As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
BRUSSELS QUESTIONS FACEBOOK: The European Commission asked Facebook (FB) and the Libra Association to respond to a series of questions on financial stability, money laundering and data privacy risks that could be posed by the Libra coin project as the EU prepares to overhaul regulation of digital currencies, The Financial Times' Sam Fleming and Mehreen Khan reported Sunday. Brussels is also seeking to understand how Libra would manage its reserves, protect customer data and address the potential for widespread use of the digital currency to spawn threats to financial stability. Additionally, Congresswoman Maxine Waters, Chairwoman of the House Financial Services Committee, announced Wednesday that Facebook Chairman and CEO Mark Zuckerberg will testify before the Committee at an October 23 hearing. Zuckerberg will be the sole witness at the hearing, which is entitled, "An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors."
EU PROMISES CRYPTO REGULATION: Valdis Dombrovskis, the European Union’s finance commissioner vowed to propose new rules to regulate digital currencies following Facebook’s Libra plans, Reuters’ Francesco Guarascio reported Tuesday. The comments come after both France and Germany voiced concerns Libra could reduce monetary sovereignty. “Europe needs a common approach on crypto-assets such as Libra. I intend to propose new legislation on this,” Dombrovskis said, adding Libra “could have systemic effects on financial stability.”
TETHER PARENT FACES CLASS-ACTION: The companies behind stablecoin Tether are facing a class-action suit accusing them of “propping and popping the largest bubble in history,” causing the disappearance of $265B in cryptocurrency wealth, Bloomberg’s Olga Kharif reported Monday. The complaint claims the issuer manipulated bitcoin prices as Tether’s owners also own the Bitfinex exchange allowing them to execute unbacked bitcoin purchase orders with unbacked Tether. Tether originally said it was backed 1:1 by fiat reserves, but its issuer announced earlier this year that it may also use other assets to support its value. According to the complaint, the buy orders can artificially raise prices in the illiquid crypto market.
BITWISE BITCOIN ETF REJECTED: The Securities and Exchange Commission denied the final application for an exchange-traded fund linked to bitcoin, the Bitwise Bitcoin ETF Trust, according to a Wednesday document posted on its site. The ETF would have followed the spot price for bitcoin and the move comes after the SEC rejected a similar bitcoin ETF by VanEck last month. "Because, among other things, the Sponsor has asserted that 95% of the bitcoin spot market consists of fake and non-economic activity, but has not established that it has, in fact, identified the ‘real’ bitcoin market, or that the ‘real’ bitcoin market is isolated from the fraudulent and manipulative activity, we find, in each case, that NYSE Arca has not met its burden to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and therefore the Commission disapproves this proposed rule change," the agency wrote.
CFTC SAYS ETHER IS A COMMODITY: Commodity Futures Trading Commission chairman Heath Tarbert said he believes ether is a commodity falling under the jurisdiction of the CFTC and he expects ether futures trading on U.S. markets in the near future, Yahoo Finance’s Daniel Roberts reported Thursday. “We've been very clear on bitcoin: bitcoin is a commodity. We haven't said anything about ether -- until now,” Tarbert said. “It is my view as chairman of the CFTC that ether is a commodity…It stands to reason that similarly assets should be treated similarly. If the underlying asset, the original digital asset, hasn’t been determined to be a security and is therefore a commodity, most likely the forked asset will be the same, unless the fork itself raises some securities law issues under that classic Howey Test.”
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), DPW Holdings (DPW), Kodak (KODK), Ideanomics (IDEX), Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin rose roughly 2.3% this week to $8,354 in U.S. dollars, according to TradeBlock.
Keywords: bitcoin, ethereum, crypto, cryptocurrency, cryptocurrencies, token, stocks, blockchain, stablecoin, regulation