CoinDesk Crypto

The governor of the Bank of England (BoE) has said stablecoins need global regulation, warning private issuers that an international regulatory framework could soon be in the cards.

• Governor Andrew Bailey said regulators have to come together for a “global response” so they can effectively regulate stablecoins.
• Speaking Thursday, he said the international nature of stablecoins, which can be based in one country and operate in another, meant failure to coordinate could result in confusion and regulatory fragmentation.
• Bailey addressed an audience at the Hutchins Center on Fiscal & Monetary Policy of the Brookings Institution – a think tank that has called on policymakers to devise regulation for cryptocurrencies.
• In a published speech, he said: “[H]ost regulators of global stablecoins must, and are, working with other regulators in other jurisdictions to ensure that they are appropriately regulated and gaps in coverage, opportunities for regulatory arbitrage, do not emerge.”
• While Bailey recognized stablecoins could reduce frictional costs, he emphasized that private issuers had to do more to ensure users can always redeem their stablecoins 1:1 with the underlying fiat currency.
• He also warned that future stablecoin offerings may have to do more to satisfy regulatory standards at both a national and international level.
• Compared to bitcoin, which he described as wholly unsuitable for payments, he said some stablecoin proposals could become the primary means for purchasing goods and services.
• In a possible inference to Facebook’s libra coin, he said discussions about multi-asset stablecoins were currently premature.
• The BoE has previously toyed with the idea of launching a digital pound – even suggesting private companies could play a role in issuance.
• It also joined a working group with five other central banks and the Bank of International Settlements (BIS) at the start of the year.

See also: Bank of England Building Payments Network to Support a Potential Digital Pound

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Ethereum developers are turning their focus back to the current version of the network after months of focus on the upcoming Ethereum 2.0 release to address exponential fee growth.

• The surge in fees is being driven by the explosive popularity of decentralized finance (DeFi) applications that are predominantly built on Ethereum.
• Average network fees reached $15.21 on Wednesday, up 660% from $2 a month ago. Ethereum’s median fees also spiked nearly 900% over the same period, reaching $8.95.
• Moreover, the day after CoinDesk reported about new record highs Tuesday for transaction costs, average fees climbed another 24% and median fees spiked 37 percent. 
• In a bid to ameliorate soaring fees, Ethereum co-founder Vitalik Buterin released his Ethereum Improvement Proposal (EIP) 2929 Tuesday that proposes making certain heavy contracts more expensive by a factor of three. Contracts affected would be those that update the Ethereum state, including some applications.

• This repricing proposal could break some smart contracts already operating on Ethereum, Buterin wrote. He added that developers “have had years of warning” about potential changes.
• Approving this proposal, however, requires consensus from the Ethereum community, a process that can take weeks or months. Other broad-brush scaling solutions like EIP 1559 or sharding remain on the distant horizon as well.

Read more: Ethereum Developers Consider New Fee Model as Gas Costs Climb

• For now, individual developers need to incorporate their own individual scaling solutions, said Hendrik Hofstadt, founder of staking firm Certus Oneit, in an email with CoinDesk. “I think the pain is now big enough to push the people to move quicker with L2 (layer 2) solutions,” he added.
• Tether, for example, announced its intention to explore zk-rollups for settling tether (USDT) transactions on the Ethereum blockchain Tuesday. The stablecoin’s transaction on Ethereum consumes the second largest amount of fees, just behind the wildly popular decentralized exchange Uniswap.

Related Stories

• First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care
• Around the Crypto World in 15 Charts: CoinDesk Research’s August Review
• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Price Point

Bitcoin was down early Thursday to about $11,250, extending Wednesday’s sell-off and falling to its lowest price since early August. [Update: At press time prices had slumped further to around $10,850.]

The cryptocurrency tumbled 4.4% on Wednesday, the most in a month, leading to a heightened level of margin calls and position liquidations. Prices appeared to fall in sync with gold and silver prices, which tumbled as the dollar rebounded following a recent slide. 

Related: Buterin, Ethereum Developers Focus on Congestion as Fees Spike Over 600% in 1 Month

“Failure to hold at the $12,000 level has turned the milk sour,” the crypto trading firm Diginex wrote in a note to clients. “Leveraged longs have been forced to drink it.”

Market Moves

With stocks soaring to new records after a decade-long climb, traders in traditional markets are asking how much higher they can go in the midst of a global pandemic, openly discussing whether the market is just propped up by government stimulus checks and Federal Reserve money injections. 

The conversation around bitcoin is very different. The assumption among many digital-asset investors is the cryptocurrency’s price will definitely, inevitably go higher, much higher. It’s only a matter of time. 

Cameron and Tyler Winklevoss, who run the cryptocurrency exchange Gemini, wrote last week that bitcoin prices could reach $500,000, in an extensive analysis that somehow relates to a database of 600,000 asteroids. 

Related: Bitcoin Plunges $403 in 1 Hour to Lowest in a Month

Nobody really knows if any of that will pan out, of course. What’s clear is a lot of investors have bought bitcoin because they see it as a deep out-of-the-money option (with no expiration date) on financial Armageddon, severe currency debasement or at the very least an inflation rate well above the Federal Reserve’s 2% annual target. According to CoinDesk Research’s monthly review published this week, bitcoin’s price appears to be rising whenever the dollar falls in foreign-exchange markets.  

Bitcoin costs $11,200 now, and it might be possible to lose it all, but it also might be worth $500,000 at some point. That’s the general gambit anyway.  

Invented just 11 years ago, bitcoin is exceedingly difficult to value partly because it has such a short track record. Similar to gold and many other commodities, the cryptocurrency offers no yield, so bond math won’t work. Bitcoin has no earnings or dividend, so stock analysis won’t work either. 

Philip Bonello, director of research for the money manager Grayscale (owned by CoinDesk parent Digital Currency Group), says his favorite chart for thinking about bitcoin’s price trajectory might be one showing “holders” versus “speculators.” A holder in this case is defined as a bitcoin that has not moved for one to three years, while a speculator coin has moved in the past 90 days.

An increase in holders is considered “likely bullish,” while an increase in speculators is “likely bearish,” according to a recent Grayscale report. The idea is that it’s positive for the market if more investors appear to be holding the cryptocurrency for the long term, versus those who merely appear to be in it for a quick volatility ride. 

Right now, the chart shows holders increasing and speculators decreasing. According to Grayscale, it’s a “similar structure to that of early 2016,” just before bitcoin went on a bull run toward its all-time high around $20,000. 

“It’s reassuring,” Bonello said Wednesday in a phone interview, “that the sentiment of the investor base is growing day by day.” The holders appear to have been unfazed by the volatility witnessed in March, when the spread of the coronavirus quickly sent bitcoin prices swooning from above $9,000 to below $5,000. “It’s probably unlikely that they’re going to sell right now at $11,000,” Bonello said.  

All of this might mean nothing for the future price of bitcoin. It just shows that a growing number of investors are holding onto their tokens in a bet that the cryptocurrency’s price will – or even that it might – eventually go up. By a lot.  

Bitcoin Watch

• Bitcoin may extend Wednesday’s price pullback, as exchange flows indicate increased selling pressure in the market.
• While the top cryptocurrency fell by 4% on Wednesday, it defended the long-held support zone of $11,100-$11,200. [Update: At press time prices had slumped further to below $10,850.]
• The cryptocurrency may breach the support zone, as exchanges witnessed an inflow of 92,000 BTC on Wednesday – the biggest single day rise in 37 days, according to blockchain intelligence firm Chainalysis.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at Chainalysis, tweeted early Thursday. In other words, the number of coins on exchanges, potentially poised for liquidation, increased.
• “I think there is still sell pressure to work through,” Gradwell said.
• A violation at immediate support at $11,170 would confirm a bearish reversal pattern on technical charts.

Read more: Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike

– Omkar Godbole

Token Watch

Ether (ETH): Open positions in Deribit’s ether options hit record high above $500 million.

Bitcoin Cash (BCH): Proposed changes by development team could reduce rewards for miners, splitting community support.

OKB (OKB): OKEx CEO says foundation burned 3.8 million of its utility tokens, just over 1% of total supply, deepening commitment to “deflation” at time when “central banks around the world are ceaselessly printing money.”  

Theta Network (THETA): Decentralized streaming network says DeFi could be used to pay content providers who are just starting out, with few followers.

What’s Hot

U.S. Senate Banking Committee Chair Crapo wants clear crypto rules “without stifling innovation” (CoinDesk)

Ethereum miners are cashing in on DeFi-driven gas-price hikes (CoinDesk)

Japanese crypto exchange Bitgate to offer cold storage through BitGo (CoinDesk)

Boosting Blockchain: Germany to introduce electronic securities (JDSupra)

Are bitcoin ATMs an anomaly or just an aberration? (Hacker Noon)

Analogs The latest on the economy and traditional finance

German ministry predicts V-shaped recovery in Europe’s largest economy (WSJ)

French president Macron unveils 100 billion-euro ($118B) stimulus plan (Bloomberg)

India bans 118 Chinese apps, including Tencent’s hit games, as border tensions flare (CNBC)

United Airlines to cut 16,370 workers, as company and union press for more aid (Reuters)

CEO of Calvin Klein owner: Retail sales hinge more on containing coronavirus than stimulus spending (CNBC)

Times Square Hilton hotel in New York City is set to close (Wall Street Journal)

Shopping centers from Miami to Alabama start to evict delinquent store operators (WSJ) 

Tweet of the Day Related Stories

• Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike
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Jump Trading, the publicity-shy market maker for Robinhood, Bitfinex and BitMEX has made a significant investment into decentralized exchange (DEX) Serum.

• Serum announced Thursday it had received a significant investment from Jump Trading and inked a liquidity partnership with the firm.
• Per a release shared with CoinDesk, Jump Trading will provide market making and liquidity services for assets as they go live on Serum’s platform, which only launched last week.
• The value of the investment was not disclosed.
• Serum’s founding partner Sam Bankman-Fried said the news represented a major step for the maturation of the DeFi space.

See also: FTX to Launch ‘Scalable’ Decentralized Exchange in Weeks

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Bitcoin (BTC) tumbled about $403 in an hour early Thursday, deepening a two-day sell-off that pushed the largest cryptocurrency to its lowest point in a month.

• The price was down 4.9% on the day to $10,838 as of 13:09 coordinated universal time.
• The move down came after CoinDesk reported that exchange platforms were witnessing elevated inflows of bitcoin, potentially a sign that some investors were preparing to liquidate some of their holdings.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at the blockchain intelligence firm Chainalysis, tweeted early Thursday.
• U.S. stock futures were down and the dollar was gaining in foreign-exchange markets early Thursday
• A U.S. government report early Thursday showed jobless claims dropped to 881,000, the lowest since the coronavirus pandemic struck earlier this year, though still elevated compared with historical levels.

Also read: Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike

Related Stories

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• Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike
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• Around the Crypto World in 15 Charts: CoinDesk Research’s August Review

Bitcoin (BTC) may soon extend Wednesday’s price pullback, according to a data metric that suggests there’s increased selling pressure in the market.

• While the top cryptocurrency by market value fell by 4% on Wednesday, it defended the long-held support zone of $11,100–$11,200.
• Exchange platforms witnessed an inflow of 92,000 BTC on Wednesday, the biggest-single day rise in 37 days, according to blockchain intelligence firm Chainalysis.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at Chainalysis, tweeted early Thursday.

• Gradwell believes the selling pressure (arising from the exchange buildup of 92,000 BTC) has probably not been fully absorbed yet.
• That’s because bitcoin’s median trade intensity, which measures the number of times an inflowing coin is traded, remained low at 3.113, well below the 180-day average.
• Put simply, there were not enough buyers to match sellers.
• As such, coins that weren’t liquidated yesterday could still be offloaded into the market in the short run, causing a more profound price decline.

• “I think there is still sell pressure to work through,” Gradwell said.
• Bitcoin is currently trading near $11,300, representing a 0.7% decline on the day.
• As discussed Wednesday, a violation at immediate support at $11,170 would confirm a bearish reversal pattern on the technical charts.

Also read: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

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Authorities in the Swiss canton of Zug plan to begin accepting taxes in cryptocurrency from the start of next year.

• From next February, citizens and companies based in Zug will be able to pay up to 100,000 CHF (around $109,000) of their taxes in either bitcoin (BTC) or ether (ETH).
• No partial payments in cryptocurrency will be accepted.
• For the initiative, authorities have partnered with the Zug-based crypto broker and custodian Bitcoin Suisse, which will convert cryptocurrency payments into Swiss francs and hand them over to the tax office.
• Zug is home to “Crypto Valley,” a loose association of cryptocurrency companies based in the canton.
• In a statement Thursday, Zug Finance Director Heinz Tannler said the move would help to normalize the use of cryptocurrencies in everyday life.
• A pilot of the tax scheme is set to be trialed in the coming weeks, ahead of the planned February 2021 launch.

See also: Crypto Bank Hopeful Bitcoin Suisse Raises $48M in First-Ever Round

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Robinhood is reportedly in hot water with a top U.S. regulator for not properly disclosing that it was making revenue by passing customer orders onto market makers.

• Sources speaking to the Wall Street Journal (WSJ) for a report Wednesday said the Securities and Exchange Commission (SEC) is investigating the app-based trading platform
• The allegations are that Robinhood, which is popular with retail investors, failed to disclose that it was selling order flow on its “How We Make Money” page – which was taken down in October 2018.
• In the U.S., brokerages, like Robinhood, have to fully disclose all the material facts investors need to make an informed decision.
• During this period, Robinhood did disclose in regulatory submissions that it was making revenue from order flow payments.
• The SEC investigation is reportedly in an advanced stage, one WSJ source said.
• CoinDesk approached Robinhood for comment, but hadn’t received a response by press time.
• Payment for order flow is a practice where brokerage firms are compensated for routing customer orders to market makers for execution.
• This creates business for market makers; for brokerages, it saves them executing thousands of varied and complex orders, creating a new source of revenue instead.
• While legal, some have argued that selling order flow creates conflicts of interest for brokerage firms.
• Robinhood does now disclose that it makes money from rebates from market makers, and argues that it helps create better prices for the customer.
• Although Robinhood and the SEC haven’t yet entered formal fine negotiations, one WSJ source said the trading app could be looking at a $10 million settlement.
• A settlement could save Robinhood from having to admit to misconduct, one source said.
• Robinhood offers trading of stocks, ETFs and options, as well as 17 cryptocurrencies.

See also: Exchange Outages Are Going Mainstream: What Robinhood Can Learn From Crypto

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Revolut has opened up its cryptocurrency services to Australian residents for the first time.

• According to a press statement received by CoinDesk on Thursday, Australian customers of the digital banking firm can now buy and sell up to six different digital assets and receive real-time notifications updating users on price movements.
• The offering supports bitcoin (BTC), ether (ETH), litecoin (LTC), bitcoin cash (BCH), XRP and stellar (XLM).
• Australian members of the firm’s premium Metal service will get first access.
• Users can now convert Australian dollars, alongside 26 other fiat currencies, into cryptocurrency using the app.
• In early August, Revolut made its first foray into the Australian market with fiat-based banking services including remittances and loans.
• Founded in July 2015, U.K.-based Revolut is a financial services platform offering banking products through its mobile app, generally targeting younger, web-savvy customers.
• The company has been expanding its crypto offerings internationally this year, most recently to the U.S.
• In July, Revolut updated its terms giving users legal control over their own cryptocurrency on the platform – though they are still not allowed to transfer digital assets out of the Revolut ecosystem.
• Previously Revolut conducted cryptocurrency transactions on behalf of its customers.
• The fintech firm began its foray into crypto in the summer of 2017 after completing a $66 million series B funding round led by Index Ventures, BitPay, Xapo, Balderton Capital and Ribbit Capital.

See also: Digital Bank Revolut Adds Stellar to List of Supported Cryptocurrencies

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A nonprofit that champions digital rights wants Coinbase to be more transparent in how it handles authorities’ requests for users’ private financial data.

• In a post on its website Wednesday, the Electronic Frontier Foundation (EFF) argued that the U.S.-based cryptocurrency exchange should begin releasing regular transparency reports.
• These should detail the number of government and law enforcement requests for information Coinbase receives and how it goes about dealing with those requests, the EFF said.
• Financial data is one of the “most sensitive types of information” a user produces, the group went on.
• Further, the EFF suggested that how Coinbase responds to government requests could “have a huge impact on what types of speech thrive online.”
• Founded in 1990, the EFF is a nonprofit organization that sets out to defend “civil liberties in the digital world” by championing user’s privacy, free expression and grassroots activism.
• Cryptocurrency exchanges should “especially understand” the importance of privacy, given their users tend to value censorship resistance and anonymity, the EFF said.
• Unlike Coinbase, Kraken, a rival U.S.-based crypto exchange, received high praise for its apparently transparent behavior around requests for information from government and law enforcement agencies.
• Kraken “already recognized the importance of being open on this topic,” said the group, pointing to a tweet in January of a 2019 transparency report showing the U.S. topped the number of requests for information.
• Coinbase built its reputation as a reliable platform by stressing regulatory compliance from the start.
• In June, the exchange initiated procurement deals with a number of U.S. agencies, including the Drug Enforcement Administration and the Internal Revenue Service (IRS), for a cryptocurrency investigations tool called “Coinbase Analytics.”
• The tool enables tracing of transactions conducted across Coinbase, with the IRS claiming the tool possessed “capabilities that are not currently found in other tools on the market.”
• At the time, Coinbase told CoinDesk the analytics data was “fully sourced from online, publicly-available data, and does not include any personally identifiable information for anyone.”
• The exchange has made disclosures about how it would deal with requests for user data.
• In 2018, Coinbase told 13,000 customers it would share “only certain limited categories of information” following demands from the Internal Revenue Service, though it did not disclose precise details.
• It had previously tried to fight the tax agency's request for the information of 14,000 customers in a lengthy legal battle, but ultimately the court sided with the IRS.
• By releasing transparency reports, the EFF said Coinbase could “display leadership” and “fill in the gaps” of current knowledge “by simply shining a much-needed light on government requests for information.”
• Coinbase declined to comment for this article.

See also: Secret Network’s Privacy-Focused Smart Contracts Move a Step Closer to Going Live

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A nonprofit that champions digital rights wants Coinbase to be more transparent in how it handles authorities’ requests for users’ private financial data.

• In a post on its website Wednesday, the Electronic Frontier Foundation (EFF) argued that the U.S.-based cryptocurrency exchange should begin releasing regular transparency reports.
• These should detail the number of government and law enforcement requests for information Coinbase receives and how it goes about dealing with those requests, the EFF said.
• Financial data is one of the “most sensitive types of information” a user produces, the group went on.
• Further, the EFF suggested that how Coinbase responds to government requests could “have a huge impact on what types of speech thrive online.”
• Founded in 1990, the EFF is a nonprofit organization that sets out to defend “civil liberties in the digital world” by championing user’s privacy, free expression and grassroots activism.
• Cryptocurrency exchanges should “especially understand” the importance of privacy, given their users tend to value censorship resistance and anonymity, the EFF said.
• Unlike Coinbase, Kraken, a rival U.S.-based crypto exchange, received high praise for its apparently transparent behavior around requests for information from government and law enforcement agencies.
• Kraken “already recognized the importance of being open on this topic,” said the group, pointing to a tweet in January of a 2019 transparency report showing the U.S. topped the number of requests for information.
• Coinbase built its reputation as a reliable platform by stressing regulatory compliance from the start.
• In June, the exchange initiated procurement deals with a number of U.S. agencies, including the Drug Enforcement Administration and the Internal Revenue Service (IRS), for a cryptocurrency investigations tool called “Coinbase Analytics.”
• The tool enables tracing of transactions conducted across Coinbase, with the IRS claiming the tool possessed “capabilities that are not currently found in other tools on the market.”
• At the time, Coinbase told CoinDesk the analytics data was “fully sourced from online, publicly-available data, and does not include any personally identifiable information for anyone.”
• The exchange has made disclosures about how it would deal with requests for user data.
• In 2018, Coinbase told 13,000 customers it would share “only certain limited categories of information” following demands from the Internal Revenue Service, though it did not disclose precise details.
• By releasing transparency reports, the EFF said Coinbase could “display leadership” and “fill in the gaps” of current knowledge “by simply shining a much-needed light on government requests for information.”
• Coinbase declined to comment for this article.

See also: Secret Network’s Privacy-Focused Smart Contracts Move a Step Closer to Going Live

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• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm

Prime Minister Narendra Modi has become the latest victim of a Twitter hack undertaken to trick social media users into sending cryptocurrency to the attackers.

• According to a report by the Nikkei Asian Review on Thursday, a Twitter account of Modi’s personal website known as the Prime Minister’s National Relief Fund (PMNRF) was hacked.
• A series of tweets were posted by hackers asking the PMNRF’s 2.5 million followers to donate to the relief fund using cryptocurrency, Twitter has confirmed.
• It is unclear whether funds were sent to a private wallet address or how much may have been siphoned off.
• Funds from the PMNRF are generally used to provide relief to families of those killed in natural disasters such as floods, cyclones, and earthquakes. Donations are usually paid in fiat.
• “We are actively investigating the situation,” a Twitter spokeswoman said in an email statement cited in the Nikkei. The social media giant is “not aware of additional accounts being impacted,” she said.
• The event follows the recent hacks that compromised several high-profile accounts, including those of U.S. Democratic Presidential nominee Joe Biden, Tesla’s Elon Musk, Kanye West and CoinDesk.
• The attacks used celebrity accounts in order to deceive unsuspecting victims into handing over their bitcoin through a rudimentary giveaway scam promising to double a victim’s funds if they sent it to a particular address.
• In late July, the Federal Bureau of Investigation and local officials arrested three young men in the U.S. in connection with the hacks – including alleged mastermind Graham Ivan Clark.
• Clark has pleaded not guilty to all charges brought against him.
• It is unclear whether those attacks might be related to the one on Modi.

The Modi incident is another sobering reminder to always think twice before sending crypto to strangers on the internet, even if there’s a blue check and the portrait of a head of state in the profile.

See also: Social Engineering: A Plague on Crypto and Twitter, Unlikely to Stop

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Members of Congress are urging the federal government to use blockchain solutions to boost COVID-19 relief efforts.

In a Wednesday letter addressed to the U.S. President Donald Trump and federal officials, lawmakers said blockchain technology can help identify and authenticate individuals set to receive government benefits, streamline supply chains and create a registry of medical professionals. 

This is the latest development in a trend of U.S. lawmakers actively advocating for blockchain applications and virtual currencies, with representatives re-introducing bipartisan legislation in January that would reduce the tax burden on small crypto transactions, and Massachusetts Representative Stephen Lynch (D-Mass.) proposing a bill in April to record national stockpiles on a blockchain. 

Related: Government of Bermuda Pilots Stimulus Token in Response to COVID-19 Crisis

Read more: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

The letter was led by the four co-chairs of the Congressional Blockchain Caucus: Reps. Tom Emmer (R-Minn.), Bill Foster (D-Ill.), David Schweikert (R-Ariz.) and Darren Soto (D-Fla.). 

They were joined by Caucus members Stephen Lynch, Warren Davidson (R-Ohio), Jerry McNerney (D-Calif.), Matt Gaetz (R-Fla.) and Ro Khanna (D-Calif.).

“The membership of the Congressional Blockchain Caucus urges your consideration, support and implementation of utilizing blockchain technology that could greatly mitigate the effects of the [c]oronavirus,” the letter said.  

Ongoing effort

Related: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

This is not the first time members of Congress have urged the government to consider innovative technologies in the pandemic response. In April, 11 representatives signed a letter calling on the U.S. Treasury Department to consider blockchain and distributed ledger technologies (DLT) in streamlining the distribution of stimulus funds to citizens across the nation. 

Within a week of sending the letter, Lynch introduced a bill to mitigate the failures of the Strategic National Stockpile (SNS) in distributing personal protection equipment such as ventilators to those in need: it would require relevant government agencies to use private blockchain technology to inventory supplies in each state to ensure availability. 

Read more: Bermuda Starts Development of a Blockchain-Based National ID System

The goal of the bill is to facilitate the creation of a network that would allow the government to have a transparent view of stockpiles, and allocate resources to where they are most needed, Lynch told CoinDesk back in April. 

“I think there are reasons for adopting a very secure protocol. You could envision instances where if the country were at war you would not want this system to be hackable and so I think the private blockchain model probably works best,” he said.  

‘Wake-up call’

The lawmakers’ letter to Trump echoes Lynch’s call to use blockchain to create secure and efficient databases. 

The letter makes a case for a blockchain-based identification system, to securely store and authenticate an individual’s identity “to receive necessary funding or supplies” 

The lawmakers explained how the built-in architecture of blockchains can help easily identify individuals when receiving government benefits, while its strong encryption protects sensitive data. It also urged the government to consider putting crucial supply chains that would map origins, inventories and transportation routes on a blockchain.

“The lack of these fundamental supplies has served as a wake-up call across the nation as we continue to struggle to track, reroute, and deliver necessary supplies to those who need them most,” the letter said. 

The lawmakers also suggested that blockchain could help create a comprehensive registry of medical professionals that would verify qualifications, locations and help deploy “skilled resources” in times of crisis.

“Federal regulators must be willing to shed the bureaucracy and implement new solutions,” Rep. Emmer said in a statement to the press. 

Read the full letter below:

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Members of Congress are urging the federal government to use blockchain solutions to boost COVID relief efforts.

In a Wednesday letter addressed to the U.S. President Donald Trump and federal officials, lawmakers said blockchain technology can help identify and authenticate individuals set to receive government benefits, streamline supply chains and create a registry of medical professionals. 

This is the latest development in a trend of U.S. lawmakers actively advocating for blockchain applications and virtual currencies, with representatives re-introducing bipartisan legislation in January that would reduce the tax burden on small crypto transactions, and Massachusetts Representative Stephen Lynch (D-MA) proposing a bill in April to record national stockpiles on a blockchain. 

Related: Government of Bermuda Pilots Stimulus Token in Response to COVID-19 Crisis

Read more: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

The letter was led by the four co-chairs of the Congressional Blockchain Caucus: Reps. Tom Emmer (MN-06), Bill Foster (D-IL), David Schweikert and Darren Soto (D-FL). 

They were joined by Caucus members Stephen Lynch, Warren Davidson (R-OH), Jerry McNerney (D-CA), Matt Gaetz (R-FL) and Ro Khanna (D-CA).

“The membership of the Congressional Blockchain Caucus urges your consideration, support, and implementation of utilizing blockchain technology that could greatly mitigate the effects of the Coronavirus,” the letter said.  

Ongoing effort

Related: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

This is not the first time members of Congress have urged the government to consider innovative technologies in the pandemic response. In April, 11 representatives signed a letter calling on the U.S Treasury Department to consider blockchain and distributed ledger technologies (DLT) in streamlining the distribution of stimulus funds to citizens across the nation. 

Within a week of sending the letter, Lynch introduced a bill to mitigate the failures of the Strategic National Stockpile (SNS) in distributing personal protection equipment such as ventilators to those in need: it would require relevant government agencies to use private blockchain technology to inventory supplies in each state to ensure availability. 

Read more: Bermuda Starts Development of a Blockchain-Based National ID System

The goal of the bill is to facilitate the creation of a network that would allow the government to have a transparent view of stockpiles, and allocate resources to where they are most needed, Lynch told CoinDesk back in April. 

“I think there are reasons for adopting a very secure protocol. You could envision instances where if the country were at war you would not want this system to be hackable and so I think the private blockchain model probably works best,” he said.  

‘Wake-up call’

The lawmakers’ letter to Trump echoes Lynch’s call to use blockchain to create secure and efficient databases. 

The letter makes a case for a blockchain-based identification system, to securely store and authenticate an individual’s identity “to receive necessary funding or supplies” 

The lawmakers explained how the built-in architecture of blockchains can help easily identify individuals when receiving government benefits, while its strong encryption protects sensitive data. It also urged the government to consider putting crucial supply chains- that would map origins, inventories and transportation routes- on a blockchain.

“The lack of these fundamental supplies has served as a wake-up call across the nation as we continue to struggle to track, reroute, and deliver necessary supplies to those who need them most,” the letter said. 

The lawmakers also suggested that blockchain could help create a comprehensive registry of medical professionals that would verify qualifications, locations and help deploy “skilled resources” in times of crisis.

“Federal regulators must be willing to shed the bureaucracy and implement new solutions,” Rep. Emmer said in a statement to the press. 

Read the full letter below:

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Japanese crypto exchange Bitgate will soon offer customers cold storage services through BitGo Inc., meeting new legal requirements set by the local financial regulator. 

BitGo announced Wednesday it would provide its “Self-Managed Custody” service to the exchange, which is supervised by the Japanese Financial Services Agency (JFSA). Japan-based financial services firm Daiko Holdings secured a controlling stake in the exchange earlier this year.

These are requirements by the JFSA, said BitGo CEO Mike Belshe, with new regulations going into effect this past May reflecting an increased amount of attention paid to security in a country that has suffered some of the crypto world’s largest exchange hacks.

Related: BitGo Weighs Building a Sidechain for WBTC as Ethereum Fees Climb

According to a press release by BitGo, the solution was built for the Asian markets, and enables security features like multi-signature wallets that ensure there isn’t a single point of failure which could lead to a breach or loss.

“This probably stems in fact from the long history that Japan has with crypto,” Belshe told CoinDesk. “As you know, crypto in Japan has been pretty strong, but we’ve also had a couple of really prominent losses over time, one being Mt Gox, and later Coincheck.” 

Read more: Crypto Exchange Coincheck to Launch Japan’s First IEO

The regulator mandates exchanges use cold storage for the bulk of their clients’ assets, Belshe said, which BitGo agrees is a best practice for the industry.

Related: BitGo Applies to Be Regulated Custodian in New York State

BitGo currently provides services to six of the 24 licensed exchanges in Japan, Belshe claimed, and the company has been meeting with the regulator for years.

In his view, the JFSA recognizes the risk that exists with storing assets online, whether that’s in the crypto space or other, more traditional firms. This may be part of why it recommends offline solutions for regulated entities.

“I think Japan thinks a lot more about breaches,” he said. “I think culturally [it cares] a lot about the reputation of the country, and what it means when there’s a loss inside a firm” based in Japan.

CORRECTION (Sept. 3, 2020, 01:25 UTC): This article originally said BitGo Trust provided the “Self-Managed Custody” solution. It’s actually provided by BitGo Inc., a separate division of BitGo Holdings.

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Bitcoin took a dive Wednesday. Ethereum miners are benefiting from all that DeFi.

• Bitcoin (BTC) trading around $11,396 as of 20:00 UTC (4 p.m. ET). Slipping 4.8% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,159-$12,058
• BTC above its 10-day moving average but below the 50-day, a sideways signal for market technicians.

Read More: Bitcoin Price Drops 4% After Latest Rejection at $12K Resistance

Bitcoin dropped to as low as $11,159 on spot exchanges like Coinbase Wednesday. The fall was exacerbated by long-oriented derivatives traders on exchanges like BitMEX. That platform experienced $9 million in sell liquidations in one hour as prices fell, the equivalent of a margin call in the cryptocurrency world. 

Related: Around the Crypto World in 15 Charts: CoinDesk Research’s August Review

Alex Mascioli, head of institutional services at crypto brokerage Bequant, said long traders were convinced bitcoin’s price would surpass 2020 highs but instead were wiped out. “Bitcoin still needs to break above its previous high at $12,400 to have enough serious momentum to have a chance of retesting previous highs,” he said. 

There is a chance that next time bitcoin hits that price level it could head into higher territory, approaching 2020 highs around $12,475, Mascioli added. “For now, $12,400 is the most important resistance level the bulls must take out. The technicals appear as if the bulls may retest this level in the next week.” 

Read More: Total Value on Bitcoin’s Lightning Network Sets Another Record High 

Meanwhile, the rise of decentralized finance, or DeFi, gives hardcore bitcoin holders an opportunity to profit even when price moves are bearish on days like Wednesday. 

Related: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

“The DeFi market is giving long-term bitcoin holders a chance to increase their yields and return,” said Zachary Friedman, chief operating officer for Global Digital Assets.

However, some traders aren’t convinced DeFi can maintain its status quo, and that is reflected in bets on the options market for ether (ETH). Based on probabilities, options traders have 66% confidence ether will be over $400 by September 20 maturity, but that number drops to 48% by December 20 maturity. 

“I have a sneaky feeling that ETH options are going to be in play given the amplifying uncertainty brought about by variables such as yETH and the punitive gas fees,” said Vishal Shah, an options trader and founder of derivatives exchange Alpha5. yETH is a product from Yearn.Finance that allows ether holders to deposit the crypto and gain yield by leveraging various other DeFI projects. 

Read More: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

Ethereum mining hits record fee percentage

Ether, the second-largest cryptocurrency by market capitalization, was down Wednesday, trading around $436 and slipping 8.5% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Uniswap Topples Coinbase in Trading Volume

The percentage of revenue Ethereum miners receive from fees has hit an all-time high. It crossed the 70% threshold Tuesday as DeFi projects that run on the network are pushing gas prices, the unit of account for transactions and smart contract interactions, to fresh highs. 

While fees are a problem, many stakeholders say this cost inherent to Ethereum is a better price to pay than in the traditional financial world. “The DeFi market removes one crucial intermediary – the bank,” said Global Digital Asset’s Friedman. “With fewer parties taking a cut, and much more transparency, as well as a collateralized lending system ensuring high levels of security, all the benefits of lending can fall onto the lender and thus remove the majority of costs,” he said.

Read More: Yearn.Finance’s New Vault Leverages DeFi ETH, MakerDAO and Curve

Other markets

Digital assets on the CoinDesk 20 are all in the red Wednesday. Notable losers as of 20:00 UTC (4:00 p.m. ET): 

• 0x (ZRX) – 10.4%
• zcash (ZEC) – 10.3%
• eos (EOS) – 10.2%

Read More: Police Reportedly Raid Headquarters of South Korea’s Largest Exchange

Equities:

• In Asia the Nikkei 225 ended the day in the green 0.47% as August manufacturing and unemployment numbers were better than investors expected.
• In Europe, the FTSE 100 climbed 1.3% as a Bank of England deputy governor told the U.K. Parliament the central bank could increase quantitative easing if needed.
• The United States’ S&P 500 gained 1.7% on positive economic news; human resources provider ADP reported private payrolls grew by 428,000 in August.

Read More: Senate Banking Chairman Asks OCC About Its Planned Crypto Rulemaking

Commodities:

• Oil is down 3.4%. Price per barrel of West Texas Intermediate crude: $41.53.
• Gold was in the red 1.3% and at $1,942 as of press time.

Read More: Newly Discovered Malware Has Arsenal of Tricks to Help It Steal Crypto

Treasurys:

• U.S. Treasury bond yields slipped Wednesday. Yields, which move in the opposite direction as price, were down most on the 30-year, in the red 3.1%.

Read More: Ethereum Classic Labs Airs New Plan to Stop Future 51% Attacks

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A recently disclosed vulnerability in two popular hardware wallets would have allowed attackers to hold users’ cryptocurrency for ransom without going anywhere near the device.

• ShiftCrypto, the Swiss company that manufacturers the BitBox hardware wallet, has disclosed a potential man-in-the middle ransom attack vector on the rival Trezor and KeepKey hardware wallets.
• A ShiftCrypto developer known as Marko discovered the vulnerability in the spring of 2020, and notified the Trezor and KeepKey teams respectively in April and May.
• ShiftCrypto did not suggest the attack had been carried out, only that an attack was possible. CoinDesk reached out to Trezor and KeepKey to ask if the attack had affected any of their customers but did not hear back from either by press time.
• Trezor has patched the vulnerability for its Model One and Model T hardware wallets. KeepKey (which is a fork, or copy, of Trezor and so runs near-identical code) has not made a fix, according to the ShiftCrypto team, who said the manufacturer cited “higher priority items” as the reason.
• The hypothetical attack involves an optional passphrase that Trezor and KeepKey users can set to unlock their device in lieu of the usual PIN code. Both hardware wallets require a USB connection with a computer or mobile device to manage accounts. When plugging the hardware wallet into the other device, a user would type the passphrase into the latter to access the former.
• The problem is that neither Trezor nor KeepKey would verify the passphrase users entered. Verification would require displaying the passphrase on the wallet’s screen so the user could ensure it matched what they typed on the computer.
• Without this safeguard in place, a man-in-the-middle attacker could have modified the information relayed between Trezor or KeepKey and their users by importing a new passphrase into the wallet. The user would be none the wiser, since he or she couldn’t check that the passphrase on the device matched the one on the computer screen.
• Upon inputting the old passphrase, the user would open the hardware wallet’s interface on the computer as usual. Each address generated, however, would be under the control of the new passphrase set by the hacker, so the hardware wallet user would be unable to spend funds locked in these addresses.
• The attacker, however, would not have access to these addresses because they are still derived from the wallet’s seed phrase, so they can only be held for ransom. Thus, even if the hacker had access to the real passphrase, he or she would need the seed phrase or access to the device itself.
• This ransom attack could be executed against multiple users at once, and multiple cryptocurrencies could be taken hostage at the same time.
• Trezor and KeepKey have had run-ins with vulnerabilities in the past, but all of these required physical access to the hardware wallets to succeed sans a couple exceptions. The one discovered by their competitor broke ground by allowing the hypothetical attacker to work remotely.

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Bitcoin had a lackluster August while Ethereum “gas” fees are soaring. In 15 charts, CoinDesk Research’s Monthly Review for August looks at bitcoin (BTC) performance compared to traditional assets, its relationship to the dollar and other fiat currencies, and at Ethereum’s increasing congestion.

Some of the key takeaways:

• BTC had a lackluster August in terms of price movements, underperforming most of the CoinDesk 20 as well as the S&P 500. However, so far this year BTC is up over 60% while the S&P 500 is up just over 8%.

• The correlation between BTC and the DXY dollar index is reaching new lows, at a time when bitcoin is increasingly becoming part of macro conversations both within and outside the industry.

• Currency movements affect performance: The declining dollar has recently given a boost to the performance of the BTC/USD pair, but in terms of year-to-date returns, BTC denominated in Korean won has fared better while BTC in euros has lagged.

• Ethereum’s congestion issues as evidenced by its soaring gas fees can be largely explained by the growth in use of tokens and applications, shown here in the number of transactions that invoke smart contracts.

• After strong growth in the first half of the year, the number of tether transactions on Ethereum has started to level off, while the number of tether transactions on the Tron blockchain is gathering steam.

For more insights and more charts, download our free report here.

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The Commodity and Futures Trading Commission (CFTC) said Wednesday it approved LedgerX LLC’s amended registration order, allowing the firm to go beyond offering digital currency-based products. 

• According to the press release posted on the CFTC website, LedgerX is now authorized to offer fully collateralized futures and options products, in addition to the digital asset swaps it already offers.
  
• While the amended order will allow LedgerX to provide clearing services for futures and options beyond digital assets, it is already registered with the CFTC as a designated contract market and swap execution facility.

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Three retail-orientated trading platforms have participated in the latest $4.75 million funding round for crypto trading infrastructure provider Zero Hash.

• Zero Hash announced Wednesday it had completed its Series C funding round, which was led by tastyworks, the owner of app-based brokerage, tastytrade.
• Other participants included another app-based broker-dealer Dough as well as Small Exchange, a futures market aimed at retail customers.
• Existing investors including Bain Capital, brokerage firm TradeStation, CMT Digital and Monday Capital also participated in the round.
• Zero Hash provides a settlement infrastructure for platforms, such as app-based brokerages, to offer cryptocurrency trading for their users.
• A Form D filed by Zero Hash’s parent, Seed CX, to the Securities and Exchange Commission (SEC) Tuesday shows $3.75 million had been raised – $1 million off the $4.75 million funding target.
• But co-founder Edward Woodford told CoinDesk Wednesday that Zero Hash had, in fact, hit the $4.75 million raise amount.
• In response to a question about how many retail-oriented trading platforms that invested in the latest round could wind up using Zero Hash’s technology, Woodford said, “Watch this space in particular for Dough and tastyworks announcements in the next two weeks.”
• Indeed, Zero Hash already counts TradeStation, as well as several unnamed over-the-counter (OTC) groups as clients.
• Seed CX launched in 2015 as a derivatives trading platform for exotic commodities, including cannabis, but pivoted into crypto in late 2017.
• Initially a subsidiary, Seed CX, closed its exchange in June in order to focus on Zero Hash, as it brought in roughly 95% of total revenue.
• Woodford said the company now trades exclusively under the name Zero Hash.

See also: Crypto Trading Platform CrossTower Raises $6M in Seed Round

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