This week, FINRA debuted its regulation of the U.S. crypto market, while the SEC targeted crypto hedge funds in an apparent first. Here what’s to come
U.S. CFTC Chairman J. Christopher Giancarlo has said that crypto needs the “do no harm” approach that regulators gave the early Internet
In recent news pertaining to exchanges, Sfox has attributed a reducing spread in the price of BTC across exchanges to the increased presence of institutional investors in the cryptocurrency markets, Brazil’s government has issued a questionnaire to three local crypto exchanges seeking to obtain data pertaining to their operations, and data from the United States Commodity Futures Trading Commission (CFTC) has revealed a steady decline in bearish pressure on the BTC futures markets in recent months.
SFOX Finds Increased Institutional Presence is Driving Down Crypto Price Spread Across Exchanges
Research conducted by Sfox has asserted that a larger presence from institutional investors has reduced the spread in the price of BTC across various exchanges.
Danny Kim, head of growth at Sfox, claims that the current spread in BTC prices seldom exceeds one-tenth of one percent, asserting that “Before institutional firms were actively trading crypto or heavily involved (before 2018) bitcoin price differences between exchanges varied as high as 4.5%.”
Among the institutional players are a number of high-frequency trading firms (HFTs), according to Mr. Kim, who added: “Some HFT firms have been trading since crypto 2014, but have limited themselves because the infrastructure wasn’t there. Most if not all HFT firms require a FIX connection at an exchange in order to trade efficiently. Crypto exchanges haven’t offered FIX connectivity until recently.”
Mr. Kim predicts that in future the growing presence of institutional investors will have a stabilizing effect upon BTC prices, stating: “As this trend continues, the stabilizing effects of institutional investment will extend beyond price spreads, and on to price fluctuations.”
Brazilian Government Questions Three Crypto Exchanges
The Brazilian Ministry of Finance has issued questionnaires to the three local cryptocurrency exchanges among the top ten largest by volume. The questionnaire comprises 14 questions ostensibly intended to “subsidize study to Combat Corruption and Money Laundering,” according to a rough translation.
According to local media, one of the exchanges has completed and returned the questionnaire, another exchange claimed to not have received such, and the third exchange claimed that it would not respond to the letter as the questionnaire was not technically mandatory.
The majority of the questions pertain to the exchanges’ compliance, KYC, and monitoring procedures, in addition to information regarding the accounts and employees of the exchanges.
CFTC Data Shows Record Lows for Shorting Pressure on Futures Markets
Data published by the United States Commodity Futures Trading Commission has revealed that the weekly number of short positions opened on the bitcoin futures markets continued to experience a significant decline during August.
For the week ending on the 21st of August, the number of non-commercial futures contracts of bitcoin totaled a net position of -1,266 contracts.
The number of bearish positions on the futures markets has consistently declined over the course of the ten weeks since June’s high of -1,945.
Do you think that a greater presence from institutional investors can be attributed to the reduction in the price spreads across various exchanges? Share your thoughts in the comments section below!
Images courtesy of Shutterstock
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CBOE, the Chicago exchange that pioneered the listing of bitcoin futures in the U.S., has quietly begun telling market makers that it is close to launching a new cryptocurrency product: ethereum futures. Citing an unnamed source with knowledge of the situation, Business Insider reports that CBOE wants to become the first U.S. exchange to list
Bearish positions for Bitcoin futures are waning, according to fresh data released by the U.S. Commodity Futures Trading Commission
The US Commodities Futures Trading Commission (CFTC) helped bring a fraud case to court, hoping to both assist in its ultimate prosecution and establish precedent. The New York Eastern District Court decided in the CFTC’s favor, ending in a combined over $1.1 million decision in fines and restitution. It also established the regulator as having jurisdiction over cryptocurrencies.
CFTC Wins Precedent Setting Case to Regulate Crypto
It’s rare a legal case accomplishes two firsts. In the proceedings taken against Patrick K. McDonnell, Cabbage Tech, and Coin Drop Markets, the New York Eastern District Court decided to not only rule against the defendant, but also wound up establishing standing for US regulator Commodities Futures Trading Commission (CFTC).
Until the decision handed down on August 23rd, 2018 in a 139-page Memorandum, it was assumed the Securities and Exchange Commission (SEC) would be the lone regulator when it came to cryptocurrencies in the US. As a result, part of the case involved the CFTC arguing for its jurisdiction when it came to crypto scams in general.
In what amounts to a permanent injunction, the defendant was ordered to pay more than a quarter million dollars in victim restitution along with a fine of more than $800,000, bringing the grand total to more than $1.1 million.
It was alleged during the first six months of 2017, the defendants fraudulently lured victims into believing they were purchasing and trading under the expert advice of Mr. McDonnell and Cabbage Tech. Evidently, Mr. McDonnell was listed as Chief Technology Officer, insisting he and Cabbage Tech had offices in places such as Wall Street, among other falsehoods about the company’s infrastructure, prosecutors claim.
Investigations revealed the company was a one man enterprise operated from Mr. McDonnell’s home. By summer of last year, the company’s website posted about being hacked, and declared it would suspend all activity. Not long after, the website and its chatroom, along with social media accounts, had been shuttered. Customers were left to wonder. By the beginning of this year, the CFTC charged defendants with “a deceptive and fraudulent virtual currency scheme for purported virtual currency trading advice; for virtual currency purchases and trading misappropriated [investor] funds.”
Though the CFTC prevailed, Mr. McDonnell maintained he was the subject of a political prosecution. As he explained to news.Bitcoin.com just a few months ago, he believed the “CFTC was grandstanding in Washington just weeks later of the complaint asking for a budget increase and pointing at their most recent ‘cryptocurrency’ enforcement. Much of this will come to light throughout the trial and you will see the CFTC was reckless in an attempt to force regulation. They needed something to point at,” Mr. McDonnell complained.
Is having the SEC and now the CFTC going after crypto scams a good thing? Share your thoughts in the comments section below.
Images via Pixabay.
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The director of the U.S. Financial Crimes Enforcement Network (FinCEN) says that the agency has seen a surge in filings of crypto-related Suspicious Activity Reports
This week the firm Ledgerx announced the soft launch of its ‘Ledgersavings’ platform, a new service that allows users to deposit bitcoin core (BTC) and accrue interest on the deposit over a variety of maturation periods. The CFTC-regulated company explains the new savings program will allow clients to gain an annualized return of roughly 16 percent, even when crypto-markets are not appreciating.
Ledgerx Launches Ledgersavings
Last May, the US Commodity Futures Trading Commission (CFTC) regulated digital currency clearinghouse and options exchange, Ledgerx, announced the company had plans to launch a savings program for BTC. The firm has been trading a lot of BTC derivatives over the past few months and Paul Chou, the CEO at Ledgerx, announced the official soft launch of Ledgerx savings on August 3. Chou says it is the first major service launch since the company started the digital currency options business.
“I’m excited to announce the soft launch of Ledgersavings, the first major new service since we launched Ledgerx late last year,” Chou details. “The first transaction was completed a few weeks ago and yielded the client a 15% per annum return on their Bitcoin for the next 6 months, even if Bitcoin depreciates or stays at current levels. This is a powerful use case in market conditions where Bitcoin is not appreciating.”
The First CFTC-Regulated Digital Currency Savings Options Allow Ledgerx Clients to Collect Interest on Idle Funds
Because BTC prices are volatile, the rate for a 2x strike call option for Ledgersavings is 16 percent annualized. Investors can opt for 3-month, 6-month, and 12-month maturities with interest paid out in USD. According to Ledgerx, the company holds the digital assets and a US bank holds the gained USD.
“Ledgersavings takes one of the most popular trades on the Ledgerx platform, call over-writing, and puts it in terms that are more intuitive to investors who are not as familiar with the minutiae of options theory.
We list contracts that have a defined maturity, an interest percentage in USD that you receive up front, and the terms of when you might exit the underlying Bitcoin. It provides an intuitively simple way to monetize an innate quality of Bitcoin — high volatility. You deposit Bitcoin, choose an interest rate, and you can get the cash today.
A lot of people hold their digital currencies for a while and a savings account allows people to earn interest on idle funds. Ledgersavings is the only CFTC-regulated interest-bearing account that works with virtual currencies but there are a few global trading platforms offering savings programs. For example, the trading platform Magnr not only offers digital currency trading but also a savings program that earns interest. Magnr Savings provides regular interest for deposited funds held with the company as well. In addition to the BTC savings options, the Ledgerx CEO details that the firm will also be supporting ethereum (ETH) in the future.
What do you think about the Ledgersavings platform Ledgerx launched this week? Let us know in the comment section below.
Images via Shutterstock, and Ledgersavings.
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The U.S. Securities and Exchange Commission (SEC) has extended the time period it needs to make a decision on the Vaneck Solidx bitcoin ETF based on the proposed rule change filed by Cboe BZX Exchange. Meanwhile, the ETF team has submitted to the SEC key changes addressing all concerns cited as reasons for rejecting Solidx Bitcoin Trust ETF last year.
The SEC announced Tuesday that it has extended the time it will take to make a decision on the proposed rule change to list and trade shares of Solidx Bitcoin Shares issued by the Vaneck Solidx Bitcoin Trust.
Cboe BZX Exchange filed the proposed rule change with the SEC on June 20, which was published in the Federal Register on July 2. This bitcoin ETF has received a lot of attention from the crypto community. “As of August 6, 2018, the Commission has received more than 1,300 comments on the proposed rule change,” the agency wrote.
The Commission explained that the Securities Exchange Act provides that within 45 days of the publication in the Federal Register a longer period may be designated, elaborating:
The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change.
The SEC now “designates September 30, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.” However, this may not be the last time the SEC postpones its decision on this bitcoin ETF. According to the Exchange Act, the Commission can extend it 240 days from the date published in the Federal Register.
Key Concerns from Last Rejection ‘Resolved’
In March last year, the SEC rejected the proposed rule change filed by NYSE Arca to list and trade shares of Solidx Bitcoin Trust.
A document published on the SEC website dated August 1 details a meeting the previous day between 15 SEC officials and six representatives from Van Eck Securities Corporation, Solidx Management LLC, and Cboe BZX Exchange Inc.
A presentation was submitted by Solidx Management and Van Eck Securities to the Commission staff outlining the reasons why this proposed rule change should be approved, addressing concerns the SEC had in March. The presentation reads:
Issues identified in [the SEC’s previous] disapproval order have been resolved.
In July, Van Eck submitted a 13-page report to the Commission addressing various concerns the SEC has related to the ETF such as valuation, liquidity, custody, arbitrage, and potential manipulation.
Major Changes From Last Rejection
The presentation points out that there have been major changes since the SEC decided to reject the proposed rule change for Solidx Bitcoin Trust in March last year.
The first significant change is that “multiple derivatives markets now exist for bitcoin.” The presentation lists as examples CME bitcoin futures, Cboe bitcoin futures, Ledgerx bitcoin swaps and options contracts, and Cantor Exchange self-certified bitcoin swaps contract. The first two have a combined daily trading volume of “approximately $150 – $200 million,” the presentation details, reiterating that they are all regulated by the U.S. Commodity Futures Trading Commission (CFTC).
Secondly, the product pricing has changed as the proposed trust will use OTC index for pricing and NAV. Citing that the “CFTC has jurisdiction over OTC bitcoin trading,” the presentation emphasizes:
Potential manipulative activity would be identified immediately, providing the ‘necessary deterrent to manipulation’ described in the March 2017 disapproval notice.
In addition, there has been a “proliferation of information sharing agreements” that were not previously put in place in March last year.
Furthermore, citing the SEC’s “concerns regarding bitcoin ETFs and retail investors,” the presentation notes that “the initial share price will be set at a level designed to ensure that only institutional and ‘non-retail’ investors will be able to purchase shares,” which is a price per share of $203,750 as of July 30. The presentation also claims that existing bitcoin investments do not provide investors with sufficient protection, naming GBTC and XBT Provider as examples.
What do you think of the SEC postponing its decision on Vaneck/Solidx bitcoin ETF? Do you think the SEC will eventually approve this bitcoin ETF? Let us know in the comments section below.
Images courtesy of Shutterstock, Solidx, Van Eck, and the SEC.
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Here’s how the Chamber of Digital Commerce suggests to facilitate the “responsible growth” of the crypto market
“Customers will not be able to pay for Frappuccinos with bitcoin,” Starbucks clarifies, after media misleadingly report on the company’s new crypto-related venture
Money? Commodities? Securities? Utility tokens? The world’s governments can’t agree on what cryptocurrencies really are
Intercontinental Exchange (ICE), owner of arguably the most important stock exchange in the world, the New York Stock Exchange (NYSE), is introducing a new company, Bakkt. The idea is to weave bitcoin into 401(k)s, credit cards, and retail. The project is getting a lot of hype due in large measure to two very powerful backers: Microsoft and Starbucks. Is this the mainstreaming ecosystem enthusiasts have been urging?
NYSE Wants Bitcoin in 401(k)s, Credit Cards, Retail Stores
ICE’s digital assets head, turned CEO of the new project Bakkt, Kelly Loeffler, explained in a company blog, “Formed by Intercontinental Exchange — an operator of global exchanges, clearing houses, data and listings services — Bakkt will work with companies that include BCG, Starbucks, Microsoft and others, to create an open ecosystem that supports growing needs in the ~$270 billion digital asset marketplace.”
ICE quietly owns and operates two dozen regulated markets and exchanges, from the United States and Canada to Europe. It also holds clearing houses in the Netherlands, Singapore, greater Europe, the US, and Canada as well. It has revenues well in excess of $5.5 billion. It’s also the parent company for the NYSE, an exchange with great prestige among traditional finance: the NYSE is 226 years old, and is easily the globe’s biggest exchange by market cap, some $21.3 trillion as of last summer.
Ms. Loeffler told Fortune how for over a year ICE built Bakkt in secrecy. The company name is a twist on asset backed securities, Bakkt, which by design is to engender trust. And trust is everything in the legacy marketplace, but it has a decidedly different meaning in the cryptocurrency world. Trust on Wall Street usually means regulations, and lots of them.
Indeed, by late Fall this year, Bakkt hopes to have a fully federally regulated space for all things bitcoin. Fortune notes how “ICE aims to transform Bitcoin into a trusted global currency with broad usage.” That’s an interesting admission for enthusiasts wondering what Wall Street is ultimately up to with this enormous announcement and marketing/public relations campaign. Trust in the Bitcoin ecosystem is established through mathematics, voluntary adoption, by completely bypassing third party fragility, frictions, and gatekeepers for which legacy finance is famous.
Speculation and Coffee
“By combining regulated infrastructure with institutional and consumer applications,” Ms. Loeffler continues, “we’ll apply our track record of bringing transparency and trust to previously unregulated markets. In this way, we intend to play a key role in boosting institutional, merchant and consumer participation in digital assets.” Investment, also according to Fortune, includes Boston Consulting Group, Fortress Investment Group, Eagle Seven, and Susquehanna International Group in addition to better known brands Starbucks and Microsoft.
No doubt, ICE’s endorsement of Bitcoin lends a great deal of credence for other Wall Street investors to start exploring the cryptosphere. A futures market appears immediately in the works. Ms. Loeffler’s blog post details, “As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.”
Fortune believes the bigger move Bakkt is proposing involves everyday retail ventures. “Using Bitcoin to streamline and disrupt the world of retail payments,” the magazine stressed, “by moving consumers from swiping credit cards to scanning their Bitcoin apps. The market opportunity is gigantic: Consumers worldwide are paying lofty credit card or online-shopping fees on $25 trillion a year in annual purchases.” Both Microsoft customers and Starbucks customers are very familiar with digital, smartphone related transactions. Transitioning over to bitcoin, with institutional blessing, should be a snap, ICE is assuming.
Starbucks’ Vice President of Partnerships and Payments, Maria Smith, was quoted in the press release, noting, “As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted, and regulated applications for consumers to convert their digital assets into U.S. dollars for use at Starbucks.” That also appears to fly directly in the face of Bitcoin’s ultimate point. To nearly everyone familiar with its power, bitcoin as a currency is an end in-and-of-itself, it is the value, and was meant to leave fiat — not to be simply a keen transfer mechanism to government paper. Nevertheless, Bakkt’s CEO, Ms. Loeffler, concludes, “We’re excited about the opportunity to help unlock the transformative potential of digital assets across global markets. Bakkt is preparing for launch in upcoming weeks, and we look forward to keeping you updated.”
Is bringing Wall Street into crypto a good thing? Let us know in the comments section below.
Images via Pixabay, ICE, NYSE.
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The operator of NYSE has announced plans to create an “open and regulated, global ecosystem for digital assets”
Republican U.S. Congressman Bill Huizenga calls for more action in Congress on crypto regulation and empowering financial authorities
Cryptos have been hit with major losses across the board in response to the SEC’s rejection of the Winklevoss Bitcoin ETF application, and CME’s rejection of altcoin futures
In recent regulatory news, the CFTC chairman has warned that the regulator is falling behind its international counterparts with regards to virtual currency and blockchain regulations; a U.S. Congressional bill is advocating the incorporation of cryptocurrencies into the regulatory mandate of FinCEN; and a candidate of the Wisconsin Libertarian Party is accepting donations in the form of bitcoin despite a state Ethics Commission finding that cryptocurrency donations may not be legal.
CFTC Chairman Warns Regulator is Failing to Keep Pace with Crypto and DLT
Whilst speaking to the House Committee on Agriculture during a Congressional hearing on the “upcoming agenda for the CFTC” that took place on the 25th of July, J. Christopher Giancarlo, the chairman of the United States Commodity Futures Trading Commission, warned that the CFTC is falling behind its international counterparts with regards to regulation in the spheres of cryptocurrency and distributed ledger technology.
“We’re falling behind. Just two days ago, the Bank of England announced that they’re putting in a new bank-to-bank payment system in the U.K., and it’s gonna be blockchain-compliant. And they’ve had the last four years […] to participate in all these blockchain beta tests that we’ve not been able to participate in. […] So I feel like we’re four years behind, because we do need to test it, […] we need to see how it can help us do a better job as regulator. […] Emerging financial technologies are taking us into a new chapter of economic history. There’s a lot of coordination going on,” the CFTC chairman said.
Mr. Giancarlo also promoted a bill put forward by Ag Committee member Georgia Representative Austin Scott that the CFTC believes “would greatly enhance the Commission’s ability to keep pace with emerging technology, explore its potential, and facilitate its adoption.”
U.S. Congressional Bill Proposes FinCEN Mandate Covering Cryptocurrencies
A Congressional bill filed by U.S. Congressmen Ed Perlmutter (D-CO) and Steve Pearce (R-NM) on July 18th seeks to establish a regulatory mandate for the United States Financial Crimes Enforcement Network (FinCEN) to examine the use of cryptocurrencies for the financing of illegal activities.
The “FinCEN Improvement Act” claims that “Although the use and trading of virtual currencies are legal practices, some terrorists and criminals, including international criminal organizations, seek to exploit vulnerabilities in the global financial system and are increasingly using emerging payment methods such as virtual currencies to move illicit funds.”
Wisconsin Libertarian Candidate Accepts BTC Donations Despite Ethics Commission Concerns
Libertarian candidate for the governor of Wisconsin, and chair of the state branch of the Libertarian Party, Phil Anderson, has stated that he will accept campaign donations in the form of bitcoin, despite a state Ethics Commission finding that BTC contributions could be in violation of Wisconsin law.
“We will not allow the lack of appropriate interpretation of the current statute (to) affect the First Amendment rights of those who want to show support and contribute,” said the candidate, adding that he holds “no faith in the Assembly to handle this fairly nor expeditiously.”
Mr. Anderson asked the state Ethics Commission to permit candidates to accept political donations in the form of bitcoin and other cryptocurrencies earlier this year. In May, the commission found that “allowing cryptocurrency contributions presents a serious challenge to the commission’s ability to ensure compliance with state law,” ultimately deferring the issue to the state Legislature.
Do you expect that Mr. Anderson will face recourse for his decision to accept bitcoin donations? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, fincen.gov, lp.org
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Crypto markets are seeing a healthy flush of green, with Bitcoin above $8,200 and total market cap holding above $300 billion
During a July 25 Congressional hearing, the chairman of the CFTC outlined the need for a legal process for the agency to participate in blockchain project trials
The United States Commodity Futures Trading Commission (CFTC) Commissioner J. Christopher Giancarlo has stated that the agency’s primary remit is not to exercise regulatory jurisdiction over cryptocurrency trading markets and other cash markets, but to deal with fraud and compliance in large futures markets. He made this comment while responding to a question from Rep. … Continued
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