said that compared with traditional means, e-CNY is more efficient and swift when it comes to subsidies, although he feels the size of the current consumption stimulus is too small.

Lin Yifu, an economist at Peking University said in a speech earlier this month that China should hand out 1,000 yuan to each family in locked-down areas, half of which can be in digital yuan.

In the latest campaign, consumers in Shenzhen can join a lottery for the free e-CNY, which can be used to shop online or at stores. In Xiong’an, digital cash subsidies can be used to buy products including food, electronics appliances and furniture.

($1 = 6.6600 Chinese yuan)

(Reporting by Samuel Shen and Andrew Galbraith; Editing by Jacqueline Wong)