News Updates September 21, 2022
1. Cryptos, Stocks Rally as Fed Raises Rates by 0.75% for Third Straight Month
Powell was guarded when asked about what might come in November — markets are still betting on a 75 bps increase at the next FOMC meeting.
Wednesday marks the Fed’s fifth consecutive rate hike, showing the days of easy money are long gone
Spending and production have shown modest growth, the Fed noted in its statement Wednesday
The Federal Reserve doubled down on its newfound quantitative tightening strategy Wednesday, bumping interest rates by three-quarters of a percentage point for the third straight time.
The US regulator cited slowing consumer spending and production levels. The move marks the central bank’s fifth consecutive rate increase, a strategy it hopes will curb the highest inflation the country has seen in more than four decades.
Overall economic activity appears to have slowed a bit, Fed officials wrote in a statement released at the end of their two-day policy meeting, pointing to reduced spending and business production statistics.
The unemployment rate remains low, the central bank noted in its statement, but considering maximum employment, its inflation goals remain unchanged: a rate of 2% over the longer run.
In June, when the central bank opted to raise rates 75 basis points for the first time, Fed Chair Jerome Powell called the move “unusually large,” but if current conditions persist, higher increases could become the norm.
Crypto markets reacted well to the news, which analysts say was mostly priced in. Bitcoin and ether gained 2.2% and 2.7%, respectively. The S&P 500 and tech-heavy Nasdaq initially fell on the news before rallying slightly back to the green.
2. India to Finalize Stance on Legality of Cryptocurrency by Q1 2023: Report
The Indian government is reportedly planning to finalize its stance on the legality of cryptocurrency by the first quarter of next year in order to become Financial Action Task Force (FATF) compliant. “We will finalize our responses by February-March 2023. We have to respond to the FATF by May,” a government official said.
*India Finalizing Crypto Stance*
The Indian government is finalizing its stance on the legality of cryptocurrency in order to submit its response to the Financial Action Task Force (FATF) for the country’s “mutual evaluation” by early.
“The Revenue Department has already sent their views and the Department of Economic Affairs has now been tasked to prepare a detailed response on India’s stance on the legality of cryptocurrency,” a government official was quoted as saying.
The FATF mutual evaluations are “in-depth country reports analyzing the implementation and effectiveness of measures to combat money laundering and terrorist financing,” its website details.
In addition, a Financial Stability Board (FSB) report is expected in October. It will help the Indian government decide whether to ban cryptocurrency transactions or provide a legal framework for dealing with crypto trade in India, Outlook India reported Monday, citing a senior government official.
We will take a view on whether to ban wallet transfers depending on what the report suggests. The legislation part is still being worked on. When we had taxed it (in Budget 2022), we had made it clear that legislation is still a work in progress. This report would help address the legislation aspect to a considerable extent,” the official additionally detailed.
India is currently not FATF-compliant on crypto assets since the global money laundering and terrorist financing watchdog requires countries to have a clear stance on the legality of crypto assets to be compliant.
Indian Finance Minister Nirmala Sitharaman recently chaired a meeting of the Financial Stability and Development Council (FSDC) where issues relating to crypto assets were discussed. The council stressed the urgent need for a clear consensus on the legality of cryptocurrencies.
The finance minister also recently had a meeting with the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, where she urged the IMF to take a lead role in regulating crypto assets.
3. Iran to Start Testing a Digital Rial This Week
The country's central bank published a draft document outlining goals and and opportunities for a digital currency in August.
The Central Bank of Iran will start a central bank digital currency (CBDC) pilot on Thursday, according to the news service of the country's Chamber of Commerce, Industries, Mines and Agriculture.
* In the report, the CBI was quoted saying the goal of the "crypto-rial" is to turn banknotes into programmable entities.
* The announcement comes after the bank published a draft document outlining the "goals, dimensions, threats and opportunities for the development" of a digital rial in August.
* In May 2021, former CBI Governor Abdolnaser Hemmati said the bank had already developed a "primary version" of a digital rial. The CBI's current head, Ali Salehabadi, said earlier this month that the bank had the necessary infrastructure and rules in place for a CBDC.
* Although the country's government views crypto as a means of circumventing strict U.S. sanctions – even placing a $10 million import order to be paid in crypto earlier this year – the CBI has revealed little about its work on a digital rial, or its function.
* The digital currency is not designed to compete with global cryptocurrencies like bitcoin, according to the report.
- The central bank did not immediately respond to requests for comment.
4. Digital Dollar Likely Won't Be Part of Retail Banking World, US Lawmaker Says
A U.S. central bank digital currency (CBDC) may be one step closer to reality after the White House published several reports analyzing the technical and policy aspects of a digital dollar last week. Congressman James Himes (D-Conn.) has been an outspoken advocate for a U.S. central bank digital currency, going so far as to publish a white paper on the issue in June 2022.
Himes, who chairs the House Financial Services Committee’s Subcommittee on National Security, International Development and Monetary Policy has also overseen a number of hearings on crypto assets and their role in national security and related issues.
The six-term Congressman spoke to CoinDesk after the White House, Treasury, Commerce and Justice Departments published half a dozen reports in response to U.S. President Joe Biden’s executive order on crypto on Sept. 16.
5. EU Finalizes Legal Text for Landmark Crypto Regulations Under MiCA
A leaked draft of the text, reviewed by CoinDesk, shows the rules could apply to fractionalized NFTs.
The European Union has finalized the full text of its landmark Markets in Crypto Assets legislation. Officially, the text is still open to comments, but sources briefed on the talks have told CoinDesk that it is, in practice, finalized.
A leaked draft of the bill dated Sept. 20 and verified by CoinDesk urges EU enforcers to take a “substance over form” approach to the law, meaning its provisions could even apply to some assets categorized as NFTs.
In principle, NFTs are excluded from the framework, which requires issuers of crypto assets to publish white papers containing technical roadmaps, for platforms to register with the authorities, and requires stablecoin issuers to hold capital and be prudently managed.
NFTs are typically designed to have a unique digital identifier that cannot be copied, interchanged or subdivided, but the rise of fractionalized assets – where a set of fungible tokens are issued to represent one NFT – have been drawing some attention from regulators as they could resemble traditional securities.
While the leaked draft – thrashed out in a series of technical meetings following a June 30 deal – shows MiCA doesn’t apply to NFTs that are genuinely unique and incapable of being traded with each other, “the issuance of crypto-assets as non-fungible tokens in a large series or collection should be considered as an indicator of their fungibility,” the final compromise text says in a Recital, even if the issuer gave it a unique identifier.
A Recital is a text which introduces an EU law and sets out its motivation. Though not – unlike the substantive articles of the regulation – legally binding, a recital can be used by supervisors and courts when interpreting the scope of the legislation.
The details of the provision have caused concern within the industry. The exact drafting used could determine whether in practice the regulation covers the bulk of the NFT market – such as similar, but distinct Bored Apes, implying issuers and trading platforms would be caught by its strictures.
When considering whether to regulate a particular asset, national and EU regulators “should adopt a substance over form approach under which the features of the asset in question should determine the qualification, not its designation by the users,” the text added.
6. Jerome Powell is prolonging our economic agony
Jerome Powell is lengthening economic pain by refusing to raise interest rates at the necessary pace. It’s time to rip off the band-aid.
Can we all agree that the Federal Reserve has a plan to combat runaway inflation? They do. Chair Jerome Powell has all but admitted it. After tempering his comments before previous rate hikes, allowing wiggle room which gave way to market rebounds, Powell has left no bones about this one. It is necessary to wreak some havoc on the economy and put downward pressure on the labor markets and wage increases to stop the creep of inflation. Whether you buy into that logic or if you believe — like Elon Musk — that such movements could result in deflation — doesn’t matter.
All that matters is what those voting on the rate hikes believe, and there’s plenty of evidence that they won’t stop until the rate is over 4%. Wednesday’s rate increase of 75 basis points only moves us in that direction. This is the third such adjustment of 75 basis points, and we’ve been all but told that it wouldn’t be the last. While these rate hikes have been historical, they prolong the economic pain associated with them. It's time for the Fed to be brutally honest about where the economy is and where it is heading.
Jerome Powell has said that he aims to give the economy a soft landing. However, he’s also said, “Our responsibility to deliver price stability is unconditional.”
Except that the soft landing he’d like to attain is something from a science fiction novel. It is something that those following the situation don’t believe. Former Federal Reserve Bank of New York President William Dudley admitted as much, saying, “They’re going to try to avoid recession. They’re going to try to achieve a soft landing. The problem is that the room to do that is virtually non-existent at this point.”
7. Bitcoin mining stock report: Wednesday, September 21.
A majority of mining companies trended upward Wednesday, although nearly just as many traded lower.
Bitcoin's price reached $22,500 earlier in the day but sunk below $19,000 after the news that the U.S. Federal Reserve increased interest rates by 75 basis points.
8. Bitcoin Reacts To 75 Basis Point Fed Rate Hike | BTCUSD September 21, 2022.
In this episode of NewsBTC’s daily technical analysis videos, we look at the volatility in Bitcoin price action following the FOMC meeting today where the Federal Reserve announced a 75 bps rate increase.
Bitcoin price action has been ultra volatile before and after the United States Federal Reserve announced its decision to increase rates by 75 basis points. Although the market had been considering as much as a 100 basis points increase from the increasingly hawkish Fed, the central bank ultimately chose a slightly softer touch.
Fed Chair Jerome Powell expects rate increase to continue well into next year, with inflation not returning to the normal 2% rate until at least 2025.
Crypto Market Gets Volatile Before & After Fed Rate Hike Decision
To demonstrate the incredibly powerful volatile proper to the announcement, Bitcoin plunged by 6% in only one minute of trading. Less than an hour later, the top cryptocurrency retraced almost the entire move, yet is now struggling to keep its head above $19,000 support.
Not just Bitcoin, but anything that trades against the dollar moved in a similar manner.
9. South Korean Police Swoop on 25 Suspected Kimchi Premium BTC Traders
South Korean law enforcers continue to crack down on illegal kimchi premium traders – and have arrested 25 suspected traders who they think ran an illegal international bitcoin (BTC) trading ring.
KBS and Newsis reported that the South Jeolla Province branch of the National Police Agency’s Security Investigation Division says the trading ring processed some $72,000 worth of illegal transactions through South Korean crypto exchanges in 2021.
The division announced that 10 of the individuals it had arrested were South Koreans, nine were Vietnamese citizens, and a further six were Vietnamese individuals who had received South Korean citizenship.
The kimchi premium is a phenomenon whereby, during crypto bull markets, bitcoin trading volumes rise higher in South Korea than in other parts of the world. This spike in demand drives up BTC prices on South Korean exchanges – up to 30% and above on some occasions. Some traders have sought to use this to their own advantage, by buying coins from over-the-counter (OTC) traders elsewhere in Asia and then dumping BTC on domestic exchanges.
This contravenes South Korea’s strict laws on foreign exchange transactions, and traders have often attempted to cover their tracks by selling their BTC for fiat and transferring their funds abroad. In many cases, customs officials have found, traders have sought to buy precious metals and semiconductors with their profits.
The division said that it was working to investigate possible links to OTC traders based in Vietnam and claimed that the group may have been most active in April, May, and June last year – a time when BTC market prices in South Korea were around 10% higher those that in Vietnam.
Officers stated that they were investigating the roles of 33 other individuals they think may have links to the group and did not rule out the possibility of making further arrests.
Customs officers in Seoul made 16 arrests as part of a similar investigation earlier this year, while a number of domestic banks could also find themselves on the hook with prosecutors and regulators conducting their own probes into kimchi premium-related matters.
