CoinDesk Crypto

Prevailing doubts over whether the Fed has what it takes to hit its 2% inflation target hit traditional markets and may have contributed to a bitcoin price drop early on Thursday.

• CoinDesk data shows bitcoin’s price fell to just under $10,900 in the Asian trading hours – not long after it had climbed to near $11,100.
• The drop is bitcoin’s latest failure around the key psychological hurdle and could be the result of prevailing doubts over the Fed’s ability to hit the 2% inflation target.
• At the Federal Open Market Committee (FOMC) Wednesday, Fed chair Jay Powell said the U.S. central bank would keep interest rates at rock bottom until 2023 when it expects to hit its 2% inflation target.
• It follows Powell’s announcement last month that the Fed would tolerate inflation above the 2% target to compensate for the drop in consumer prices earlier in the year.
• The prospect of high inflation is generally considered good for bitcoin and the price instantly ticked up above the $11,000 mark following the FOMC announcement.

• But some market observers are now concerned whether the Fed has what it takes to reach 2% inflation.
• Speaking to the Financial Times, John O’Connell, a portfolio manager at Garda Capital, said the Fed hadn’t been able to create inflation consistently for a very long time and still had much to prove.
• Indeed, the Fed announcement was met with general uneasiness across the market. The S&P 500 slumped 0.46% and the Nasdaq fell a further 1%, while both bond yields and the U.S. dollar strengthened slightly.
• Similarly, an announcement from the Bank of Japan to keep rates unchanged this morning led to the Nikkei dropping 0.67% in the Asia trading day.
• The Bank of England has also just announced that it will keep rates unchanged at 0.1%.
• While there’s a case for bitcoin benefiting in a deflationary environment, it nonetheless goes against the prevailing narrative that the original cryptocurrency’s fixed supply makes it an ideal hedge against the deleterious effects of a runaway money supply.
• Analysts have previously warned that bitcoin prices remain vulnerable to sell-offs in stocks.
• Bitcoin was trading at $10,890 at press time, little changed over 24 hours.

See also: First Mover: As Central Banks Print $1.4B an Hour, Bitcoiners Bet on Federal Reserve ‘Capture’

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ParaSwap, a decentralized exchange (DEX) aggregator, has completed a $2.7 million seed funding round joined by some of the industry’s top investors.

• France-based ParaSwap hopes its API will become the connective tissue between various decentralized finance (DeFi) applications, founder Mounir Benchemled told CoinDesk via email.
• “The API does not only allow access to DEXs but also to other DeFi services such as Aave and Compound,” Benchemled said.
• According to a press release Thursday, ParaSwap raised the seed funding from a total of 32 investors including Blockchain Capital, Alameda Research, Arrington XRP Capital, Coinfund, CoinGecko, Aave founder Stani Kulechov and others.
• While ParaSwap was started as DEX aggregator, Benchemled said the firm shifted focus in late 2019 to fine-tuning its API and making the platform an easy-to-use entry point for DeFi applications, traders and wallets.
• “Our next steps are growing the team and scaling ParaSwap’s infrastructure so that we can support our next business challenges,” he said in the release.

Read more: DEX Aggregator 1inch Raises $2.8M From Binance Labs, Galaxy Digital and More

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The Libra Association, the organisation developing the Facebook-led cryptocurrency payments project, has hired a banking heavyweight to help drive the initiative forward.

• The Geneva, Switzerland-based organisation announced Thursday that former HSBC executive James Emmett will take on the role of managing director of Libra Networks LLC, the operating company subsidiary of the Libra Association.
• Taking up his new position on Oct. 1, Emmett will “help make Libra’s vision a reality,” said the association’s CEO, Stuart Levey.
• Emmett brings with him 25 years of experience at HSBC, where has was previously CEO of HSBC Bank PLC and Europe.
• Before that he was chief operating officer at the bank, where he guided technology and operations.
• Talking of his new role, Emmett said: ” I am delighted to be joining Libra Networks with a mission to enhance financial innovation and inclusion and to deliver the operationalization of the network.”
• The Libra project is forging on with its plans, despite having had strident pushback from regulators and politicians over its potential affects on financial stability and monetary sovereignty.
• In effect, some fear that a digital payments system pushed over Facebook’s network of billions of global users could lessen the influence of fiat currencies and the powers that control them.
• Libra was said to have abandoned plans for its stablecoin to be backed by a basket of major fiat currencies, though that was disputed by its policy director in July.
• To help smooth its path with the world’s watchdogs, Libra has been hiring legal experts with connections to government such as the former general counsel of the U.S. Department of Homeland Security and a former aide to a U.S. senator.
• Meanwhile, the EU may bring in regulation that would set stringent standards for “global stablecoins,” the apparent regulators’ code term for Libra.

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A mobile bitcoin options trading platform set to launch this year has secured funding from some of the industry’s top-tier investors.

• PowerTrade raised $4.7 million via token sales in a round led by Pantera Capital and joined by Framework Ventures, CMS Holdings and QCP Capital among others.
• Prominent founders Kain Warwick of Synthetix, Loi Luu of Kyber Network and Bobby Ong of CoinGecko also participated.
• PowerTrade said in a press release it will offer low minimum deposits allowing traders access to crypto options for as little as $1.
• Making options trading easy to understand is “key” to furthering crypto adoption from retail investors, said Joey Krug, Pantera Capital’s co-chief investment officer.
• Krug attributed Robinhood’s success to its ease of use and said PowerTrade could bring a “similar user experience” to the cryptocurrency market.
• The platform, which will launch to non-U.S. traders first, will focus on user experience and education, while helping traders understand and manage risk, it said.
• PowerTrade was founded by the former CTO of the Liquid exchange, Mario Gomez Lozada, alongside a team of technologists and cryptocurrency veterans in May.
• The app will enter closed beta in October and see its public release Q4 2020.

See also: Pantera Tells SEC Its Crypto Fund Has Raised Nearly $165M

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Most projects wait months, years even, for a Coinbase listing, but DeFi protocol Uniswap has had its new UNI token added to the exchange’s Pro trading platform just hours after launching.

• Coinbase announced Thursday morning that it would begin accepting UNI deposits immediately, with trading beginning as soon as there’s sufficient liquidity.
• UNI will be tradable against the U.S. dollar in all Coinbase’s covered jurisdictions except New York.
• Coinbase has not yet said whether UNI will be made available on its retail-orientated platform.
• Launched in 2018, Uniswap is one of the pioneers of a new type of trading platform that uses smart contract-based liquidity pools to spot prices and facilitate trades, also known as “swaps.”
• Called an automated market maker (AMM) protocol – users become liquidity providers on Uniswap by depositing digital assets into the pools, receiving interest, and a cut of transaction fees in return.
• Coinbase, on the other hand, uses the more traditional order book format – where a user’s trade is matched up against a list, or book, of buys and sells, and executed at the best available price.
• Uniswap announced late last night that it would issue a billion UNI tokens to founders, team members and the community over the next four years.
• Per a release, the token will be used to power on-chain governance decisions.
• A governance token that gives users a role in running the protocol might be a move to prevent a flow of tokens and liquidity going to rival SushiSwap.
• Approximately $830 million-worth of crypto moved over to SushiSwap last week.
• Out of the two AMM exchanges, SushiSwap is generally considered to be more decentralized.

See also: Coinbase Effect Hits DeFi as yEarn’s YFI Token Surges 10% on Pro Listing News

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The Gibraltar Financial Services Commission (GFSC) has updated its guidance notes for distributed ledger technology (DLT) providers, the regulator announced Thursday. The amended guidance now includes clarity on token issuances and recommendations for risk management. 

• The GFSC has made considerable updates to seven out of the nine guiding principles on which the regulatory framework, launched in 2018, was set up.
• According to the announcement, the changes reflect the “natural evolution of the defined regulatory principles” to include new developments in the space.
• The updates include a risk framework to distinguish between virtual assets and virtual asset denominated instruments that are arguably higher risk, the announcement said.
• The guidance on tokens specifies that following a public token offering, DLT providers will not be allowed to use reserves of internally generated tokens as part of its regulatory capital requirement, and includes a section detailing risks associated with stablecoins.
• The new updates are part of an ongoing effort to adapt its regulatory framework to include the latest Financial Action Task Force (FATF) recommendations for virtual asset service providers.
• The European Union has criticized Gibraltar’s efforts to stem money laundering in the past, mentioning its DLT rules in the process.
• Currently, 13 DLT providers are licensed under the Gibraltar regulator, including international platforms like eToro, Xapo and Bitso.

Also read: Leaked EU Draft Proposes All-Encompassing Laws for Crypto Assets

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The number of pending transactions on Ethereum per minute has jumped 30% after the claim for Uniswap’s UNI token begins.

The decentralized trading platform announced around 00:30 UTC time Thursday that it has launched its governance token dubbed UNI with 1 billion coins that will be released over the next four years.

While the liquidity mining for the governance token will not start until Friday, Uniswap said historical users and liquidity providers on the platform are now able to claim for 400 UNI per each address.

Related: Uniswap Launches Governance Token in Bid to Keep Up With Rival AMM SushiSwap

“15% of UNI [150,000,000 UNI] can immediately be claimed by historical liquidity providers, users, and SOCKS redeemers/holders based on a snapshot ending Sept. 1, 2020, at 12:00 am UTC,” Uniswap said in the blog post.

Following the announcement, the number of pending transactions on the Ethereum network per minute has jumped from around 160,000 to over 210,000 as of writing, according to data on blockchain explorer Etherscan.

Within three hours after the claim started, over 18,000 transactions were sent to the smart contract address of the UNI governance token, with more than 5,000 of them pending at the time. The total number of transactions has now reached over 26,000 while the pending ones have dropped to around 3,700 as of writing.

The increasing number of transactions sent to the UNI smart contract appears to have led to a surge of the gas fee on the Ethereum network, which Uniswap’s protocol is built on.

Related: Ava Labs Sets Avalanche Mainnet Launch for Sept. 21

The current average gas fee on Ethereum has reached 650 Gwei, compared to the average 152 Gwei on Wednesday UTC time, based on Etherscan’s data.

In fact, the UNI token’s smart contract address is now ranking the 3rd in terms of the overall transaction fees in the past three hours, with a total of 534 ETH worth over $200,000 as of writing, according to Etherscan.

Even the site traffic on the blockchain explorer has reached a peak. “The last time etherscan site traffic peak to the current level was during the 2017-2018 ICO mania. Kudos to Uniswap for the successful launch of the UNI token,” said Etherscan’s founder and CEO Matthew Tan in a tweet.

Within hours of Uniswap’s announcement, major centralized exchanges including Binance, Huobi and OKEx have all listed trading pairs for the governance token, which is now changing hands at around $2.9.

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China’s state-sanctioned blockchain infrastructure project is finally bringing public chains to its Chinese users – but with a significant twist. 

The Blockchain-Based Service Network (BSN), a standardized internet services provider for decentralized applications (dapp) developers, plans to make 24 public chains available in its network for Chinese users starting from the second half of November, according to an internal memo obtained by CoinDesk. 

Developers can use the technical frameworks behind these public chains to build and run dapps that serve a range of purposes such as financing platforms for small and medium enterprises, source tracking for food companies and record-keeping for banks, law firms or government agencies. 

Related: US Charges 3 With Vast ‘Crypto Jacking’ Computer Fraud Scheme

These public chains will look quite different after being “localized” for the Chinese market, however. The network will make the decentralized public chains permissioned and replace their tokens with direct payment by the Chinese currency renminbi to cover transaction fees on these chains.  

This is part of a much larger story. The Chinese government is an active supporter of blockchain technology – but only on its own terms. Authorities would like to reap the benefits of blockchain tech’s traceability and efficiency, but without the decentralization embraced by public chains like Bitcoin and Ethereum. 

BSN’s latest move came one month after the network integrated six major public chains into the global version of its network. This was so that developers outside China could use a standardized development environment to build and run decentralized applications on these public chains. Unlike in the localized version, public decentralized chains are allowed in the global version of BSN. 

“There have been few effective ways for public chains to enter the Chinese market and scale up due to legal and regulatory requirements and how these projects position themselves,” the memo, translated by Coindesk from the original Chinese, said of this latest development. 

Related: ‘Sharing Economy’ Startup ShareRing Tapped for China’s Blockchain Service Network

“The public decentralized chains will become public permissioned consortium chains, which can be supervised by regulators, and that is currently the most direct and effective way for the projects to be compliant and reach domestic users within China.” 

Read more: China Aims to Be the World’s Dominant Blockchain Power – With Help From Google, Amazon and Microsoft

These new permissioned chains will look very different from the original versions. To make public decentralized chains, such as Ethereum, permissioned, BSN will only allow its designated operators to build and operate nodes, where dapps verify on-chain transactions and store data. The network will block all peer-to-peer fee transactions and require its users to use renminbi instead of Ethereum “gas”  to cover fees for building and running dapps on chain. 

“BSN has made it technically impossible to do any virtual currency transactions on the public chains,” the memo said. “BSN strictly follows related laws and regulations and will remove any chain that violates them from the network.”

BSN aims to complete all 24 public chains’ integration with the domestic version of the network during the first quarter of 2021 and enable these chains to share data with each other in the first half of the same year. 

The networkhas formed Public Permissioned Blockchain, a consortium to govern the services on adapted public chains. Huobi Group, as the only named member of the consortium in the memo, will be in charge of transaction settlement and clearing, marketing for the new services and operating the official portal. 

An unnamed cloud services provider will offer the adapted public chains data storage and other basic internet resources. One of BSN’s backers is Chinese tech conglomerate China Mobile, which has an extensive network of data centers across the country. BSN has also worked with the Chinese branch of Amazon Web Service to provide Internet services for dapps. 

BSN is backed by the State Information Center of China, a think tank under the National Development and Reform Commission (NDRC), the highest economic planning agency. BSN will be responsible for compliance with Chinese regulators and adapting the public chains’ technical framework into the network.  

While the memo does not disclose any names of these 24 public chains, BSN has already integrated major international projects including Tezos, Ethereum and Cosmos’ IrisNet. 

“The 24 public chains are highly reputable in the global blockchain community, however, we will not use their original names when they go live on BSN,” the memo said. The chains will be renamed based on 24 Chinese solar terms, a traditional agricultural calendar that informs farmers of seasonal changes. 

For example, one of the 24 solar terms is First Frost, which indicates the weather is getting colder and water droplets are starting to freeze. Insect Awakening means it is getting warmer and insects that hibernate underground are about to wake up and go outside. 

The forbidden fruit

Public decentralized blockchains have been under heavy scrutiny from the Chinese government since 2017, when China cracked down on initial coin offerings and local exchanges. ICO projects were hard to supervise because of their decentralized nature, and authorities feared that wild token speculation could undermine China’s financial stability. 

The tokens from public chain projects are a threat to China’s long-standing capital control and monetary sovereignty of the Chinese currency.

For example, tether, an Ethereum-based token pegged to the U.S. dollar, has become one of the most popular ways for cross-border transactions between Asia and the rest of the world. Authorities may also fear tokens could threaten the use of the renminbi and that would jeopardize monetary policies relying on the control of supply and demand of the Chinese currency.

Read more: China’s Blockchain Infrastructure to Extend Global Reach With Six Public Chains

In part to pre-empt the rise of tokens such as bitcoin, the Chinese central bank invented its own national virtual currency, Digital Currency Electronic Payment (DCEP) or the digital yuan. 

Another reason why China is critical of public decentralized chain projects is the potential for scams, such as Ponzi and pump-and-dump schemes offered as initial coin offerings (ICO) that mushroomed during and after the 2017 ICO boom. In September 2017, the Chinese central bank made any centralized ICO fundraising illegal.  

The People’s Bank of China also carried out a slew of crackdowns on centralized crypto exchanges and fiat-crypto trading, and prohibited any Chinese bank from processing crypto-related transactions.

Inspired by AntChain

AntChain, a permissioned enterprise blockchain developed by Ant Financial, a subsidiary of Chinese tech giant Alibaba, has been one of the inspirations for BSN to launch the Public Permissioned Blockchain consortium, according to the memo. 

“It was a milestone when the company launched Ant Blockchain Open Alliance, a consortium that governs its blockchain-based platform lowering the cost for small and medium enterprises to use blockchain technology,” the memo said. “Technically speaking, it is a public permissioned chain with a few authorized nodes.” 

Read more: China’s Blockchain Infrastructure Launches Website for Global Devs

One of the main missions for Ant Financial is to provide small and medium enterprises with a more accessible financing platform based on its public permissioned blockchain technology. The company could also leverage the large client base of Alibaba’s other subsidiaries, such as Ali Cloud for internet and data services and the digital payment company Ant Financial for any financial transactions in its app. 

Ant Financial claims its users had been uploading an average of $100 million in digital assets, including copyright and property ownership certificates as well as transaction records, to its blockchain in July. Chinese shipping giant Cosco said it was trialing AntChain for tamper-free documentation including container records and import licenses. 

The company aims to go public on the Shanghai and Hong Kong stock exchanges at a valuation of $200 billion. If the deal follows through, it will be arguably the largest company that operates its own enterprise blockchain. 

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Decentralized trading platform Uniswap has launched a governance token, UNI, minting 1 billion coins to be released to the public over the next four years.

• Announced Wednesday night, the new token will be allocated to Uniswap community members (60% of all tokens), team members/future employees (21.51%), investors (17.8%) and advisors (0.69%).
• “UNI officially enshrines Uniswap as publicly-owned and self-sustainable infrastructure while continuing to carefully protect its indestructible and autonomous qualities,” the firm wrote.
• The move comes just a week after Uniswap competitor SushiSwap migrated over $800 million in crypto assets from its rival. Of the two automated market makers (AMMs), the newer SushiSwap had been cast as the more “decentralized” of the pair.
• SushiSwap launched with a token to enable liquidity mining, and incentivized users to load up on assets prior to the migration to maximize their potential rewards when SushiSwap went fully live.
• Uniswap will launch a liquidity mining program on Sept. 18, targeting its USDT, USDC, DAI and wBTC pools.
• While the blog post said Uniswap “team members will not participate directly in governance for the foreseeable future,” it noted that team members could delegate votes to protocol delegates, and all UNI holders will have ownership of the governance process. Tokens dedicated to employees, investors and advisors have a four-year vesting schedule.
• “A community-managed treasury opens up a world of infinite possibilities,” the blog post said.

Read more: SushiSwap Will Withdraw Up to $830M From Uniswap Today: Why It Matters for DeFi

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New investors are entering the bitcoin market at a faster pace and possibly creating upward pressure on prices, on-chain data shows. 

• The number of “young investment” wallets (those that are one to three months old and rarely send bitcoins) has jumped to 2,25,467 this month, the highest level since February 2018, according to data provided by the blockchain analysts firm Chainalysis. That’s double from 1,162,632 six months ago.
• The growth curve was much flatter in the first two months of the year but went near-parabolic following bitcoin’s March crash. 
• “It looks like new people are entering the market, buying bitcoin and putting it in wallets for long-term investment,” Chainalysis’ economist Philip Gradwell told CoinDesk. 
• Investors took advantage of the 40% price drop to levels below $4,000 observed on March 12 and have continued to pour money into the top cryptocurrency ever since.
• “Overall, the data suggests that buying pressure for bitcoin is increasing, and the supply available to buy is reducing as new purchases likely get locked up for the long term,” Gradwell said. 
• Bitcoin is trading near $10,900 at press time, representing a 52% gain on a year-to-date basis, but still down 83% from the record high of $20,000. 
• The number of young wallets surged from 791,289 to 2,000,000 in the second half of 2017 as bitcoin rallied by $2,000 to $20,000. The investor interest remained strong even as prices fell back sharply to $6,000 in February 2018. 

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Bitcoin’s price continues to move up, with a little help from the U.S. Federal Reserve, while ether traders are hedging in the options market.

• Bitcoin (BTC) trading around $10,979 as of 20:00 UTC (4 p.m. ET). Gaining 2% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,662-$11,099
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin hit as high as $11,099 on exchanges such as Coinbase Wednesday after the U.S. Federal Reserve announced it was keeping interest rates near zero until maximum employment is achieved. The price lost steam to $10,979 as of press time, however.

Read More: Federal Reserve Now Targets Inflation Above 2%, Bitcoin Breaks $11K

Related: Bitcoin ‘Young Investment’ Wallets at Highest Level Since February 2018

“Buyers have already reached $11,000 per BTC. We expect an increase to $11,200, and then a test of $11,500,” said Constantine Kogan, partner at crypto fund of funds BitBull Capital. 

Read More: This Crypto Startup Takes Bitcoin Advocacy to a Whole New Level

At least one stakeholder remains wary until there is more buying volume in the bitcoin market, however. “Personally I think we need to see sizable purchase volume above $12,000 to really get this moving, otherwise I would tend to expect some more consolidation over the next few weeks,” said Neil Van Huis, director of institutional trading at liquidity provider Blockfills. The last time bitcoin hit $12,000 was back on Sept. 1.

Bitcoin mining could play a role in near-term market movements, added Van Huis. “If BTC prices are higher, miners may look to capitalize on it by selling to raise cash,” he said. The mining difficulty adjustment, expected on Sept. 19, is anticipated to trend higher since hashpower has been hitting record highs this week. That means older mining machines will be replaced with newer models in order for some operations to compete.

Related: Federal Reserve Now Targets Inflation Above 2%, Bitcoin Breaks $11K

“Miners would essentially be speculating on whether it would be more profitable to just let their bitcoin holdings ride because they can’t get access to equipment, or sell BTC to raise cash for equipment to mine more efficiently going forward,” added Van Huis. 

Italian over-the-counter trader Alessandro Andreotti pointed to the amount of bitcoin locked in decentralized finance, which crossed the 100,000 BTC mark this week, as a bullish sign for the world’s oldest cryptocurrency. “I think it is a great milestone for decentralized finance as a whole, showing how much potential it has and how many investors believe in it,” Andreotti said. “These are exciting times.” 

Read More: Bakkt Bitcoin Futures Daily Trading Volume Hits Record High

Ether options bet below $400

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Wednesday trading around $365 and climbing 0.28% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

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Ether options traders remain biased toward spot prices below $400. While 36% expect ether to be over $380, only 22% of options bets expect ether over $400 next week at the Sept. 25 expiration.

William Purdy, an options trader and founder of analysis firm PurdyAlerts, said that ether’s implied volatility, the forecast of its price movements, has been higher than realized volatility, a measure of price movements from past behavior, since July. As option prices are based on implied volatility, he sees an opportunity in shorting ether options.

“The implied volatility is priced at a premium to historical volatility as ether investors are looking for downside price protection from future unfortunate events,” said Purdy. “This protection cost is often overestimated by the market and can be taken advantage of by selling options.”

Other markets

Digital assets on the CoinDesk 20 are mixed, mostly in the red Wednesday. Notable winners as of 20:00 UTC (4:00 p.m. ET):

• basic attention token (BAT) + 3.7%
• stellar (XLM) + 1.5%
• dogecoin (DOGE) + 0.73%

Read More: Ava Labs Sets Avalanche Mainnet Launch for Sept. 21

Notable losers as of 20:00 UTC (4:00 p.m. ET):

• tron (TRX) – 6.8%
• nem (XEM) – 5.6%
• chainlink (LINK) – 4%

Read More: Polkadot Projects Will Be Able to Mint Their Own Tokens in 2021

Equities:

• Asia’s Nikkei 225 ended the day flat, in the green 0.09% as investors mostly sat on the sidelines ahead of the U.S. Fed’s monthly meeting.
• Europe’s FTSE 100 closed in the red 0.44% as concerns about coronavirus and concern about the looming Federal Reserve announcement dragged on the index.
• The United States’ S&P 500 slipped 0.46% as major tech companies dropped, including Facebook falling 3.3% and Apple dipping 2.5%.

Read More: Diginex Moves Closer to Backdoor Nasdaq Listing With Merger Approval

Commodities:

• Oil is up 4.4%. Price per barrel of West Texas Intermediate crude: $40.09
• Gold was in the green 0.27% and at $1,958 as of press time.

Read More: Kraken Becomes First Crypto Exchange to Become a US Bank

Treasurys:

• U.S. Treasury bond yields were mixed Wednesday. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 8%.

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Federal Reserve officials said Wednesday they would hold U.S. interest rates at close to zero and work to push inflation above 2% “for some time.”

• Federal Open Market Committee keeps interest rates unchanged close to zero, according to its statement.
• Panel agrees to maintain accommodative monetary policy until inflation climbs above 2% “for some time.”
• The central bank will increase holdings of U.S. Treasury securities and mortgage-backed securities “at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions.”
• Projection materials released with the statement show officials, on average, expect rates to remain close to zero through 2023.
• On average, officials don’t expect 2% inflation until 2023.
• Robert Kaplan, president of the Federal Reserve Bank of Dallas and a voting member of the panel, voted against the plan. He “prefers that the Committee retain greater policy rate flexibility.”
• Neal Kashkari, president of the Federal Reserve Bank of Minneapolis, also cast a dissenting vote. He prefers that interest rates stay on hold “until core inflation has reached 2% on a sustained basis,” according to the statement.
• Economists weren't expecting Fed officials to make any changes to U.S. interest rates – which in March were cut close to zero on an emergency basis – as the devastating economic toll of the coronavirus started to become clear.
• Last month, Fed Chair Jerome Powell said in a speech that officials plan to let inflation rise above 2% and stay there for a while to keep borrowing conditions easy for a longer time and allow the economy to heal.
• “The Fed kind of kicked the door open at their last meeting by indicating a more aggressive approach to inflation,” Mati Greenspan, founder of the cryptocurrency and foreign-exchange firm Quantum Economics, told subscribers in an email on Tuesday, a day before the Fed announcement. “Of course, now that they have everyone’s attention, followup will be critical.”
• Bitcoin’s price was trading at around $11,022.90 at press time, up 2.4% in the past 24 hours. The price moved temporarily to $11,071.33 right after the Fed’s release.
• The S&P 500 Index was up 0.35%.

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• This Crypto Startup Takes Bitcoin Advocacy to a Whole New Level

Amid the market shocks of March, users quickly transitioned from “the long game of lending and borrowing” on decentralized applications, instead flocking to safe-haven assets such as stablecoins.

Discreet Log Contracts (DLCs), a wide-reaching application of blockchain technology, has seen its first incorporation onto the main Bitcoin blockchain, opening the gateway for Bitcoin users to access this technology without relying on any other chains or third-party applications.

The U.S. Treasury Department has slapped sanctions on a pair of Russian nationals accused of stealing $16.8 million from customers of three different crypto exchanges, including two in the U.S.

• According to a U.S. Department of the Treasury press release, Danil Potekhin and Dmitrii Karasavidi impersonated the exchanges using fake websites imitating legitimate exchange portals to obtain customer login information.
• The exchanges were not named by the Treasury Dept.
• This information was used to access the customers’ accounts and steal their crypto, the Treasury statement said.
• The defendants allegedly laundered the funds using fake profiles on different exchanges.
• The exchanges were not identified.
• The U.S. Secret Service seized “millions of dollars in virtual currency,” according to the statement.
• Bitcoin, ether, monero, litecoin, zcash, dash, bitcoin gold and ethereum classic were all included in the list of sanctioned addresses.
• Cryptocurrency exchanges are frequent targets for malicious actors in the space, who typically hope the pseudonymous properties of the technology will allow them to better hide their proceeds even though the immutable ledger records all transactions.

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Jewel, which is awaiting regulatory approval to open a bank in Bermuda, is partnering with digital asset custody firm Anchorage.

• The idea, according to a press statement released Wednesday, is for Anchorage to provide crypto custody services for Jewel, which is applying for a full bank license from the Bermuda Monetary Authority. 
• Jewel also wants to be able to use the partnership to provide lines of credit to cryptocurrency-related businesses backed by their deposited digital assets. 
• “Our relationship with Anchorage enables us to serve our clients with the rigorous security and product standards needed for bank-level safety, service and compliance,” said Chance Barnett, Jewel’s founder and chairman.

Read more: Crypto Custodian Anchorage Teases Growth Plan With 2 Executive Hires

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U.S. prosecutors charged three Chinese nationals with allegedly mounting a global hacking campaign to steal sensitive corporate data from over 100 companies and installing a mass network of crypto-mining malware.

According to an indictment dated May 2019 and unsealed Wednesday, Jiang Lizhi, Qian Chuan and Fu Qiang ran their multi-year front out of the purportedly “white hat” Chinese cybersecurity firm Chengdu 404 Network Technology Co. They’re being charged with money laundering, conspiracy, identity theft and a raft of computer-related allegations, based on allegations they operated a vast crypto-jacking scheme and installed malware on victim computers, among other charges.

Chengdu 404’s “offensive” operations are what raised prosecutors’ ire. Their indictment outlines how Chengdu 404’s chief officers targeted at least 100 “victim companies, organizations and individuals” with a multi-year cyber scheme that employed “big data” analytics to maximize its impact. 

Related: ‘Sharing Economy’ Startup ShareRing Tapped for China’s Blockchain Service Network

Beginning in May 2014, the trio “conspired to commit a sprawling array of computer intrusions targeting protected computers belonging to hospitality, video game, technology and telecommunications companies, research universities, non-governmental organizations, and other organizations around the world,” according to the indictment.

They allegedly stole source code and customer data from the companies, deployed “supply chain hacks” to knock out customers’ own computers like dominoes, infected networks with ransomware and installed cryptocurrency mining malware to bolster Chengdu 404’s bottom line.  

“The underlying common goal of the conspiracy was to obtain commercial success for CHENGDU 404 – and personal financial gain for members of the conspiracy – through computer intrusions targeting protected computers,” the indictment read.

The alleged perpetrators brought a hands-on approach to their crypto-jacking operations. As alleged in court filings, Jiang, the vice president for the Technical Department of Chengdu 404, told an unnamed fourth hacker to “get more domains to increase the computing power” of a Singaporean target. “Let’s see how the profit is if we get a total of around 10,000 machines.”

Related: Jihan Wu Regains Upper Hand in Bitmain Co-Founder Fight

Jiang allegedly advised the same hacker to sniff out French and Italian companies as potential targets, saying, “The only thing is that the time difference is a bit troublesome. Going on [ECS #1] at night happens to be their work hours.”

The indictment did not state which cryptocurrencies the defendants tried to mine.

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A slew of regulatory happenings are in the works. First, the Bahamian central bank plans to issue the first CBDC this October while the Indian legislative body is considering a ban on crypto trading. 

Further, the latest SEC injunction into an allegedly unregistered token sale could set a grave precedent, argues Commissioner Hester “Crypto Mom” Peirce.

Top shelf

CBDC first
The Central Bank of the Bahamas has confirmed it is moving ahead with the nationwide launch of its digital currency, called the “Sand Dollar,” sometime in October. Approximately $48,000 worth of the new central bank digital currency (CBDC) – pegged to the U.S. dollar-tracking Bahamian dollar (BSD) – will enter circulation initially with commitments to mint and remove BSDs as necessary. A mobile-based wallet app will also be rolled out. If it sticks to its October release, the Sand Dollar will likely become the first CBDC to launch anywhere in the world – it has been suggested China won’t launch its own digital yuan initiative until the Beijing Winter Olympics in 2022, CoinDesk’s Paddy Baker reports. 

Related: First Mover: Binance’s CZ Doesn’t Even Dispute That DeFi Might Be Inevitable

‘Chilling effect’
Online gaming and gambling platform Unikrn will pay a $6.1 million settlement – “substantially all of the company’s assets” – for conducting an allegedly unlicensed initial coin offering (ICO) in 2017, according to the U.S. Securities and Exchange Commission (SEC). The securities regulator said Unikrn’s $31 million fundraise was in violation of registration requirements, though Commissioner Hester M. Peirce has offered a dissenting opinion that the token startup wasn’t accused of committing any fraud. Further, this injunction will have a chilling effect on innovation on the part of other firms. Unikrn will continue to offer its services supported by major currencies, including fiat currencies, bitcoin (BTC), bitcoin cash (BCH), ether (ETH) and USDC, among others.

Leaked legislation
A leaked legislative draft shows the European Commission is thinking seriously about aligning its oversight over the cryptocurrency and digital asset industry with standing regulations for traditional financial instruments. Europe’s Markets in Crypto-Assets (MiCA) will provide legal certainty around crypto assets, though may also stifle innovation, CoinDesk’s Ian Allison reports. Europe’s MiCA is due this September, but will not likely be transitioned into European Union law until 2022 at the earliest. Siân Jones, senior partner at XReg Consulting, said the bill takes particular focus on stablecoins, which could affect development in  projects as diverse as the multi-asset-backed Libra project and the nascent decentralized finance (DeFi) ecosystem. 

Another ban?
India may ban cryptocurrency trading, according to a recent Bloomberg report. According to sources close to the matter, the federal cabinet is weighing a new bill that seeks to impose limits on trading activity, similar in function to a Reserve Bank of India ban that was repealed by the nation’s supreme court in March. The news comes amid a flurry of crypto activity and as the government explores potential use of blockchain technology to manage land records, pharmaceutical drugs supply chain or records of educational certificates.

Similar standards
Bank regulators in 48 U.S. states, Washington, D.C., and Puerto Rico plan to make compliance for cryptocurrency companies simpler by consolidating supervisory exams. The Conference of State Bank Supervisors (CSBS), a coordinating body for state regulators, said the new regime for money service businesses (MSB) will introduce the standards to streamline compliance and enable firms like Coinbase to work across multiple states, instead of going through the time and expense of getting regulated in each and every one, CoinDesk’s Paddy Baker reports. 

Quick bites

• Diginex Moves Closer to Backdoor Nasdaq Listing With Merger Approval (Sebastian Sinclair/CoinDesk)
• ‘Sharing Economy’ Startup ShareRing Tapped for China’s Blockchain Service Network (Jaspreet Kalra/CoinDesk)
• Binance, Huobi, OKEx Have FOMO for DeFi (Muyao Shen/CoinDesk)
• Can Bitcoin Ever Become Worthless? (Daniel Phillips/Decrypt)
• Bakkt Bitcoin Futures Daily Trading Volume Hits Record High (Omkar Godbole/CoinDesk)

At stake

Related: Blockchain Bites: MicroStrategy’s BTC Buy, Bitmain’s Power Struggle, Paxful’s Goodbye

Bitcoin CEO
MicroStrategy CEO Michael Saylor spoke with CoinDesk reporter Danny Nelson about his decision to invest nearly half a billion dollars of his firm’s treasury into bitcoin.

Tuesday, MicroStrategy announced it has purchased $175 million more BTC over and above the $250 million worth acquired in August. The reason? Dollars are no longer a safe place for its excess cash. 

This marks a pronounced turnaround for the chief executive who once called bitcoin fool’s gold. 

“I went down the rabbit hole” during COVID-19, Saylor said, admitting he “was wrong” to have doubted bitcoin back in the $600 range. “I wish I knew then what I know now,” he said.

Led by the industry’s most prominent public faces – Anthony Pompliano, Nathaniel Whittemore and Andreas Antonopoulos – Saylor realized that the age of quantitative easing and hot-headed inflation has left its mark on the dollar’s long-term future. 

“This is not a speculation, nor is it a hedge,” said Saylor. “This was a deliberate corporate strategy to adopt a bitcoin standard.”

While this move does add legitimacy to the industry and the goals of creating a stateless, intervention-proof economic system, there’s reason to pause. MicroStrategy is just one among thousands of publicly traded firms. The whims of its executives hardly represent anything beyond its board room.

Then again, as money blogger and CoinDesk columnist J.P. Koning ironically noted: “Big announcement today about 16,796 bitcoins being sold for $175 million! CoinDesk interviews the sellers to find out why they are betting big on fiat.”

Market intel

Fed whisperer
Bitcoin is struggling to clear the important psychological hurdle of $11,000. Analysts will watch closely for any changes in the U.S. Federal Reserve’s rate decision due today, where central bank heads will likely remain committed to letting the economy run hot for the next few years. CoinDesk’s Omkar Godbole reports there is a schism in how crypto markets could react, citing a tolerance of higher inflation as a bullish development for scarce assets like bitcoin and gold. On the other hand, BK Asset Management’s Kathy Lien said the U.S. dollar may find buyers if the Fed is more positive on economic growth. In that case, bitcoin will likely face selling pressure.

Data buy
Data provider CB Insights has acquired Netherlands-based Blockdata to bolster its cryptocurrency and digital asset intelligence. “It’s become something that our clients are increasingly talking about as big and practical,” CB CEO Anand Sanwal said. The terms of the deal were not disclosed.

Tech pod

Playing with DSL
Discrete log contract (DSL), a form of “invisible” smart contract that became feasible on Bitcoin just this year, has gone live. Disguised as standard multi-signature transactions, DSL has been advanced by Bitcoin developer Lloyd Fournier and his work building “scriptless-scripts.” The principal use case will be betting, CoinDesk’s Colin Harper reports.

Online censorship
The Open Observatory of Network Interference (OONI) is allowing people around the world to monitor internet censorship and interference in their countries in a decentralized manner for free. It has created the world’s largest open dataset on internet censorship, with millions of measurements collected from more than 200 countries since 2012, CoinDesk Privacy Reporter Ben Powers said. 

Op-ed

How crypto can win
Blockchain Association Executive Director Kristin Smith details how the cryptocurrency and blockchain industry can get its foot in the door of Congress. “The public policies that we need for crypto to thrive cannot be achieved if our industry is unwilling to unite and work with the government. If men were angels, government regulation would be unnecessary,” she writes. 

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HOPR, a data privacy startup, announced the release of a public incentivized testnet for its mixnet on xDai, an Ethereum sidechain.

• A mix network or “mixnet” (taking its name from the proxy servers it employs, called “mixes”) obscures the metadata left behind when data passes through a network, which can be observed on most networks by state-level adversaries.
• Nicknamed HOPR Säntis (after a Swiss mountain) and running on the xDai chain, the firm says the testnet provides “fast transactions secured by proof-of-stake, while eliminating the high Ethereum transaction fees.” Transaction costs on the xDai network are lower than on the Ethereum mainnet.
• Participants in the program will earn ERC-20 HOPR tokens for running a node. These tokens will be distributed when the HOPR mainnet launches in late 2020.
• “We want to get people to run a node ahead of our mainnet launch later this year and already earn tokens for that,” HOPR lead Sebastian Bürgel said in an email to CoinDesk.
• The incentivized testnet is also a chance to get feedback on the mixnet, detect bugs and generally take the network to the next level with a second round of feedback, following the firm’s initial public testnet this summer, according to Bürgel.  
• While HOPR sells its own hardware node version (at $440), a HOPR node can also be run on devices that run Windows, macOS and Linux. 
• The reason for using hardware rather than the cloud, said Bürgel, is that it’s better for decentralization as it doesn’t rely on cloud infrastructure.
• In July, HOPR announced a $1 million funding round led by Binance Labs.

Read more: Privacy Startup Nym Will Pay You in Bitcoin to Run Its Mixnet

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Kraken is the first cryptocurrency firm to become a bank.

On Wednesday, the Wyoming Banking Board voted to approve the San Francisco-based crypto exchange’s application for a special purpose depository institution (SPDI) charter. Kraken is now the first SPDI bank in Wyoming. According to the Wyoming Division of Banking’s general counsel, Chris Land, Kraken will also be the first newly chartered (de novo) bank in the state since 2006. 

“By becoming a bank we get direct access to federal payments infrastructure, and we can more seamlessly integrate banking and funding options for customers,” said David Kinitsky, a managing director at Kraken and the CEO of the newly formed Kraken Financial. (Kinitsky has run Grayscale Investments, was the first digital assets hire at Fidelity and was most recently head of business development at payments startup Circle.)

Related: The Crypto Firms Collaborating on a Swiss Franc Stablecoin

In the wake of a July letter from the U.S. Office of the Comptroller of the Currency giving national banks the go-ahead to custody crypto, the Division of Banking also announced it has been working with Promontory Financial Group, a prominent Washington, D.C.-based consulting firm made up of lawyers and former government regulators. In October, the division along with Promontory will publish the first manual for banks regarding procedures and policies for handling digital assets, Land said. 

In addition to more products, Kraken Financial will give Kraken the ability to operate in more jurisdictions, Kinitsky said. As a state-chartered bank, Kraken now has a regulatory passport into other states without having to deal with a patchwork state-by-state compliance plan.

Kraken has been silent about its application until now. The first hint the exchange was interested in the Wyoming charter was in December when it opened a position for the job Kinitsky has now.  

“We would expect to offer a host of new products as we get established,” Kinitsky said. “Those will range from things like qualified custody for institutions, digital-asset debit cards and savings accounts all the way to new types of asset classes. We can engage with securities and commodities and things like that as a bank. So a lot more TBD there.” 

Related: Kraken Taps Casa Co-Founder, Former CEO Jeremy Welch as VP of Product

Kraken expects its major revenue drivers to be fees and services, Kinitsky said. SPDIs are not allowed to lend, and each bank has to hold 100% of its assets in reserve. Kraken wouldn’t say how much equity capital the firm raised for its application, but the Division of Banking is encouraging applicants to raise between $20 million and $30 million, similar to the equity capital kept at a de novo bank.  

Initially, Kraken Financial will play the same function as third-party banking relationships that Kraken has already formed, Kinitsky said. Eventually, the subsidiary will become the U.S. customer service provider, with Kraken affiliated services offered on the back end. 

Read more: What It Takes to Get a Crypto-Friendly Bank Charter in Wyoming

Having received the charter, Kraken will focus on building out operations and personnel for the bank, aiming to have 10 to 25 department heads to start out, Kinitsky said. The exchange has hired its board and C-suite and expects to have the rest of its permanent hires in place by the end of the month. 

The statutes undergirding the SPDI charter reconcile digital assets with the U.S. uniform commercial code by making the safekeeping of digital assets a bailment, which is the same legal relationship that valet drivers have to the cars they park, said Wyoming blockchain pioneer Caitlin Long. SPDI banks can hold digital assets but will never have legal ownership over those assets. This means that even if a SPDI bank goes bankrupt, those assets have to be returned to customers, whereas a trust company can have its assets claimed by a judge during bankruptcy.  

Long has her own SPDI bank application underway, called Avanti Financial, which she expects to open in October with new bank-issued digital assets. She expects SPDIs to diversify the crypto banking sector, which has been historically underserved. The Division of Banking is currently working with six companies that are applicants or potential applicants for the charter, and each company could be chartered by the end of 2021. 

Long also expects the SPDI charter to pressure crypto companies to offer proof of reserves to customers and the industry at large. 

“SPDI banks have to provide a Merkle tree to their auditor so they can cryptographically verify that their reserves are there,” she said. “We have zero insight into whether the service providers are solvent or not and they’re not even audited in most cases.”

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