News updates August 18, 2022
1. Bitcoin price heads above $23.5K after highest EU inflation in history
Inflation surprises keep coming, while the European central bank refuses to rule out even higher numbers in future.
Bitcoin (BTC) shifted higher on Aug. 18 as the latest data confirmed the European Union’s highest ever inflation.
Support and resistance close in on BTC spot price
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD passing $23,500 at the time of writing, having preserved $23,000 as support overnight.
Concerns over a deeper risk asset drawdown had become widespread over the week, with Bitcoin and Ether (ETH) notably unable to crack long-term resistance levels.
With bulls seemingly on the back foot, the mood among analysts was naturally wary.
“BTC did break down from this huge rising channel/wedge everyone seems to be watching,” Daan Crypto Trades wrote in part of his latest Twitter update.
Near-term support meanwhile came in the form of whale buy-ins at $22,800 and up, on-chain monitoring resource Whalemap argued.
Now just below Bitcoin’s 200-week moving average, the $22,800 zone should be the line in the sand to watch in the event of a market downturn.
2. Bitcoin Loses Bullish Trendline as Fed Sees Restrictive Rates Needed for Some Time
Bitcoin lost a key price support after the minutes of the Federal Reserve's July meeting dashed hopes that looser monetary policy is set to return to the U.S. next year.
The leading cryptocurrency fell more than 2% on Wednesday, dropping below a bullish trendline drawn from July 15 and July 26 lows. The breakdown sparked concerns of a deeper sell-off on social media.
Fed minutes released late Wednesday showed policymakers discussed the need to continue raising interest rates to keep borrowing costs at levels that restrict U.S. economic growth for long enough to tame inflation. The cryptocurrency is sensitive to changes in Fed policy and has halved since the central bank kicked off its tightening cycle in March.
The push for continued rate hikes and restrictive policy contradicts recent market pricing, which had indicated expectations of interest-rate cuts in 2023 and lifted bitcoin to a two-month high of $25,203. The surprise may also inject volatility into markets.
"It seems reasonable that increasing and elevated rates are headwinds for bitcoin," said Lewis Harland, a researcher at Decentral Park Capital. "The Fed appears to keep consistent in their inflation north star and the cost seems like an economic contraction
Traders of Fed fund futures no longer see the central bank switching to rate cuts next year, according to Mott Capital Management's Michael Kramer. Traders expect rates to peak around 3.7% by March and remain there until late 2023. Last month, the central bank raised the benchmark interest rate by 75 basis points (0.75 percentage point), lifting it to the 2.25%-2.5% range.
While the tightening may end next year, as traders predict, the timing of renewed liquidity easing is unclear. That could cap the upside in risk assets.
The liquidity contraction is still underway. The Fed's remarks in the minutes of its July meeting indicated that the liquidity contraction may end in 2023, but the timing of the re-addition of liquidity is unknown," Griffin Ardern, a volatility trader from crypto asset management firm Blofin, said.
"The Fed rate hike in September and the uncertainty about by the ETH merge [stemming from possibility of a chain split] will further suppress investors' bullish expectations," Ardern said.
Some observers, including former Fed trader Joseph Wang, read the minutes as somewhat less hawkish because the transcript revealed concerns about overdoing tightening to contain inflation. The also said policymakers judged it would be appropriate to slow rate hikes at some point. It remains to be seen if markets agree with Wang's assessment and reverse Wednesday's losses.
Bitcoin traded near $23,500 at press time, indicating a slight recovery from Wednesday's low of $23,180. However, the cryptocurrency remains well below the former-support-turned-resistance level of the rising trendline.
Bitcoin traded near $23,500 at press time, indicating a slight recovery from Wednesday's low of $23,180. However, the cryptocurrency remains well below the former-support-turned-resistance level of the rising trendline.
3. These Crypto Exchange Owners Can Get 5-Year Jail
The Financial Services Commission in South Korea is investigating 16 cryptocurrency exchanges for violating the Specific Financial Information Act. The FSC has alleged that these exchanges were operating as non-reporting entities.
Furthermore, they conducted they actively conducted sales activities on their websites through attractive offers without reporting to the South Korean government. On August 18, the Financial Intelligence Unit (FIU), working under FSC, names those 16 exchanges for violating the law.
This included some of the top exchanges operating in the country such as KuCoin, MEXC, Phemex, XT.com, Bitrue, ZB.com, Bitglobal, CoinW, CoinEX, AAX, ZoomEX, Poloniex, BTCEX, BTCC, DigiFinex, and Pionex.
*The Special Act Rules In South Korea*
According to the Special Act, any business entity associated with virtual assets, need to meet the regulatory requirements of the FIU. This includes getting the information security management system (ISMS) certification.
In the case of non-reporting, a business can face 5-year imprisonment or a fine not exceeding 50 million won. Furthermore, the business cannot operate in the crypto sector for another five years. These rules are applicable to both local as well as foreign businesses.
4. US Extradites Alleged Crypto Money Launderer From Netherlands
The United States has extradited an alleged cryptocurrency money launderer from the Netherlands, according to a Department of Justice press release.
Denis Mihaqloviv Dubnikov, 29, a Russian citizen, made an initial appearance in federal court in Portland, Oregon on Wednesday, and a five-day jury trial is scheduled to begin on Oct. 4. If convicted, Dubnikov faces a maximum sentence of 20 years in prison, the DOJ release said.
The DOJ cites court documents that allege Dubnikov and his accomplices laundered ransom payments extracted from victims of Ryuk ransomware attacks.
After receiving ransom payments, Ryuk actors, Dubnikov and his co-conspirators, and others involved in the scheme, allegedly engaged in various financial transactions, including international financial transactions, to conceal the nature, source, location, ownership, and control of the ransom proceeds," the DOJ release said.
Dubnikov is alleged to have laundered more than $400,000 in Ryuk ransom proceeds. "Those involved in the conspiracy laundered at least $70 million in ransom proceeds," the DOJ alleges.
Multiple agencies are working on the case. The Justice Department's Office of International Affairs handled Dubnikov's extradition, coordinating efforts with the department's Ransomware and Digital Extortion Task Force created to combat digital extortion attacks. The FBI's Portland Field Office is investigating the case.
5. Brazilian Central Bank hopes for new progress in the crypto world
According to Campos, not the famous goalkeeper but the president of the Brazilian Central Bank, the national and international agreements that form the legislative structure within which terms the crypto world can move should have broader scopes and encourage the spread and improvement of the protocols underlying cryptocurrencies, NFTs and other instruments put in place.
*Brazilian Central Bank: crypto progress coming soon*
The president continued by saying how important he thinks it is to integrate legislation around this asset class with the digital world but in a different way than what other central banks such as the US or European central banks are doing with the MiCa.
Of the same opinion as Campos is Joao Pedro Nascimento, the President of the CVM (Brazilian Securities and Values Commission) who said he is in favor of not stopping this wave of resources towards digital currencies.
In this regard, the CVM has carried out a preparatory study to facilitate and integrate the legislative and digital work on the regulation of CBDCs and cryptocurrencies at large since it is the opinion of the commission that in time the sector can self-regulate itself at least as far as the system in general is concerned.
In September of this year, the government’s vice chamber is scheduled to discuss the issue for a legislative implantation, but it is feared it will be postponed due to the concurrence of government elections.
At the same time, the general ballot for the election of the president, vice president and members of congress will take place in Brazil and this in all likelihood will be the reason for a delay on the framework law.
For now, the necessary regulation does not seem to see the light of day but unlike other countries, the process seems to be going to be quicker as all the institutions in the country seem to be in agreement on the highlights of the framework.
If September is the month of the renewal of state offices by the end of 2022, a first agreement could be reached and we could see the light of ad hoc legislation in the South American country as well, which differentiates it in the implantation from those of other countries in the world in that it is more open in intent.
6. Canada Restricts Crypto, Here’s How The New Rules Affect You
Nine provinces in Canada have decided to limit the amount of crypto you can buy in a year. The provinces have set an annual limit of $30,000 as the maximum amount of crypto that can be brought. However, there are four notable exceptions for cryptocurrencies under this rule.
Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are exempted from this regulation. As a result, those four tokens will not be counted in your annual limit.
*Why Canada Is Restricting Crypto*
The nine provinces have formed the regulation to protect consumers from the volatility of the crypto market. The nine provinces that will enforce this regulation are:
The regulation will not affect the Alberta, British Columbia, Quebec, and Manitoba provinces. The limit set by the provinces is $30,000. However, the limit will reset after every 12 months. The rule also gives certain exemptions based upon the type of investors. Moreover, certain types of investors, based on their income and net worth, can buy a higher amount of crypto.
7. Crypto Exchange Gemini Introduces Staking Support for US Investors
The company hopes to capitalize on rising user interest ahead of Ethereum’s upcoming shift to a proof-of-stake model.
Gemini will offer support for clients throughout the U.S. to earn and store staking rewards in their Gemini accounts, the crypto exchange announced Thursday.
Beginning Thursday, the firm will support staking Polygon (MATIC) on the Polygon network and will roll out support for Ethereum (ETH), Audius (AUDIO), Solana (SOL), and Polkadot (DOT) over the next few months.
Gemini’s announcement comes as other crypto firms expand their staking offerings ahead of the Ethereum blockchain’s much-anticipated Merge, which will shift the protocol from proof-or-work to a faster, more energy efficient proof-of-stake model. After years of delay, The Merge is now scheduled to occur on Sept. 15.
Gemini VP of Product Layla Amjadi said investor interest driven by the Merge was integral in the firm’s decision to introduce its staking services.
It's now more clear than ever that people are interested in staking, especially now that we're on the cusp of the Ethereum Merge,” Amjadi told CoinDesk. “With Ethereum being a staking option for them on Gemini soon and after the Merge, and with there being more liquidity and higher yields, staking is becoming more and more appealing for people.”
Gemini’s support services will allow users to stake and unstake any amount of crypto without any fees, Amjadi said. The firm will cover infrastructure costs and gas fees associated with staking and unstaking, and will offer slashing protection and other reimbursement opportunities for penalties incurred during the staking process.
Support for the service will be available in the U.S., except for New York, where local laws prohibit staking. The firm plans to roll out the service in Singapore and Hong Kong soon.
Gemini’s expansion is part of a wider push by large crypto exchanges to create opportunities for retail and institutional investors to collect staking rewards. Coinbase, Binance, Kraken and Crypto.com have all launched staking services of some kind, with Coinbase Prime announcing this month that it would add Ethereum to its growing list of staking options for U.S. domestic institutional clients ahead of the Merge.
8. South African Reserve Bank encourages friendly behavior with crypto
The banking authority said avoiding risk by cutting off crypto-involved clients may pose a “threat” to financial integrity.
*The Prudential Authority of the Reserve Bank*
of South Africa sent out guidelines to its subsidiaries in an effort to prevent illicit activities, encouraging banks not to cut all ties with cryptocurrency.
It suggested that such an act could cause greater risk in the long run.
The official notice was signed by Prudential Authority CEO Fundi Tshazibana. In the past, certain South African banks had cut ties with crypto asset service providers (CASPs) — as they are called in the document — due to unclear regulations or a high-risk factor.
However, the notice highlights that risk assessment doesn’t mean dropping crypto entirely:
It goes on to say such a move could even be a “threat” to general financial integrity, as it may limit the possibilities of treating issues such as money laundering.
In late July, the Reserve Bank released an assessment of risks within the local banking sector. According to the report, cryptocurrencies and virtual assets were included in the top 10 threats identified by the top local banks.
*European Central Bank addresses guidance on licensing of digital assets*
Prior to the report, the South African government released a plan that entailed the classification of crypto as a financial asset for regulatory purposes. The laws pertaining to the classification are expected within the next 12 months.
Crypto exchanges in South Africa reacted positively to this announcement. Many believe this move will drive adoption in the country. The country has seen major signs of interest and innovation in the crypto community, including "in real life," or IRL, crypto use cases.
South Africa is home to crypto projects such as Bitcoin Ekasi, a township that introduced Bitcoin as a means of bolstering the financial independence of local underserved communities and Unravel Surf Travel, a South African-based travel pro-crypto travel company.
9. US Treasury's Tornado Cash Sanctions Are ‘Unprecedented’, Warns Congressman
With just 28 legislative days left this year, “it’s unlikely that any crypto legislation is going to move,” Rep. Tom Emmer said on CoinDesk TV’s “First Mover” show.
The U.S. Treasury Department’s sanctioning of the Tornado Cash cryptocurrency mixer was an unprecedented move threatening privacy and innovation, according to one U.S. member of Congress. And he thinks Congress should start asking questions.
On CoinDesk TV’s “First Mover” program Thursday, Rep. Tom Emmer (R-Minn.) said the Treasury Department’s Office of Foreign Asset Control (OFAC) was wrong to sanction the service.
“I'm totally opposed to OFAC looking at this,” said Emmer. “My problem is that this software is controlled by code, not by any person or entity. So if you think about it, the sanctioning of Tornado Cash is an unprecedented shift in the Office of Foreign Asset Control in their sanctioning policy.”
“Their primary priority is protecting the United States national security,” he added. “So I think our role – Congress – can be most effective in inquiring with OFAC to find out if they believe the sanction addresses are controlled by people, not code, and what this means for privacy rights and innovation.”
The ban on Tornado Cash is driving internal debate on Capitol Hill regarding what regulatory agency should be responsible for oversight of cryptocurrencies, according to Rep. Emmer. He said government agencies now are “not doing the job they were assigned to do.”
When it comes to digital assets, it should be the job of Congress to define “what qualifies or fits the definition of cash, commodity and or a security,” and which agency should be responsible for regulating each, said Emmer.
The coin mixer’s sanction sent shockwaves across the industry, and reignited concerns about privacy and the use of open-source tools.
Congress now needs to get its “act together,” according to Emmer.
Emmer used the broadcast to once again slam the Securities and Exchange Commission (SEC) for what he considers overreaching its authority.
10. Seoul Says It Is Talking to Int’l Counterparts About Streamlined Stablecoin Regulations.
South Korean regulators say they will move to regulate stablecoins in the wake of the “Terra/LUNA incident.”
ZDNet Korea reported that the regulatory Financial Supervisory Service (FSS) has indicated that a new Digital Assets Framework Act (literal translation) will deal with matters pertaining to “non-security tokens,” while cryptoassets that are classified as securities will be subject to regulation under the terms of the existing Financial Investment Services and Capital Markets Act.
But Seoul wants to move in step with its international counterparts, particularly on the matter of stablecoin regulation. In particular, the FSS and other regulators have insisted that policy must be formed “in a manner that is consistent with overseas regulations.”
Lee Bok-hyeon, the head of the FSS, was quoted as stating that there was now a consensus among regulators and policymakers that “the regulation of stablecoins” needed to be “strengthened.”
But Lee claimed that talks “between global authorities” on “various issues” pertaining to cryptoassets were “ongoing.”
