Tether slapped with $41 million fine for ‘untrue or misleading statements’ on fiat currency backing

Stablecoins
Stablecoins

  • Tether was fined $41 million by the CFTC for “untrue” statements when it came to its fiat currency backing.
  • The agency found Tether only held sufficient fiat reserves to back USDT tokens for only 27.6% of the days during a sample period.
  • CFTC also discovered Tether relied on unregulated entities and third parties to hold their funds.
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Tether on Friday was slapped with a $41 million fine by the US Commodity Futures Trading Commission for “untrue or misleading statements” when it came to the fiat currency backing of its stablecoins.

The companies behind the famous stablecoin misrepresented the truth to its customers from June 1, 2016, to February 25, 2019, by saying it had sufficient US dollar reserves to back every Tether or USDT token when, in fact, it had not, the agency said in a statement Friday.

Instead, the CFTC discovered that the companies only held sufficient fiat reserves in their accounts to back USDT tokens in circulation for only 27.6% of the days in a 26-month sample time period from 2016 through 2018.

Additionally, Tether relied on unregulated entities and third parties to hold the funds comprising the USDT token reserves, according to the CFTC.

That includes combining reserve funds with Bitfinex, a crypto exchange affiliated with Tether. On Friday, CFTC also announced a separate $1.5 million fine on Bitfinex for allowing illegal transactions with ineligible American retail investors from March 1, 2016, through at least December 31, 2018.

Tether in response said, “CFTC’s order found no issues relating to Tether’s current operations,” pointing to the timeframe of the investigation. And regarding Bitfinex, Tether maintained CFTC “makes no finding of a violation after December 2018.”

It also said the company updated its terms in February 2019 when it revised its pledge from a one-to-one US dollar backing to a broader reserve backing, “which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.”

Tether added in a statement on its website: “There is no finding that tether tokens were not fully backed at all times-simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times.”

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US Treasury alerts crypto companies to their growing role in preventing ransomware payments and sanctioning evaders

Janet Yellen testifies before the House Finance Committee
  • The US Treasury reminded crypto companies of their growing responsibility to not enable ransomware payments, and to sanction evaders.
  • Ransomware payments have been on the rise this year as cryptocurrencies make payments by companies held hostage hard to trace.
  • “We need partners in the private sector to help prevent this illicit activity,” the US Treasury said.
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Crypto companies have a growing responsibility to help prevent ransomware payments and sanction evaders, the Treasury said in a statement on Friday.

Ransomware payments have surged in 2021 as cyber criminals take company data hostage and demand payment in the form of cryptocurrencies to unlock it. This makes payments both harder to trace and easier to make for companies looking to get their data back quickly.

Suspected ransomware payments hit $590 million in the first six months of the year, well above the $416 million paid in all of 2020, according to the Treasury department.

A ransomware attack against the Colonial Pipeline led to temporary gas shortages in the southeast earlier this year after the oil and gas company’s pipeline was shutdown for days. Colonial paid the ransomware attackers in cryptocurrency to remedy the situation.

“The virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers, and users, plays an increasingly critical role in preventing sanctioned persons from exploiting virtual currencies to evade sanctions and undermine U.S. foreign policy and national security interests,” the Treasury said in a statement.

This is the Treasury department’s first overt outreach to the crypto industry to help in preventing US sanction evaders and criminal activity that is enabled by cryptocurrencies, such as ransomware payments.

“Treasury is helping to stop ransomware attacks by making it difficult for criminals to profit from their crimes, but we need partners in the private sector to help prevent this illicit activity,” Deputy Treasury Secretary Wally Adeyemo said.

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Elon Musk’s Tesla is up $1 billion on its $1.5 billion bitcoin investment as the cryptocurrency soars

Elon Musk
Elon Musk

  • The bitcoin bought by Tesla for $1.5 billion in January is worth $2.5 billion after bitcoin’s rally.
  • The token topped $60,000 briefly because the SEC looks likely to approve bitcoin futures ETFs.
  • Tesla CEO Elon Musk is influential in crypto and his comments have driven volatility in bitcoin’s price.
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Elon Musk’s vow that Tesla will hold onto its billion-dollar-plus investment in bitcoin is paying off as ETF excitement drives the coin’s price to highs not seen since April.

The electric-car maker now holds 42,902 bitcoin, according to Bitcoin Treasuries. It added $1.5 billion worth of the cryptocurrency to its balance sheet in February.

That investment is valued at $2.5 billion on Friday, after bitcoin climbed more than 3%, according to Coinbase data. The price of the token touched $60,000 but has since slipped back to $59,310 – still its highest level in five months.

This is not the first time Tesla’s holding has added $1 billion in worth. Its fair value was almost $2.5 billion in March, the company said in an SEC filing. Overall, the value of Tesla’s crypto investment has tracked the price moves for bitcoin since February.

The token has gained 23% over the past month on hopes the SEC will give the go-ahead for crypto exchange-traded funds. A report Friday that regulators are ready to allow bitcoin futures ETFs to trade next week has boosted the price.

Tesla has sold only 10% of its bitcoin, and that was only to find out whether it was as liquid as cash on a balance sheet, Musk said.

“Tesla will not be selling any bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy,” its CEO Musk said in a tweet in May.

Musk is a crypto influencer whose comments have contributed to volatility in the price of dogecoin and shiba inu as well as bitcoin. The comment indicating Tesla had suspended vehicle purchases in bitcoin was followed by a drop in the token’s price.

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Bitcoin breaks $60,000 for the first time since April as crypto ETFs look set for watershed SEC approval

bitcoin cryptocurrency - stock illustration
  • Bitcoin broke the $60,000 level on Friday for the first time since April as investors were encouraged by signs a futures ETF will soon be approved.
  • The SEC is set to allow trading of the first US bitcoin futures ETF next week, Bloomberg reported.
  • The digital coin rose as much as 5% to $60,343.07. It’s now just 7.5% from a record high.
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Bitcoin topped $60,000 for the first time since April on Friday as investors celebrated the prospect of the SEC approving the first US bitcoin futures ETF within days.

The digital asset rose as much as 5% to $60,343.07, according to Bloomberg data, bringing it within 7.5% of its record price of $64,869.78. That takes bitcoin’s year-to-date gains to roughly 107%.

Market sentiment is on the upturn as the SEC is ready to allow the first US bitcoin futures ETF to start trading next week, according to Bloomberg.

Anticipation has been further fuelled by the regulator approving Volt Equity’s ETF last week, according to Will Hamilton, head of trading and research at digital asset management firm TCM Capital.

Volt’s ETF specifically tracks companies that have significant exposure to bitcoin, or generate most of their profit from bitcoin-related activities like mining, lending, or manufacturing mining equipment.

“It’s a small step, but a very promising one,” Hamilton said. “In essence, the SEC has given the nod, from an investor protection point of view, that investing in these heavily crypto-exposed companies is ‘ok’.”

Separately, a direct update from the SEC seems to have contributed to Friday’s moves. The regulator’s investor education Twitter account posted a link to a June notice on Thursday, warning about the risks associated with investing in bitcoin.

“Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the tweet said. Investors interpreted it as signalling the regulator will approve those types of funds at some point next week.

On Wednesday, Russian President Vladimir Putin said he recognizes cryptocurrencies as a means of payment. And Morgan Stanley CEO James Gorman admitted crypto is more than just a fad.

Further, Coinbase proposed creating a special regulator as a potential solution to the lack of regulatory clarity and enforcement in crypto markets, as it believes digital assets need to be treated differently to stocks.

Crypto traders seem to have brushed off comments from JPMorgan boss Jamie Dimon that bitcoin is “worthless,” and Bank of England’s deputy governor Jon Cunliffe warning that the coin could trigger a 2008-level meltdown.

“Instead of scaremongering about bitcoin, certain officials should look closer to home,” said Paolo Ardoino, chief technology officer at trading platform Bitfinex. “The unsustainable inflationary monetary policies of central banks will inevitably unravel.”

Read More: 2 ETF veterans-turned crypto investors break down why they think the SEC should approve a bitcoin ETF that invests in the digital currency itself instead of futures contracts – and share the 3 main pitfalls of a futures-based ETF

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NuCypher soars 1,134% in a single day as the altcoin touches $2 billion market valuation

NYSE trader

NuCypher, a little-known altcoin that bills itself as a decentralized threshold cryptography network, soared as much as 1,134% on Friday.

The surge catapulted NuCypher’s market valuation to more than $2 billion from about $200 million as one-day volume exploded 18,266% higher, according to data from CoinMarketCap. The altcoin hit a high of $3.58 before paring its gains by about 50% to $1.80.

While NuCypher celebrated its one-year anniversary on Friday, there was no clear indication as to what developments drove such a sharp surge in demand for the altcoin, which is now the 79th largest cryptocurrency by market value.

“One year ago today the NuCypher network launched. Since then, thousands of stakes and dozens of dapp developers have discovered threshold cryptography,” NuCypher’s Twitter profile said Friday morning.

The surge in NuCypher came as bitcoin continued its October rally and hit $60,000 amid ongoing speculation that the SEC may be close to approving the first bitcoin futures ETF.

NuCypher has 687.5 million coins in circulation and a max supply of 3.9 billion coins. NuCypher, which is built on the ethereum network, serves as an encryption service for public blockchains and offers end-to-end encrypted data sharing on public blockchains and decentralized storage solutions.

NuCypher’s white paper was first published in 2017, and the altcoin began trading on October 15, 2020, at a price of $0.23 and a market valuation of $2.4 million.

NuCypher chart price
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Bitcoin briefly hits $60,000 for the 1st time since April as crypto ETFs look set for watershed SEC approval

bitcoin cryptocurrency - stock illustration
  • Bitcoin touched $60,000 on Friday as investors awaited approval of a futures ETF tracking its price.
  • The SEC is set to allow trading of the first US bitcoin futures ETF next week, Bloomberg reported.
  • The digital coin hit a 24-hour high of $60,018, taking its year-to-date gains to around 104%.
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Bitcoin briefly topped $60,000 for the first time since April on Friday, as investors celebrated the prospect of the SEC approving the first US bitcoin futures ETF within days.

The digital asset hit a 24-hour high of $60,018, according to data from CoinGecko, nearing its record price of $64,895. That takes bitcoin’s year-to-date gains to about 104%.

Market sentiment is on the upturn as the SEC is ready to allow the first US bitcoin futures ETF to start trading next week, according to Bloomberg.

Anticipation has been further fuelled by the regulator approving Volt Equity’s ETF last week, according to Will Hamilton, head of trading and research at digital asset management firm TCM Capital.

Volt’s ETF specifically tracks companies that have significant exposure to bitcoin, or generate most of their profit from bitcoin-related activities like mining, lending, or manufacturing mining equipment.

“It’s a small step, but a very promising one,” Hamilton said. “In essence, the SEC has given the nod, from an investor protection point of view, that investing in these heavily crypto-exposed companies is ‘ok’.”

Separately, a direct update from the SEC seems to have contributed to Friday’s moves. The regulator’s investor education Twitter account posted a link to a June notice on Thursday, warning about the risks associated with investing in bitcoin.

“Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the tweet said. Investors interpreted it as signalling the regulator will approve those types of funds at some point next week.

On Wednesday, Russian President Vladimir Putin said he recognizes cryptocurrencies as a means of payment. And Morgan Stanley CEO James Gorman admitted crypto is more than just a fad.

Further, Coinbase proposed creating a special regulator as a potential solution to the lack of regulatory clarity and enforcement in crypto markets, as it believes digital assets need to be treated differently to stocks.

Crypto traders seem to have brushed off comments from JPMorgan boss Jamie Dimon that bitcoin is “worthless,” and Bank of England’s deputy governor Jon Cunliffe warning that the coin could trigger a 2008-level meltdown.

“Instead of scaremongering about bitcoin, certain officials should look closer to home,” said Paolo Ardoino, chief technology officer at trading platform Bitfinex. “The unsustainable inflationary monetary policies of central banks will inevitably unravel.”

Read More: 2 ETF veterans-turned crypto investors break down why they think the SEC should approve a bitcoin ETF that invests in the digital currency itself instead of futures contracts – and share the 3 main pitfalls of a futures-based ETF

Read the original article on Business Insider

The SEC is ready to allow bitcoin futures ETFs to start trading next week, report says

Three dimensional render of Bitcoin shining inside mine - stock illustration
  • The first US bitcoin futures ETF is likely to start trading next week, Bloomberg reported late Thursday.
  • It reported the SEC is unlikely to block the products, which would be a “watershed moment for crypto,” an analyst said.
  • Bitcoin hit a six-month-high above $60,000 on Friday, on hopes a bitcoin futures ETF is within reach.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The Securities and Exchange Commission is set to allow the first US bitcoin futures exchange-traded fund to start trading next week, Bloomberg reported late Thursday.

The SEC is not likely to block such products from beginning to trade, the news outlet reported, citing people familiar with the matter.

Four proposed bitcoin ETFs are in line for an October decision from the SEC on whether to approve, deny or delay their submissions. The firms involved – ProShares, Valkyrie Investments, Invesco, and VanEck – are among several applicants waiting for word.

ProShares and Invesco’s proposals are based on futures contracts and filed under a 1940 law that the chairman of the SEC, Gary Gensler, has said provide “significant investor protection” for mutual funds and ETFs.

While pure bitcoin ETFs have not found favor with Gensler, he has sounded more positive about those based on futures contracts for the digital asset.

The SEC green light would be “a watershed moment for the crypto community, as they have been waiting for this since 2018,” Naeem Aslam, chief market analyst at Avatrade, said in a note.

“The reflection of this optimism can also be seen by looking at the bitcoin price, which is only 7% away from its all-time high.”

Bitcoin briefly topped $60,000 for the first time since April on Friday, before slipping to around $59,440. Its price has been gaining over recent days in anticipation of ETF approval, with many expecting it could regain April’s record high of $64,895 before the end of the year.

Firms waiting for a crypto ETF decision from the SEC include Fidelity, WisdomTree, Wilshire Pheonix, VanEck, First Trust SkyBridge, and Valkyrie, as well as ProShares and Invesco.

Whichever fund secures first approval could gain a significant first-mover advantage, as investors seek exposure to the price of the digital asset in their traditional brokerage and retirement accounts.

Tyler and Cameron Winklevoss were the first to try to create a bitcoin futures ETF, without success, in the US in 2013. This year, crypto ETFs were approved in Canada and Europe.

Anticipation that a bitcoin futures ETF is just around the corner has been brewing, given recent developments.

Cathie Wood’s Ark Invest has put its name to an ETF whose SEC application was filed by issuer Alpha Architect on Wednesday. The ARK 21Shares Bitcoin Futures Strategy ETF carries the ticker ARKA, a positive sign of pending regulatory approval, an analyst said.

Some investors are flagging an SEC tweet as another positive signal. The regulator’s investor education office on Thursday posted a link to a June notice that warns about crypto funds.

“Before investing in a fund that holds bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits,” the tweet said.

The SEC last week gave the go-ahead to Volt Equity’s ETF, which tracks stocks with significant exposure to bitcoin – seen as the closest fund to a bitcoin ETF so far.

The SEC didn’t immediately respond to Insider’s request for comment.

Read More: An ultimate guide to 10 top altcoins, their real-world applications, and why investors are betting their tech is the future of crypto

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Coinbase wants Congress to create a special regulator to oversee the crypto market

Coinbase IPO
  • Coinbase wants a special regulator to oversee cryptocurrency markets.
  • The biggest crypto exchange in the US proposed the idea in a regulatory framework released on Thursday.
  • Coinbase argued that it shouldn’t be regulated by the SEC or CFTC, but instead a single designated entity.

Coinbase has suggested Congress create a special regulator just for cryptocurrency markets, according to a new proposal.

“To avoid fragmented and inconsistent regulatory oversight of these unique and concurrent innovations, responsibility over digital asset markets should be assigned to a single federal regulator,” Coinbase said in its “Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership” released Wednesday.

Coinbase – the cryptocurrency exchange that went public in August – said a single federal regulator should be in charge of oversight. That would mean jurisdiction would rest outside entities like the SEC or CFTC. In addition, the company wants Congress to create a self-regulatory organization in order to “strengthen the oversight regime.”

The two would create rules dealing with a range of crypto topics such as digital asset trading, transfer, custody, clearing, settlement, money payment, staking, borrowing and lending, and related incidental services, the company said in its policy proposal.

“This two-tier regulatory structure will ensure efficient and streamlined regulation and oversight, and evolve elements of the existing frameworks to meet the requirements of our new technologically-driven financial system,” Coinbase said.

The policy proposal comes as the government has struggled with how to approach a regulatory framework for cryptocurrencies. And some big investors have stayed away from the asset class as they await more clarity from the government.

“Regulatory certainty in the United States is urgently needed to maintain our leadership in responsible financial innovation,” Michael Piwowar, executive director of the Milken Institute Center for Financial Markets and former Commissioner and acting chairman of the U.S. Securities and Exchange Commission, said in an email.

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There are 52 companies representing $7 trillion worth of stock exposed to cryptocurrencies

crypto
Cryptocurrencies.

  • Investors are becoming increasingly exposed to cryptocurrencies and risks associated with digital assets, said MSCI.
  • At least 52 companies under coverage at MSCI ESG Research have crypto exposure.
  • And 26 such companies are included in MSCI’s flagship ACWI World Index.

Investors focused on environmental, social and governance matters are increasingly subject to “creeping” exposure to cryptocurrencies, according to MSCI.

The index provider said at least 52 public companies covered by MSCI ESG Research have exposure to cryptocurrencies, representing about $7.1 trillion in market capitalization, or around 6.6% of the market cap covered by the unit, according to the ESG team’s podcast.

“While most cryptocurrencies are speculative investments with little evident utility, some have seen limited success as genuine currencies, and many have posted eye-popping returns,” said MSCI ESG Research. “This growth has contributed both to the rise of cryptocurrency-exposed companies and efforts by established companies to gain cryptocurrency exposure.”

Exposure comes from a range of companies such as pure-play crypto firm Coinbase, the exchange operator that went public in April. Other names include Facebook, which logs no revenue from digital coins but is exploring ways to monetize the system, and Nvidia, the chipmaker with a dedicated graphics-processing unit for professional cryptocurrency miners.

Crypto exposure creeps in when newly listed cryptocurrency companies are added to indexes, or when companies that investors already own – directly or through indexes – venture into activities involving bitcoin or other cryptocurrencies, said MSCI.

Crypto-exposed companies include 26 constituents of the MSCI ACWI Index, the company’s flagship global equity index that gauges the performance some large- and mid-cap stocks in 23 developed and 27 emerging markets. The index includes more than 2,900 constituents across 11 sectors.

Meanwhile, investors with crypto exposure may also be running counter to their ESG goals.

Environmental risks from cryptocurrencies include greenhouse-gas emissions from energy usage and electronic waste. Governance risks include boards of cryptocurrency-exposed companies needing to adapt risk-management policies to issues such as cybersecurity and anti-money laundering practices.

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Bitcoin futures premium doubles ahead of SEC’s potential approval of an ETF next week

Bitcoin
Bitcoin

  • Bitcoin futures premium has doubled this month as the SEC rules on the potential of approval of several ETFs.
  • SEC Chairman has recently voiced his support for bitcoin ETFs that hold futures contracts rather than directly holding bitcoin.
  • The SEC is set to either approve, deny, or delay bitcoin ETF proposals from four firms over the next two weeks.
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The premium tied to bitcoin futures contracts has doubled this month as investors anticipate the SEC’s potential approval of several bitcoin ETFs over the next two weeks.

The SEC is set to either approve, deny, or delay bitcoin ETF proposals from ProShares, Valkyrie Investments, Invesco, and VanEck, which were all submitted to the regulatory agency in August.

While still wary of a pure bitcoin ETF due to concerns for potential fraud, SEC Chairman Gary Gensler has voiced his support in recent weeks for a bitcoin ETF that buys underlying futures contracts on the cryptocurrency rather than directly buying bitcoin itself.

Since Gensler has made clear his thoughts on the possibility of bitcoin futures-based ETF, several issuers have submitted new ETF applications that would utilize that same approach, including Cathie Wood’s ARK Invest.

With approval of a bitcoin futures ETF looking more likely than ever, the annualized premium of CME bitcoin futures prices over bitcoin’s spot value was 15%, compared to an average of 7.7% over the first nine months of the year, according to the Wall Street Journal.

Given that there could very soon be a surge in demand for bitcoin futures contracts due to the onslaught of new ETFs, the Chicago Mercantile Exchange is planning to raise the limit on the number of bitcoin futures contacts a single firm can hold.

The SEC also seems to be ramping up education about bitcoin futures contracts ahead of their decision on the ETFs later this month. On Thursday, the SEC Investor Education Twitter account shared a link to more information on bitcoin futures and said, “Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits.”

Whichever firm receives approval for the first bitcoin futures-based ETF could see a significant first-mover advantage as investors seek exposure to bitcoin in their traditional brokerage and retirement accounts. Bitcoin is up more than 30% so-far in October, and is up just over 100% year-to-date.

Bitcoin price chart
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