SEC Chair Gary Gensler and Proshares CEO Simeon Hyman discussed the launch of the first Bitcoin-linked ETF in a CNBC breaking news segment on Tuesday.Proshares Bitcoin Strategy ETF, also known as BITO, is based on CME Bitcoin futures contracts. CNBC commentator Bob Pisano shared concerns from some investors that BTC futures could deviate from the BTC spot price:“The futures market is a better place for price discovery,” said Hyman. “The CME futures market trades more volume than the largest US crypto exchange. We launched a similar mutual fund on 7/28 and since we launched on Friday, the Bitcoin Reference Rate is up 52 percent, our BTC mutual fund is up 52 percent and the BTC Greyscale Trust is up 37 percent.”The debut of BITO follows announcements that other BTC-linked funds, including Valkyrie’s Bitcoin Strategy ETF, are set to start trading on the Nasdaq. A new blockchain-industry-based fund, called the Volt Crypto Industry Revolution and Tech ETF, intends to begin trading soon as well.Pisano asked SEC Chair Gary Gensler about earlier comments where he said he did not have the same concerns with issuing BTC futures-linked funds versus a fully-linked BTC fund. Gensler confirmed:“What we are trying to do is bring new projects into the investor-protected perimeter. BTC futures have been overseen by the SEC’s sister agency, The Commodities Futures Trading Commission, for the past four years. You have something that’s been overseen for the past four years by a federal regulator and it’s also been wrapped up in the SEC’s jurisdiction through the Investment Company Act of 1940.” Hyman expressed his confidence in the new fund noting the history of BTC’s price action, US securities laws, and the opportunity for a new opportunity for investors:“There’s a lot of history here. We believe it will trade quite well. We think regulated futures traded in a 40-act ETF will open the opportunity to get BTC exposure to a lot of folks who may have been waiting on the sidelines.”
Between fever-pitch anticipation over the impending approval of a Bitcoin exchange-traded fund, the CFTC’s $42-million-plus settlement with Tether and Bitfinex, and Vladimir Putin brooding over cryptocurrency’s capacity to transfer value, this past week has been saturated with major policy news. While all the above are the instances of the state figures and institutions’ top-down actions and statements on digital assets, an arguably even more interesting tide has emerged on the side of the crypto industry itself.Two major players of the digital space, Coinbase and a16z (Andreessen Horowitz), came forward with proposed visions for regulating internet-native economic activityBelow is the concise version of this newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.Regulatory push from the bottom upThe broad proposal put forth by a16z presents a vision of Web 3.0 as an array of technologies to organize human activities that are fundamentally decentralized. Its policy agenda emphasizes the need for regulators to ensure an environment where the digital infrastructure supporting Web 3.0 could flourish and where risks are addressed in a targeted fashion. Coinbase’s framework is more narrowly focused on the realm of digital finance. Consonant with a16z’s vision, it argues in favor of designating a separate agency (presumably, not the SEC) to oversee the activities of what the framers call marketplaces for digital assets, or MDAs.ETF excitementA huge part of the crypto crowd seemed on the verge of breaking into tears of joy over multiple signals suggesting that the SEC would not get in the way of a Bitcoin ETF. SEC Chair Gary Gensler has previously spoken favorably of the level of investor protection granted by those Bitcoin ETFs that are based on BTC futures rather than the “physical” asset.Gensler’s sentiment provided a background against which subtle cues like Nasdaq’s certification of Valkyrie’s Bitcoin Strategy ETF and a suspiciously well-timed SEC Investor Ed tweet made the approval look all but a done CBDCs never sleepAnother week, another crop of reports of central bank digital currency advancement from nearly every time zone. In the United Kingdom, an independent nonprofit called the Digital Pound Foundation will support the nation’s CBDC effort with expert insight. Over in Japan, a central bank official emphasized the need for the simplicity of the prospective digital yen’s design that would ensure interoperability with commercial payment systems. Finally, the financial brass of the G7 discussed foundational policies around digital national currencies, suggesting that there is enough cross-border coordination to make the major sovereign CBDCs of the future fully interoperable.
Optimism is bordering euphoria in the cryptocurrency market after a trove of documents pointing toward the eventual approval of Valkyrie’s Bitcoin (BTC) ETF application by the U.S. Securities Exchange Commission before the end of the month. Data from Cointelegraph Markets Pro and TradingView shows that the price action for BTC spiked in the early trading hours on Friday with bulls managing to rally to an intraday high at $61,880, marking the first time BTC has surpassed $60,000 since April. BTC/USDT 1-day chart. Source: TradingViewHere’s what traders and analysts are saying about what comes next for Bitcoin now that the price is back above $60,000 and the long-awaited Bitcoin ETF look ready to become a reality. On the precipice of a massive breakoutAccording to cryptocurrency analyst and pseudonymous Twitter users Rekt Capital, Bitcoin’s move on Friday has it trading just below a major resistance level that is the last barrier standing in its way from exploding into uncharted territory. #BTC is hovering just below the price level it needs to Weekly Candle Close above to enable further exponential upside$BTC #Crypto #Bitcoin pic.twitter.com/eGfO8uWulz— Rekt Capital (@rektcapital) October 15, 2021From this perspective, if BTC can manage to post a weekly close above this level, there is “exponential upside” potential as price discovery will not be hampered by previously establish resistance zones while bulls will attempt to fulfill the calls for a $100,000 BTC price. Analysts say crypto markets are maturingInsight into the long-term trajectory of the cryptocurrency ecosystem was provided by Konstantin Shugla, CEO and co-founder of Finery Markets, who indicated that “crypto markets are going the same maturity route as other traditional asset classes.”According to Shugla, the growth in the sector is beginning to attract “a new level of mass institutional adoption that no firm can ignore anymore,” and the approval of an ETF will likely result in more institutional and retail inflows “from investors that were previously concerned with infrastructure/regulation risks.”Shugla said:“That will cause more volume and arbitrage opportunities for underlying instruments. I expect both historic records in terms of pricing and volumes can be hit in October and November.”Related: Bitcoin gets green light for price discovery with ‘almost no supply’ on exchanges above $59KNew all-time highs are coming in “just a matter of time”A more technically-grounded perspective of the recent price action was provided by crypto trader and pseudonymous Twitter user Pentoshi, who posted the following chart outlining major support and resistance zones. BTC/USD 3-day chart. Source: TwitterAccording to Pentoshi, Bitcoin has now “taken out the macro lower high from when it topped” and started to form lower lows and lower highs, and now looks to form “a new trend of higher highs and higher lows.”Pentoshi said, “It’s only a matter of time before all-time highs with this structure.”The overall cryptocurrency market cap now stands at $2.443 trillion and Bitcoin’s dominance rate is 46.4%.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
On Oct. 6, the United States Department of Justice, or DOJ, announced the creation of a specialized unit, the National Cryptocurrency Enforcement Team, or NCET, tasked with prosecuting criminal misuses of digital assets and crypto infrastructure, as well as tracing and recovering the ill-gotten cryptocurrency.The move continues the U.S. authorities’ push to disrupt the corners of the crypto ecosystem that are thought to facilitate illicit activity, such as ransomware attacks. What does the government’s crypto enforcement ramp-up hold for the larger digital asset space?Pooling crypto expertiseThe new unit will operate according to the principles articulated almost exactly one year ago in DOJ’s Cryptocurrency Enforcement Framework. The document, for one, asserts the Department’s broad jurisdiction over criminal activity that affects financial or data storage infrastructure inside the U.S.In addition to investigating its own cases and supporting the efforts of U.S. Attorneys’ Offices across the country, the NCET will promote cooperation between all relevant federal, state, and local law enforcement agencies in addressing cryptocurrency-related crime. The team is also tasked with training and advising law enforcement officers on crypto matters and developing investigative strategies.Operatives for the new task force will come from of both the Money Laundering and Asset Recovery Section and the Computer Crimes and Intellectual Property Section of the DOJ, as well as from a number of U.S. Attorneys’ Offices.In a conversation with Cointelegraph, Kevin Feldis, partner at law firm Perkins Coie, called both MLARS and CCIPS “very respected components of the Department of Justice,” whose members are “well versed in handling cross border investigations and coordinating with law enforcement around the globe.”New tool for existing policiesThe NCET is expected to direct its enforcement efforts at illegal or unregistered money services, ransomware payments infrastructure, and various other marketplaces where digital money meets criminal activity. None of this is particularly new, and the DOJ is simply putting together a more streamlined, coordinated mechanism for tackling cybercrime and potentially recovering stolen funds.The announcement also extends the string of developments that illustrate the Biden administration’s commitment to enforcement-first stance on cybercrime, including criminal activity facilitated by crypto.Jackson Mueller, director of policy & government affairs at digital asset firm Securrency, commented to Cointelegraph:This announcement should not come as a surprise to those of us following the Biden administration and its efforts, whether through federal financial regulators, the Treasury Department, the President’s working group on stablecoins, among others, to apply greater scrutiny and enforcement actions against the broader ecosystem.Mueller added that the emergence of the NCET signals the government’s preference for more enforcement-focused policies rather than the orientation toward engagement and cooperation that many in the industry would prefer to see.Michael Bahar, chair of cybersecurity practice at global law firm Eversheds Sutherland, traces the roots of the NCET initiative back to Joe Biden’s May 2021 executive order, that made it a top priority to bring to bear the full scope of federal government authorities and resources to protect the nation’s computer systems against cyber-attacks. Bahar further commented:As part of that all-of-government effort, the U.S. Department of Justice is leveraging its decades of experience in following the money and in rooting out money laundering, both to catch the perpetrators and return the money, as well as to undercut the financial incentive for criminals to engage in ransomware attacks in the first place.Ron Brisé, government affairs and lobbying attorney at law firm Gunster, said that the DOJ is “Connecting the dots across all of its sections to bring a more centralized focus to cryptocurrency-related investigations and prosecutions.” Brisé added that he wouldn’t be surprised to see certain individual states replicate the federal initiative, instituting their own cryptocurrency enforcement teams in the near future.Wider implicationsGranted, rooting out bad actors of the cryptocurrency sector who give the entire industry a bad name in the eyes of the public (and, quite often, in policymakers’ eyes) is a noble endeavor. Yet, there is also room for legitimate concern for those crypto players who act in good faith and invest substantial resources in compliance – that is, for the overwhelming majority of industry participants.A scenario where overly aggressive enforcement could create additional burden for legitimate actors is not difficult to envision.Kevin Feldis of Perkins Coie believes that DOJ’s focus on ramping up criminal investigations and building capacity to recover illicit crypto proceeds will also likely mean more government scrutiny throughout the industry. Feldis added:The legal and regulatory landscape is still evolving, and investing in compliance and being a good crypto corporate citizen will likely serve industry players well in the face of this increased government enforcement focus by the DOJ, SEC and others.At the same time, the kind of expert enforcement that is competent enough to single out criminals while not imposing excessive burden on the good guys could be a boon to the sector. Having all of the DOJ’s most crypto-savvy people within one well-coordinated force could also lead the NCET to yielding its enforcement authority in a targeted fashion. Gunster’s Ron Brisé notes that the emergence of a specialized crypto unit within the Justice Department could be seen as beneficial, all things considered. He commented:From a bigger perspective, if there is recourse for those whose digital funds get stolen, the levels of confidence for both consumers and crypto business will increase.Indeed, if the NCET lives up to its stated mission rather than casting nets that are unnecessarily wide, the crypto space will become a safer place for legitimate financial activity.
On Oct. 15, the Commodity Futures Trading Commission, or CFTC, handed sister crypto companies Tether and Bitfinex fines totaling $41 million and $1.5 million, respectively, citing violations of the Commodity Exchange Act, or CEA, and of a prior CFTC order.The regulator has found that Tether, the firm behind an eponymous stablecoin, has only held sufficient fiat reserves to back the dollar-pegged asset for 27.6% of time during the 26-month period under review between 2016 and 2018. The agency also stated that Tether violated the law by holding part of the reserves in non-fiat financial instruments, as well as by comingling operational and reserve funds.In a simultaneous action, the commodity futures watchdog settled charges with Bitfinex for facilitating “illegal, off-exchange retail commodity transactions in digital assets with U.S persons” on its platform, in addition to operating “as a futures commission merchant, or FCM, without registering as required.”In a concurring statement, CFTC Commissioner Dawn Stump backed the action while also expressing concerns that the settlement could “provide users of stablecoins with a false sense of comfort” as they may falsely conclude that CFTC regulates stablecoins and oversees their issuers.While the CFTC has applied a broad definition of a “commodity” to stablecoins in the present case, Stump distanced the Commission from regulating this asset class and having “daily insight into the businesses of those who issue” stablecoins.Tether issued a rebuttal statement, insisting that it “maintained adequate reserves” at all times. The firm explained its decision to settle by its willingness to “resolve this matter in order to move forward and focus on the future.”
On Thursday, cryptocurrency exchange platform Coinbase published its Digital Asset Policy Proposal, a document offering both a justification and conceptual framework for the comprehensive regulation of digital assets in the United States.Coinbase presented the proposal as a product of dozens of meetings with industry participants, policymakers, crypto innovators and academics that the company’s representatives had held in the last several weeks.The firm’s intention is for the proposal to “animate an open and constructive discussion regarding the role of digital assets in our shared economic future” and offer good-faith suggestions on what a sensible approach to crypto regulation might look like.The document opens by enumerating the benefits of the emerging system of digital finance for both consumers (democratization of financial markets) and regulators (more transparency and new ways to combat illegal activity). The authors further maintain that laws drafted in the 1930s are a poor foundation for regulating the internet-native asset class, and that forcing digital assets into the legal framework developed before the computer age could lead to stifling crypto innovation in the U.S.A more tailored and therefore more constructive approach, according to Coinbase, should rest on four key principles: defining a separate regulatory framework for digital assets; designating a single regulator to oversee digital asset markets; protecting and empowering holders and promoting interoperability and fair competition.In a separate op-ed published on the same day in Wall Street Journal, Coinbase CEO Brian Armstrong argued that the proposed framework is not meant to benefit his company alone.He maintained that, while Coinbase is big enough to absorb the costs of an unclear regulatory environment, it is smaller firms, retail consumers and the Unites States’s position as a global technology leader that stand to benefit from forward-looking regulation of the digital asset space.
Jon Cunliffe, deputy governor for financial stability at the Bank of England, said the risks of a growing crypto market on the financial system are “relatively limited” at the moment but have the potential to grow very rapidly if regulators do not keep pace.In a speech to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) on Oct. 13, Cunliffe said policymakers around the world have only just started to develop the framework needed to properly regulate digital assets but should pursue it “as a matter of urgency.” The deputy governor spoke about the risks that cryptocurrencies and stablecoins may pose when connected to traditional financial systems through individuals, financial institutions, hedge funds and banks.Given that digital assets are continuing to work their way into these institutions, sentiment over crypto volatility and otherwise could cause “investors to sell other assets that are judged to be risky.” Cunliffe referred to the interconnectedness of crypto and traditional finance as having the potential for a shock “transmitted through the financial system” if something were to go wrong.One of the scenarios that Cunliffe posed was if the price of an unbacked crypto asset were to fall to zero. In addition, price volatility — even seemingly among major cryptocurrencies — “could trigger margin calls on crypto positions forcing leveraged investors to find cash to meet them, leading to the sale of other assets and generating spillovers to other markets.”“Financial stability risks currently are relatively limited but they could grow very rapidly if, as I expect, this area continues to develop and expand at pace,” said Cunliffe. “How large those risks could grow will depend in no small part on the nature and on the speed of the response by regulatory and supervisory authorities.”Related: Bank of England governor issues crypto investment warningCunliffe has previously argued that England’s central bank should “issue public digital money that can meet the needs of modern day life,” implying that a digital pound may be in the BoE’s future. He is currently co-chairing a task force set up by the U.K. government to explore the rollout of a central bank digital currency.
Cryptocurrency lending platform Celsius Network has raised $400 million in a new equity funding round amid United States regulators increasingly cracking down on crypto lending.Announcing the news on Tuesday, Celsius noted that the latest funding was led by Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec (CDPQ), and WestCap, an equity firm established by former Airbnb executive Laurence Tosi.Celsius Network raises $400m. @FT “The funding round was led by WestCap… and Caisse de dépôt et placement du Québec (CDPQ).” More:https://t.co/L5wpMxCvcR— Celsius (@CelsiusNetwork) October 12, 2021Celsius CEO Alex Mashinsky expressed hope that the new fundraising would help the industry reassure regulators about the stability of his crypto lending business and expand it across mainstream financial markets. “It’s not $400 million. It’s the credibility that comes with the people who wrote those cheques,” he said in an interview with the Financial Times on Tuesday.This story is developing and will be updated.
There is nothing surprising about Senator Cynthia Lummis, a Wyoming Republican known to be among the staunchest crypto supporters in the U.S. legislature, revealing a sizable Bitcoin (BTC) purchase that she had made earlier in the summer. It is still oddly satisfying to observe the alignment between a politician’s long-declared stance on an issue and corresponding monetary behavior (Lummis had been hodling BTC since 2013). Such consistency will be a norm in blockchain-based governance systems where individuals’ interests are aligned with those of the entire community and where all information that could be of remote public interest is transparent.Below is the concise version of this newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.Debt ceiling staved offLast week finally saw the resolution, if temporary, of the weeks-long saga around the U.S. federal government’s borrowing cap, and there is now certainty that the Treasury Department will be able to meet its financial obligations until early December at least. This time around, the unimaginable prospect of the nation’s default on its debt seemed a bit less unimaginable than usual, as Senate Republicans took a stand to protest what they see as an irresponsible Democratic spending spree.While opinions on the short-term effects of the debt ceiling uncertainty on the crypto market differed, there was a near consensus around the notion that in the long run, the political weaponization of federal debt policy will erode trust in the greenback.Letting the watchdogs outIt has emerged that Coinbase is not the only major crypto industry player that is being harassed by the Securities and Exchange Commission. Circle, the firm behind USD Coin (USDC), has revealed receiving an investigative subpoena from the agency back in July, also stating its willingness to “cooperate fully.”Over in the enforcement realm, a major announcement came from Deputy Attorney General Lisa Monaco, who has recently been prominent in the DOJ’s efforts to combat ransomware and cyberattacks. Speaking at the Aspen Institute Cyber Summit, Monaco said that the Justice Department launched the National Cryptocurrency Enforcement Team in order to boost the government’s capacity to disrupt financial networks facilitating cybercrime.100+ CBDCs are comingKristalina Georgieva, managing director of the International Monetary Fund, spoke favorably of digital currencies last week. Expectedly, she referenced central bank digital currencies, or CBDCs, which sit tight within the regulatory perimeter. More interestingly, Georgieva shared some previously undisclosed numbers on how many countries are at some stage of exploring or developing CBDCs.
Over the past few months, there have been some major developments coming out of China that have rocked the cryptocurrency market and the global financial markets. China’s Evergrande debt repayment crisis sent shockwaves throughout global equities markets, as well as the United States Securities and Exchange Commission’s (SEC’s) consistent signaling of upcoming regulation for stablecoins and decentralized finance (DeFi) continued to weigh on sentiment within the market. While the Evergrande situation somewhat resolved itself, for the time being, the government crackdown on unregulated DeFi platforms and stablecoin transactions continues. This has resulted in cross-chain equipped layer-one protocols and layer-two solutions seeing increased volumes as traders search for non-centralized venues to interact with. According to CryptoQuant CEO Ki Young Ju, after China announced a ban on all cryptocurrency transactions, major cryptocurrency exchanges like Huobi suspended services for accounts in mainland China. This triggered an exodus of funds from Asia-based centralized exchanges (CEXs), and these funds were eventually deposited onto decentralized exchanges (DEXs) and the wider decentralized finance (DeFi) ecosystem. It seems Huobi users moved $ETH, #stablecoins, and DEX tokens to decentralized exchanges like Uniswap.Outflow transactions spiked after Huobi announced the suspension of existing accounts in mainland China. Ironically, regulation led to decentralization this time. pic.twitter.com/EKpkHIdSv0— Ki Young Ju 주기영 (@ki_young_ju) September 29, 2021This phenomenon is particularly interesting and requires further investigation, given the assumed failure of Ethereum’s London hard fork in addressing untenable gas fees and the regulatory concerns mounting over the U.S. and China’s response to cryptocurrencies. Let’s take a look at some of the recent thriving DEXs and popular protocols that are seeing an increase in inflows.The Ethereum networkThe Ethereum network is by far the most dominant smart contract and it hosts the largest and most used decentralized exchanges like Uniswap (UNI) and SushiSwap (SUSHI), according to data from Dune Analytics. Monthly DEX volume. Source: Dune AnalyticsWhile the most recent cryptocurrency ban out of China dominated headlines in the last two weeks of September, the announcement was originally made on Sept. 3, around the same time that activity on Uniswap surged higher. Uniswap trading volume vs. total revenue. Source: Token TerminalAs shown in the graph above, the spike in Uniswap’s activity and trading volume actually began on Aug. 28 and remained elevated above its previous average for the next couple of weeks. Uniswap has also benefited from its recent integrations with the newly released layer-two solutions Optimism and Arbitrum, which helped to lower the transaction costs and speed up confirmation times for users on the network. The Fantom networkThe Fantom protocol has risen in prominence in recent months thanks to the launch of a bridge to the Ethereum network and a 370 million FTM developer incentive program designed to attract new projects to the Fantom ecosystem. Data from Token Terminal shows that while the announcement of the incentive program on Aug. 30 provided an initial boost in protocol revenue and token price, it wasn’t until after the regulatory announcement from China on Sept. 3 that activity and protocol revenue really experienced a sustained increase. Fantom price vs. protocol revenue. Source: Token TerminalFantom utilizes a directed acyclic graph architecture that enables a high throughput capability for near-zero fees, which has helped the protocol grow in popularity amongst DeFi and NFT traders who were priced out of conducting transactions on Ethereum. SpookSwap and SpiritSwap are the two top DEXs on the Fantom network and together currently handle an average of $95 million in 24-hour trading volume. AvalancheThe Avalanche network is a blockchain protocol that has been gaining traction since its mid-August launch of the Avalanche Rush liquidity mining incentive program, which includes more than $180 million worth of rewards and incentives designed to attract liquidity to the DeFi ecosystem on Avalanche. Avalanche price vs. protocol revenue. Source: Token TerminalSince the release of the incentive program in mid-August, the protocol revenue and token value for the native token AVAX have been on the rise as users transferred assets across-chain to engage in Avalanche’s growing DeFi ecosystem. According to data from DefiLlama, the top DEXs on Avalanche are Trader Joe (JOE) and Pangolin (PNG), which combined currently see an average 24-hour trading volume of $355.2 million. Decentralized perpetuals tradingDecentralized perpetuals trading protocol dYdX, which has exploded in popularity in September following the airdrop of its native DYDX token, has also seen an uptick in user activity and volumes.According to data from Token Terminal, the daily trading volume on the exchange exploded in the final days of September, surging from an average below $2.1 billion to more than $9 billion on Sept. 27. Total value locked on dYdX vs. trading volume. Source: Token TerminalThe regulatory crackdown has been especially hard on derivative and leveraged cryptocurrency exchanges like BitMEX and Binance, leading to an increase in demand for decentralized options like dYdX and Hegic. While many across the cryptocurrency ecosystem lamented China’s crackdown on the crypto sector, their heavy-handedness may have actually turned out to be a blessing in disguise. It prompted traders to venture away from centralized exchanges and out into the rapidly expanding DeFi ecosystem where the ethos of decentralization and the ability to “be your own bank” is still available to those who seek it. Want more information about trading and investing in crypto markets?The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.