Japan’s Top Financial Regulator Planning to Limit Stablecoin Issuance to Banks & Wire Transfer Companies

Japan’s Top Financial Regulator Planning to Limit Stablecoin Issuance to Banks & Wire Transfer Companies

After the US, Japan is focusing on stablecoins and is acting to limit the number of companies that can issue these assets backed by fiat currency, according to a Nikkei report.

The country’s top banking regulator, Financial Services Agency (FSA), is reportedly planning to propose legislation next year to restrict the issuance of stablecoins to banks and wire transfer companies, which are legally required to protect customer assets.

The report cited China’s real estate giant Evergrande’s debt crisis bringing attention to the stability claims made by the stablecoins like USDT and USDC.

In September, as we reported, Tether and Circle came under scrutiny for holding commercial paper, but the former clarified that it doesn’t hold any commercial paper issued by Evergrande; rather, its vast majority of the commercial paper is in A-2 and above rated issuers.

The market cap and usage of stablecoins have exploded in popularity ever since last year. Their combined market cap now stands above $146 billion compared to just $29 bln at the beginning of this year.

Besides limiting the issuers, the FSA will also toughen regulations to prevent money laundering, as per the report. Intermediaries like wallet providers will further be brought under the agency’s oversight and required to meet obligations under the law on preventing transfers of criminal proceeds, including verifying user identities and reporting suspicious transactions, it added.

Meanwhile, in a November report, the US financial authorities, including OCC, the FDIC, and the Federal Reserve, called for stablecoin issuers to be insured depository institutions, which are subject to regulation and supervision.

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Author: AnTy

Big US Banks Exploring Using Bitcoin as Collateral Against Cash Loans, Fidelity Rolls-out the Service for Institutions

Big US Banks Exploring Using Bitcoin as Collateral Against Cash Loans, Fidelity Rolls-out the Service for Institutions

Fidelity Digital Assets is set to allow its institutional customers to use Bitcoin as collateral against cash loans.

This new service is for those BTC investors who want to turn their holdings into cash but don’t want to sell their crypto assets either, said Tom Jessop, president of Fidelity Digital Assets, in a statement this week.

With this service, Fidelity is targeting hedge funds, miners, and over-the-counter (OTC) trading desks.

Fidelity Investment’s subsidiary will hold the crypto and won’t make the loans itself. For this, it has partnered with crypto lender BlockFi, which will help manage the risk by providing cash for 60% of the loan backed by the trillion-dollar asset. This means, to avail of this service, Fidelity customers have to have an account with BlockFi as well.

“As the markets grow, we’d expect that this becomes a fairly important part of the ecosystem.”

Fidelity is one of the largest asset managers in the US, with over $4 trillion in assets under management (AUM). This week, it launched a Bitcoin spot ETF in Canada.

Exploring Bitcoin-Backed Loans

Besides Fidelity, banks in the US, including Goldman Sachs, are also exploring using BTC as collateral for cash loans to institutions, reported Coindesk citing people familiar with the plans.

Earlier this year, Goldman Sachs re-established its crypto trading desk amid increased interest from its clients, including endowments, hedge funds, and other institutional money managers. The trading desk provides principal liquidity for CME Group’s crypto-related futures and OTC equivalents.

The process allows Goldman Sachs to execute trades with larger notional values. “We’re active in providing liquidity and taking risk on behalf of our clients and in the market,” said Andrei Kazantsev, Goldman’s global head of crypto trading, in an interview.

The Herd is Coming

While these banks won’t get involved in the spot crypto market, they will offer this service through futures products.

“Goldman was working on getting approved for lending against collateral and tri-party repo,” one of the people was quoted as saying. “And if they had a liquidation agent, then they were just doing secured lending without ever having bitcoin touch their balance sheet.”

Already, crypto-friendly banks like Silvergate and Signature have been offering Bitcoin-backed cash loans since earlier this year; late last year, the then-acting OCC Chief Brian Brooks gave banks the green light to accept Bitcoin as collateral.

Out of the half a dozen big banks, some are ready to offer this service in the “next three to six months,” while some “further out.”

“What’s interesting is some of these banks will use their own balance sheet to make the loan. Others will syndicate this out,” another individual from a large institutional trading firm was quoted as saying.

Fidelity Digital Assets and Coinbase are cited as potential custodians among these banks. But not just are big banks interested in offering this service but also smaller lenders are considering ways to accept crypto as collateral.

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Author: AnTy

Mastercard Will Now Allow Banks and Merchants to Buy, Sell, and Pay with Crypto

Mastercard Will Now Allow Banks and Merchants to Buy, Sell, and Pay with Crypto

Payment giant Mastercard is now preparing to allow millions of merchants and thousands of banks on its network to integrate cryptocurrency into their products soon announced the company on Monday.

This will cover bitcoin wallets, debit and credit cards that enable spending crypto assets and earning rewards in crypto, and loyalty programs where the airline or hotel points can be converted into digital currency.

For this, Mastercard is partnering with Bakkt, which will provide custodial services. Sherri Haymond, Mastercard’s executive vice president of digital partnerships, in an interview, said,

“We want to offer all of our partners the ability to more easily add crypto services to whatever it is they’re doing.”

“Our partners, be they banks, fintechs or merchants can offer their customers the ability to buy, sell and hold cryptocurrency through an integration with the Baktt platform.”

The company has more than 20,000 financial institutions as part of its network. Also, there are 2.8 billion Mastercards in use.

The growing interest in crypto this year has Mastercard clients also asking them to help in providing crypto services, said Haymond. According to her, this will allow banks to keep customers on their platforms instead of having their dollars migrate to crypto exchanges. Bakkt CEO Gavin Michael said,

“We’re lowering the barriers to entry, allowing people to take something like your rewards points and trade them into crypto.”

“It’s an easy way to get going because you’re not using cash, you’re putting something that’s an idle asset sitting on your balance sheet, and we’re allowing you to put in to work.”

This is in line with earlier findings that nearly half (48%) of respondents purchased crypto in the first half of 2021, and 32% of those who didn’t are either very or somewhat interested in doing so before year-end.

77% of millennials are also interested in learning more about crypto, with 75% saying they would use cryptocurrency if they understood it better.

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Author: AnTy

Crypto Market Dips and Over 165k Traders Get Liquidated for More Than $890 Million

But as long as central banks and governments continue to print money, which they will as Democrats are now pushing to expand the largest single spending bill in history $3.5 trillion package, investors will continue to turn to risk assets.

The cryptocurrency market has taken a drop today.

From its highs in the last 24 hours, Bitcoin has fallen more than 3.6% to as low as $50,590. The leading cryptocurrency had surged to $53,000 late on Sunday or early Monday.

As for Ether, it slid more than 6.5% to $3,675 from its 24-hour high of about $3,975.

Among the top 100 crypto assets, the biggest hit in the past 24-hours was recorded by SafeMoon of 15%, with other double-digit losses seen by Avalanche, IOTA, Horizen, Internet Computer, Filecoin, Sushi, Compound, Ethereum Classic, Polygon, Uniswap, VeChain, BAT, GRT, Cardano, Shiba Inu, Terra, Dogecoin, and Aave.

This has resulted in a 4% dip in the total market cap, which was at almost $2.47 trillion yesterday, nearing its $2.55 trillion peak, which slid down today and is currently at $2.36 trillion.

Despite the losses, Solana is up 25% and Fantom over 23%, while FTT is in the green by almost 5%.

The latest drop in the market resulted in liquidating 165,323 traders for more than $890 million, according to Bybt. But these numbers are not exhaustive as Binance does not report its full figures.

Bitcoin accounted for the most of it at $222.4 million, followed by $159.3 million in Ether and $80.8 million in Solana.

The funding rate on Bitcoin perpetual contracts has slid down some, with the highest currently at 0.0536% on Binance. The crypto asset prices have been recovering since July 21, and last week funding started trending up as prices made their way up, especially for Ether which went past $4k briefly on Friday, not far off of its $4,380 peak.

The highest funding rate on Ethereum perpetual is currently on Bybit at 0.0778% on USDT margin contracts, while the lowest is 0.01% on Binance for token margins contracts.

Meanwhile, open interest remains elevated at $19.41 billion on Bitcoin futures, gradually making its way to a $27.68 billion high. For Ethereum, OI has hit a new ATH on Monday, surpassing $11.6 billion from May 10. Today, it has seen a slight dip to $11.26 billion.

Despite the dip, the macro outlook remains bullish, with Democrats pushing to expand the largest single spending bill in history, $3.5 trillion tax and spending package.

So, as cryptocurrency exchange FTX noted in its blog titled “The everything bubble & TINA 2.0,” as long as money is being printed, the prices of everything from stocks, commodities, to venture capital, retail estate, and crypto should increase in value.

Since the COVID-19 pandemic began, already $32 trillion of fiscal and monetary stimulus — the largest stimulus as a percentage of global GDP — has been pumped into the markets while government bonds are negative-yielding.

“If global central banks and governments are going to continue to print money, investors are faced with a TINA 2.0 predicament, where cash is literally burning a hole in their pockets, pushing them not just into risk assets, but further out the risk curve, exacerbating wealth inequality along the way, leading to even further risk taking,” noted FTX.

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Author: AnTy

Traditional Banks Should Look For Opportunities In Crypto: American Bankers Association

Traditional Banks Should Look For Opportunities In Crypto to Drive Profits: American Bankers’ Association (ABA)

The surge in the popularity of cryptocurrencies has awakened the interest of several traditional financial institutions in the sector. According to a report by the American Bankers’ Association (ABA), banks are steadily looking for opportunities in crypto.

Banks Considering Crypto Partnerships

The report stated that the rise in customers’ interest has encouraged banks to provide them access to cryptocurrencies.

ABA suggests that one of the ways banks can do this is by partnering with crypto firms to offer access to crypto-related products.

The document cited a survey by institutional crypto trading and custodial firm NYDIG that found that 80% of Bitcoin holders would move their Bitcoin to a bank if the bank had secure storage.

The association says the increased profitability of the sector and client interest have given rise to why banks are considering such collaborations.

“With the increasing profitability of the crypto industry, banks have found it more lucrative to take crypto companies on as partners and their customers as clients while crypto companies need banks to provide access to the payments system to onboard and offload fiat deposits.”

ABA suggested partnerships that include a bank partnering with a blockchain payment firm to allow faster and cheaper cross-border transactions. The report also proposed that banks can partner with blockchain firms that offer lending processes.

Other areas where banks can collaborate include KYC/AML, digital identity, reporting, and banking, where a bank could offer business banking services to crypto companies.

Several banks around the world are already offering crypto-related product offerings. Some of them are JPMorgan Chase, Wells Fargo, Silvergate Capital, Goldman Sachs, Revolut, and so on.

Crypto Regulation In The US

The American Bankers’ Association also highlighted regulatory concerns surrounding crypto in its report. ABA urged the government and regulators to provide clarity around what type of crypto-related activities are allowed for banks.

The report noted that while the regulators focus on promoting innovation alongside protecting citizens against risks, regulations should evolve. This is important because of the rapidly changing crypto sector.

ABA’s report comes at a time where US lawmakers are pushing for a cryptocurrency regulatory framework. On July 26, Senator Elizabeth Warren sent a letter to Treasury Secretary Janet Yellen urging the Financial Stability Oversight Council (FSOC) to coordinate a regulatory strategy surrounding cryptocurrency.

The chair of the Senate Banking Committee’s Subcommittee on Economic Policy emphasized the need to address cryptocurrencies’ risks to ensure the safety and stability of the financial system.”

The Securities and Exchange Commission chairman Gary Gensler recently revealed, as reported by Bloomberg, that the agency has started looking at an array of potential policies.

According to him, the policies are based on different crypto issues, including initial coin offerings, trading venues, lending platforms, decentralized finance, stable value coins, custody, and ETFs.

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Author: Jimmy Aki

US Lawmakers See All the “Flashing Warning Signs” of Crypto Putting USD at Risk

Shadowy, faceless groups of super coders and miners have replaced giant banks, they say.

The US Senate Banking Committee held a hearing on Tuesday discussing what cryptocurrencies are good for.

Some lawmakers spoke in favor of the industry, with Sen. Cynthia Lummis, R-Wyo., saying the transparency of open source finance can promote financial inclusion. Sen. Sherrod Brown, D-Ohio, a critic, suggested that blockchain technology could have many useful non-financial applications.

Meanwhile, Elizabeth Warren (D-Mass.), to whom “all the warning signs are flashing,” in terms of hype, volatility, and false wild claims, called for tighter regulation.

“Instead of leaving our system, our financial system at the whims of giant banks crypto puts the system at the whims of some shadowy, faceless group of super coders and miners, which doesn’t sound better to me.”

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In a letter on Tuesday, Warren also called on Treasury Secretary Janet Yellen to draft a framework to regulate cryptocurrencies because as demand for them grows and they become more embedded into the financial system, the system itself and consumers are getting “under growing threats,” she wrote.

Meanwhile, Facebook’s Diem and Tether (USDT) has been the main focus of a recent meeting held by US regulators on the financial risks posed by stablecoins.

Led by Yellen, the President’s Working Group on Financial Markets’ recent private meeting on the financial risks posed by stablecoins, were particularly concerned about Facebook’s Diem and Tether’s claims that it holds massive amounts of commercial paper.

Participants were also concerned that the situation could be susceptible to a chaotic investor exodus while likening it to an unregulated money-market mutual fund.

DeFi Dad Sen Warren

During the hearing, lawmakers basically focused on the decentralized nature of cryptocurrencies and system failure in the market that they feel could ripple over to the traditional financial system.

“We need to acknowledge the power concentrations within it and make thoughtful policy and risk decisions about how to address that power,” said Angela Walch, a professor at St. Mary’s University School of Law and a research associate at the UCL Centre for Blockchain Technologies, according to whom, crypto has the same problems as the existing financial system.

Sen. Pat Toomey, R-Pa., who has invested in crypto assets, talked about Bitcoin’s use as a store of value and pressed the panel about the developing problems in cryptocurrency “cascading into the conventional financial system.”

Others like Brown, who see the potential in blockchain technology, continue to be wary of crypto and see “nothing democratic or transparent about a shady diffuse network of online funny money.”

He called for “smart regulations” to protect consumers from crypto “extortionists” and their “phony populist marketing.”

Brown also said that crypto assets are putting “Americans’ hard-earned money at risk,” adding that people don’t trust banks, especially not the biggest banks, and these new technologies just mirror the Wall Street model.

Amidst this, Sen. Jon Tester (D-Mont.) brought in his own theory as he pointed to China’s Bitcoin mining exodus as a state-sanctioned plan to achieve dominance over the US.

“They’re shipping ‘em around the world because they know these guys can raise hell with our financial system.”

Meanwhile, Jerry Brito, executive director at the advocacy organization Coin Center, said that the US shouldn’t shy away from cryptos, which “ultimately are commodities,” but install appropriate guardrails in place for hedge funds and other market participants.

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Author: AnTy

Santander UK Joins Other Banks to Block Payments to Binance Due to FCA Warning

Santander UK Joins Other Banks to Block Payments to Binance Due to FCA Warning & to Keep its Customers ‘Safe’

The British unit of the Spanish banking giant also said that they have seen “a large increase in UK customers becoming the victims of cryptocurrency fraud.”

Santander UK is the latest bank to block payments to leading cryptocurrency exchange Binance amidst global crackdown, which now also includes Poland, where the Polish Financial Supervision Authority cautioned against using the platform citing the FCA’s statement.

Much like Barclays, Santander UK says, this move has been made to keep its customers’ funds safe.

“Keeping our customers safe is a top priority, so we have decided to prevent payments to Binance following the FCA’s (Financial Conduct Authority’s) warning to consumers,” tweeted the support page of the British unit of the Spanish banking giant.

Santander UK further said that it has been seeing “a large increase” in its UK customers, becoming the victim of crypto fraud in recent months.

According to FCA, about 2.3 million people in the UK hold cryptocurrencies. Meanwhile, a study by behavioral finance firm Oxford Risk found that one in five UK customers actually don’t know what they are doing despite owning crypto assets.

This move comes after the UK regulator FCA banned Binance Markets Limited (BM), a separate UK-based entity of Binance, from operating in the country, saying the firm is not authorized to do so.

The ban, however, was limited to BML and did not affect Binance. Still, since then, Binance’s UK customers are facing issues in deposits and withdrawals, with banks suspending transfers to the crypto exchange, citing FCA’s warning.

“We are disappointed that Santander appears to have taken unilateral action based on what appears to be an inaccurate understanding of events,” said a Binance spokesperson in a statement.

As we reported earlier this week, Barclays banned debit or credit card payments to Binance until further notice, which came after a similar ban by Lloyds Bank. Lender NatWest has also lowered the daily limit on transfers to crypto exchanges due to a “high level of cryptocurrency investment scams.”

“When one bank bans, refuses transactions in a region… generally they all do. Call it a linked network of businesses. Call it a cartel. It is what it is,” commented crypto enthusiast and market maker @IamNomad.

Additionally, Binance itself temporarily suspended customer deposits via the Single Euro Payments Area (SEPA), which allows customers to send euros across 36 countries due to “events beyond our control.”

Unlike the banks in the UK, Bank of America has launched cryptocurrency research efforts, calling the sector “one of the fastest-growing emerging technology ecosystems.”

“We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform, and our blockchain expertise,” Candace Browning, the bank’s global head of research, wrote in the note to colleagues.

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Author: AnTy

Fitch: El Salvador’s BTC Adoption Increases Banks’ Regulatory, Financial & Operational Risks

Fitch Rating Agency: El Salvador’s Bitcoin Adoption Increases Banks’ Regulatory, Financial & Operational Risks

While El Salvador is all set to officially make Bitcoin a legal tender on Sept. 7 and preparing to airdrop $30 in BTC to its every adult citizen, rating agency Fitch says this step means banks face higher risks, including violating rules against money laundering and terrorism financing.

The bitcoin adoption “would increase financial institutions’ regulatory, financial and operational risks, including the potential of violating international anti-money laundering and terrorist financing standards,” said Fitch in its report this week.

According to Fitch, the possibility of using bitcoin for all obligations, including bank loans, could funnel bitcoin traffic through the Central American country. This may then increase the risks that proceeds from illicit activities pass through the country’s financial system.

Bitcoin’s lack of transparency, Fitch said, could further increase the increase of money laundering.

The rating agency added that regulations need to fully comply with the global standards set by the Financial Action Task Force (FATF).

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Author: AnTy

Strike Dumps Tether, Set To Partner With Banks for El Salvador Remittances

Strike Dumps Tether, Set To Partner With Banks for El Salvador Remittances

  • Lightning network solution provider Strike is making big moves for remittances in El Salvador.
  • The startup would no longer use Tether’s USDT stablecoin as a US dollar substitute on its network.
  • The Chief Executive Officer of Strike, Jack Mallers announced this on the “What Bitcoin Did” podcast.

Mallers Says He No Longer Needs USDT

Mallers revealed that his firm would be integrating with the top five banks and two biggest cashpoint distributors in El Salvador. He said the cashpoint stores would enable people to exchange cash for balances on a mobile app like Strike and vice versa.

The integrations would remove the need for USDT because Strike would be able to hold customers’ balances at the banks. It would also give them more places to cash out those balances for fiat currencies.

USDT was included in Strike’s beta pilot released in January after Mallers learned that keeping dollars on users’ behalf would be illegal.

Hence USDT, the largest stablecoin, had to serve as a surrogate for dollar remittances sent to El Salvador through the Strike platform. Mallers said,

“We built Tether into Strike which was the equivalent of the Chase bank account in America and at least gave us some MVP basic functionality.”

The plan was for Strike to debit the bank account of a sender, convert it to Bitcoin, and forward it to the company’s Central American infrastructure; and then convert it to USDT which will then be credited to the recipient’s account.

In the recent podcast, Mallers said he only included USDT due to the limited options he had initially.

This change by Mallers comes less than a month after he introduced El Salvador President Nayib Bukele to the Bitcoin community at a Miami conference.

Bukele had then announced the partnership with Strike to build a financial infrastructure using Bitcoin. This was before the country made international headlines for becoming the first to make Bitcoin a legal tender.

Concerns Surrounding Tether’s Backing

Mallers’ recent removal of Tether from his network may come as a relief to those concerned about USDT’s backing.

For a long time, Tether has been the subject of controversy about whether its stablecoin is fully backed with dollar reserves. Last month, Tether revealed the breakdown of its reserves for the first time.

Tether stated that the bulk of Tether’s reserves are in cash, equivalents, or other short-term deposits, with the remainder in secured loans, corporate bonds, and other investments.

The breakdown of funds comes as part of a settlement with the New York State Attorney General (NYAG) which probed into its finances in February.

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Author: Jimmy Aki

Texas Banking Department says Chartered Banks are Allowed to Provide Virtual Currency Custody Services

Texas Banking Department says Chartered Banks are Allowed to Provide Virtual Currency Custody Services

“Texas leads the way,” said Texas Blockchain Council as it noted that the Texas Department of Banking has issued a notice saying that chartered banks in the state may provide customers with virtual currency custody services, as long as they have adequate protocols in place to effectively manage risks.

The notice called “Authority of Texas State-Chartered Banks to Provide Virtual Currency Custody Services to Customers” was published on June 10.

In the notice, the department said that while custody and safekeeping of cryptos will differ from more traditional assets, it believes that “the authority to provide these services with respect to virtual currencies already exists pursuant to “Texas Finance Code.”

It is up to the bank which custody services it chooses to offer based on its expertise, risk appetite, and business model. They can either store copies of the customer’s private keys or take direct control of the bank. Basically, the banks will have to determine which storage option best fits the circumstances.

In a non-fiduciary capacity, the bank acts as a bailee, taking possession of the customer’s asset for safekeeping while legal title to that asset remains with the customer, but the bank owes its customer the duty to use proper care to keep the asset safely and to return it unharmed upon request.

As for offering custody services in a fiduciary capacity, the bank has the authority to manage virtual currency assets as it would any other type of asset held in such capacity.

However, banks are required to conduct due diligence and when offering new crypto services and implement controls; of technical, physical, and administrative nature, to measure and monitor relevant risks associated with custody of digital assets.

Establishing a relationship with a service provider with expertise in handling virtual currency is also recommended as part of due diligence, as per the notice.

The banks offering crypto services are further required to have adequate coverage with their insurance carrier.

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Author: AnTy