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Cryptocurrency

CFTC delves into Binance’s insider trading conduct

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U.S. Commodity Futures Trading Commission (CFTC) sharpens its regulatory gaze as it initiated a condensed investigation into cryptocurrency trading platform Binance Holdings Ltd. for probable crypto exchange abuse for insider trading and market manipulation, according to Bloomberg

It seems that even though not everyone can stand its probing scrutiny, the U.S. is feeding its recently found power over tech companies by initiating its latest investigation into Binance, following concerns of the platform’s servers’ location and if the U.S. has any power to impose its authority on the case.

Bloomberg reported on Friday that CFTC watchdogs have been searching for probable witnesses to provide information concerning Binance’s behavior in the U.S. and whether it allows the country’s residents to buy and sell derivatives linked to Bitcoin and other cryptocurrencies.

It is worth highlighting the intensity of the CFTC’s investigation lies with the fact that Binance’s prohibition from conducting any business in the U.S. since it is not registered with the country.

In its defense, the trading platform released a statement addressing the issue by emphasizing the value it holds for its unthreatened saintly guidelines and its customers.   

“At Binance, we have a zero-tolerance policy for insider trading and a strict ethical code related to any type of behavior that could have a negative impact on our customers or industry,” Binance spokesman stated.

“Binance’s security team has long-standing guidelines for investigating wrongdoing and holding workers accountable, with termination being the minimal repercussion,” the spokesperson told Bloomberg.

The Commission’s representative has refused to comment on the matter so far.

This isn’t the first time the CFTC launches a thorough examination into cryptocurrency, specifically the sales of derivatives connected to cryptocurrency.

As Washington sets its focus on cryptocurrency’s exponential growth and examines its behavior, the Justice Department and Internal Revenue Service unleashed a criminal investigation into whether Binance has been an accomplice in money laundering and tax evasion schemes.

The Justice Department and the CFTC have been studying the platform’s moves for months as both worryingly observe its market behavior concerning links to unlawful conduct, as crypto firms are deviating towards traditional financial services without preserving their consumers’ interest.

If the CFTC’s concerns are in place, then the absence of consumer protections, in addition to regulations, might potentially harm users signing up to safeguard their valuable investments by placing their trust in the hands of the Chinese platform and a multitude of crypto exchange firms.

Daryn is a technical writer with thorough history and experience in both academic and digital writing fields.

Cryptocurrency

Novi, Facebook digital wallet sirens regulatory warning

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Facebook launched on Tuesday its own digital wallet Novi to support decentralized currencies in collaboration with Coinbase and was faced with an urge from U.S. senators and lawmakers to cease the wallet’s pilot release, effective immediately. 

One notion Facebook’s six-hour outage proved to us: the magnitude of our reliance on just one company.

Facebook made a name for itself by continuously entering different playfields to strengthen users’ reliance on any platform.

Now, the social networking company’s act to work together with Coinbase to develop a new digital wallet is just an additional aspect that we did not take into consideration when Facebook was releasing its digital coin, Libra.

While some might say that Libra is a failed attempt at cryptocurrency, the networking platform’s collaboration with Coinbase shows that the Big Tech titan is hiding some cards in its sleeve, and this collab is just pushing it one step closer towards its goal of having a say or simply amplifying its presence in the decentralized market.

Novi, previously known as Calibra, is the tech mogul’s rebrand of its troubled digital wallet. Initially, Calibra was built for users to adopt as their go-to wallet to use and hold the company’s own digital currency, Libra, later rebranded as Diem.

Last year, Facebook announced that once launched to the public, Novi could be incorporated into messaging platforms WhatsApp and Messenger, in addition to being deployed as a stand-alone application.

Now, the Big Tech giant is initiating the first step into releasing its digital wallet to the public. In its early stages, it will run pilot programs in the U.S. and Guatemala, according to a letter from the networking company.

“Today we are starting to roll out a small pilot of the Novi digital wallet app in Guatemala and the U.S. The purpose of the pilot is for us to affirm our operational readiness and show that our Novi systems, such as our customers care response, compliance program, and core feature functions are serving customers well,” Facebook said.

While Facebook will provide availability on U.S. turf, however, Alaska, Nevada, New York, and the U.S. Virgin Islands will be excepted from the digital wallet’s enrolment, for undisclosed reasons.

So, how will Facebook’s partnership with Coinbase strengthen the wallet’s enrollment to the public?

Since Novi will allow users to transfer money internationally without any fees, the application/app extension will allow users to send a stablecoin pegged to the price of U.S. dollars (USDP) that can be withdrawn in a local currency.

And here is where Coinbase’s role sweeps in.

The cryptocurrency platform will weaponize Novi with its trademarked, completely isolated cold storage capacity to manage confidential keys, Coinbase Custody. With its deeply embedded security measures to its infrastructure, Coinbase made a name for itself as one of the most secure crypto asset managers in the industry.

As for Facebook’s stance on the matter, the head of Novi, David Marcus, stated that the giant’s digital wallet is set to provide assistance to the 1.7 billion people spread globally to access their digital assets despite not having a bank account.

Even though Novi’s concept might appear quite unusual to some crypto enthusiasts, Facebook seems to address a different crypto audience by simplifying the access to digital assets without relying on a bank.

“We chose USPD so that we can test our systems with a stablecoin that has been operating successfully for over three years and that has important regulator and consumer protection attributes,” Marcus said in a statement.

“USPD reserves are fully backed by the U.S. dollar and are helping 100 percent in cash and cash equivalents. This means that people can easily withdraw their money in their local currency when they choose,” he added.

As for availability, the digital platform will be deployed on the App Store and Android Play Store, where people can sign up by using a government ID, while money withdrawal options presented on the platform may vary by country.

Regulatory stance on Facebook entering the crypto market

The moment Facebook publicized news of its cryptocurrency project, global regulatory authorities fixated their attention on the Big Tech company. Worldwide scrutiny, in addition to the U.S. House of Committee on Financial Services, has endlessly vocalized its suspicion of Facebook’s plan to enter the decentralized market.

But as the regulatory eye gazes deeper and deeper into Facebook’s conduct, can the tech titan be trusted with users’ digital wallets?

Since its surfacing to the digital scene ten years ago, Facebook manifested into one of the world’s largest companies and most influential ones. As it metamorphosis into a global digital phenomenon, regulators constantly assess the company’s plans and ulterior motives.

Senators Brian Schatz, Sherrod Brown, Richard Blumenthal, Elizabeth Warren, and Tina Smith from the democratic party expressed their disapproval of the tech mogul’s never-ending efforts to enter the decentralized field of blockchain by founding its own cryptocurrency and digital wallet.

“Facebook is once again pursuing digital currency plans on an aggressive timeline that has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape,” the senators wrote in a letter to CEO Mark Zuckerberg.

“Facebook cannot be trusted to manage a payment system or digital currency when its existing ability to manage risks and keep consumers safe has proven wholly insufficient,” the letter added.

The Senators letter clearly states that even though Novi is still in its pilot phase, it will not be exempted from regulatory scrutiny from lawmakers as Facebook has proved, from its own behavior, that it cannot be entrusted as it has raised unsettling concerns.

“We look forward to responding to the committee’s letter,” Novi’s spokesperson addressed the issue.

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Cryptocurrency

As Bitcoin goes mainstream, Wall Street looks to cash in

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Love cryptocurrencies or hate the very idea of them, they’re becoming more mainstream by the day.

Cryptocurrencies have surged so much that their total value has reached nearly $2.5 trillion, rivaling the world’s most valuable company, Apple, and have amassed more than 200 million users. At that size, it’s simply too big for the financial establishment to ignore.

Firms that cater to the world’s wealthiest families are increasingly putting some of their fortunes into crypto. Hedge funds are trading Bitcoin, which has big-name banks starting to offer them services around it. PayPal lets users buy crypto on its app, while Twitter helps people show appreciation for tweets by tipping their creators with Bitcoin.

And in the latest milestone for the industry, an easy-to-trade fund tied to Bitcoin began trading on Tuesday. Investors can buy the exchange-traded fund from ProShares through an old-school brokerage account, without having to learn what a hot or cold wallet is.

It’s all part of a movement across big businesses that see a chance to profit on the fervor around the world of crypto, as a new ecosystem further builds up around it, whether they believe in it or not.

“The one thing you can say for certain is that the advent of the era of the Bitcoin ETF opens up the opportunity for Wall Street to make money on Bitcoin in a way that it hadn’t been able to previously,” said Ben Johnson, director of global ETF research at Morningstar. “The winners in all of this are the exchanges and the asset managers and the custodians. Whether investors win or not is a big, bold question mark.”

Bitcoin has come a long way since someone or a group of someones under the name Satoshi Nakamoto wrote a paper in 2008 about how to harness computing power around the world to create a digital currency that can’t be double-spent. The price has more than doubled this year alone to roughly $62,000. It was at only $635 five years ago.

Supporters of cryptocurrencies say they offer an ultra-important benefit for any investor: something whose price moves independently of the economy, rather than tracking it like so many other investments do. More high-minded fans say digital assets are simply the future of finance, allowing transactions to sidestep middlemen and fees with a currency that’s not beholden to any government.

Critics, meanwhile, question whether crypto is just a fad, say it uses too much energy and point to all the stiff regulatory scrutiny shining on it. China last month declared Bitcoin transactions illegal, for example. The chair of the U.S. Securities and Exchange Commission, Gary Gensler, said in August that the world of crypto doesn’t have enough investor protection and “it’s more like the Wild West.”

That hasn’t been enough to halt the immense momentum for crypto, as it’s gone from an online curiosity to a bigger part of the cultural and corporate landscape.

U.S. Bank earlier this month said it has begun offering a cryptocurrency custody service for big investment managers. That means it essentially holds their Bitcoin in safekeeping for them, and it expects to offer support for other coins soon.

Other name-brand banks have also announced intentions to offer custodial services for crypto.

“It’s not just in the fringes and dark corners of the Web that it’s happening,” said Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts.

Ahmed doesn’t recommend his clients invest in crypto. Before then, he said he’ll need to be able to “go to my local supermarket and buy things for my family and offer crypto and not be laughed out of the store.”

But others are more willing to try it.

In a survey by Citi Private Bank of family offices around the world that manage money for wealthy people, roughly 23% said they have made some investments in crypto. Another 25% said they are researching it.

The growing acceptance of crypto on Wall Street has created a new crop of darlings that help people buy it. Crypto trading platform Coinbase has a market value of roughly $64 billion, for example, putting it on par with such established companies as Colgate-Palmolive, FedEx and Ford Motor.

At Robinhood Markets, meanwhile, the company that became famous for getting a new generation of investors into the stock market is increasingly becoming a place for crypto trading. This spring was the first time when new Robinhood customers were more likely to make their first trade in cryptocurrencies rather than in stocks.

In the end, what many on Wall Street see lasting may not be as much Bitcoin and other cryptocurrencies as the technology that underlies them.

Called the blockchain, it allows for a public ledger that everyone can check and trust, and many expect it to lead to a wealth of innovations. It’s akin to today’s Netflix, Facebook and other services that sprung out of the infrastructure built during the boom and bust of the dot-com bubble.

“The applications built on this new software architecture appear to be growing more quickly than past technologies,” Bank of America strategists Alkesh Shah and Andrew Moss wrote in a recent research report positing digital assets are only in their first inning of growth. “New companies are likely to emerge and poorly positioned companies will exit, creating significant upside potential for some and downside for others.”

JPMorgan Chase, for example, is already using blockchain technology to improve fund transfers between global banks. That’s the same JPMorgan Chase run by CEO Jamie Dimon, who said in an interview with Axios this month that bitcoin has “got no intrinsic value.”


NEW YORK (AP)

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Bitcoin investing could get boost from exchange-traded fund

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NEW YORK (AP) — Interested in Bitcoin but don’t want to open a crypto trading account? Wall Street has something for you.

ProShares said Monday it plans to launch the country’s first exchange-traded fund linked to Bitcoin. The ETF with the ticker symbol “BITO” is expected to begin trading Tuesday, barring any opposition from regulators.

It’s the latest milestone for Bitcoin and for the ETF industry in general. In a statement, ProShares CEO Michael Sapir compared the launch of a crypto-linked ETF to the 1993 launch of the first stocks ETF and the 2002 rollout of the initial bond ETF. The U.S. market for ETFs has grown to more than $5.4 trillion and they’re owned by roughly 9% of all the nation’s households, according to the Investment Company Institute.

Cryptocurrencies, meanwhile, have exploded into a nearly $2.5 trillion industry after the creation of thousands of digital currencies. Bitcoin is the biggest of them all, with a total value of nearly $1.2 trillion. But like much in the crypto world, the Bitcoin-linked ETF is a bit complicated.

The fund won’t invest directly in Bitcoin itself. Instead, it will focus on futures related to Bitcoin, a market that’s overseen by U.S. regulators and can be complicated in its own right. That means investors need to be particularly aware of what they’re buying, and how it’s likely to perform.

Here’s a look at what the ETF does and doesn’t do:

WHY IS THIS A BIG DEAL?

A Bitcoin-related ETF would give investors a new way to get involved in the fast-growing field of cryptocurrency. Bitcoin’s price has more than doubled this year, and a growing number of investors see it as a way to offer their portfolios some protection.

The hope is that Bitcoin’s price will move in a way that’s not as tied to expectations for the economy as stocks and other investments are. If it does, it could help support portfolios when everything else is falling or when inflation is high. It doesn’t have a perfect track record, though: When the U.S. stock market fell nearly 34% at the start of the pandemic in 2020, Bitcoin lost roughly as much.

Some investors may not want to open a new trading account for cryptocurrencies. Instead, they can buy the ETF through old-school brokerage accounts they may already be using for their stocks or their IRA.

WHAT IS AN ETF?

An exchange-traded fund allows investors to easily buy a whole basket of investments. Some of the most popular ETFs track things like the S&P 500 index of big U.S. stocks, the price of gold or high-yield bond indexes.

Unlike with a traditional mutual fund, which prices just once a day, investors can buy or sell an ETF throughout the trading day. That’s particularly important for cryptocurrencies, whose prices can swing sharply from minute to minute, let alone day to day.

SO THIS NEW ETF WILL TRACK THE PRICE OF BITCOIN?

No, and this is one of the most important distinctions. The fund will invest in Bitcoin futures, which are essentially bets on where Bitcoin’s price will go in each of the months ahead.

The Bitcoin futures market is overseen by the Commodity Futures Trading Commission, which may offer investors more protection. But it also doesn’t perfectly track the price of Bitcoin.

“This is not a replacement for owning bitcoin directly,” said Todd Rosenbluth, head of ETF and mutual fund Research at CFRA.

WHO IS THIS BEST SUITED FOR?

Because it will be invested in futures instead of actual Bitcoins, the ETF is less than ideal for a Bitcoin believer who wants to invest in it for the long term, Rosenbluth said.

Instead of a buy-and-hold investor, he said it’s more likely to be popular with shorter-term traders who want to make money off its volatility, at least initially. There’s certainly plenty of opportunity for that.

In the span of roughly three months earlier this year, Bitcoin more than halved from nearly $64,900 to less than $30,000. Since that low point in July, it’s surged back to nearly $61,800.

HOW MUCH WILL IT COST?

BITO will have an expense ratio of 0.95%. That means $95 of every $10,000 invested in the fund will go toward paying its annual operating expenses.

Such fees could be a hard sell for Bitcoin fans, many of whom see cryptocurrencies as a way to erase middlemen from industries.

IS THIS THE FIRST AND LAST SUCH ETF?

No, several other fund companies have their own applications for ETFs linked to Bitcoin futures. Some may try to separate themselves by charging lower fees.

Beyond just extending the reach of Bitcoin, the ETFs will help create a bigger ecosystem in the financial world around it, said Ben Johnson, director of global ETF research at Morningstar.

With a Bitcoin-linked ETF, skeptical investors will have something that they can sell short. In such a trade, they can bet on the ETF’s price to fall by borrowing a share and selling it, hoping to buy it back later at a lower price. The ETFs could also allow for trading of options around them.

“The money made on all that trading activity is going to dwarf the money made just on collecting fees for those products,” Johnson said.

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