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G20’s Financial Watchdog Unveils Plan to Monitor Cryptocurrency Threat

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The Group of 20’s Financial Stability Board (FSB) has outlined a comprehensive plan to monitor the cryptocurrency market and rein in what it believes to be material risks to the global financial system.

G20 Unveils Crypto Framework

The G20’s financial regulator on Monday unveiled its strategy for determining whether cryptocurrencies such as bitcoin and Ethereum represent a risk to financial stability. In a ten-page report, the FSB lays out a framework that can assist G20 nations in identifying crypto-related risks using publicly-available data.

According to the report, metrics “that are most likely to highlight such risks” include market capitalization (size and growth rate), price levels and volatility. Basically, cryptocurrencies that exhibit unusually large growth rates and volatility may pose a risk to financial stability if their total value rivals that of more conventional markets.

FSB officials provide a further breakdown of what they call wealth effect metrics and institutional metrics. Initial coin offerings (ICOs) and capital flows into the blockchain arena are classified as wealth effect metrics. On the institutional side, the FSB recommends monitoring trading volumes, margin levels and interest among traditional lenders.

The FSB says the framework “should help to identify and mitigate risks to consumer and investor protection, market integrity, and potentially to financial stability.”

FSB Expands Oversight Efforts

In March, Hacked reported that the FSB was evaluating the cryptocurrency market but had not identified it as a major risk to financial stability.

To that effect, Bank of England (BOE) Governor and FSB head Mark Carney issued the following statement:

“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system.

“Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited.”

At the time the statement was issued, the total cryptocurrency market was valued at roughly $300 billion, not far from current levels. The market peaked above $830 billion earlier this year, prompting an investigation into crypto-assets.

While cryptocurrencies represent only a tiny fraction of the global financial system, their direct and indirect contribution to the economy is far greater. The crypto boom has generated an entire economy devoted to maintaining the size and growth rate of digital assets, as well as a bustling startup community whose funding has exceeded that of early stage venture capital.

For many, institutional interest represents the next frontier of digital currency adoption. Major banks and hedge funds are already experimenting with blockchain technology and the launch of bitcoin futures has given rise to a new breed of investor accessing digital assets.

The race for custodial services and efforts to launch the first bitcoin ETF also suggest that the market has potential to attract large sums of capital. These developments suggest that Carney may have to revise his previous statement about crypto assets having a limited use for the real economy.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 546 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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ETFs

CBOE Aims to Be the First to List Bitcoin ETF

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The race to list the first bitcoin exchange-traded fund has intensified in recent months even as regulators balk at the notion of crypto-backed funds. When the SEC does come around, CBOE Global Markets Inc. is planning to be the first-mover.

CBOE Takes Aim at Bitcoin ETF

The Chicago-based exchange is confident that the U.S. Securities and Exchange Commission (SEC) will eventually approve a rule change that would pave the way for the first bitcoin ETF. According to Chris Concannon, CBOE’s president and COO, the approval process may not be far off.

“As we chip away at their issues to make them less concerned, at some point they’ll be comfortable with an ETF,” Concannon told Bloomberg on Tuesday.

Concannon took a balanced approach in explaining both the opportunities and challenges of listing a bitcoin ETF. In his view, it’ll take just one domino to fall before we are looking at multiple crypto-backed funds, and in relatively short order.

“Having the underlying futures come to market first, prior to an ETF, I think you have a healthier, more mature market.The problem with a futures-based ETF is, what is the right level of liquidity? It’s never been tested before.

“There’s a huge first-mover advantage in the ETF world,” he added. Once the assets “come pouring in, it tends to continue. We’ve seen that in other ETFs.”

The Best Shot

Concannon’s confidence likely stems from the fact that his exchange plans to list the VanEck SolidX Bitcoin ETF, which the market regards as having the best shot of being approved by regulators. VanEck penned a lengthy letter to the agency in July reiterating industry-wide support for the proposed fund, which claims to overcome many of the liquidity and market manipulation concerns currently held by regulators.

Unlike other bitcoin ETF applications, the VanEck/SolidX proposal plans to back the fund with physical bitcoin rather than track the digital currency through the futures market.

As Hacked reported last week, the SEC has postponed its ruling on the VanEck proposal until the end of September to investigate the matter more closely. This triggered a massive correction in the price of bitcoin and the broader market.

Only a Matter of Time

Although the chances of regulators approving a bitcoin ETF this year have always been low, assent could be granted as early as February of next year, according to Hany Rashwan, the chief executive officer of crypto startup Amun Technologies.

“The SEC is likely to delay until February of 2019 and the chances of a Bitcoin ETF approval in 2018 have always been low,” Rashwan told Bloomberg last week.

In conducting our research, we also came across this interesting tidbit by the crypto journal outlet, which claims to have spoken with a former SEC employee in the know about the agency’s bitcoin deliberations. Here’s what the source had to say:

“The four people I still talk to on the daily at the SEC are basically telling me this ‘it is going to get approved but we are going to make the markets understand that we dug really, really deep i.e. investor protection/transparency’. And that makes sense. The vast majority of the public still has no idea what ‘digital assets’ are or what it means. So when you do an approval like this, and the successive approvals that will follow in this asset class – think of the 3-5 year return number that will be associated with this market? And maybe that is the key to the VanEck SolidX approval? It is set up as an accredited investor vehicle. That singular element is probably what gives so many of us a firm belief in its approval. And it is a stroke of genius by the VanEck SolidX group.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 546 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Regulation

U.S. SEC Postpones VanEck-SolidX Bitcoin ETF Decision, Markets Sell Off

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If you’re wondering why the cryptocurrency market is suddenly in freefall, look no further than the probability of a bitcoin ETF. The U.S. Securities and Exchange Commission (SEC) issued an announcement that it was delaying its decision on the rule change that would pave the way for the product to be traded on the CBOE until Sept. 30. The VanEck-SolidX bitcoin ETF is the market’s best hope for such a product after a similar application proposed by Cameron and Tyler Winklevoss was recently shunned. Traders were hoping for a decision by as soon as Aug. 10.

In response, the bottom fell out in the bitcoin price, sending it from approximately $7,000 to $6,765 in a freefall whose speed was only rivaled by the recent run-up in the bitcoin price from the $5,800 level in anticipation of a potential bitcoin ETF. The silver lining is that Wall Street’s top regulator didn’t put the kibosh on this product, but on the downside is there could be even more delays to come.

Source: CoinMarketCap

The SEC announcement, which surfaced on Tuesday, revealed that the regulator has been flooded with “1,300 comments on the proposed rule change.” But apparently, regulators have more questions, as evidenced by their decision to push back their decision.

“The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change,” according to the SEC statement. The agency identified Sept. 30 as the date by which they will “either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”

“Market’s Not Ready”

If you ask cryptocurrency trader Brian Kelly of the firm that bears his name, the securities regulator is likely to choose option three and delay its decision yet again. He said on CNBC this evening that “the market’s not ready” for a bitcoin ETF. Kelly noted that selling in response to this delay “is the wrong way to do crypto investing,” adding “there is more to this story than just an ETF.”

Nonetheless, trading in the cryptocurrency market of late has been fueled by emotions tied to the probability of a bitcoin ETF, with pundits suggesting that the passive investment product could catapult BTC into the 401(k) retirement plans of mainstream America. CryptoCompare Co-Founder Charles Hayter is quoted in MarketWatch as having said: “The ETF decision is going to be the next catalyst for the market. There’s a lot of uncertainty around the decision, but also a lot of hope.”

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 36 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Bitcoin ETF Possible in 18 Months: Former Goldman Sachs Executive

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Investors awaiting the arrival of a bitcoin exchange-traded fund (ETF) should’t get their hopes up, according to Ali Hassan, a former Goldman Sachs executive currently running a cryptocurrency asset management firm. In Hassan’s view, bitcoin’s ‘holy grail’ is certainly coming, but not before regulators fully dissect its implications on consumer safety.

Bitcoin ETF: Timelines and Expectations

In an interview with Bloomberg Markets, Hassan predicted that a bitcoin ETF will be approved only once regulators are convinced that the asset doesn’t expose investors to unnecessary risk. As the recently rejected Winklevoss ETF application clearly showed, the U.S. Securities and Exchange Commission (SEC) is not convinced that crypto-backed funds are “uniquely resistant to manipulation.”

“We do think that a product is coming soon,” Hassan told Bloomberg. “Perhaps, in the next 18 months, we’ll see a Bitcoin-only ETF.

Hassan, who runs Crescent Crypto, spoke at length about the potential for bitcoin and other crypto funds to revolutionize asset management strategies. He also said that passive investment strategies in crypto will “actually increase the participation in the market.”

The long-awaited bitcoin ETF has been described as the ‘holy grail’ for its potential to lure passive investors and traditional asset managers to the cryptocurrency market. Hopes for its imminent arrival helped spur a nearly 30% rally in bitcoin’s price last month.

Some analysts believe that a joint proposal submitted in June by VanEck and SolidX has the best chance of gaining regulatory approval. The SEC could rule on the fund as early as Aug. 16, though many believe the process will drag on for several months.

Hassan’s Crescent Crypto fund invests in 20 high-profile digital assets that meet specific requirements tied to market capitalization, liquidity and security.

According to the company’s third-quarter report, cryptocurrencies are broken down into four brackets or “sectors,” including: store of value, platform, value transfer and anonymity. Bitcoin, a “store of value” currency, accounts for nearly 45% of the portfolio. “Platform” Ethereum is second at 19.3%. They arefollowed by Ripple and bitcoin cash (“value transfers”) and EOS (“platform”).

For “anonymity,” the fund includes Monero, Dash and Zcash.

Debate Continues

A debate over bitcoin and crypto-backed securities is being waged within the SEC’s own ranks, underscoring a gradual shift in how regulators approach the subject.

Last week, SEC Commissioner Hester Peirce formally dissented to the regulator’s ruling on the Winklevoss ETF. In a lengthy statement published on the SEC website, Peirce said:

“I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order. More generally, the Commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs.”

On Thursday, Hacked commented on a transcript that described a “heated debate” on cryptocurrency between SEC Chairman Jay Clayton and an unnamed attorney. According to Eric Werner, an associate director of enforcement with the SEC, Clayton is giving the cryptocurrency debate “the same dedication and thought process” as every other issue he has faced throughout his tenure as agency chief.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 546 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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