CoinDesk Crypto

Bitcoin’s bearish price performance this month has prompted investors to pull out of some crypto derivatives products, with trading volumes taking a nosedive as a result.

• A CryptoCompare report published Thursday shows volumes for cryptocurrency-based exchange-traded-products (ETPs) have fallen to a fraction of what they were in August.
• Average daily volumes have fallen 75% from $186.5 million in mid-August to just $48 million by the middle of September, the firm wrote.

• The slump was experienced across the board with product providers in both Europe and North America, including Deutsche Boerse XETRA, feeling the pinch.
• August had been a record month for crypto derivatives generally, as CoinDesk reported at the time.
• CryptoCompare’s report doesn’t include volumes from products that run on unregulated derivative providers, such as BitMEX or Binance.

• Market leader Grayscale saw volumes for its Bitcoin Trust fall to just $40 million a day (pictured above).
• Its Ethereum and Ethereum Classic products have lost nearly 65% of their value since June, something CryptoCompare puts down to waning interest among investors.
• Grayscale is part of Digital Currency Group, CoinDesk’s parent company.
• Crypto derivatives track the price performance of selected digital assets, usually bitcoin, through a product that’s tradeable on regulated stock exchanges.
• As such, they are popular with investors who want to gain exposure to the digital asset market through a traditional instrument.
• Constantine Tsavliris, CryptoCompare’s head of research, told CoinDesk investors may have been put off as bearish market sentiment grew.
• In the first week of September, bitcoin fell from $12,000 to $10,000, but has since recovered to trade around $10,613 at press time, according to CoinDesk data.
• But negative feelings still pervade the market. The Fear and Greed Index, a consolidated sentiment tool for digital assets, is currently at 46, suggesting traders are still mildly bearish.
• “ETP investors generally invest long-term, and therefore the recent drop in price combined with a generally bearish market has likely encouraged more cautious trading activity,” Tsavliris said.

See also: Japanese Financial Giant SBI Holdings Launches Short-Term Crypto Derivatives

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Chinese bitcoin miner manufacturer MicroBT is looking to grab a bigger slice of the U.S. market by setting up its first overseas production center.

The company said on Friday that it has partnered with New York-based Foundry Digital LLC and a Southeast Asian company in order to improve supply chain efficiencies for North American buyers of its flagship bitcoin mining equipment.

The Southeast Asian listed company – which MicroBT declined to name – is contracted to produce and deliver MicroBT’s WhatsMiner equipment to U.S. investors, who would otherwise pay an additional 25% tax if they receive shipments directly from China due to U.S. tariffs.

Related: Iran Is Ripe for Bitcoin Adoption, Even as Government Clamps Down on Mining

The strategy is similar to that adopted by Beijing-based Bitmain, which contracts a production factory in Malaysia responsible for overseas manufacturing and shipments.

As part of the deal, Foundry, a subsidiary of Digital Currency Group (DCG) that provides miner financing and procurement for institutions in North America, will be the first to receive new batches of MicroBT’s WhatsMiner M30S equipment produced in the Southeast Asian facility.

DCG, which wholly owns CoinDesk, previously said it plans to invest more than $100 million into its Foundry business through 2021 to provide loans to bitcoin mining clients as well as buying equipment for them in bulk.

“With our collaboration and MicroBT’s upgraded production capabilities, we look forward to continuing to facilitate the timely procurement and delivery of the latest generation bitcoin mining hardware for our clients, who are institutional cryptocurrency miners in North America,” said Mike Colyer, CEO of Foundry.

Related: Marty Bent on Why Bitcoin and Big Energy Are Unlikely Allies

The move also underscores MicroBT’s effort to keep challenging Beijing-based Bitmain’s dominance in the bitcoin miner market, both domestically and overseas.

MicroBT managed to boost its market share by selling some 600,000 WhatsMiner units worth more than $500 million in 2019. This coincided with Bitmain’s ongoing internal turmoil, which has caused notable production and shipment delays.

“The Foundry team’s in-depth understanding of the mining business and regional expertise have already helped us in making the initial tests of this new supply chain a success,” said MicroBT’s COO Jiangbing Chen. “We will continue working closely with Foundry to provide the highest quality of machines and after-sale services to our customers in North America.”

Also read: Jihan Wu Regains Upper Hand in Bitmain Co-Founder Fight

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Compared with the traditional financial system, the cryptocurrency industry is evolving fast. Technologists are experimenting with the vast-reaching potential of blockchain. And regulation is typically immature, inconsistent and unevenly applied across international borders, allowing entrepreneurs to move fast and break things, as it were. 

But there’s also no shortage of competition. The latest example comes from CoinDesk’s Ian Allison, who reported Thursday that Tron, the three-year-old blockchain headed by Justin Sun (the crypto executive who paid $4.5 million to have a meal with Warren Buffett), has entered into a strategic alliance with custody specialist BitGo to accommodate wrapped bitcoin (WBTC) tokens.

Wrapped bitcoin is a tokenized version of the largest cryptocurrency, reformatted so it can move easily on a non-Bitcoin blockchain. It’s become popular among users of the Ethereum blockchain partly because traders can deposit the tokens in various decentralized finance or “DeFi” applications to receive juicy interest rates. Bitcoin doesn’t pay interest or dividends, a fact that sometimes draws comparisons to a “pet rock.” So DeFi is one of the main places that holders of bitcoin can go to make money off their holdings, aside from the usual speculative price gains.

Related: Bitcoin’s Bearish September Has Kneecapped Crypto ETP Activity: Report

As documented recently by CoinDesk’s Will Foxley and Zack Voell, tokenized versions of bitcoin, including WBTC, now total more than $1.1 billion. Just Thursday, the cryptocurrency fund Three Arrows minted some 2,316 WBTC tokens, the largest-ever single issuance, for use on the Ethereum blockchain, Voell reported. Later in the day, Sam Bankman-Fried, CEO of the crypto fund Alameda, tweeted an Ethererum blockchain data scan suggesting that a new transaction had occurred to break that record. 

The past few months’ explosion in DeFi, with the debut of automated trading platforms like Uniswap and copycat SushiSwap, has jammed the Ethereum network with congestion, driving up transaction fee rates and prompting rival blockchains to offer competing venues for developing new applications. 

Now Tron apparently wants a piece of the thriving DeFi business. “Our new strategic alliance with Tron creates even greater opportunities for users to expand to other chains and tokenize their BTC,” BitGo CEO Mike Belshe said in a statement. That means “transacting at a lower cost and faster speed.” 

There is so much more development and activity taking place on Ethereum that DeFi traders are unlikely to decamp en masse to Tron. But it’s good for the industry that they have the option.  

Bitcoin Watch

Related: Up 5%: Bitcoin Sees Biggest Single-Day Price Gain for 2 Months

Bitcoin’s 5% gain on Thursday confirmed its biggest single-day percentage gain since July 27. 

While the recovery from weekly lows near $10,200 has been impressive, the immediate bias remains neutral. That’s because the cryptocurrency has yet to violate the three-week trading range of $10,000 to $11,000.

A big move could happen soon, since the one-month implied volatility has declined to 44%, the lowest level in nearly two years, according to data source Skew. In the past, an implied volatility of 50% or below has consistently paved the way for violent price action. 

The gauge is now closing on the record low of 35% seen just ahead of the big crash from $6,000 to $4,500 seen in the second half of November 2018. 

– Omkar Godbole

Token Watch

Ether (ETH): Traders might be using options market to hedge price risks of ether locked in DeFi liquidity pools.  

Bitcoin (BTC): Options open interest hits record $2.1B with notional value of $1B set to expire Friday, potentially triggering volatility. 

Wrapped Bitcoin (WBTC): Three Arrows Capital mints 2,316 of the Ethereum-ready tokens, single largest issuance.    

Avalanche (AVAX): Tokens in smart-contract platform (and Ethereum competitor) shoot up to $4 each, providing fast paper profit for investors who bought in just two months ago at 85 cents each in a $42M fundraise, Messari says.

Uniswap (UNI): Users claim 78% of existing UNI supply in first week, though Glassnode Insights op-ed argues that transition toward token-based governance via the UNI token falls far short of true decentralization. 

What’s Hot

China Central Television publishes three-minue news clip highlighting that “cryptocurrency has undoubtedly become the top performing investment” among global assets (CoinDesk)

U.S. Internal Revenue Service makes it harder for taxpayers to avoid declaring cryptocurrency assets — by putting a question front and center on 1040 form (CoinDesk)

European Commission proposes to turn cryptocurrencies into regulated financial instruments, while warning that stablecoins will be subject to stringent checks (CoinDesk)

New U.S. bill would bring crypto exchanges under single federal framework, treat digital currencies similar to commodities (CoinDesk)

Paul Brodsky leaves Pantera to start hedge funds aimed at volatility plays, says bitcoin too energy-intensive to offer massive investor upside. (CoinDesk)

Russia’s Ministry of Finance wants citizens to report their crypto wallet details, news source RBK reports (CoinDesk)

First crypto exchange with no trading fees launches in Middle East (CoinDesk)

OCC guidance on stablecoins might not accelerate “slow burn” of adoption (CoinDesk)

Analogs The latest on the economy and traditional finance

U.S. jobless claims unexpectedly increase to 870K as Pantheon says “labor market is stalling” (CNBC/Pantheon)

Racial inequality cut U.S. GDP by $16T over past two decades due to discrimination (CNBC)

ECB hands banks $203B in cheap cash to boost lending (Bloomberg)

Federal Reserve governor Lael Brainard said to be Biden’s choice for Treasury secretary, Bloomberg says (CoinDesk)

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Bitcoin (BTC) is taking a breather after Thursday’s sharp rally that took prices back above a widely tracked technical line.

• On Thursday, bitcoin jumped almost 5% to levels above $10,750, confirming its biggest single-day gain since July 27, according to data source Coin Metrics.
• With the move, the cryptocurrency found acceptance above the 100-day moving average at $10,448, which was breached to the downside earlier this week.
• So far, however, the sharp recovery from weekly lows near $10,200 has failed to draw stronger buying pressure.
• At press time, bitcoin is trading near $10,680, representing a 1% decline from the high of $10,789 observed during Thursday’s U.S. trading hours.

• The market has been a little lacking direction in recent weeks, with prices largely stuck in the $10,000 to $11,000 range since Sept. 4.
• John Ng Pangilinan, managing partner at Singapore-based Signum Capital, sees a bullish revival occurring above $11,000.
• “A stronger rally would materialize if prices rise above $11,000,” Pangilinan told CoinDesk. “I would buy on a breakout above the psychological hurdle.”
• The odds, however, may be stacked in favor of the bears, as dollar liquidity in international markets is beginning to tighten, as tweeted by macro analyst David Belle.
• As such, the dollar may extend recent gains against other currencies, putting downward pressure on the cryptocurrency.
• “A break below the early September low of $9,800 would open the doors to $8,000,” Joel Kruger, a currency strategist at LMAX Digital, told CoinDesk.
• A big move may happen soon, as bitcoin’s one-month implied volatility has declined to 44% – the lowest level in nearly two years, according to data source Skew.
• In the past, an implied volatility of 50% or less has paved the way for violent price action.

• Currently, implied volatility closing on the all-time low of 35% seen ahead of the mid-November 2018 crash.

Also read: Market Wrap: Bitcoin Hits $10.7K; Options Market Likes Sub-$360 Ether

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Bank of New York Mellon (BNY Mellon) has been accused of playing a “central role” in the $4 billion Ponzi scheme OneCoin, just days after the publication of the so-called FinCEN Files.

Accusing it of “turning a blind eye” and “laundering” approximately $300 million for the scheme, investors Donald Berdeaux and Christine Grablis have added one of America’s oldest banks to an existing class-action lawsuit seeking damages against OneCoin and its key figures, including founder Ruja Ignatova, who disappeared in late 2017.

The plaintiffs, who together invested approximately $1 million into OneCoin, say that while BNY Mellon processed payments for OneCoin in May 2016, and even referred to it as a possible “Ponzi/pyramid scheme” in an internal investigation that December, it didn’t file a suspicious activity report (SAR) with the Financial Crimes Enforcement Network (FinCEN) until February 2017.

Related: IRS May Make It Harder to Avoid Declaring Crypto on Tax Returns

“Accordingly, BNY Mellon knowingly participated in, or was complicit in, laundering OneCoin’s criminal proceeds,” the filing reads.

Plaintiffs accuse BNY Mellon on one count of aiding and abetting fraud, as well as one count of commercial bad faith.

In a statement, a BNY Mellon spokesperson said the bank took “its role in protecting the integrity of the global financial system seriously” but, by law, would not comment on any SAR it may have filed with the U.S authorities.

The bank declined to comment on the allegations.

Related: Ant Launches Business Trade Blockchain in Run-Up to $35B IPO

See also: US Moves to Seize $400M From Convicted OneCoin Money Launderer

The amended suit comes days after news source BuzzFeed released thousands of normally secret SARs reports flagging suspect transactions with the authorities.

One particular transaction in 2016 saw $30 million wired from an account belonging to a British Virgin Islands-based company, to BNY Mellon, who then credited it to an account in Hong Kong. While the transaction was allegedly a loan for the purchase of an oilfield, emails seized by the authorities show the loan was never repaid and that $10 million was actually withdrawn by one of the OneCoin founders.

U.S. authorities have already testified, in a separate case, to say that they believe this loan was an example of proceeds from the OneCoin sale being laundered.

Ignatova’s brother, Konstantin, was dropped from the class-action filed by Berdeaux and Grablis last month after the two sides reached a settlement.

Read the amended complaint below:

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Russian internet censorship agency Roskomnadzor blacklisted Binance in June, but apparently only made the cryptocurrency exchange aware of its decision today.

• Binance Russia director Gleb Kostarev notified followers on Facebook Friday that Roskomnadzor had added the exchange’s domain to its list of prohibited websites.
• The reason, according to Kostarev, was that Binance had been caught publishing information about how to buy and sell bitcoin, which is apparently an offense in Russia.
• “Not sure if we should laugh or cry,” he said.
• While cryptocurrencies are officially recognized as taxable property in Russia, the Ministry of Finance has recently made moves to put crypto trading under harsh supervision.
• Russian news agency RBK said a court had already approved Roskomnadzor’s motion to block Binance on June 2.
• “Issuance and usage of bitcoins are fully decentralized, and there is no way to regulate it by the government, which contradicts the current Russian law,” the court decision reads.
• In a Kafkaesque twist, Kostarev told CoinDesk that Binance wasn’t notified about the court’s decision or even aware of its existence until today.
• Roskomnadzor also banned access to a bitcoin wallet, Metbea.
• Kostarev said that Binance is looking into contesting the prohibition.

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Several Chinese state-owned media have made coordinated reports describing cryptocurrencies as the year’s top performing investment.

• China Central Television (CCTV), the country’s top broadcaster, published a three-minute news clip on Friday that highlighted crypto assets have soared by 70% this year so far.
• The report added that “cryptocurrency has undoubtedly become the top performing investment” among various global assets.
• CCTV’s clip followed the state-owned news agency Xinhua, which published an online article Thursday entitled “Cryptocurrency is this year’s ‘No. 1 asset.'”
• The same article first appeared on the Thursday print version of Cankaoxiaoxi and was a summarized translation of an article from Bloomberg on Tuesday.
• Cankaoxiaoxi is one of the longest running state media that selectively translates news reports from foreign sources, including those that are normally blocked by China’s Great Firewall.
• The CCTV clip immediately drew wide attention from the Chinese crypto community.
• Many started sharing the clip on WeChat news feeds as a bullish signal since the unusual neutral-to-positive tone is seemingly at odds with China’s stance that crypto speculation could undermine financial stability.
• Such a rare and coordinated effort also sparked some to wonder what the real intention and nuance might be, since state-owned media in China typically carry political agendas.
• Citing Bloomberg’s index, CCTV said the yield of crypto asset has this year surpassed that of gold, which has risen only 20%.
• The broadcaster said various countries’ economic stimulus plans following the coronavirus pandemic and the recent mania for decentralized finance contributed to the surge of values in cryptocurrencies.
• However, it also cautioned that the risks for retail investors still remain high given crypto assets’ volatility.

Also read: China Sees Advantages in Being First on New Digital Currency ‘Battlefield’

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The U.S. Internal Revenue Service (IRS) is about to deploy a simple trick to make it far harder for taxpayers to avoid declaring their cryptocurrency assets.

• According to a Wall Street Journal report Friday, the Internal Revenue Service plans to reposition a question on the 1040 income tax form for 2020 that will require all returnees to check a box if they have transacted any crypto assets over the year.
• An IRS draft of the 1040 shows that the question placed near the top of the form will likely read: “At any time during 2020, did you sell, receive, send, exchange or otherwise acquire any financial interest in any virtual currency?”
• The question was included on the form for 2019, but was placed in a part of the document that not all returnees had to fill out, the WSJ says.

• An expert on tax law told the WSJ that the question would make it easier for the IRS to win cases if the taxpayer checks the “no” box and is later found to have held crypto.
• Reporting crypto taxes in the U.S. is notoriously tricky and even the IRS has conceded things need to improve.
• An official told CoinDesk in July that some of the guidance published to date could be clarified and “is not ideal.”
• The IRS is working to keep up with the crypto industry, the official added.
• The more prominent placement of the crypto question for 2020 may be effective, the WSJ writes.
• The IRS previously added a similar question regarding taxpayers’ offshore bank accounts resulted in the IRS receiving over $12 billion in taxes.

Also read: Cryptocurrency Earned From Carrying Out Microtasks Is Taxable, Says IRS Memo

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Ant Group has launched a cross-border trading blockchain platform as it prepares for what could be the largest stock market flotation of all time.

• Ant said Friday that its new trade platform, called “Trusple,” will make it easier for small and medium-sized enterprises (SMEs) to sell their wares to clients overseas.
• Built on AntChain, Trusple automates key aspects of the payments process, such as order placement and tax liabilities.
• This makes cross-border trades feasible for entities that would otherwise struggle had they used legacy systems, according to the firm.
• Ant has partnered with the likes of Standard Chartered, Deutsche Bank and BNP Paribas to help “optimize” the process.
• The news comes as Ant continues to stoke up investor enthusiasm for its upcoming dual initial public offering (IPO) next month in Hong Kong and China’s tech-focused STAR Market.
• The company, a sister to Alibaba Group, is looking to raise a record $35 billion, surpassing the $29.4 billion Saudi Aramco raised last December.
• Ant – last valued at $200 billion – is best known as the operator of Alipay, one of the two primary payment apps used China.
• But the firm has an increasing presence in the cryptocurrency space: Chinese shipping giant Cosco has trialed AntChain to speed up the documentation process and Ant is believed to be one of the primary issuing partners for the upcoming digital yuan.

See also: Ant Group Claims 100M Digital Assets Are Uploaded to Its Blockchain Daily

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Visa-owned fintech enabler Plaid, which connects traditional bank accounts to thousands of digital platforms, including crypto exchange Coinbase, is quietly working with at least two decentralized finance (DeFi) startups.

Plaid’s head of UK, Keith Grose, a former Google wallet builder, has a vision for how crypto (and DeFi) will evolve in tandem with the fintech revolution his company is said to be driving.

The firm currently has integrations with Dharma, the Uniswap-friendly DeFi wallet with early backing from Coinbase and others; Teller Finance, the DeFi startup looking to bring unsecured lending to the Ethereum blockchain; and potentially others.

Related: Stablecoins Hit $20B Milestone, a Nearly 300% Year-to-Date Surge

Open banking and DeFi may occupy quite different levels of digitization’s evolutionary ladder, but Grose sees a “common democratizing thesis” when it comes to accessing and using financial assets. 

“I think it’s still a long way before DeFi becomes part of the main route for finance, but it’s a really exciting corner and one that personally I’m passionate about,” Grose told CoinDesk.

Still, nobody would deny DeFi is a stretch for regular fintech. Systems that are completely open to anyone, and where participants’ identities are essentially hidden behind a wallet address, present problems in today’s digital world. But people in Silicon Valley or Wall Street aren’t stupid, they attempt to manage their own disruption, and to some extent even buy into it. Take for example the way enterprise has tried to embrace blockchain, or perhaps the lengths Visa went to in acquiring Plaid. 

Read more: This DeFi Group Wants to Bring Maturity to the Yield Farming Craze

Related: ConsenSys-Incubated Startup Releases In-Browser Atomic Swap Wallet for DeFi

Armed with a widely-used API and a huge $5.3 billion exit earlier this year thanks to Visa, Plaid has become instrumental in opening up consumer finance by allowing transaction data to be shared with third-party fintech platforms. 

But persuading banks to open up to fintech is just the beginning, says Grose, who sees crypto as a next logical step.

‘Scratching the surface’

“We’re only scratching the surface of what open banking can do because it only covers payment accounts,” Grose said. “I think a key thing is to be able to allow people to access and use their crypto assets in tandem with more traditional budgeting applications, payment applications. There’s no reason why, longer-term, your Coinbase account or your Compound wallet could not be included in that so you can track it and use it across many other traditional applications.”

In Grose’s personal opinion, “protocols like Compound that provide an APY on crypto assets have been a long time coming and are a really exciting and super interesting step because that’s when you start to get the point of having the financial ecosystem and the whole space for lenders.”  

Another area that excites Grose is decentralized derivatives exchanges like the Andreessen Horowitz-backed dYdX.

“What you’re starting to see, for better or for worse, are some aspects of traditional, high-tech trading firms coming to the retail investor on the DeFi side,” Grose said. “There’s danger in that. But I think ultimately, there are interesting democratization aspects to it as well. Can the average person access financial tools in the future that have traditionally been quite hard to access as a retail investor?”

Streamlining DeFi

The practicalities of what Plaid can do, even providing a holistic view of all your assets with real-time data flowing in and out of a crypto trade you just made, for example, remains poles apart from DeFi, which combines the idea of decentralized exchange (DEXs) with crypto lending, adding a steroid shot of token drops to drive liquidity.

But in the future, a fintech plumbing company like Plaid could play a role in making access to realms like DeFi less daunting, said Howard Krieger, CEO of digital asset lending platform Residual.

“For someone to use DeFi, they have to go through a series of trust exercises before they can participate,” said Krieger. “A company like Plaid can eliminate a whole bunch of risk because they hold information and have the ability to plug different parties together; if Plaid has already verified who I am, that KYC/AML requirement goes away. So I can see where a plumbing company like Plaid could streamline a lot of back-office processes.”

Read more: Uniswap Users Have Claimed $560M-Worth of UNI Tokens in a Week

Indeed, the reason Plaid has had an explosive impact, said Grose, is that in order to build applications like Venmo, Robinhood and Coinbase, you need to be able to easily connect bank accounts, authenticate and transfer funds – and building a slick user experience around this is essential.

“When you think about what will be needed for DeFi to take off, a lot is around the user experience and making this accessible to people who are not really deep in crypto,” Grose said. “I think you’re going to see roles for players like us, helping the ecosystem develop longer-term because one of the things holding back DeFi is that it is still a lot of work to actually get up and running. You have to go quite deep into a knowledge base to really get started.”

Cambrian swamp

It’s hard to see how DeFi’s pseudonymous clusters of lenders and borrowers might cross-pollinate traditional fintechs like Funding Circle or SoFi, which rely on knowing as much as possible about counterparties on the platform. 

“That’s definitely a difficulty,” Grose said. “If everything is hidden behind the wallet address, that’s completely against the regulation you have to have, in terms of doing lending on any sort of institutional or traditional scale. At some point, there will have to be bridges built there.”

But as a recent opinion piece on CoinDesk points out, nobody knows what will crawl onto land and evolve from crypto’s Cambrian swamp. 

Read more: Banks Are Toast but Crypto Has Lost Its Soul

For Paul Brody, blockchain lead at EY and co-founder of Ethereum-based Baseline Protocol, the priority is getting DeFi going with privacy so enterprises can use it.

“I hope that’s where DeFi is headed,” said Brody. “Right now, as a consumer product, all this yield farming, SushiSwapping is interesting but not useful. The purpose of financial markets is to allocate capital for productive use. I’m not sure that’s happening here.”

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Lael Brainard, a member of the Federal Reserve board of governors, could be Joe Biden’s top pick for the Treasury secretary role if he should win this year’s presidential election.

• According to a report from Bloomberg Thursday, Brainard is seen as a character that would appeal to both Wall Street and progressives.
• Senator Elizabeth Warren, who is also being considered, is seen as too progressive for Wall Street, nine individuals “familiar with the candidates and Biden’s thinking” told Bloomberg.
• Biden is also said to be keen to pick a woman for the role – a historic move, as the Treasury secretary has always been a white male.
• The presidential hopeful seeks a secretary who would help drive the economic recovery after the knock from the coronavirus pandemic and avoid dividing Democrats, per the report.
• One Bloomberg source said Brainard would prefer the role of Federal Reserve chair, but would accept the Treasury secretary role if asked.
• While she may appease conservatives on Wall Street, Brainard is progressive when it comes to technology, having been involved with the Fed’s efforts to research a digital dollar.
• She’s made several announcements on the ongoing research into the possible central bank digital currency (CBDC) based on distributed ledger technology.
• She said in August that the Fed has been studying for several years what effects a digital currency might have on the payments ecosystem, monetary policy, financial stability and the banking sector.
• “Given the dollar’s important role, it is essential that the Federal Reserve remain on the frontier of research and policy development regarding CBDCs,” she said at the time.
• An economist told Bloomberg that if Biden were to choose Brainard, it would signal to the markets that that he “intends to govern as a moderate, not give in to the progressive wing.”
• It’s not a done deal, however, with ex-Fed Reserve official Roger Ferguson and Atlanta Fed president Raphael Bostic also on the list – both are black men.
• Sarah Bloom Raskin, a former deputy secretary at the Treasury is also keen on the role, the sources said.

Also read: The Federal Reserve Is Experimenting With a Digital Dollar

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The total value of stablecoins has now surpassed $20 billion, reflecting the growing demand of investors looking to hedge their risks in both crypto and traditional markets amid the coronavirus pandemic.

• Data from Coin Metrics show that the total value of assets for all stablecoins breached the $20 billion mark Thursday, only a little more than four months after the number broke a $10-billion record in May. Stablecoins are digital tokens, the values of which are pegged to fiat currencies like U.S. dollars.

• The main driver of the most recent rise is the latest downward pricing trend in non-stablecoin digital currencies such as bitcoin, according to John Todaro, director of institutional research at cryptocurrency analysis firm TradeBlock.
• “Because some exchanges do not offer fiat pairs, stablecoins are the only available option for traders to move risk off into fiat-like assets during periods of volatility,” Todaro wrote in an email response to CoinDesk.
• More traders and individuals view stablecoins as an intermediary step before putting money in riskier cryptocurrencies. After purchasing the stablecoins with U.S. dollars or other government-issued currencies, they can move the stablecoins to exchanges and trade for cryptocurrencies such as bitcoin, ether or others.
• Data from crypto data site Glassnode show that the balance on exchanges for tether, the most popular stablecoin by market capitalization, hit its all-time high in April.

• The increased supply of stablecoin also caused higher liquidity in both crypto trading and transactions last week, Glassnode’s weekly report wrote on Sept. 21.
• The surge of stablecoin demand may also be because of heightened interest in the decentralized finance (DeFi) sector. Stablecoins are used by DeFi users to receive high yields from a variety of DeFi platforms, such as Uniswap, Curve and Aave.
• With more political uncertainty, stablecoins are also being used by individuals and corporations to “bypass capital controls and other enforcements in order to move USD-like assets around,” said Todaro.

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Israeli bitcoiners take note: a handful of Knesset members are seeking to ease Israel’s hefty taxation of cryptocurrencies.

Four Knesset members from the nationalist Yisrael Beiteinu party on Tuesday introduced a draft bill that would effectively end Israel’s 25% capital gains tax on bitcoin by redefining certain “distributed digital currencies” as currency, instead of a taxable asset.

• The proposed re-designation applies to cryptocurrencies with: a distributed issuance network, a 1 billion shekel ($288 million) market cap or more, a general use purpose and an independent origin story.
• Bitcoin and certain other cryptocurrencies meet these criteria, according to the bill authors: Oded Forer, Evgeny Sova, Yulia Malinovsky and Alex Kushnir.
• “This regulatory clarity will create commercial certainty and allow more digital currencies to enter the Israeli market,” the lawmakers wrote in their proposal.
• Defining cryptos as currency would simplify Israeli bitcoiners’ tax burden and make qualifying coins a more attractive payment mechanism, according to the measure.
• The Yisrael Beiteinu party is part of Israel’s parliamentary opposition, making passage unlikely without backing from members of the majority.
• Forer did not respond to a request for additional comment.

Read more: Israeli Court Rules Bitcoin Is an Asset in Feud Over Tax Payment

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A new bipartisan-backed bill aims to clarify investment contract assets or digital tokens sold as part of a securities offering are separate and distinct commodities, not securities. 

• The legislation introduced by Chairman of the National Republican Congressional Committee Rep. Tom Emmer (R-Minn.) would amend existing securities laws to exclude tokens from the definition of a security.
• Speaking to CoinDesk, Amy Davine Kim, chief policy officer for the Chamber of Digital Commerce (CDC), noted if a company issues a token, and there is an investment contract there, it has to register with the Securities and Exchange Commission (SEC) to qualify for an exemption.
• The token that’s the object or the subject of that investment contract itself isn’t necessarily a security, Kim said.
• According to a press statement on Emmer’s website, the bill would allow companies in compliance with securities registration requirements or have qualified for an exemption to “distribute their assets to the public without additional regulatory uncertainty.”
• It goes on to state that digital tokens associated with security offerings “are in fact, and always were, commodities.”
• The bill has bipartisan support, Kim said, adding that the bill would make law a legal standard argument made in an amicus brief submitted by the CDC following the SEC injunction against messaging app Telegram, in which Telegram was accused of violating securities law when it issued its native gram token in 2018.  
• The new legislation would help to bring clarity to this area of the industry that’s in desperate need of it, Kim said.
• Rep. Michael Conaway (R-Texas), who joined Emmer in introducing the legislation, proposed a separate bill Thursday that could bring digital currency exchanges under a single federal framework. 

Read the full draft of the bill below: 

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Bitcoin had a small rally Thursday. Meanwhile, the ether options market is giving some investors protection from decentralized finance downsides.

• Bitcoin (BTC) trading around $10,653 as of 20:00 UTC (4 p.m. EDT). Gaining 3.3% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,135-$10,736.
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price made gains Thursday as the world’s oldest cryptocurrency began a modest rally at around 15:00 UTC (11 a.m. EDT). It jumped $343 to as high as $10,736 in just two hours on spot exchanges such as Coinbase. Bitcoin was changing hands at $10,653 at press time. 

Thursday’s bitcoin price pop came after several days of stagnation followed by a quick drop in tandem with equities Wednesday. 

Related: Bitcoin Options Open Interest Hits Record High in Expiry Week

George Clayton, partner at Cryptanalysis Capital, maintains that the average cryptocurrency holder is a risk-oriented trader and that quantitative strategies kept bitcoin’s price near at $10,400 in the days leading up to Wednesday’s decline. 

“If volumes are low, traders and algorithms are in charge,” Clayton said. “This last move down was on pretty low volume and coincided with the sell-off in stocks.” 

Momentum in the crypto market had been absent this week prior to bitcoin’s rise Thursday, according to Denis Vinokourov, head of research for the digital assets prime broker Bequant. “There has been a distinct lack of aggressive liquidations and the actual bitcoin futures curve has been flat for much of the month,” he said. 

Liquidation volume in September on derivatives exchange BitMEX has fallen. Liquidations, the crypto equivalent of margin calls, often exacerbate price movements as long or short traders have their positions wiped out.

Related: First Mover: Federal Reserve, Congress Play Game of Chicken Over Stimulus as Market Lurches

Rupert Douglas, head of institutional sales at crypto brokerage Koine, says he still has some concerns that investors will quickly sell off crypto should traditional markets take another nosedive. “Risks are still to the downside,” he said.

Read More: Strengthening US Dollar Could Bring Further Downside for Bitcoin

Bitcoin has performed poorly compared to equities thus far in September, down 10.7% while the S&P 500 is in the red 7.9%. Major stock indexes in Europe and Asia are also treading below 0% month-to-date.

Bequant’s Vinokourov points to decentralized finance, or DeFi, as contributing to the bitcoin market’s lack of overall momentum. “It appears that leverage flow has already been sucked out and quietly exited or transitioned to other parts of the crypto ecosystem, namely DeFi,” he said. 

Despite this, Vinokourov sees positive sentiment towards bitcoin’s use in DeFi-based yield generation to eke out profits in slow market cycles. “The use of bitcoin on the Ethereum network remains on a strong uptrend, with over 100,000 BTC now locked,” he noted.

Ether options hedging DeFi

Ether (ETH), the second largest cryptocurrency by market capitalization, was up Thursday, trading around $346 and climbing 5.5% in 24 hours as of 20:00 UTC (4:00 p.m. EDT). 

Read More: Uniswap Users Have Claimed $560M-Worth of UNI Tokens in a Week

The ether options market for October expiration seems to favor the cryptocurrency being priced below $360. Traders are betting there is a 50% chance of ether trading over $340 at next month’s expiration, a 40% chance of it priced over $360, and just a 24% chance of it being over $400 according to data aggregator Skew.

Vishal Shah, an options trader and founder of derivatives exchange Alpha5, said this market behavior signals smart investors are likely hedged on DeFi’s risks. 

“This is a protective premium against DeFi total value locked; a lot of people have ETH locked up in pools,” he said. “The larger players definitely are hedged, plus this can make offering DeFi structured products a lot easier [such as one with a] USD-yield with protective puts against the pool.”

Other markets

Digital assets on the CoinDesk 20 are mostly in the green Thursday. Notable winners as of 20:00 UTC (4:00 p.m. EDT):

• chainlink (LINK) + 20.4%
• orchid (OXT) + 9.7%
• 0x (ZRX) + 7.9%

One notable loser as of 20:00 UTC (4:00 p.m. EDT):

• dogecoin (DOGE) – 1%

Read More: Ex-Pantera Partner’s New Crypto Fund Is ‘Not for the Faint of Heart’

Equities:

• Asia’s Nikkei 225 closed in the red 1.1% as traders in Tokyo eyed an equities sell-off in the United States amid a contentious presidential election.
• Europe’s FTSE 100 ended the day slipping 1.3% as a rise in coronavirus cases on the continent dampened sentiment.
• In the United States the S&P 500 slipped 0.10% on a volatile trading day as unemployment numbers declined but were higher than forecasted.

Commodities:

• Oil was up 1.5%. Price per barrel of West Texas Intermediate crude: $40.22.
• Gold was in the green 0.32% and at $1,869 as of press time.

Treasurys:

• U.S. Treasury bond yields fell Thursday. Yields, which move in the opposite direction as price, were down most on the 2-year, dipping to 0.137 and in the red 5.4%.

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Privacy tech company Aleo has launched a data privacy-oriented blockchain and developer kit to make writing zero-knowledge proofs in web applications easy and scalable.

The startup is releasing its first round of software tools to let developers write private applications for the web using a new programming language called Leo, as well as integrate these tools into pre-existing browsers’ functions. 

“I think it’s become very clear that the internet is broken,” said Aleo co-founder Howard Wu on a phone call. “As users of the internet, we give up our personal data in exchange for services from providers. This model is really outdated. It’s an antiquated one. For us, the goal is to provide a new type of model where this incentive can be aligned for both sides.”

Zero-knowledge proofs

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Aleo leverages zero-knowledge proofs (ZKPs), a cryptographic technique that allows two parties on the internet, such as an app and a user, to verify information with each other without sharing the underlying data related to this information.

If you think about it in the context of logging into a website for example, it would verify who you are without sharing info such as your password, geolocation data or other information that can be used to suss out additional details about yourself that you aren’t aware you might be giving up.

See also: Zcash’s Halo Breakthrough Is a Big Deal – Not Just For Cryptocurrencies

“The idea is that we can provide user interface (UI) components and frameworks that look just like traditional web applications,” said Wu. “But when you click on something, it does some magic under the hood, and makes executing ZKPs much easier, happening within your browser. We will provide a UI toolkit, a UI framework that lets web developers build it into existing web applications.”

Aleo’s development toolkit

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Aleo’s initial release is made up of four different components. 

There is the Aleo Studio, the first integrated development environment (IDE) for writing privacy-focused, zero-knowledge applications. An IDE is a holistic environment for developers to write computer programs. 

The Aleo Package Manager is focused on letting developers manage and store data packages. Integrated with Aleo Studio, the package manager makes it easier for developers to organize and share their work. 

SnarkOS is Aleo’s decentralized operating system for private web applications and the first implementation of the Aleo protocol.

“It runs a blockchain and it supports all sorts of applications,” said Wu. “So it’s very similar to ones that people know and love on Ethereum. The idea for us is to use snarkOS as the foundation or the backbone of this entire system. So snarkOS is meant to checkpoint, verify and store data in state.”

See also: Privacy Startup Nym Will Pay You in Bitcoin to Run Its Mixnet

As users interact with the web, they’re making transactions such as payments, inputting their data, or interacting with games through applications, all of which involve state transitions, or the ways that data moves throughout the internet. Private app integrations with Aleo can address all of these phases, meaning the data privacy functionality isn’t negated at any one point. 

The last part of Aleo’s developer kit is the “Aleo Testnet I,” a testnet on snarkOS that allows developers to write and deploy applications. 

Developers must build programs on the Aleo blockchain to use the kit, as Aleo is the foundation for everything else developers want to build and integrate with. The focus is on establishing a strong and private core, so that users are able to choose whether they want their data to be public or not. 

The whole goal, however, is for developers to integrate existing apps with Aleo. Existing applications will be able to integrate on Aleo using normal web paradigms. 

“Our goal isn’t to disrupt the web, it’s to integrate with it.” said Wu. “Aleo will host infrastructure and services to make it easy for web applications to use Aleo.”

Leo: programming privacy with a new language

The company has also created a new programming language called “Leo.” Wu explained that while Leo looks and feels like JavaScript, under the hood, it is uniquely able to abstract low-level cryptographic concepts, so developers can build private applications without a degree in cryptography. 

“We built Leo to make it easy to write private applications,” said Wu. “For crypto-natives, Leo allows developers to build applications like dark pools, anonymous mixers, private marketplaces – you name it.”

He added, for web developers, Leo provides a framework that allows developers to build secure components for applications like password-less login, instant checkouts and more. 

Addressing shifting attitudes around data privacy

According to a recent report from AI-powered fraud detection company Sift, if a company inadvertently exposes a customer’s data, whether it’s the companies fault or not, 56% of survey respondents said they’d stop using the site altogether. 

“The idea here is to provide an ecosystem that is robust enough to give you alternative options and I think that’s a model that’s far more far more cohesive for both companies and consumers,” said Wu. 

Right now, according to Wu, Aleo’s goal is to plant a seed and get as much feedback as they can before they launch their mainnet. 

“Many of the common L1 foundations have tried Aleo Studio and Leo in private,” said Wu. “We have been using the opportunity to architect requirements to integrate. After all, many blockchains would like a shielded pool for applications on their chain.”

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Andreessen Horowitz’s (a16z) late-stage venture fund has received a green light from the U.S. Federal Trade Commission (FTC) for a transaction involving Coinbase. It is unclear at press time whether the approval is for the fund’s previously disclosed purchase of shares in the cryptocurrency exchange or for a new purchase.

• The VC giant’s $2 billion fund, Andreessen Horowitz LSV Fund I, L.P, received antitrust clearance from the FTC in a filing dated Sept. 22 involving “Coinbase Global, Inc.”
• Given that Coinbase’s $8 billion valuation would represent nearly half of a16z’s $16.6 billion assets under management, it’s extremely unlikely the clearance is for an outright purchase.
• a16z most recently participated in Coinbase’s $300 million Series E in October 2018. Its first investment in the crypto exchange came in 2013’s Series B, a round it led. 
• Since a16z already has a stake in Coinbase, it’s likely the FTC clearance is for the firm’s previously disclosed purchases of Coinbase shares, or for a purchase of additional shares. The exchange is reportedly considering going public.
• A Coinbase spokesperson confirmed that “Coinbase Global” is the firm’s parent entity but would not comment further. A spokesperson from a16z declined to comment on the record.
• Coinbase has had close ties with a16z since at least 2013. The exchange added a16z chief Marc Andreessen as a board observer in August.

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A new cryptocurrency trading platform is gearing up to offer zero-fee trades to users in six countries in the Gulf Region. Announced on Thursday, the platform Fasset Exchange (FEX)  has started sign-ups for its private beta and is planning a public rollout later this year. 

• According to a press statement emailed to CoinDesk, FEX will be available to investors in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. 
• Launched by fintech firm Fasset, the exchange aims to service both tokens backed by real world assets like gold and cryptocurrencies like bitcoin (BTC), ether (ETH) and USDT. 
• While the platform plans to not levy trading fees, it will charge consumers for services like withdrawal and over-the-counter fees. According to the emailed statement, users who sign up for its private beta testing, will have full access to the FEX platform and marketplace. 
• Earlier in July, Fasset had also announced the launch of an Ethereum based operating system to help tokenize investment in climate-friendly infrastructure.

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A new cryptocurrency trading platform is gearing up to offer zero-fee trades to users in six countries in the Gulf Region. Announced on Thursday, the platform Fasset Exchange (FEX)  has started sign-ups for its private beta and is planning a public rollout later this year. 

• According to a press statement emailed to CoinDesk, FEX will be available to investors in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. 
• Launched by fintech firm Fasset, the exchange aims to service both tokens backed by real world assets like gold and cryptocurrencies like bitcoin (BTC), ether (ETH) and USDT. 
• While the platform plans to not levy trading fees, it will charge consumers for services like withdrawal and over-the-counter fees. According to the emailed statement, users who sign up for its private beta testing, will have full access to the FEX platform and marketplace. 
• Earlier in July, Fasset had also announced the launch of an Ethereum based operating system to help tokenize investment in climate-friendly infrastructure.

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Three Arrows Capital just completed the single largest issuance of new wrapped bitcoin tokens by any merchant, minting 2,316 WBTC through BitGo Thursday afternoon.

• The Singapore-based firm’s mint represents nearly 3% of the current wrapped bitcoin supply, just over 81,000 at last check.
• One week ago, Alameda Research set the previous record for most tokens issued in a single mint with 1,999 WBTC issued.
• Since January, the total supply of wrapped bitcoin has grown by over 13,000% from less than 600 WBTC, according to data from Dune Analytics.

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