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Fed’s Williams: potential for stablecoins to be “very useful”

(Reuters) – A form of digital currency that is designed to have a stable price and is generally linked to a mainstream currency or something such as gold could prove beneficial if properly regulated, New York Federal Reserve Bank President John Williams said on Tuesday.

“I see there is a potential for stablecoins to serve a very useful purpose both in cross border payments…I also see this technology could be used for wholesale payments in general as well,” Williams said while appearing at a digital panel discussion on digital currencies organized by the Bank for International Settlements.

He added they would have to be properly regulated to ensure consumer and investor protection. Asked about other types of cryptocurrencies, Williams said they “have some fundamental flaws.”

(Reporting by Lindsay Dunsmuir; Editing by)

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Britain’s advertising watchdog clamps down on crypto firms

LONDON (Reuters) – Britain’s advertising watchdog on Tuesday stepped up scrutiny of cryptocurrency ads, ordering more than 50 companies in the industry to tell consumers that digital assets are unregulated and volatile.

Cryptocurrencies have soared in popularity during the COVID-19 pandemic, with retail and institutional investors alike flocking to the asset class. But bitcoin and other tokens are mostly unregulated in Britain.

Adverts for digital assets, from crypto to non-fungible tokens, have become commonplace in Britain on public transport and at sports events.

The Advertising Standards Authority (ASA) said adverts must not state or imply that deciding to invest in cryptocurrencies is “trivial, simple, easy or suitable for anyone.” They must also not create a “fear of missing out” or that investments are “low risk”, the watchdog said.

The ASA said its rules apply to adverts for crypto tokens like bitcoin, exchanges that traders use to buy and sell tokens, and other related promotions aimed at British consumers.

“We’re concerned that people might be enticed by ads into investing money they can’t afford to lose, without understanding the risks,” Advertising Standards Authority Chief Executive Guy Parker said in a statement.

The watchdog will monitor advertising and take enforcement action on adverts that fall foul of its rules after May 2, it said.

Its move comes as Britain’s financial watchdog plans to curb the marketing of cryptoassets amid an advertising boom and celebrity endorsements.

Other European regulators have moved to tighten curbs on crypto advertising. Such campaigns in Spain, for instance, will require authorisation from the stock market supervisor, the Spanish government said in January.

(Reporting by Tom Wilson. Editing by Jane Merriman)

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Cryptoverse: Remember when bitcoin was ‘anonymous’?

By Lisa Pauline Mattackal and Bansari Mayur Kamdar

(Reuters) – Bitcoin just isn’t anonymous enough for a growing cohort of crypto users who are seeking greater seclusion.

A volatile class of crypto known as privacy coins, created with the primary aim of masking the identity of users and details of transactions, has quietly been gaining ground this month as maturing bitcoin inches towards mainstream finance.

Monero and Zcash, among the most popular, have respectively gained 7.6% and 46% since March 1, according to CoinMarketCap data, even as bitcoin has lost about 5%.

The pair has gained 4.7% and 16% in the past week. An index tracking privacy coins more broadly, compiled by research firm Macro Hive, has risen 4%.

This could be a blip in the wild ride of privacy coins, which conceal more information about transaction amounts and parties through differences in their underlying blockchains.

In the past five years, Monero’s market cap – the total value of all the coin out there – has pinballed from $100 million to $6.8 billion to $3.4 billion now, according to CoinMarketCap data.

Yet the interest in crypto privacy coincides with bitcoin’s diminishing function as an anonymous currency. It also comes against the backdrop of war in Europe, a tightening sanctions dragnet and strong noises from policymakers in the United States, EU and Japan about regulating the crypto market.

Aidan Arasasingham and Gerard DiPippo, of the Washington-based Center for Strategic and International Studies, note that bitcoin is not truly anonymous, but rather pseudonymous, where coins can be held in wallets opened under alternative or false names.

“If a wallet can be linked to an entity or person, the actor can be identified,” they wrote in a report in the context of the possibility of crypto being used in Russia and Ukraine to move funds. “Their transactions and wallets can be traced.”

Volatility aside, though, there are several obstacles that keep privacy coins from being a top-tier altcoin, or alternative to bitcoin, which has a market cap of around $776 billion.

Some major crypto exchanges do not list privacy coins due to their potential for illicit activity, for example. Daily trading volumes for Monero have mostly been under $250 million this month while altcoin Ripple sees more than $1.5 billion changing hands each day.

“Privacy coins will probably grow. The challenge is that you have to do a lot of things do make them anonymous that make for a horrible user experience and adds big transaction costs,” said Dave Siemer, CEO at asset management firm Wave Financial in Los Angeles who owns some Monero coins.

TRACING THE LAST SATOSHI

Privacy coins have evolved in recent years as the ability of authorities to track blockchain activity for bitcoin and other major cryptocurrencies has become more advanced.

“Coins can, with some effort, be traced back to the very last “satoshi”, bitcoin’s smallest unit,” Teunis Brosens, head economist of digital finance and regulation at ING, said in a note.

“Recent reports of ransomware money being recaptured, and arrests made for crypto exchange hacks made years ago, attest to this progress.”

Large regulators have the crypto market in the sights, with efforts intensified by concerns that Russian oligarchs and other sanctioned people could use bitcoin to clandestinely move money.

U.S. senators have introduced a bill that could give the president power to sanction foreign cryptocurrency firms. The European Union has also voted in favor of comprehensive digital asset legislation. Japan’s Financial Services Agency has said it will punish anyone making unauthorized payments to those targeted by the sanctions.

SO HOW’S BITCOIN MOVING?

Bitcoin’s movements have been contained in part by the Ukraine conflict and the Federal Reserve’s hawkishness.

The crypto kingpin has been stuck between $35,000 and $45,000 since mid-January, unable to reach the $50,000 level it held at the end of 2021. A bitcoin long-to-short positions ratio on Binance is at 1.5, the same level it was at on Feb. 24 when Russia invaded.

Meanwhile data from Glassnode shows a jump in the proportion of bitcoin supply being absorbed by entities with a low statistical history of spending it.

Marcus Sotiriou, analyst at UK-based digital asset broker GlobalBlock, sees this as “suggesting a bullish market structure for the medium-long term”.

“Bitcoin is consolidating under $41,000, as the percentage of long-term holders in the market continues to increase,” Sotiriou said.

(Reporting by Lisa Pauline Mattackal and Bansari Mayur Kamdar in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)

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Crypto sector posts outflows for 2nd straight week – CoinShares

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Cryptocurrency investment products and funds showed net outflows for a second straight week, a report from digital asset manager CoinShares showed on Monday, on persistent concerns about regulation and the possible fallout from the Russia-Ukraine conflict.

The sector posted net outflows of $47 million in the week ended March 18, after experiencing outflows of $110 million the previous week. Previous to the last two weeks, digital asset investment products saw seven straight weeks of inflows.

The outflows came amid ongoing efforts to regulate crypto. President Joe Biden signed an executive order a few weeks ago requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other crypto issues.

Bitcoin saw the largest outflow of $33 million in the latest week, the report showed, following $70 million outflows previously. Year-to-date flows remained positive, however, at $63 million.

On Monday, bitcoin was down 0.5% at $41,047. Since its intra-day low on Feb. 24 when Russia invaded Ukraine, bitcoin has gained about 18%.

“Even though bitcoin has retraced a bit after tagging $42,000 over the weekend, it still managed to close the week well above $40,000,” said Mikkel Morch, executive director at digital asset hedge fund ARK36.

“Such a retrace seems healthy after a notable move up over the past week and shouldn’t be viewed as a negative reaction to any particular piece of geopolitical or macro news. As long as bitcoin stays above $40,000, there is a good chance of continuation.”

Ethereum-based products had outflows of $17 million last week, lower than the previous week, which saw outflows of $50 million. Ethereum continues to suffer from negative investor sentiment, analysts said, with year-to-date outflows of $151 million, or 1.2% of total assets under management.

In contrast, other altcoins saw inflows last week, such as Ripple, Polkadot, and Solana.

Blockchain-linked equity investment products also posted net inflows of $17 million last week, up from $4 million the previous week.

Assets under management at Grayscale and CoinShares, the world’s two largest digital asset managers, fell from their highs to $37.25 billion and roughly $3.7 billion, respectively.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci)

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Dollar gains ground after Powell comments

By Chuck Mikolajczak

NEW YORK (Reuters) – The dollar strengthened against a basket of major currencies on Monday, in the wake of comments from U.S. Federal Reserve Chair Jerome Powell that opened the door for the central bank to take a more aggressive monetary policy path.

The greenback had been fluctuating between slight gains and losses earlier in the day, and weakened slightly after comments from Atlanta Federal Reserve Bank President Raphael Bostic. The policymaker said he sees six rate hikes this year and two for 2023, a more dovish stance than most of his colleagues as he has concerns about the effects of the conflict between Russia and Ukraine on the U.S. economy.

But the dollar gained ground after Powell said the central bank must move “expeditiously” to bring too-high inflation under control, and will, if needed, use bigger-than-usual interest rate hikes to do so.

“He keeps saying the same thing over and over, that we’ve got to get inflation down and whatever it takes that’s what we’re going to do. The market unfortunately is hanging on to old norms, that they’ll just do a quarter (of a percentage point) every time,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.

“The Fed is kind of rewriting that playbook – we may have to go every meeting, we may have to do something more than 25 basis points, and we might have to do rate hikes and quantitative tightening at the same time.”

Markets have been volatile over the past month as the situation in Ukraine has escalated, increasing the prices of commodities such as oil and putting upward pressure on already high inflation.

The Fed raised its key interest rate by 25 basis points last week for the first time since 2018 as it attempts to combat rising prices while trying to avoid a policy error which could send the U.S. economy into recession. Investors are now focused on the potential speed and size of future rate hikes.

The dollar index rose 0.123%, with the euro down 0.24% to $1.1022.

Ukraine defied a Russian demand that its forces lay down arms in the besieged port city of Mariupol before dawn on Monday.

While many central banks around the globe have been hiking rates, with the Fed the latest to do so, the Bank of Japan on Friday maintained its massive stimulus program and held rates steady, while warning of increased risks from the Ukraine crisis to a delicate economic recovery.

That disparity has served to weaken the yen, with the Japanese currency trading near six-year lows versus the dollar despite its safe-haven status.

European Central Bank President Christine Lagarde said on Monday that the Fed and ECB will also move out of sync, as the war in Ukraine has very different impacts on their respective economies.

The Japanese yen weakened 0.17% versus the greenback at 119.38 per dollar, after touching 119.46 yen, its lowest level since February 2016.

Sterling was last trading at $1.3168, down 0.06% on the day.

In cryptocurrencies, Bitcoin last fell 1.84% to $40,973.32 while Ethereum last fell 1.33% to $2,908.60.

(Additional reporting by Sinéad Carew; Editing by Jonathan Oatis and Andrea Ricci)