Tag: Cryptocurrencies

By Hernan Nessi and Agustin Geist

BUENOS AIRES (Reuters) – In the Crypstation cafe in downtown Buenos Aires, trendy young Argentines order their lattes and pastries surrounded by screens with real-time cryptocurrency price quotes and a huge neon Bitcoin logo. The bill can be paid in digital money, too.

Savers in the South American nation are increasingly being drawn to cryptocurrency to offset years of painful inflation, now running near 60% – shrugging off a recent market crash and El Salvador’s troubled experiment with virtual tender.

“The local environment is pushing people to protect their capital in cryptocurrencies and so we see growth speeding up,” said Mauro Liberman, 39, one of the founders of the cafe, which is aimed at promoting the use of digital tender.

“Throughout Latin America the growth potential is enormous,” he said, adding that most local users were buying it as a way to hoard their savings. “It is an avalanche that won’t be stopped.”

An April report from Americas Market Intelligence showed crypto penetration in Argentina was 12%, around double the level of Mexico and Brazil. Adoption in hyperinflation-plagued Venezuela is even higher, according to a recent Chainalysis report. (Graphic: Argentina: crypto is king – https://graphics.reuters.com/CRYPTO-CURRENCY/ARGENTINA/gdpzyeybxvw/chart.png)

‘I LOSE LESS’

The draw is a lack of confidence in the local peso currency, which has depreciated 14% this year against the dollar. Capital controls limiting foreign exchange to $200 monthly are also spurring crypto adoption.

Annual inflation rose to 58% in April and could go as high as 70% this year, a rate which makes crypto attractive, despite the recent crash which has seen stablecoins like TerraUSD and Tether slide, and bitcoin drop to a 16-month low.

Victor Levrero, 44, an IT specialist in Buenos Aires province, puts his extra savings into stablecoin and bitcoin each month after using up his $200 quota to convert pesos to dollars. He doesn’t bother with fixed-term peso savings.

“Basically, it’s because I lose less,” he said. “With Argentine inflation of between 60-70%, and fixed terms paying 30-35%, it just doesn’t work.”

Local crypto platforms like Lemon Cash and Buenbit told Reuters that their user base had ballooned over the last year.

The central bank has warned repeatedly about the risk of investing in volatile digital currencies, and some adopters are taking it carefully.

Marcelo Vila, 37, a self-employed computer technician, said for now he only he had a small amount invested in bitcoin and Ether.

“The idea is to expand the proportion of funds invested in crypto,” he said. “But until I get to know the crypto market, I can’t put a lot of money into it.”

Sebastian Carsorio, 23, from a poor Escobar neighborhood outside the capital, has little to lose. He is looking to dig himself out of poverty using a home-made cryptocurrency mine he assembled with recycled computer parts from his work.

“I repaired the things and put it together in a computer,” he told Reuters at his home, where he had screens showing how the mining is going. He started with Ethereum and then bitcoin – which allowed him to buy some land and go back to school.

“I’ll keep mining because it’s a good way of saving,” Carsorio said, explaining that he gets a better exchange rate for pesos than he would on the street. “When money has been tight, mining has saved me many times.”

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Argentina: crypto is king (Interactive graphic) https://tmsnrt.rs/38x0Kdi

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(Reporting by Hernan Nessi and Agustin Geist; Additional reporting Horacio Soria; Editing by Adam Jourdan and Rosalba O’Brien)

(Reuters) – Binance said on Friday its legal entity in Italy had registered with the regulator in the country, as the major cryptocurrency exchange seeks to gain traction in Europe.

The registration of Binance Italy, which was established in recent months, could potentially make the company more accountable and reduce the prospects for money laundering.

Binance said it could now open offices in Italy and expand the local team. The company is one of the 14 virtual asset operators to be registered with the Organismo degli Agenti e dei Mediatori (OAM), which regulates the crypto industry in Italy.

The move comes almost a year after Binance was forced to dial back on its product offerings across Europe after coming under scrutiny from regulators. In Italy, the company had to wind down its futures and derivatives business.

Earlier this month, Binance’s Chief Executive Officer Changpeng Zhao said the company had also registered with France’s market regulator. Binance is also seeking registration in Switzerland, Sweden, Spain, Netherlands, Portugal and Austria.

(Reporting by Niket Nishant in Bengaluru and Maria Pia Quaglia in Milan; Editing by Amy Caren Daniel)

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission on Friday rejected a proposal to list and trade a carbon-neutral spot bitcoin exchange-traded fund (ETF) by asset management firm One River on the NYSE Arca exchange.

The action was the latest in a series of rejections by the market regulator to approve a bitcoin ETF that tracks the underlying digital asset, including proposals from Fidelity, NYDIG and SkyBridge earlier this year.

(Reporting by John McCrank)

(Reuters) – Russia is considering allowing cryptocurrency to be used for international payments, Interfax news agency quoted a government official as saying on Friday.

“The idea of using digital currencies in transactions for international settlements is being actively discussed,” Ivan Chebeskov, head of the finance ministry’s financial policy department, was quoted as saying.

Russian officials are wrestling with how to regulate the country’s crypto market and use of digital currencies, with the finance ministry opposed to the central bank’s calls for a blanket ban.

Discussions have been ongoing for months and though the government expects cryptocurrencies to be legalised as a means of payment sooner or later, no consensus has yet been reached.

The finance ministry is discussing adding the latest proposal on international payments to an updated version of a draft law, the Vedomosti newspaper reported on Friday, citing government officials.

Allowing crypto as a means of settlement for international trade would help counter the impact of Western sanctions, which has seen Russia’s access to traditional cross-border payment mechanisms “limited,” Chebeskov said.

(Reporting by Reuters)

By Lindsay Dunsmuir

(Reuters) – The world is moving rapidly toward increasing use of digital payments and an official digital version of the U.S. dollar could help safeguard its global dominance as other countries issue their own, Federal Reserve Vice Chair Lael Brainard said on Thursday.

“I don’t think we should be taking the global status of the dollar for granted and in a world where other major jurisdictions move to the issuance of their own digital currencies it is important to think about whether the United States would continue have the same type of dominance without also issuing one,” she told lawmakers in Congress.

Fed policymakers remain divided on the need for a central bank digital currency (CBDC) and have just finished a four-month public consultation period soliciting feedback on the idea.

Brainard has emerged as a supporter of the idea while some other Fed policymakers, including Fed Governor Christopher Waller, are more skeptical and point out that many dollar transactions are already digital, and have also raised privacy concerns. The Fed as a whole has indicated it would not launch one without clear support from the White House and lawmakers.

She reiterated that no decision has been made, and acknowledged the risks of both sides, but noted that in a world that is rapidly digitalizing creating a digital currency could help ensure financial system stability as crypo-assets and digital currencies developed by other countries become increasingly popular.

“We recognize there are risks of not acting, just as there are risks of acting,” Brainard said during a hearing on the issue before the U.S. House of Representatives Financial Services Committee, noting that even if it was agreed to set up one it would take perhaps five years to put a U.S. digital dollar in place.

That puts it behind its other major global central bank peers, including the ECB, Bank of Japan and Bank of England, on the process of possible adoption. China is currently piloting its own CBDC and in total nine countries have launched one and another 87 countries are exploring the option, according to the Atlantic Council think tank.

CRYPTO MARKETS NEED MORE REGULATION

The risks of loosely-regulated cryptocurrencies and stablecoins, which exploded in value during the COVID-19 pandemic, have come into sharp focus with the crypto market slumping sharply this month after the downfall of major “stablecoin” terraUSD. Leading cryptocurrency Bitcoin has dropped more than 50% since November.

“These events underscore the need for clear regulatory guardrails to provide consumer and investor protection, protect financial stability, and ensure a level playing field for competition and innovation across the financial system,” Brainard told the committee.

Unlike cryptocurrencies, which are typically run by private actors, a CBDC would be issued and backed by the central bank. If the United States goes ahead with creating one, Brainard said the Fed should mitigate the risk of “disintermediating banks,” given their centrality to the financial system, by, for instance, limiting the amount an individual could hold or transfer.

Brainard also said her preference would be for a U.S. digital dollar not to be interest bearing in order to prevent a reduction of deposits elsewhere in the banking system.

(Reporting by Lindsay Dunsmuir; Editing by Aurora Ellis)

By Jessica DiNapoli and Divya Chowdhury

DAVOS, Switzerland (Reuters) – Cryptocurrency firms, many of which lined the main street in Davos this week, were told they will need to clean up their act before gaining complete acceptance from the World Economic Forum’s old guard.

“The future of crypto, I’m sorry to say, looks regulated to me,” said Nela Richardson, senior vice president and chief economist for human resources software provider ADP. She said she thinks central banks will step in to provide oversight.

Blockchain and crypto firms blitzed Davos with parties, briefings and panels on the sidelines of the main conference, with the hope of gaining credibility and inking deals with companies ranging from Tyson Foods Inc to Salesforce.com Inc also perched on the main street.

Some of the events outside the security cordon of the main event featured speakers from traditional financial institutions, including Perella Weinberg Partners and State Street.

But, inside the gates, there was a cry for regulation and concerns about risks from the sector, including about it being used illegally by sanctioned Russians.

“Crypto currencies have received a big push from (Russian) sanctions,” Saudi finance minister Mohammed al-Jadaan said. “And I’m worried because it could be used for illicit activities.”

David Rubenstein, co-founder and co-chairman of U.S. buyout firm Carlyle, shared his concerns.

“A lot of wealthy people who want to hide their assets after the Russian situation will say I will put 5% to 10% in some basket of cryptocurrencies,” he said.

“The government won’t know what I have, they can’t get it and I can always get access to it.”

CRASHING INTO THE FUTURE

The roles of regulators, authenticators and custodians have come into sharp focus in Davos, which begun after a crypto crash that saw digital assets lose some $800 billion in market value and one of the top ten digital coins become worthless.

“It’s still early days (for crypto) in terms of an investment class,” Ling Hai, co-president for international markets at Mastercard, told the Reuters Global Markets Forum (GMF). “It needs to be sanctioned and regulated by the central bank and government. It has monetary implications. Value needs to be stable.”

However, crypto and financial executives on the sidelines said the rout would strengthen the industry because strong technology and coins would survive it.

“There’s been a lot of volatility but the reality is it’s here to stay,” said Justin Fogerty, managing director and founder at financial consultancy Pivotas AG. “I think what’s happened with the volatility, (it) has actually taken a lot of speculators and gamblers out of the market.”

Cryptocurrency firms have also attracted new interest at Davos, especially from locations looking for investment.

Vit Jedlick, the President of Liberland, a micronation claiming disputed land between Serbia and Croatia, attended an event for Polkadot in the hope of starting a stronger partnership with the blockchain technology.

The Indian delegation to Davos, which included six state governments, was housed in pavilions surrounded by blockchain and crypto houses, and has been meeting many of them to attract investment, particularly in education and training.

“When you map out where the next generations of developers are and where is the talent and where actually should we go, India pops up very, very high on the map,” Marieke Flament, CEO at NEAR Foundation, which backs blockchain projects, told GMF.

Miami Mayor Francis Suarez, in the spotlight over the crash of the city’s MiamiCoin, said he was working with the operators to fix glitches.

“I still am taking my salary in bitcoin,” Suarez told a WEF panel. “I will note for the record it’s not my only salary.”

(Reporting by Jessica DiNapoli, Divya Chowdhury and Aditya Kalra in Davos; Editing by Alexander Smith)

(Reuters) – Creating an official digital version of the U.S. dollar could help ensure financial system stability as crypo-assets and digital currencies developed by other countries become increasingly popular, Federal Reserve Vice Chair Lael Brainard said on Wednesday.

“As we assess the future digital financial system, it is prudent to consider how to preserve ready public access to safe central bank money, perhaps through the digital analogue of the Federal Reserve’s issuance of physical currency,” Brainard said in testimony released in advance of her appearance on the issue before the U.S. House of Representatives Financial Services Committee on Thursday.

“We recognize there are risks of not acting, just as there are risks of acting,” she said.

Fed policymakers remain divided on the need for a central bank digital currency (CBDC) and have just finished a three-month public consultation period soliciting feedback on the idea. The Fed has also indicated it would not launch one without clear support from the White House and lawmakers.

That puts it behind its other major global central bank peers, including the ECB, Bank of Japan and Bank of England, on the process of possible adoption. China is currently piloting its own CBDC and in total nine countries have launched one and another 87 countries are exploring the option, according to the Atlantic Council.

The risks of loosely-regulated cryptocurrencies and stablecoins, which exploded in value during the COVID-19 pandemic, have come into sharp focus with the crypto market slumping sharply this month after the downfall of major “stablecoin” terraUSD. Leading cryptocurrency Bitcoin has dropped more than 50% since November.

“These events underscore the need for clear regulatory guardrails to provide consumer and investor protection, protect financial stability, and ensure a level playing field for competition and innovation across the financial system,” Brainard said.

Unlike cryptocurrencies, which are typically run by private actors, a CBDC would be issued and backed by the central bank. If the U.S. goes ahead with creating one, Brainard said, it ought to be designed so that commercial banks, given their centrality to the financial system, are not disintermediated, by for instance limiting the amount an individual could hold or transfer.

Brainard also argued a U.S. CBDC could safeguard the dollar’s global importance.

Other Fed policymakers, including Fed Governor Christopher Waller, are more skeptical and point out that many dollar transactions are already digital, and have also raised privacy concerns.

(Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Richard Pullin)

By Hannah Lang

(Reuters) – Developers behind failed stablecoin TerraUSD have voted to abandon the token in favor of creating a new blockchain and digital asset weeks after the cryptocurrency collapsed, according to a tweet from the Terra blockchain protocol.

Unlike most other major stablecoins which are backed by other assets, TerraUSD’s value was derived by complex algorithmic processes, linked to another paired token called Luna. Both tokens have lost nearly all of their value since TerraUSD, known as UST, slipped below its 1:1 peg to the dollar earlier this month.

Under the recovery plan for the Terra ecosystem, developers will create a new Terra blockchain with a revived Luna token.

The original blockchain will be renamed Terra Classic, while the original Luna token will be called Luna Classic.

Terra backers will distribute the new Luna token to Luna Classic and UST holders. In a tweet, Terra said that it would work with crypto exchanges Binance and Bybit to distribute the new asset to people who held Luna Classic and UST on exchanges.

“Our strength will always be in our community, and today is the most resounding sign yet of our resilience. We can’t wait to resume our work together building the future of money,” Terra said in a tweet.

Prior to its collapse on May 9, TerraUSD had a market cap of more than $18.5 billion and was the tenth-largest cryptocurrency. Its market cap is now hovering at around $1 billion.

(Reporting by Hannah Lang in Washington; editing by David Evans)

(Reuters) – Analysts at J.P. Morgan turned negative on alternative investments as they expect lower returns for the asset group compared to traditional assets.

The brokerage downgraded alternatives to “underweight” from “overweight” after estimating the asset group to return 10% over the next 12 months against 12% for traditional assets.

The outstanding value of alternative assets like hedge funds and private debt in total asset investments have fallen by 10% this year to $25 trillion, analyst Nikolaos Panigirtzoglou said.

However, the brokerage said market share of alternatives in total assets remain at a record level.

Record high inflation, along with market sell-offs, cloud the outlook for alternative assets, even though private equity and hedge funds have seen strong performance this year.

However, share of alternatives in total asset has reached a new high of 13.7% in 2022, compared to just 7.6% in the beginning of 2007, according to analysis by JPM.

“While public markets already price in significant recession risks, and digital assets have repriced significantly following the collapse of Terra USD, some alternative assets such as private equity, private debt and real estate appear to have lagged somewhat,” Panigirtzoglou said.

TerraUSD, one of the world’s largest stablecoins, lost a third of its value earlier this month, spooking cryptocurrency investors and partly contributing to bitcoin’s tumble below $30,000 for the first time in 10 months.

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Maju Samuel)

(Reuters) – Hong Kong-based Babel Finance said on Wednesday it had raised $80 million in a new funding round that valued the cryptocurrency lender and asset manager at $2 billion.

Investors who participated in the Series B financing round include Jeneration Capital, Circle Ventures and 10T Holdings, joined by existing backers Dragonfly Capital and BAI Capital.

A number of family offices in the Asia-Pacific regions joined the round as well, Babel said.

The firm had raised $40 million in its previous round, a year earlier.

Babel, whose major businesses are crypto lending and trading, limits itself to bitcoin, ethereum and stablecoins, it said. The firm has a clientele of 500 customers and had ended last year with $3 billion of loan balances on its balance sheet.

“The crypto financial market is full of opportunities and hidden risks,” co-founder and Chief Executive Officer Del Wang said, adding that Babel is focused on the long-term development of the crypto industry instead of short-term profits.

The firm said it has applied for business licenses in Hong Kong, Luxembourg and the United Kingdom, among others.

Babel’s latest capital raise follows a punishing slide in the value of cryptocurrencies in recent weeks, with bitcoin losing more than a third of its value in two months.

Investors, however, seem unfazed by the market rout and are seeing potential opportunities in the industry. Venture capital giant Andreessen Horowitz raised $4.5 billion for its fourth crypto fund on Wednesday and said it intends to invest in Web3 startups.

(Reporting by Manya Saini and Sohini Podder in Bengaluru; Editing by Shailesh Kuber)

(Reuters) – Venture capital giant Andreessen Horowitz said on Wednesday it has raised $4.5 billion for its fourth cryptocurrency fund, bringing its total funds raised so far for digital currency investments to more than $7.6 billion.

(Reporting by Sohini Podder in Bengaluru)

By Jessica DiNapoli

DAVOS, Switzerland (Reuters) – Ethereum’s co-founder Gavin Wood said cryptocurrency investors need to be more aware of what is backing their holdings after a market rout which wiped more than $800 billion off their value.

“I would hope that people pay more attention to what is belying the currency name when they get involved in a community, ecosystem, economy,” Wood told Reuters on the sidelines of the World Economic Forum in the Swiss Alpine resort of Davos.

Crypto and blockchain firms have been highly visible at this year’s gathering of business and political leaders, despite the market plummeting in value in the weeks leading up to the event, with the eighth-largest coin Luna becoming virtually worthless.

British computer scientist Wood was attending for the first time to talk about a new partnership between his blockchain project Polkadot with American billionaire Frank McCourt’s Project Liberty.

Blockchains are public ledgers that keep records of transactions on networks of computers, and, along with cryptocurrencies, are largely unregulated.

“The internet has no real concept of legality, because legality is something that is determined by sovereign nations,” Wood said in an interview.

The new partnership is aimed at decentralizing control of the web and giving users more control of their data, Wood said.

“The technology cannot prevent people from making mistakes but can help those who want to understand better the facts of the world, what they’re buying,” said Wood.

The 42-year-old, who also coined the term Web3, also founded the Web3 Foundation, which backs the reorganization of the web away from big companies such as Google owner Alphabet to individual users.

(Reporting by Jessica DiNapoli; Editing by Alexander Smith)

By Elizabeth Howcroft

LONDON (Reuters) – Ukraine, battered by three months of war, plans to continue to tap crypto investors to help raise funds after a plunge in prices decimated the country’s fundraising efforts in May.

Following the Russian invasion of Ukraine on Feb. 24, the Ukrainian government used social media to ask for cryptocurrency donations. Ukraine’s Vice Prime Minister Mykhailo Fedorov this week at the World Economic Forum in Davos.

On March 19, the government’s it had raised more than $60 million worth of cryptocurrency. But two months later, on May 19, the total raised was worth $51.5 million, Ukraine’s deputy minister for digital transformation Alex Bornyakov said.

Cryptocurrencies have fallen sharply in recent weeks. Bitcoin has lost more than 20% of its price so far in May, following a 17% drop in April, highlighting the risks faced by holders of the highly volatile assets.

All the funds raised in the “Aid for Ukraine” fund were stored in cryptocurrency but the government was able to spend $45 million of it on equipment for Ukraine’s army before the crash, Bornyakov said in written responses to Reuters questions.

Ukraine has been funding its war effort in part with cryptocurrencies. The year before the war saw a rise in bitcoin donations to Ukrainian volunteer groups, some of which supplied equipment to government forces.

While crypto may provide some much-needed funds, Kiev estimated it needs $15 billion over the next three months to help its war-torn economy recover.

NFTS FOR WATER

Despite the volatility, crypto assets still appeal to Ukrainians seeking to raise funds.

Ukraine’s largest independent beer brand, Obolon, plans to sell non-fungible tokens (NFTs) to help it distribute free water for humanitarian aid.

It is following the lead of Ukraine’s Ministry of Digital Transformation, which has raised 286 ether (around $550,000) with its online “Museum of War” NFT collection.

Obolon plans to sell 5,000 NFTs for 0.1 ether (around $200), which can be exchanged for a commemorative beer bottle after the war.

“This project is directly to help us continue to scale, because today the financial situation in the company is difficult because in Ukraine the economic situation is very difficult,” Olexander Chub, Obolon’s director of foreign trade, said in a video interview.

Graphic: Bitcoin so far in 2022 – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoxbngpr/Bitcoin.png

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(Reporting by Elizabeth Howcroft; Editing by Chizu Nomiyama)

By Mike Dolan

LONDON (Reuters) – Whatever the broader financial or economic stability risks of volatile crypto tokens, government watchdogs may reasonably balk at 10% household exposure to loosely-regulated speculative punts that double or halve in value every 6 months.

So far this year the leading crypto ‘currencies’ such as Bitcoin and Ether have dropped 40-50% and there’s been an earthquake in the parallel ‘stablecoin’ world of supposedly pegged tokens that act as links from regular finance to the twilight zone of crypto, or ‘decentralised’, finance.

Another typical year in the nether regions of finance? Caveat emptor, some might say.

But the latest twists touched another nerve among governments and central banks who fear they’ve let this ecosystem get out of hand without proper oversight or adequate transparency to reach levels beyond which they may find it difficult to control or shore up.

G7 finance chiefs meeting in Germany late last week cited the crypto turmoil and urged its Financial Stability Board “to advance the swift development and implementation of consistent and comprehensive regulation.”

French central bank chief Francois Villeroy de Galhau reinforced the message this week and upped the urgency at the World Economic Forum in Davos, warning of lax investment protection as well as money laundering risks.

“It’s an emergency question now… I strongly hope we will have this regulation in Europe this year,” Villeroy said.

While still relatively small compared to stocks, bonds or real estate, two surveys released this week from the U.S. Federal Reserve and European Central Bank show that at least 10% of all households in both regions have dabbled in crypto as an investment over 2021.

The Fed’s annual “Survey of Household Economics and Decisionmaking” report polled 11,000 adults late last year and painted a relative picture of rude health for consumer finances overall – conducted though it was before one of the worst starts to a year in more than 20 years.

Asking about cryptocurrency for the first time, the survey found 12% of adults used or held cryptocurrency for investment in the previous 12 months. Less than 3% had any reason to use it for payment or remittance purposes.

While this might pale against estimates of just over 50% of U.S. households holding stocks for saving or retirement, it’s likely an uncomfortably large share for governments who see these tokens as having little or no use or value longer term and who fret about financial sharks burning inexperienced savers.

And if, as some estimate, a majority of those holding the tokens arrived over the past year and are underwater at levels over $30,000 or less, then damage limitation may be the first task of watchdogs and governments.

ECB chief Christine Lagarde, for one, said this week that Bitcoin and the hundreds of other lesser-known tokens were basically ‘worth nothing’.

Graphic: Chart on crypto use from ECB household survey – https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrnkexvm/One.PNG

Graphic: Chart on crypto from Fed household survey – https://fingfx.thomsonreuters.com/gfx/mkt/egvbkwjaxpq/Two.PNG

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WORTHLESS?

And for those who think it’s all just a bit of high-octane fun for wealthy folk who can afford to lose some marginal funds in a puff of smoke, there were other sobering details in the Fed survey. While almost half invested in crypto had annual incomes of $100,000 or more, almost a third earned less than $50,000.

The ECB’s Consumer Expectation Survey, meantime, chimed with the Fed findings and showed as many as 10% of euro zone households now own crypto tokens in one shape or form.

Much like the Fed estimate, it showed a “U-shaped” curve in the income quintiles and financial literacy of those invested – concentrated either in richer and highly educated households who could perhaps afford to lose the punt, but also in low income households with low financial literacy scores.

Middle income groups appear to have given the whole thing a bodyswerve.

The question then is whether – much like the marketing of highly speculative and volatile stock or bond funds to retail investors – regulators should finally demand overhaul of rules on marketing, celebrity-endorsed advertising or easy access to these tokens on fintech banking apps or trading portals.

And now may be the time to act while the potential macroeconomic fallout still be limited and before crypto too becomes ‘too big to fail.”

Goldman Sachs estimates the global market for crypto dropped by about a trillion dollars to $1.3 trillion since late last year, with U.S. households exposed to one third of that hit.

Comparing that decline to overall US household net worth of $150 trillion, it saw little additional drag on the wider economy and felt the 20% drop in stocks over the same time would have far more impact.

But for Deutsche Bank analyst Marion Laboure the game is up already. Curbing the speculative excesses of some of the more marginal coins will likely defeat the attraction for many people of being there at all and for those tokens that threaten to rival existing currencies, the hammer will come down harder.

“Many historical examples highlight the power of regulatory bodies to maintain financial stability,” she wrote. “Regulation is coming sooner rather than later.”

Graphic: Bitcoin, Ether vs S&P500 – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwejnbvo/Three.PNG

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(The author is editor-at-large for finance and markets at Reuters News. Any views expressed here are his own.)

(by Mike Dolan, mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

DOHA (Reuters) – The Qatar Investment Authority cannot exit the Russian market and is waiting to assess its position there because of the Ukraine crisis, one of the sovereign wealth fund’s chief investment officers said on Tuesday.

Moscow placed restrictions on foreign investors trading Russian assets in March, saying it wanted to ensure decisions to exit were considered and not driven by political pressure, after Russia sent troops into Ukraine.

“We can’t do much in Russia…We have to really assess where to stand on those opportunities there. I think it is a very difficult position for us, being an investor with one name,” said Ahmed Ali Al-Hammadi, QIA’s chief investment officer for Europe, Russia and Turkey said in a panel discussion at the World Economic Forum.

QIA owns a 19% stake in Russian state-backed oil giant Rosneft, which Al-Hammadi said is the fund’s only holding “of significance” in Russia.

“We can’t (exit). All foreign investors are restricted from exiting,” Al-Hammadi said.

In March, Mubadala, Abu Dhabi’s second biggest sovereign fund, announced it was pausing investments in Russia because of the Ukraine crisis.

Qatar’s $300 billion sovereign wealth fund, which owns stakes in the London Stock Exchange and Iberdrola SA, has been diversifying its investments away from European markets, which Al-Hammadi said historically represent its biggest exposure.

Nevertheless, the fund is still eyeing smaller European opportunities.

“We’re looking at new, emerging, I would say growth-state tech companies. Some of them are quite small and fly below our radar, but we believe that we’re seeing a lot of determination from countries like France, Germany, Italy,” he said, adding that government support for such companies is appealing.

QIA also sees opportunities in Turkey, especially in companies that are able to mitigate their currency exposure, he said.

Losses this month have pushed Turkey’s lira back towards the record lows of 18.4 against the dollar which it hit in December after a series of interest rate cuts.

Fintech and companies investing in the energy transition represent the biggest investment opportunities for QIA, Al-Hammadi said.

Though the cryptocurrency market is “too big to ignore” it is too early for institutional investors to get directly involved, Al-Hammadi said.

Instead, QIA is considering investments in the technology underlying the market, such as blockchain and exchanges, he said.

(Reporting and writing by Andrew Mills in Doha, Editing by Louise Heavens)

FRANKFURT (Reuters) – One in ten euro zone households have bought crypto-assets such as bitcoin, with the rich only slightly more likely to own some than the poor, a European Central Bank study showed on Tuesday.

With the “crypto” market in turmoil, authorities are trying to gauge whether gyrations in this relatively new corner of the financial system could burn a hole in household budgets.

The ECB’s Consumer Expectation Survey found that an average of 10% of the households in the six countries where the poll is conducted own crypto-assets, with the proportion ranging from 6% in France to 14% in the Netherlands.

Around 37% of respondents reported owning up to 999 euros ($1,065) worth of crypto, with 29% holding between 1,000 euros and 4,999 euros and 13% between 5,000 euros and 9,999 euros. The balance had invested more than that.

In all countries, the richest 20% of respondents was most likely to own crypto currencies but a greater proportion of lower-income households reported owning digital coins than those in the middle ground.

“On average, young adult males and highly educated respondents were more likely to invest in crypto-assets in the countries surveyed,” the ECB said. “With regard to financial literacy, respondents who scored either at the top level or the bottom level in terms of financial literacy scores were highly likely to hold crypto-assets.”

Repeating its longstanding line, the ECB said those assets were unsuitable for most retail investors and urged European Union authorities to approve new rules on crypto assets “as a matter of urgency.”

The data, released for the first time on Tuesday, was cited in an article published as part of the ECB’s Financial Stability Review.

Launched in 2020, the ECB’s Consumer Expectations Survey is carried out monthly in Belgium, France, Germany, Italy, the Netherlands and Spain. It is still in pilot mode and results are not published in full by the ECB.

($1 = 0.9376 euro)

(Reporting by Francesco Canepa in Frankfurt; Editing by Matthew Lewis)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – The crypto winter is into its ninth week and bitcoin can’t shake the chills.

From technicals to turnover, market indicators are flashing red or amber for the biggest cryptocurrency, which has lost a third of its value in just two months.

So what now?

Bitcoin’s limited history isn’t much of a guide on crypto winters, which we’re defining as prolonged bearishness for a month or more.

There have been five since 2017 and three since 2021. Last year’s two crashes lasted 14 and 10 weeks and caused bitcoin to lose 45% to 47%. If they were typical, bitcoin’s latest drop – 36% shed in eight weeks – has road left to run.

“Bitcoin is just not attractive to retail investors right now. Nobody really sees that potential for bitcoin to give out 10 times (return),” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.

Indeed the macro background is far from supportive for an asset class now firmly seen as volatile, risky – plus vulnerable in the face of inflation. As worries over rising global rates and geopolitics bring U.S. stocks close to confirming a bear market, cryptocurrencies aren’t on anyone’s shopping list.

Yet even in the icy wilderness, there are some signs that the crypto king is plotting its comeback.

Bitcoin is drawing strength from the rest of the crypto market, for example, its relative stature providing some comfort for investors fleeing altcoins such as stablecoins deemed ultra-risky after the collapse of TerraUSD in early May.

Bitcoin dominance, a measure of the ratio between its market cap to the rest of cryptocurrency markets, has jumped to a seven-month high of over 44% even as its price has decreased.

“Institutional investors particularly are fleeing to safety, to a certain extent, to bitcoin, which has the most institutional adoption,” said Marcus Sotiriou, analyst at UK-based asset broker GlobalBlock.

Last week, bitcoin futures saw their largest net long position since the contract was launched in 2018, CFTC data showed, indicating traders are increasing positioning for a rise in the price of the cryptocurrency.

Graphic: Crypto winters – https://fingfx.thomsonreuters.com/gfx/mkt/akpezrmbgvr/Pasted%20image%201653292753399.png

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FEAR AND GREED

Scary times, though.

Bitcoin has lost half its value since a Nov. 10 peak of $69,000. This week, it is flirting with $30,000, after touching a 17-month low of $25,401 on May 12. It remains the largest digital asset by market cap, but the market value of all cryptocurrencies now stands at $1.3 trillion, less than half the $3 trillion peak in November.

Data platform Coinglass’s bitcoin Fear & Greed index of market sentiment – where 0 indicates extreme fear and 100 extreme greed – is hovering at 13.

Ether, the No. 2 token by market value, has hovered near the $2,000 mark, and is down about 60% from a peak of $4,868 on Nov. 10.

Bilal Hafeez, CEO at research firm Macro Hive, pointed to $2,300 and $2,500 as key levels and warned that failure to hold above either of those marks in the near term would be a bearish signal.

The crypto market is cowed.

Total spot market volume for all cryptocurrencies at major exchanges had fallen to $18.4 billion as of Monday – less than half of the $48.2 billion seen on May 14, which was the highest volume for 2022, according to news and research site The Block.

Blockchain analytics firm Glassnode said on May 9 that bitcoin at $33,600 puts 40% of investors underwater on their holdings.

“Many folks are left wondering what they should do with their coins – keep holding on for dear life or book losses and move on?” said Lindsey Bell, chief markets and money strategist at Ally Invest.

“It’s a good reminder that crypto probably shouldn’t be more than, say, 1-2% of your portfolio.”

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

By Kathryn Lurie

DAVOS, Switzerland (Reuters) – The World Economic Forum returned to Davos on Monday with a unique spring gathering. Here is what you need to know about Day 1:

ECONOMIC OUTLOOK ‘DARKENS’

Multiple threats to the global economy topped the worries of the world’s well-heeled at the annual Davos think-fest on Monday, with some flagging the risk of a worldwide recession.

Among the major threats to economic growth, IMF First Deputy Managing Director Gita Gopinath told Reuters that the conflict in Ukraine could escalate, adding: “You could have sanctions and counter sanctions.”

IMF Managing Director Kristalina Georgieva said the war, tighter financial conditions and price shocks – for food in particular – have clearly “darkened” the outlook in the month since the IMF cut its global growth outlook, though she is not yet expecting a recession.

MEET YOU AT BITCOIN PIZZA, BRUH

A free bitcoin pizza stall and a “Liquidity Lounge” were among the treats on offer for forum attendees in Davos where blockchain and cryptocurrency firms have taken over its main street, despite a recent crash in digital-coin values.

The $800 billion lost in market value of digital currencies has not dented plans of cryptocurrencies and their providers to show off their products and services.

Tether, one of the world’s largest stablecoins, offered up free slices to celebrate Bitcoin Pizza Day on Sunday, in honor of the day in 2010 when Laszlo Hanyecz paid for two pizzas with 10,000 bitcoin, which was worth about $41 at the time.

FEAR FUELING OIL SUPPLY CRUNCH

The world is facing a major oil supply crunch as most companies are afraid to invest in the sector amid green energy pressures, the head of Saudi Aramco told Reuters, adding it cannot expand production capacity any faster than promised.

Amin Nasser, head of the world’s largest oil producer, said he was sticking to the target of expanding capacity to 13 million barrels per day from the current 12 million by 2027, despite calls to do it faster.

LIEV SCHREIBER AT DAVOS

Ukraine can win the war against Russia but it will be a long fight and the conflict must not be allowed to fade out of the news, Hollywood actor Liev Schreiber said on Monday in Davos.

“It’s overwhelming how resilient the Ukrainian people are,” Schreiber, whose grandfather was of Ukrainian and Polish descent, told Reuters TV on the sidelines of the World Economic Forum. [L2N2XF1HP]

Ukraine is top of the agenda for the four-day event, which kicked off with a video address by Ukrainian President Volodymyr Zelenskiy.

(Writing by Kathryn Lurie; Editing by Leela de Kretser and Matthew Lewis)

By Lindsay Dunsmuir and Ann Saphir

(Reuters) – U.S. households reported their highest level of financial well-being since tracking began almost a decade ago and the gains late last year were felt across all racial and ethnic groups, a Federal Reserve report released on Monday showed, a sign of both the benefits and risks of the central bank’s aim to vanquish inflation.

Workers during the late fall of 2021 also reported enjoying the benefits of working from home even as the recovery from the coronavirus pandemic continued, with little fervor to return to the office and general bullishness about the labor market.

Both findings were part of the U.S. central bank’s annual “Survey of Household Economics and Decisionmaking” report based on responses from 11,000 adults in October and November of 2021, before a surge in COVID-19 cases due to the Omicron variant briefly dented economic growth.

It’s in line with other data, which has revealed not only that Americans in general have seen a boost in their finances over the past two years but that the gains have been felt the most by racial and ethnic groups who were disproportionately affected when the pandemic hit in March 2020 and more than 20 million people lost their jobs.

Black and Hispanic households experienced greater acceleration in real incomes compared to white families between 2019 and 2021 as the labor market recovery gathered pace and fiscal policies preserved gains, according to a report released earlier this month by the JPMorgan Chase Institute, a global think tank.

Some 78% of adults said they were living comfortably or doing “okay” financially, up from 75% in 2020 and the highest level since the survey began in 2013, the Fed’s survey showed, and financial well-being increased among all racial and ethnic groups, with a noted jump among Hispanics.

Healthier household balance sheets overall are due to a combination of pandemic-era direct cash payments and enhanced unemployment benefits that cushioned the economic blow of the pandemic on Americans in 2020 and part of 2021, rising asset prices, as well as a tight jobs market which is fueling strong wage gains.

Fed officials added that the sharp rise in children attending in-person schools and the temporarily enhanced child tax credit passed earlier in 2021 also likely contributed.

The share of Americans who said they would be able to cover a hypothetical $400 emergency expense using cash, savings or a credit card paid off on the next statement also rose to the highest level since the survey began, to 68% from 64% in 2020, the Fed said.

PLENTIFUL JOBS, BUT FOR HOW LONG?

The Fed is currently trying to rein in inflation that is running at a 40-year high, and it pivoted late last year to a more aggressive monetary policy stance after two years in which it had kept financial conditions purposefully loose to shield the economy from the worst of the pandemic.

The central bank began its tightening cycle in March and has already raised its benchmark overnight lending rate by 75 basis points as it tries to dampen demand among U.S. consumers who still have spending power despite a surge in prices exacerbated by depleted supply chains caused by the war in Ukraine and periodic pandemic-related lockdowns in China.

The Fed is closely watching the U.S. unemployment rate, which at 3.6% currently, is back near pre-pandemic levels, as it strives to choke inflation without causing outsized job losses more likely to impact the very same communities who have benefited the most from a tight labor market.

For now, there are few alarm bells. The financial well-being report showed that late last year, when the unemployment rate was still higher, 15% of workers said they had switched jobs in the past year and that most who had done so said the job change was an improvement.

Around 22% of employees worked from home in the fall of last year, down from 29% in the previous year, and well above the 7% who worked completely from home before the pandemic.

Most workers reported wanting to continue to do so, citing a better work-life balance, and said they would be about as likely to look for a new job if they were forced to return to the office as if their employer implemented a pay freeze, the Fed report said.

(Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Paul Simao)

NEW YORK (Reuters) – The co-founder and former chief executive of the cryptocurrency exchange BitMEX has been sentenced to six months of house arrest after pleading guilty to violating the U.S. Bank Secrecy Act, U.S. prosecutors said.

Arthur Hayes, 36, will also pay a $10 million fine and serve two years of probation following his house arrest for failing to establish an anti-money laundering program at BitMEX, which he founded with Benjamin Delo and Samuel Reed in 2014. Hayes was sentenced in federal court in Manhattan on Friday.

“While building a cryptocurrency platform that profited him millions of dollars, Arthur Hayes willfully defied U.S. law that requires businesses to do their part to help in preventing crime and corruption,” Damian Williams, the top federal prosecutor in Manhattan, said in a statement.

Prosecutors had sought a “significant” prison term, saying a $10 million fine was not enough to deter other cryptocurrency companies from similar behavior. Hayes’ lawyers had sought probation, without home detention.

A spokesperson for Hayes declined to comment on the sentence.

Delo and Reed have pleaded guilty and await sentencing.

The three were charged in 2020 with failing to implement a “know your customer” requirement as required by federal law.

Prosecutors said BitMEX was “in effect a money-laundering platform,” and Hayes did nothing after learning in 2018 of allegations that BitMEX was being used to launder proceeds from a cryptocurrency hack.

BitMEX last year agreed to pay up to $100 million to settle separate charges for unlawfully accepting customer funds to trade cryptocurrency without being registered, and failing to conduct customer due diligence.

(Reporting by Luc Cohen in New York; Editing by Will Dunham)