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US State Regulator Issues Warning Regarding Crypto Interest-Bearing Accounts During Market Recession

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Arizona’s financial watchdog has issued a warning to investors regarding cryptocurrency interest-bearing accounts. The regulator warned that “some companies may materially overstate the extent to which their collateral practices safeguard their ability to pay investors the stated return.”

The Arizona Corporation Commission issued an investor alert this week, warning about “digital asset financial services companies that offer interest-bearing crypto-asset accounts.”

The regulator explained: “With crypto-interest accounts, customers lend crypto assets to the company and, in exchange, receive interest paid in crypto assets.” The Arizona Corporation Commission elaborated:

However, due to the crypto market downturn, highlighted by the recent bankruptcy filings of Celsius Network and Voyager Digital, some companies are preventing account holders from withdrawing from and transferring between their accounts.

The securities regulator cautioned investors that “some crypto-interest account providers may not have adequately disclosed the risks that customers face when they deposit crypto assets onto these platforms,” adding:

Some companies may materially overstate the degree to which their collateral practices protect their ability to pay investors the stated return.

The commission recently took action against Blockfi Lending LLC and found that certain crypto-interest accounts were unregistered securities.

The regulator revealed that it is investigating whether other crypto-interest account providers are violating laws under its jurisdiction.

Celsius Network and Voyager Digital, two crypto lenders, filed for bankruptcy protection this month. “We believe Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors,” the Department of Financial Regulation of the U.S. State of Vermont stated.

The prolonged volatility and contagion in the cryptocurrency markets over the past few months, along with Three Arrows Capital’s (‘3AC’) default on a loan from the company’s subsidiary, Voyager Digital, LLC, are what compelled Voyager CEO Stephen Ehrlich to file for bankruptcy.

According to a study, cryptocurrencies are a “Good Alternative to Traditional Settlement Processes.”

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According to a recent study, cryptocurrency can be a good substitute for traditional settlement procedures because it uses blockchain technology, which enables instantaneous transaction completion without the need for middlemen. Some participants in the cross-border money transfer market believe that blockchain technology and cryptocurrencies can improve remittance procedures.

In the most recent report from the International Association of Money Transfer Networks (IAMTN), it was stated that using cryptocurrencies for the settlement of transactions can be a useful “alternative to traditional settlement processes.” The report claims that this is because transactions are settled instantly on the blockchain, the technology that powers cryptocurrencies, without the need for middlemen like correspondent banks.

The importance of the blockchain for not only reducing the cost of remitting funds but also for speeding up the transfer of money across borders is further highlighted by the combination of declining correspondent banking relationships and the rising volume of cross-border transactions.

“Cross-border transactions can be settled almost instantly, thus obviating the need for pre-funding accounts in receiving countries, which is an expensive practice for remittance providers. A number of businesses, ranging from traditional remittance services providers to cryptocurrency fintechs are using blockchain technology to improve remittance processes,” explains the report.

Cryptocurrencies a 'Good Alternative to Traditional Settlement Processes' — Study

To buttress this assertion, the report includes the findings of a study by IAMTN which sought industry players’ views on innovative technologies which can improve the process of sending funds across borders. As suggested by the findings, both the blockchain and cryptocurrencies are seen as innovations that “bring [an] an infinite number of possibilities in the realm of cross-border payments.

”Open application programming interface (API) and artificial intelligence (AI) are the other two technologies perceived to have the potential to improve the remittance process, the IAMTN study also found. Besides disrupting the financial industry, many of these new technologies can “permanently improve the infrastructure behind cross-border payments, in the interest of end-users.”

Cryptocurrencies “Have the Potential to Create New Ways for Young People to Earn,” According to Kenyan Activists

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According to some activists in Kenya, raising money through the sale of non-fungible tokens (NFTs) and cryptocurrencies is not only quicker, but also less expensive. Digital currency also has the “potential to create new ways for young people to earn, spend, save, and send money,” the activists continued.

After the Covid-19 pandemic caused traditional funding channels to dry up, some African activists responded by raising funds through cryptocurrency and non-fungible tokens (NFT) sales. The raised funds have in turn ensured the sponsorship of activists’ welfare work continued unhindered by pandemic-related challenges.

Although cryptocurrency is still relatively new to some activists, a director of a nonprofit based in the Kenyan slum known as Kibera is quoted in a Thompson Reuters Foundation report stating that this is in fact a faster way of raising funds.

“Raising funds through cryptocurrency was something new for us. But it is now going to inform how we implement our social welfare activities because we have seen how fast we can move on fundraising,” explained Byrones Khainga, the director of technical services at Human Needs Project.

According to the report, a sculpture made of plastic depicting a huge tap was installed by Khainga’s Human Needs Project. The sculpture was made by artist and activist Benjamin Von Wong, who raised money by selling NFTs, and the Kenyan NFT community Degenerate Trash Pandas, which campaigns against plastic waste. Together, they are said to have raised $110,000 through NFTs, which was used to pay for the installation of the enormous plastic sculpture.

Crypto Reduces Barriers to Entry

Besides being a faster way of raising funds, “crypto [also] reduces barriers of entry” said to Roselyne Wanjiru, a researcher at the Blockchain Association of Kenya. She adds that more companies and individuals are switching to this fintech.

The report also quotes Scott Onder, a senior managing director at Mercy Corps Ventures, explaining why cryptocurrencies are better for moving funds across borders. He said:

Cryptocurrency removes this costly barrier and has the potential to create new ways for young people to earn, spend, save and send money.

While critics often highlight the energy inefficiency of cryptocurrencies like bitcoin, Big Mich, a Kenyan choreographer, and a youth trainer, argued that the good things about technology must not be ignored. For Von Wong, any fundraising approach which makes it easier to move capital more quickly and cheaply “is always a good thing.”

Industry claims that Ukraine’s new fiat restrictions will increase the popularity of cryptocurrencies.

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The fixed rate of the national currency in U.S. dollars has been modified by the central bank of Ukraine, and stricter restrictions on hryvnia transactions for citizens have been put in place. According to a representative of the local cryptocurrency industry, the measures are probably going to encourage more Ukrainians to use cryptocurrencies.

New regulations have been made by the National Bank of Ukraine (NBU) in response to the country’s economy’s shifting fundamentals as a result of an ongoing military conflict with Russia. On Thursday, the monetary authority set new restrictions on banking activities using the national fiat currency and devalued the Ukrainian hryvnia by 25% against the strong dollar.

Banks can only sell non-cash foreign currency to their customers in accordance with the updated regulations for private individuals, which went into effect on July 21, if the amounts are deposited for a duration of at least three months with no provision for contract termination.

The previous weekly withdrawal cap of 12,500 hryvnia ($340) has been replaced with the previous cap of 50,000 hryvnia. Peer-to-peer transfers abroad from cards issued by Ukrainian banks have been cut from 100,000 hryvnia (approx. $2,700) to 30,000 hryvnia ($800). And the limit for cross-border settlements with hryvnia cards has been set at 100,000 per month.

All the measures introduced since the beginning of the war are temporary and allow the economy to survive, assured NBU Governor Kirill Shevchenko. However, they are seriously affecting Ukrainians, especially those millions of the nation’s citizens who have been forced to leave the country and are still unable to return.

According to Mikhail Chobanyan, the founder of the Ukrainian cryptocurrency exchange Kuna, the most recent NBU restrictions may spark a surge in interest in cryptocurrencies among Ukrainians. “We anticipate a rise in cryptocurrency use and turnover. 100,000 hryvnias is nothing in Europe, the businessman continued.

Chobanyan also pointed out that the new restrictions will make it harder for volunteers to carry out their duties because most of the aid is obtained using cards from Ukrainian banks that are owned by private individuals. Chobanyan, who characterized the central bank’s policy as aggressive and warned that Ukrainian banks and the state budget will suffer, said, “Now we will completely switch these flows to cryptocurrency.”

Thailand’s Oldest Lender Postpones Purchasing Bitkub Exchange Due to Tighter Crypto Regulations

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The company that owns Siam Commercial Bank in Thailand has postponed a deal to buy the majority of Bitkub, the largest cryptocurrency exchange in the nation. The choice was made in the midst of tightening cryptocurrency regulations that are preventing domestic crypto trading from expanding.

A 17.85 billion baht ($487 million) bid by Siam Commercial Bank’s parent company, SCB X, to acquire 51% of Bitkub, Thailand’s largest cryptocurrency exchange, has been postponed. The deal has been postponed indefinitely by the bank, the country’s oldest lender, because Thai regulations continue to stifle the growth of the cryptocurrency market, according to a report by Nikkei Asia, which quoted the financial group.

An unnamed senior official at the SCB X is quoted as saying, “We have made it clear in our statement to the Stock Exchange of Thailand (SET) that the deal is still undergoing due diligence.” “We don’t know when the deal will be sealed,” he added. Earlier in July, the company notified the SET that the matter is still being discussed with regulatory bodies and that its completion period had been extended.

In November of last year, SCB X first declared its intent to buy a stake in Bitkub. The intended channel for the transaction was SCB Securities, its brokerage subsidiary. The strategy was a component of the group’s overall effort to dominate the local fintech market. By the first quarter of 2022, it was anticipated that the deal would be finalized. Bitkub was considered a unicorn at the time and valued at 35 billion baht ($1.05 billion).

The delay came after a February announcement of stricter cryptocurrency regulations by the Securities and Exchange Commission (SEC) and Bank of Thailand. The new regulations restricted their use in transactions and aimed to ensure that they could only be traded on platforms authorized in the nation. Meanwhile, the crypto market slump also dimmed hopes that Bitkub could expand its customer base.

Speaking to Nikkei, Secretary General of the Thai Digital Asset Association Nares Laopannarai commented:

Let me put it this way, I think the tight regulations are quite unfriendly to crypto trade and limit the growth of crypto trading to less than we expected.

What’s more, in the beginning of this month, the SEC imposed sanctions on Bitkub Capital Group Holdings’ Chairman Sakolkorn Sakavee. He was accused of fabricating information regarding the trading volume of digital assets on the exchange. Sakolkorn was fined 8 million baht ($218,000) and banned from executive positions in the company for a full year.

In response to the increasingly stringent regulations in Thailand, Bitkub has tried to relocate to Vietnam. Sakolkorn noted that the destination has a much friendlier crypto business climate. This past spring, Bitkub joined forces with a Vietnamese startup to launch a private blockchain operator called Kubtech. The latter is expected to soon become a trading platform for digital assets.

SABIC, a Saudi chemical manufacturer, has launched a blockchain pilot project.

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According to a chemical manufacturer in Saudi Arabia, a blockchain pilot that just got underway will explore the technology’s potential for “supporting end-to-end digital traceability of circular feedstock in customer products.” Blockchain technology is expected to have several advantages, including faster data integration and reduced costs and time.

Saudi Basic Industries Corporation (SABIC), a producer of chemicals in Saudi Arabia, recently announced the start of a blockchain pilot project in collaboration with Finboot. The pilot program’s goal, according to the chemicals manufacturer, is to “investigate the possibilities of blockchain technology in supporting end-to-end digital traceability of circular feedstock [raw materials] in customer products.”

According to a press release from SABIC, the complicated petrochemical value chain makes it challenging to follow the path of feedstock in its current form. In order to “go further than previous industry applications of blockchain in end-to-end tracing,” SABIC, which is 70% owned by Saudi Arabia’s oil giant Aramco, plans to “trace the product from feedstock production to [the] converter” through the pilot.

The blockchain pilot is expected to reduce costs and time, as well as improve data integration, the statement said. The company also hopes the pilot will help reduce administrative efforts related to the certification process of materials. In remarks following the announcement of the pilot’s launch, Waleed Al-Shalfan, the vice president of Polymers Technology & Innovation at SABIC said:

At SABIC, we have a deep commitment to innovation and technology that can help us to deliver more sustainable solutions to our customers. Our vision to create a circular economy for plastics requires a total transformation of the value chain, and pioneering partnerships with partners both upstream and downstream. Blockchain technology holds exciting potential for the provision of our TRUCIRCLE products to customers, and therefore for our commitment to supporting customers in their sustainability ambitions.

Juan Miguel Pérez Rosas, CEO of Finboot, said the pilot will “contribute to the development and progression of a circular economy.”

According to the press statement, Finboot’s MARCO software will be used as a “middleware layer” that tracks the product from Plastic Energy where it’s produced, to its delivery to SABIC for conversion into its Trucircle circular polymers. The delivery of circular polymers to Intraplás “for conversion into their packaging solutions” will also be tracked.

Throughout the process, the technology will ensure the immutability of all collected data that must be distributed to suppliers, customers, and regulators. This, according to the press statement, provides “transparency, auditability, and accountability in a complex industrial ecosystem.”

The Central Bank Digital Currency is Being “Phased Implemented” by the Reserve Bank of India.

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The Reserve Bank of India (RBI), the country’s central bank, is attempting to “phase in a central bank digital currency (CBDC) in both wholesale and retail segments.” The RBI Act of 1934 has been modified as needed to permit the central bank to test and issue a digital currency.

A Reserve Bank of India (RBI) official and the minister of state in the Ministry of Finance have independently provided an update on the central bank’s progress in issuing a central bank digital currency (CBDC).

RBI Executive Director Ajay Kumar Choudhary was quoted by local media as saying during a keynote address at the PICUP Fintech Conference and Awards on Wednesday:

RBI is working on phased implementation of a central bank digital currency (CBDC) in both wholesale and retail segments.

In a similar vein, Pankaj Chaudhary, a minister of state in the Ministry of Finance, informed India’s Rajya Sabha on Tuesday that “RBI has started the work for a phased implementation of the announcement made… in the budget speech 2022-23.”

The launch of the CBDC for India was announced in the Union Budget for 2022–2023 by Indian Finance Minister Nirmala Sitharaman. After the Finance Bill 2022 passed, the RBI Act, 1934 underwent the necessary amendments to permit the central bank to pilot and issue a CBDC.

The central bank believes that “CBDCs would actually be able to kill whatever little case there could be for private cryptocurrencies,” according to RBI Deputy Governor T. Rabi Sankar, who made the statement in June. The Indian government and the central bank refer to non-state-issued cryptocurrencies, including bitcoin (BTC) and ether (ETH), as private cryptocurrencies. The RBI also warned in May that crypto could lead to the dollarization of a part of the Indian economy.

Earlier this month, RBI Governor Shaktikanta Das said: “Cryptocurrencies are a clear danger. Anything that derives value based on make-believe, without any underlying, is just speculation under a sophisticated name.”

The Indian central bank has repeatedly stated that cryptocurrencies should be prohibited. However, the country’s finance minister told parliament earlier this week that “any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.”

Technical Analysis of Bitcoin and Ethereum: BTC Drops as Tesla Sells 75% of Holdings

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As news broke that Tesla had sold 75% of its cryptocurrency holdings, the price of bitcoin fell during the day’s trading. The announcement follows the company’s Q2 earnings call, during which they confirmed that the token would be converted into fiat money. In response to the news, Ethereum also fell.

Bitcoin

Following a recent run of gains, bitcoin (BTC) fell lower in today’s session, after it was revealed that Tesla had sold 75% of its holdings in the token.

Tesla stated that, “As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency.”

As a result of this, BTC/USD fell to an intraday low of $22,707.51 in today’s session, which comes less than 24 hours after sitting at a peak of $24,196.82.

BTC/USD – Daily Chart

Ultimately, the shift in momentum comes as price strength was already nearly overbought, with the 14-day RSI tracking near a ceiling of 62 on Wednesday.

This resistance has now firmly been held, with the index now at a reading of 57, and a floor of 51 its next possible target.

Should this bearish sentiment intensify, bitcoin could potentially begin to head lower, moving towards $20,000.

Ethereum

Ethereum (ETH) also saw its recent winning streak snapped, as the token fell back into the red during Thursday’s session.

Following a high of $1,612.65 on Wednesday, the world’s second-largest cryptocurrency slipped to a low of $1,472.19 today.

The drop comes as sentiment around crypto turned bearish earlier in the session, with the global market cap trading 3.2% lower as of writing.

ETH/USD – Daily Chart

Looking at the chart, ethereum’s Relative Strength Index was tracking above 70 during yesterday’s session, which was a three-month high.

As of writing, the index now sits at 62, as bears have reentered the marketplace, with some anticipating further declines this week.

If prices are to move lower, the $1,300 support point will likely be a point of interest for bears in the market.

The Colombian Financial Superintendence has unveiled a project to regulate cryptocurrency service providers.

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A project from Colombia’s Financial Superintendence aims to clarify how future interactions between banks and virtual asset service providers (VASPs) will be managed. Before accepting virtual asset service providers as clients, banks must first confirm a number of preconditions, which are defined in the document.

Latam nations, where cryptocurrency adoption is rising quickly, are increasingly focused on regulation. The Financial Superintendence of Colombia has just released a document that aims to set standards for what cryptocurrency exchanges and custody providers need to comply with in order to be treated as customers by banks. Key terms like virtual asset service providers (VASPs) and virtual assets covered by the regulation are defined in the project.

Additionally, it stipulates that companies that offer virtual asset services must be linked to Colombia’s financial intelligence office, UIAF, and have a strategy in place to deal with any potential attempts at money laundering and terrorism financing made using their platform.

The project also makes an indirect reference to compliance with the travel rule promoted by the Financial Action Task Force (FATF). It states banks must verify these VASPs have:

The technological and operational capacity to monitor transactions with virtual assets, as well as to obtain, preserve and transmit the information of the originator and the beneficiary of each transaction.

More Requirements

The proposal establishes that the VASPs will have to be able to present clear information to their customers about the services they offer and the risks associated with these services, the costs associated with these services, and the virtual assets present on their platforms.

VASPs will also have a plan to deal with operational and cybersecurity-related risks to handle possible hacks or platform problems that might affect how their services are delivered to their customers. Also, banks will have the obligation to separate their responsibilities from those of VASPs, telling customers that only they and these platforms are responsible for VASP-related problems.

The proposal also establishes restrictions regarding investments. It states:

The supervised entities authorized to capture resources through deposit products or funds must ensure that the operations of deposit and withdrawal of resources in financial products of deposit or funds in the name of a VASP are carried out only through non-face-to-face channels.

The proposal is still in the discussion stages, and the Financial Superintendence will receive suggestions about it until August 12.

Russia Issues Digital Token to Encourage Palladium Investments

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Photo Credit: Andrey Rudakov/Bloomberg

With the introduction of a palladium token, transactions involving digital assets backed by precious metals are now possible in Russia. The rare metal is not a publicly accessible asset in the Russian Federation but is used in jewelry and has some high-tech applications.

Rosbank and the Russian division of Atomyze, a platform that specializes in tokenizing commodities, have begun trading digital financial assets (DFAs) based on precious metals. The first one is the creation of a palladium token, the owners of which will be entitled to a financial claim equal to the metal’s market value, according to a press release from Atomyze.

According to the Prime Business News Agency, which covered the transaction, palladium is not a publicly traded asset on the Russian market. It is seen as a promising investment at the same time. Palladium is used in jewelry as a substitute for platinum, and demand for platinoids worldwide is rising. It is a commercial substance used in the production of high-tech goods.

Atomyze Russia is registered as a DFA platform operator with the Central Bank of Russia and is permitted to provide financial products based on the blockchain. The report elaborates on how tokenization can open up new possibilities and give businesses and individual investors new tools.

Until a specific law “On Digital Currency” is adopted, perhaps this fall, the only legal term that can currently apply to cryptocurrencies in Russia is “digital financial assets.” DFA, in contrast to decentralized coins, primarily refers to digital assets that have organizations in charge of their issuance and circulation that ensure the rights offered by the asset. Different tokens are in fact defined as “digital rights” in the law “On Digital Financial Assets.”

The issuance of digital rights allowing investment in raw materials like metals, according to billionaire Vladimir Potanin, one of the people behind Atomyze, is a new precedent in Russia. He went even further, declaring that the Russian economy is entering a new era known as “the era of tokenization.” Potanin has previously expressed the hope that tokens will take the place of “unreliable” crypto assets, along with the digital ruble. Some people think DFAs can replace foreign currency deposits as well.

Ekaterina Frolovicheva, CEO of Atomyze Russia, continued, “This first step is just the beginning of a great story that will include a new vision of traditional products and the creation of fundamentally new products for issuers and investors.”

Russia has yet to comprehensively regulate cryptocurrencies as the discussions on their future were prolonged by the current geopolitical situation. While most government institutions oppose their use as a means of payment in the country, a proposal to allow small crypto payments in international trade amid sanctions has been gaining support. A law recently signed by President Vladimir Putin bans DFA payments inside Russia.

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