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Per the New York Times, New York enacted a temporary ban on new cryptocurrency mining permits at fossil fuel plants, a move aimed at addressing the environmental concerns over the energy-intensive activity. The legislation signed by Gov. Kathy Hochul was the latest setback in a bruising financial month for cryptocurrencies.
According to Fast Company, In the past few years, cryptocurrencies and other “digital assets” have seen explosive growth, surpassing a $3 trillion market cap worldwide last November, up from $14 billion five years earlier. VCs have invested nearly $12.5 billion in cryptocurrency and blockchain companies globally in 2022 so far, outpacing last year’s total investment of $30.7 billion. And a Pew Research survey last November found that 16% of adult Americans (and about 30% of those between ages 18 and 29) have invested in, traded, or used cryptocurrencies.
The Blockchain Association spent some $225,000 on lobbying in Albany this year to try to defeat the bill Hochul just signed and promote alternative legislation. Members of the association also donated thousands of dollars to Hochul’s surprisingly tight campaign, which left some environmental advocates worried she might let the bill die. State legislators passed the bill back in June, and Hochul faced an end-of-the-year deadline to sign or veto it. New York state passed a Climate Act in 2019 to slash its greenhouse gas emissions by at least 85 percent by 2050.
New York’s Mining Moratorium will likely be mimicked across different states that have state legislatures controlled by progressive, environmentalist legislators. When deciding whether to mine Bitcoin, make sure to work with a provider that can explain their host jurisdiction’s regulatory stances on mining for cryptocurrency.
FTX, a popular cryptocurrency exchange, filed for bankruptcy protections earlier this month. Industry voices continue excoriating FTX CEO Sam Bankman-Fried, as the circumstances surrounding its collapse begin to smack of naked fraud. One of the most important lessons from FTX collapse is self-custody – the concept of holding your cryptocurrency portfolio in a digital wallet that you control. Prior to the FTX collapse, more and more retail investors had been making the move to self-custody. Per CoinTelegraph:
On-chain exchange flow data is showing a surge in withdrawals to self-custody wallets, according to analytics provider Glassnode. In a Nov. 13 post on Twitter, Glassnode reported that Bitcoin exchange outflows had hit near historic levels of 106,000 BTC per month.It added that this has happened only three other times — in April 2022 and November 2020, as well as in June/July 2022.
Thirty-seven states have addressed legislation regarding cryptocurrency, digital or virtual currencies and other digital assets in the 2022 legislative session. Examples of enacted legislation include:
As Blockchain and Cryptocurrency gain wider acceptance, and cross larger adoption rate thresholds, more legislatures will pass additional legislation regulating this growing industry.
SEC Chair Gary Gensler tweeted birthday wishes to the #Bitcoin White Paper today. “Happy 14th birthday to Satoshi Nakamoto’s whitepaper! It has led to innovation and crypto asset investing. Let’s make sure as crypto enters its 15th year that investors get proper protection.”
Gensler has been widely criticized in various circles within the cryptocurrency and blockchain communities for not appearing to have altruistic motives for the SEC’s recent enforcement actions. The SEC is perceived to be losing a battle with Ripple over whether XRP is a security. Additionally, groups like Coinbase, that once touted their partnership with the SEC, have withdrawn their support in the face of expanding enforcement actions.
Yet, for all the criticism heaped on Gensler, the SEC continues to agree that Bitcoin is not a security. Gensler has continued the policy position put in place by his predecessor. On Thursday, June 14, 2018, the SEC announced that the commission would not be treating Ether or Bitcoin as securities. That policy remains unchanged for Bitcoin. However, pending further developments in the Ripple case, and Ethereum’s transition to Proof of Stake Consensus, it could be subject to re-classification as a security by the SEC.
Bitcoin’s movements in relation to other assets may indicate that investors see it becoming a haven again, after a stretch where it’s traded basically as a risk asset, according to Bank of America Corp. The largest cryptocurrency has a 40-day correlation with gold of about 0.50, up from around zero in mid-August. While the correlations are higher with the S&P 500, at 0.69, and Nasdaq 100 at 0.72, they’ve flattened out and are below record levels from a few months ago. BofA digital strategists Alkesh Shah and Andrew Moss see that as a sign that things could be changing.
“A decelerating positive correlation with SPX/QQQ and a rapidly rising correlation with XAU indicate that investors may view Bitcoin as a relative safe haven as macro uncertainty continues and a market bottom remains to be seen,” the strategists wrote.
Bitcoin has traded in near lockstep with risk assets in the past couple of years, as pandemic-era stimulus flooded the global economy, and then as central banks like the Federal Reserve hiked rates to combat worsening inflation. That’s contradicted one of the main investment narratives put forward by crypto believers, which is that the asset with a fixed supply could serve as “digital gold,” a safe haven free from the influence of decisions by central banks and governments.
The BofA note dovetails with recent comments from the likes of Mike Novogratz, who said on Thursday that he sees Bitcoin as “the canary in the coal mine” alongside gold and expects it to rally before other tokens, as well as Lauren Goodwin from New York Life Investments, who has said that Bitcoin and gold could both be perceived as a central-bank hedge.
Senator Bill Hagerty (R-TN) introduced a bill in the US Senate (S.3970) called the Stablecoin Transparency Act; Representative Trey Hollingsworth (R-IN) also introduced a companion bill (H.R.7328) in the House. Senator Hagerty stated, “This legislation aims to provide much-needed clarity without giving the keys away to unaccountable bureaucrats who threaten to choke off innovation.” The aptly named “Stablecoin Transparency Act” would set standards for the “quality of assets held in reserves” as well as require Stablecoin issuers to report on their reserves.
“Importantly, the Stablecoin Transparency Act states a ‘fiat currency-backed Stablecoin’ as a digital asset that (1) maintains its price by backing the value of the digital asset to a nondigital currency that is denominated in the same currency as the digital asset; and (2) is redeemable on a one-to-one basis in the denominated currency backing the digital asset. The language of the statute mandates that both requirements are met to comply with the definition of fiat currency backed Stablecoin. In turn, the bill defines a “Stablecoin issuer” as “a person that issues a fiat currency backed Stablecoin.”
The Stablecoin Transparency Act also would regulate the quality of the assets that a Stablecoin issuer should have in its reserves. Specifically, the bill defines in mandatory language that each Stablecoin issuer shall hold all reserves associated with each fiat currency-backed Stablecoin in:
Finally, the Stablecoin Transparency Act would require a Stablecoin issuer to publish in its website a report on its reserves that back its Stablecoin. According to the bill, the Stablecoin issuer shall submit its first reserve report no later than 30 days after the date of enactment of the Act and every 30 days thereafter. The bill specifically mandates that the report must be audited by a third-party auditor.
The world's largest custodian bank and the oldest lender in the U.S., Bank of New York Mellon (BK), has added cryptocurrencies to its custody services, according to a press release on October 11, 2022.
To this point, traditional fund managers interested in holding digital assets – who otherwise rely on BNY Mellon (or other custodial lenders) to perform the necessary back-office tasks related to their usual securities holdings – typically would have had to find a firm specializing in cryptocurrency for custody services.
BNY Mellon currently has $43 trillion worth of assets under custody and another $2 trillion assets under management, according to its second-quarter earnings report. Acting as a custodian, the firm's primary business, usually involves providing less active allocation or financial advice. The bank formed its new digital assets unit last February, saying then that it would "accelerate development of enterprise solutions to service the rapidly evolving digital asset space."
A recent survey sponsored by BNY Mellon highlights already significant institutional demand for a resilient, scalable financial infrastructure built to accommodate both traditional and digital assets. According to the survey, almost all institutional investors (91%) are interested in investing in tokenized products. Additionally, 41% of institutional investors hold cryptocurrency in their portfolio today, with an additional 15% planning to hold digital assets in their portfolios within the next two to five years.
"As the world's largest custodian, BNY Mellon is the natural provider to create a safe and secure Digital Asset Custody Platform for institutional clients," said Caroline Butler, CEO of Custody Services at BNY Mellon. "We will continue to innovate, embrace new technology and work closely with clients to address their evolving needs."