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Biden’s pick for CFTC chair wants the agency to be a ‘beat cop’ with the authority to oversee 60% of digital asset market

Rostin Behnam said it was "critically important to have a primary cop on on the beat" of an emerging market that included cryptocurrencies and stablecoins.

Acting chairperson of the Commodity Futures Trading Commission, or CFTC, Rostin Behnam has likened the government agency’s enforcement of the digital asset space to a beat cop on duty.

At an Oct. 27 hearing of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry to assume his position on a permanent basis, Behnam said to chairperson Debbie Stabenow the CFTC has been “aggressively pursuing enforcement cases” in the crypto space for some time, including its $100 million case against crypto derivatives exchange BitMEX and the $42.5 million in fines it levied against Tether and Bitfinex. However, he asked that the committee consider expanding the authority of the CFTC given the emerging digital asset market.

“This is the tip of the iceberg,” said Behnam. “As of yesterday, the total size of the digital asset market was $2.7 trillion. Among that $2.7 trillion, nearly 60% were commodities [...] given the size, the scope, and the scale of this emerging market, how it’s interfacing and affecting retail customers, and with the scale of the growth being so rapid, potential financial stability risks in the future, I think it’s critically important to have a primary cop on on the beat.”

Behnam also responded to a question from Ohio Senator Sherrod Brown on whether the CFTC would require “additional tools” to handle enforcement in the crypto space, saying the agency as well as the Securities and Exchange Commission would likely need “a regulatory structure for both securities and commodities.” Both groups in addition to the Financial Crimes Enforcement Network currently handle digital asset regulation in the United States, but with different jurisdictional claims, resulting in a patchwork approach companies must navigate to legally operate.

“The markets and the market transactions that are taking place right now are a huge part of the risk that digital assets pose,” added Behnam.

Related: CFTC commissioner says agency has broad enforcement authority on crypto derivatives

There are currently only two commissioners serving at the CFTC out of the normal five since the departure of Dan Berkovitz earlier this month, Brian Quintenz in August, and former chair Heath Tarbert in January. Behnam — who has been serving as acting chair at the agency following Tarbert’s departure — is President Joe Biden’s pick to lead the CFTC. In addition, Biden has chosen Kristin Johnson and Christy Goldsmith Romero to fill two of the remaining three seats. All must be confirmed by the Democrat-controlled Senate.

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Privacy or policy? Why Facebook’s crypto wallet, Novi, is facing resistance

Facebook’s Novi wallet lets users send and receive a dollar-pegged stablecoin, but not hold it.

The stablecoin market has grown exponentially over the last few months due to the numerous advantages blockchain-based versions of fiat currencies have. But, when Facebook launched its cryptocurrency wallet Novi using Paxos’ stablecoin, some United States senators were quick to oppose it. Are they concerned about user data or monetary sovereignty?

The social media giant which, according to its Q2 2021 report, has 2.9 billion monthly active users across all of its platforms, tapped Coinbase and Paxos for its Novi digital wallet project that kicked off its testing phase in the U.S. and Guatemala on Oct. 19.

The pilot program allows users in both countries to download the Novi digital wallet app for iOS or Android devices and fund their accounts with a debit card. The wallet allows them to send and receive Pax dollars (USDP), which are dollar-pegged stablecoins issued by Paxos.

Novi customer funds will be custodied with Coinbase, which manages over $180 billion in assets. A Facebook spokesperson told Cointelegraph that the pilot phase allows the company to evaluate the wallet’s core functions and showcase operational capabilities. 

Additionally, the spokesperson said that the company hasn’t dropped support for the permissionless payment system it’s developing called the Diem network and is, instead, waiting for a green light from Washington. After receiving regulatory approval, Facebook plans to launch Novi with Diem.

Bringing stablecoins to the masses

Facebook’s digital wallet Novi and its use of a stablecoin custodied by a central entity may go against the cryptocurrency space’s ethos of decentralization and self-sovereignty but could help move blockchain technology to the back-end, potentially allowing billions of people to use it every day without noticing.

Speaking to Cointelegraph, Justin Hartzman, CEO of Toronto-based cryptocurrency exchange CoinSmart, said he believes the launch of Novi is “definitely a major step towards mainstream adoption” of cryptocurrencies, given Facebook’s massive user base.

Hartzman said that on the negative side of Novi’s launch, users won’t be holding their own coins directly, but will instead “keep track of your USDP balances while they are held in custody by Coinbase.”

Sergey Zhdanov, chief operating officer of United Kingdom-based cryptocurrency exchange EXMO, echoed Hartzman’s sentiment on the potential advantages of the Novi project, pointing out that stablecoins today are the “main bridge between traditional finance and the cryptocurrency market.” Zhdanov told Cointelegraph:

“Not to mention the fact that stablecoins are often the only possible option for receiving and sending money in countries with an undeveloped banking system.”

Zhdanov said that stablecoins can become the foundation for “faster and cheaper payments, making it easier for people to pay for goods or store their money.” This will only happen, however, if stablecoins are not “stifled by overly strong regulation.”

Regulators have notably cracked down on Facebook’s original cryptocurrency ambitions, which involved launching a coin backed by a basket of fiat currencies. The project ended up changing course over a year after it was originally announced, complete with a rebrand from Libra to Diem.

Regulatory woes

Soon after Facebook launched its Novi wallet pilot, five senators called for the immediate closure of the cryptocurrency wallet. In a letter sent to Mark Zuckerberg, Facebook’s founder and CEO, the five senators wrote that given the “scope of the scandals surrounding” the company, they were voicing their “strongest opposition to Facebook’s revived effort to launch a cryptocurrency and digital wallet.”

The letter came from the office of Senator Brian Schatz and was co-signed by senators Tina Smith, Richard Blumenthal, Sherrod Brown — who also chairs the Banking Committee — and Elizabeth Warren. 

In response, Diem told regulators it’s an independent organization, stating, “Diem is not Facebook. We are an independent organization, and Facebook’s Novi is just one of more than two dozen members of the Diem Association. Novi’s pilot with Paxos is unrelated to Diem.”

To Zhdanov, Facebook may not have any other choice but to “accept the request and disconnect the wallet.” He said that global regulators cracked down on Libra because they saw it as a threat to their monetary sovereignty, adding:

“It would be strange to imagine that the United States would easily agree to redirect huge cash flows to a private company with a huge audience.”

The CEO concluded that he hopes large industry players will be “able to influence what is happening and will not let the largest part of the cryptocurrency market die,” referring to stablecoins.

To CoinSmart’s Hartzman, regulators have been pressuring Facebook because of the company’s past, and not because of its involvement with the cryptocurrency sector or stablecoins. To him, even if Facebook caves to the pressure and shelves Novi, it may not have a major effect on the wider crypto market.

Shift to the metaverse

Speaking to Cointelegraph, CEO of trading platform Spectre.ai Kay Khemani pointed to something bigger than Facebook’s plans initially revealed: the company’s rebrand to focus not on social media, but the metaverse.

The metaverse is loosely defined, but it’s often seen as a digital reality combining aspects of social media, augmented reality and online gaming and cryptocurrencies together. Sources at Facebook have been claiming the company is getting ready to announce a rebrand meant to reflect its shift in priorities to the metaverse.

As The Verge reported, the move is meant to signal the company’s focus on being known for something other than social media. Mark Zuckerberg has said the metaverse will be a “big focus” for Facebook as he believes it “is just going to be a big part of the next chapter for the way that the internet evolves after the mobile internet.”

Khemani said that Facebook is an innovator that “changes paradigms” and that it could corner the market by owning both premier virtual reality hardware producer Oculus and having the largest social media user base out there.

These two things combined could make Facebook a major player in the metaverse, one that U.S. regulators may be more lenient on to “prevent the social media conglomerate from potentially relocating its operations outside the USA.” That move, Khemani said, would trigger an exodus from tech giants that would “undoubtedly harm the U.S. economy.”

As it stands, Facebook appears to be moving forward with both its cryptocurrency wallet Novi and its stablecoin project Diem. If the company manages to make the use of blockchain technology imperceptible, it could launch a cryptocurrency application that would be adopted by billions.

As Facebook is already working with Coinbase and Paxos, it wouldn’t be a stretch to believe Novi could, in the future, offer its users seamless access to other cryptocurrencies including Bitcoin (BTC). Veteran crypto users may nevertheless choose to stay away, as controlling their private keys is paramount.

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US regulators are exploring policy for banks to handle crypto, says FDIC chair

“Establishing clear regulatory expectations will be paramount to give this market an opportunity to grow and mature in a responsible manner,” said Jelena McWilliams.

Jelena McWilliams, the chairperson of the Federal Deposit Insurance Corporation, or FDIC, has said the agency is working with other regulators in the United States to explore “under what circumstances banks can engage in activities involving crypto assets.”

In a speech at the Money20/20 fintech conference on Oct. 25, McWilliams said the FDIC, in coordination with the Federal Reserve and the Office of the Comptroller of the Currency, is looking to provide regulatory clarity for banks handling crypto assets including stablecoins. The chairperson said the FDIC planned to issue “a series of policy statements” in the coming months on guidance for banks.

According to McWilliams, stablecoins have many potential benefits to consumers, such as faster, cheaper, and more efficient payments. However, she claimed that if “one or more were to become a dominant form of payment in the United States or globally” there could be significant effects on that country’s financial stability with funds no longer being held in insured banks.

“In order to realize the potential benefits stablecoins have to offer, while accounting for potential risks, stablecoins should be subject to well-tailored government oversight,” said the FDIC chairperson. “That oversight should rest on the foundation that stablecoins issued from outside the banking sector are truly backed 1:1 by safe, highly liquid assets.”

Related: SEC chair compares stablecoins to casino poker chips

McWilliams’ remarks came the same day Bloomberg reported many U.S. regulators had agreed on the Securities and Exchange Commission leading the nation’s efforts to regulate stablecoins. The Department of the Treasury said in July it was exploring the creation of a type of banking charter for stablecoin issuers.

The seeming lack of regulatory clarity concerning digital assets in the United States has been an issue for many firms fearing legal action or other forms of governmental backlash. Some lawmakers have put forward legislation for U.S. regulators to work with participants in the crypto space to better define what’s expected of them.

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The Sioux Energy Center has mined 20 Bitcoin in secret since April

The environmental impacts of the site were quickly called into question following the reveal.

Electric services provider the Ameren Corporation announced Monday that it has successfully mined upwards of 20 Bitcoin using excess energy generated by one of its coal-based power plants — the Sioux Energy Center in West Alton, Missouri.

While the company set up the data center used to mine the coins back in April, it did not publicly announce the addition until today. Its half-megawatt mining facility taps into the Sioux Energy Energy Center’s 972 MW generation capacity to complete the necessary proof-of-work based mining activities.

Ameren’s goals in launching the operation appear to have been to stop a decline in the power plant’s energy generation, and to provide the company with a new revenue stream. When mining began in April, the power plant was allegedly running at a mere 17% of its full capacity.

Following the announcement, the company’s environmental impact was quickly called into question. In February, an alliance of three environmental groups — the Waterkeeper Alliance, Missouri Confluence Waterkeeper, and Great Rivers Environmental Law Center — announced their intent to file suit against the company for violating the Federal Clean Water Act.

“They (Ameren) have responded and we are evaluating our options,” said Bruce Morris, an attorney with The Great Rivers Environmental Law Center.

The Sioux Energy Complex, which sits on farmland near the banks of the Mississippi River, is alleged to store over 3 million tons of coal ash in an unlined storage pit. The environmental groups have urged management at the Sioux Energy Complex to remove the coal ash storage pit in the past, but to seemingly limited avail.

Ashtracker, the Energy Integrity Project’s energy pollution data-reporting site, have also stated that of the 29 water monitoring wells surrounding the plant, 15 are polluted above Federal advisory levels for molybdenum, boron, sulfate, lithium and cobalt.

Although the utility did complete a $600 million plan that upgraded the plant with the latest environmental controls back in 2010, Ameren’s mining operation appears to go against much of the industry’s views on how companies in the space should approach their environmental footprint. Everyone from Elon Musk to the crypto derivatives trading platform BitMEX have pledged to do their part to make mining a less resource and energy-intensive endeavor. Sam V. Tabar, Chief Strategy Officer for bitcoin miner BitDigital, has said that the use of carbon-neutral energy sources are integral to improving sustainable practices and mitigating the industry’s environmental impact.

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Crypto investments a financial backup for Facebook whistleblower

Frances Haugen also received financial help from nonprofit organizations backed by Pierre Omidyar, a co-founder of eBay.

Frances Haugen, a former Facebook employee turned whistleblower, revealed that her refuge in Puerto Rico is currently being supported by an auspiciously timed cryptocurrency investment.

Haugen worked as a Facebook product manager before accusing the company of spreading controversial and insensitive misinformation. She allegedly possesses numerous confidential research documents, which, according to her, shows that “Facebook prioritizes profit over the well-being of children and all users.” Previously, Facebook has been accused of influencing the 2016 United States presidential election with the help of Russian agencies.

In a follow-up interview with The New York Times, Haugen was asked about her financial situation:

“For the foreseeable future, I’m fine, because I did buy crypto at the right time.”

The whistleblower also received financial help from nonprofit organizations (NPO) backed by Pierre Omidyar, a co-founder of eBay. However, Haugen clarified that Omidyar’s NPO fundings were only used to finance travel and related expenses.

According to Haugen, shifting to Puerto Rico helped her join her “crypto friends” who enjoy capital tax exemptions on Bitcoin (BTC) and cryptocurrency assets.

Related: Bitcoin got stronger despite government crackdowns, says Edward Snowden

Iconic whistleblower and former U.S. Central Intelligence Agency agent Edward Snowden also continues to show support for the Bitcoin economy amid regulatory pressures from governments across the world.

On Oct. 4, Snowden tweeted about Bitcoin’s tenfold growth despite China’s blanket ban on crypto mining and trading.

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YouTube channels hacked and rebranded for live-streaming crypto scams

Google’s Threat Analysis Group (TAG) attributes the attacks to a group of hackers recruited in a Russian-speaking forum, who sell the hacked YouTube channels to the highest bidder.

A new report shared by Google’s Threat Analysis Group (TAG) highlights an ongoing phishing campaign against YouTube creators, typically resulting in the compromise and sale of channels for broadcasting cryptocurrency scams.

The TAG attributes the attacks to a group of hackers recruited in a Russian-speaking forum, who hack the creator’s channel by offering fake collaboration opportunities. Once hijacked, the YouTube channels are either sold to the highest bidder or used to broadcast cryptocurrency scams:

“A large number of hijacked channels were rebranded for cryptocurrency scam live-streaming. On account-trading markets, hijacked channels ranged from $3 USD to $4,000 USD depending on the number of subscribers.”

The YouTube accounts are reportedly being hacked using cookie theft malware, a fake software configured to run on a victim’s computer without being detected. TAG also reported that the hackers also changed the names, profile pictures and content of the YouTube channels to impersonate large tech or cryptocurrency exchange firms.

According to Google, “the attacker live-streamed videos promising cryptocurrency giveaways in exchange for an initial contribution.” The company has invested in tools to detect and block phishing and social engineering emails, cookie theft hijacking and crypto-scam live streams as a countermeasure.

Given the ongoing efforts, Google has managed to decrease the volume of Gmail phishing emails by 99.6% since May 2021. “With increased detection efforts, we’ve observed attackers shifting away from Gmail to other email providers (mostly email.cz, seznam.cz, post.cz and aol.com),” the company added.

Google has shared the above findings with the Federal Bureau of Investigation (FBI) of the United States for further investigation.

Related: CoinMarketCap hack reportedly leaks 3.1 million user email addresses

Over 3.1 million (3,117,548) user email addresses were reportedly leaked from a crypto price-tracking website, CoinMarketCap.

According to a Cointelegraph report, Have I Been Pwned, a website dedicated to tracking online hacks found the hacked email addresses being traded and sold online on various hacking forums.

CoinMarketCap acknowledged the correlation of the leaked data with their userbase but maintains that no evidence of a hack has been found on their internal servers:

"As no passwords are included in the data we have seen, we believe that it is most likely sourced from another platform where users may have reused passwords across multiple sites."

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Texas Ethics Commission seeks pro-crypto rule for political contributions

If approved, cryptocurrency donations and contributions will need to be reported as in-kind contributions or as investments, not currency.

The proposal was filed with the Texas Secretary of State, which sought to address and clarify the reporting requirements of political contributions made with cryptocurrencies. According to the filing:

“The new rule permits candidates, officeholders, and political committees to accept cryptocurrency. It does not distinguish between any types of cryptocurrencies, like Bitcoin.”

If approved, cryptocurrency donations and contributions will need to be reported as in-kind contributions or as investments, not currency. According to the Commission, this move “mirrors the way the Federal Election Commission (FEC), Internal Revenue Service (IRS) and Securities and Exchange Commission (SEC) treat cryptocurrency contributions.”

The proposal clarifies that political and governmental campaigns will not be able to permitted to spend cryptocurrencies directly and will require to liquidate cryptocurrencies before spending the proceeds. However, the Commission mentioned:

“The rule would not require filers to liquidate their cryptocurrency holdings within any particular timeframe.”

In addition, the proposal plans to counter the high volatility of cryptocurrencies by directing filers to report the value of any accepted cryptocurrency as the fair market value at the time of receipt.

The legality of every crypto contribution will be determined by an affirmation that the contributor is not a foreign national. According to the filing, the new rule is proposed under Texas Government Code §571.062, which authorizes the Commission to adopt rules to administer Title 15 of the Election Code.

Related: Cryptocurrencies now recognized under commercial law in Texas

The state of Texas recently approved two house bills that promote cryptocurrency blockchain adoption.

According to a Cointelegraph report, Texas House Bills 1576 and 4474 were signed into law by Governor Greg Abbott that allows the establishment of a blockchain working group and amends the state's Uniform Commercial Code to recognize cryptocurrencies under commercial law.

The Texas Ethics Commission proposed a new rule that permits government officials and politicians to accept Bitcoin (BTC) and cryptocurrency contributions. 

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Crypto breaks Wall Street’s ETF barrier: A watershed moment or stopgap?

With the Bitcoin ETFs, investors won’t have to deal with hot/cold storage decisions, crypto exchanges, fraud, etc. “Convenience does the magic here.”

But others, like Arca CEO Rayne Steinberg, had “mixed feelings” about the events. While pleased that a much-awaited crypto investment vehicle finally received regulatory approval — ending eight years of futility on the part of U.S. fund issuers — he had some misgivings about the product that finally met the approval of the SEC, specifically the fact that it was futures-based and didn’t track the price of Bitcoin (BTC) directly.

“We do not think a futures ETF is a good way to get Bitcoin exposure,” he said in a blog, adding, “Futures based ETFs work for short term trading, but have massive tracking error issues over long periods, which is what most investors are looking for when it comes to Bitcoin exposure.”

Markus Hammer, an attorney and principal at Hammer Execution consulting firm, agreed with some others that the event was a milestone yet cautioned, “It is only one milestone with quite a journey ahead,” further informing Cointelegraph, “As an investor, if you want to go long in crypto — and many do — you prefer a fund that tracks ‘physical’ Bitcoin and not a derivative of it.”

The ProShares ETF is a bet on BTC’s future price movements. That is, “the product ultimately deviates from the BTC price itself, next to the fact that ProShares as the issuer is just another intermediary and thus counterparty risk to the investor.”

Futures-based vs. physical ETF — Does it matter?

Many institutional investors will probably wait for a physical Bitcoin ETF — tied to the spot market, not the derivatives market — that tracks the actual price of the cryptocurrency, Campbell Harvey, professor of international business at Duke University, told Cointelegraph. The BTC futures market is relatively small, he explained, “and the buying pressure in the futures will lead to a negative ‘roll return,’” meaning that:

“You are paying a premium to buy the futures each time you ‘roll over’ to the next contract. It is far more direct to buy the physical, but the SEC has given no indication they are willing to allow that.”

In an interview with CNBC shortly after the Oct. 19 launch, SEC Chair Gary Gensler suggested why the agency had permitted only this indirect path to the crypto space: “What you have here is a product that’s been overseen for four years by a U.S. federal regulator, the CFTC, and that has been wrapped in something that is within our jurisdiction [i.e., the SEC] by the Investment Company Act of 1940, so we have some ability to bring it inside of investor protection.”

In other words, the new product will have two layers of regulatory protection — the CFTC and the SEC — against potential hackers, manipulators and fraudsters.

Whatever its pedigree, the ProShares fund obviously resonated with investors — by the end of its second day of trading, it had reached $1 billion in assets under management, the earliest any ETF has reached that mark.

“This is the first American ETF that is designed to track Bitcoin, and that certainly means something,” Jeff Dorman, chief investment officer of Arca, told Cointelegraph, “but it definitely isn’t the product that the market wanted nor is it one that financial advisors feel comfortable selling, so it will likely lead to less adoption than a physical-backed ETF would have.”

Some, including Harvey, saw significance in the fact that Invesco, a leading ETF provider, announced on Monday that it was abandoning its bid to issue a BTC futures ETF — at least for the time being — and focus instead on “pursuing a physically backed, digital asset ETF,” an Invesco spokesperson told Bloomberg.

Will pension funds rush in?

Asked about pension funds, a cautious but huge subgroup within the institutional investor firmament, Dorman told Cointelegraph, “Pension funds have been doing their due diligence for years” with regard to crypto, but it is unlikely that a Bitcoin futures ETF “moves the needle” much with this investor class. “But if the ETF leads to larger market caps and increased liquidity, then the sheer growth in size of the market will make it easier for pensions to invest comfortably.”

“ProShares’ Bitcoin Futures ETF surely raises the profile of Bitcoin in the institutional investment community,” Ben Caselin, head of research and strategy at cryptocurrency exchange AAX, told Cointelegraph, and it might make it easier for pension funds to gain crypto exposure. “However, there would have to be a wider variety of different Bitcoin ETFs, including physically backed for larger players to enter the market on the back of an ETF,” said Caselin.

Related: Crypto and pension funds: Like oil and water, or maybe not?

Nigel Green, CEO of financial solutions company deVere Group, said in an emailed statement to subscribers that the ProShares futures-based ETF would “inevitably bring in a growing number and broader range of active market participants, including those using pension funds, and retirement and brokerage accounts,” but Dorman, for his part, stated that “ETFs aren’t really designed for institutional investors — it is more of a retail product.”

Any institutional investors that want exposure to Bitcoin would already have different ways to get this exposure, Dorman explained, “so this won’t change much. I do believe we’ll see more institutional adoption of all digital assets, but it’s likely that institutional adoption of Bitcoin will be less than that of other digital assets that can be more easily understood and valued. We’re already seeing new onramps gain traction — NFTs, gaming, DeFi.”

Will it attract individual users?

What about retail investors — will a futures-based Bitcoin ETF be attractive, or is it too technical?

“There are plenty of retail stock traders using trading apps who are not comfortable buying Bitcoin on the spot market, let alone withdrawing such funds into a private wallet,” Caselin said, adding, “In some jurisdictions, retail traders may not be allowed to trade on centralized crypto exchanges. ETFs open up new avenues to gain exposure to Bitcoin’s price action.”

On the other hand, the ProShares ETF’s “separately priced, complex underlying derivatives” might arguably add “an additional layer of complexity for those who have been wanting to easily and safely buy Bitcoin,” John Iadeluca, CEO of Banz Capital, told Cointelegraph, while Harvey added that “retail investors can easily get exposure to crypto by using existing brokers like Coinbase or Robinhood. They can bypass the ETF and avoid the futures.”

Still, “An ETF is a traditional financial product that can be publicly traded on the exchange like a stock,” noted Hammer. “This will certainly make it somewhat appealing to an unsophisticated retail customer to participate in crypto via their existing trading account and the familiar (centralized) banking system.” They don’t have to deal with hot/cold storage decisions, crypto exchanges, fraud, taxation issues, and the like. “Convenience does the magic here.”

Is an Ether ETF in the cards?

Bitcoin is not the only star in the crypto galaxy, of course. In fact, its dominance has been ebbing some over the past year, and there is even talk about an eventual BTC-ETH “flippening” in which Ether (ETH) surpasses Bitcoin in total market value. It bears asking: How far away is an SEC-approved Ether ETF?

“Given that Ethereum is the second-largest cryptocurrency in the world, the possibility for an Ethereum ETF is high,” Jay Hao, CEO of cryptocurrency exchange OKEx, told Cointelegraph, “but it still needs time to mature.”

“Ethereum has a track record of following Bitcoin in terms of price action and attention,” said Caselin. “However, unlike Bitcoin, Ethereum would not be suitable as legal tender. Also, Ethereum is still in its experimental phase, and while the project has done exceptionally well, there are still questions around what the transition to proof-of-stake [consensus protocol] will look like.” For now:

“Ethereum is more about the platform than it is about the asset. I don’t see an Ethereum ETF on the horizon anytime soon until the space has matured more.”

Iadeluca disagrees. “I think the approval of an Ethereum futures ETF is much more likely now” particularly since Ethereum-based investment products have closely followed the institutional product developments of Bitcoin within the mainstream markets. “However, this may take some time.”

A critical turning point?

All in all, where do the week’s events figure on the crypto historical-significance scale? Was this, indeed, a “watershed” moment where everything changed?

“This is no doubt a significant milestone for the continuous development of the crypto industry,” Hao told Cointelegraph. More attention and participation from institutional investors can only help mainstream acceptance. “As the adoption rate of Bitcoin and crypto grows, the industry will continue to flourish.”

Harvey, however, warned about succumbing to hype. “Overall, the entire space is held back by the regulatory uncertainty, and additional guidance is necessary,” he told Cointelegraph, while Hammer added that “what the market is looking for is a physical ETF rather than a crypto futures ETF.” He also agreed the market still lacks regulatory clarity:

“As long as no uniform crypto taxonomy is defined, the responsibilities between the supervisory authorities are not clearly assigned, and there is no legislative framework that regulates crypto in general, and especially DeFi and stablecoins, then nothing is gained.”

ProShares’ breaking of the ETF barrier remains a “bittersweet” moment for Dorman. On one hand, it’s “great to see another milestone achieved,” but it’s also disappointing because “it is yet another flawed product with high fees and significant tracking error that trades exclusively on a handpicked exchange by the SEC.”

By the same token, one doesn’t want to lose sight of the forest because of the trees. This week’s events could arguably be viewed as a sort of test — “to see if mainstream investors are ready to include cryptocurrencies in their portfolios alongside other assets such as stocks and bonds,” said Green. “And it appears, judging by the reaction, that they are.”

A lot of excitement radiated out of New York this week with the launch of the first Bitcoin exchange-traded fund (ETF) sanctioned by the United States Securities and Exchange Commission. The ProShares Bitcoin Strategy ETF (BITO) had a stunning debut on the New York Stock Exchange as the second-most heavily traded opening-day fund on record, with some calling it “a watershed moment for the crypto industry.” 

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Treasury official acknowledges most crypto transactions are ‘legitimate’ but still anticipates additional sanctions

“The vast majority of digital assets are being used for legitimate purposes, but for those that are primarily in the business of furthering criminal enterprises, we plan to use our tools to go after them,” said Wally Adeyemo.

Wally Adeyemo, the Deputy Secretary of the U.S. Department of the Treasury, said the department would likely be enforcing more sanctions on companies involved in illicit transactions related to ransomware payments.

Speaking at an online event hosted by the Center for a New American Security with former Treasury Secretary Jack Lew and Ambassador Paula Dobriansky, Adeyemo said the U.S. government would likely be dipping into its toolbox by employing sanctions when criminals threaten national security interests. He specifically mentioned “crypto exchanges or mixers that are fundamentally in the business of furthering cybercriminals” as possible targets.

“Our view is that the vast majority of digital assets are being used for legitimate purposes, but for those that are primarily in the business of furthering criminal enterprises, we plan to use our tools to go after them,” said Adeyemo. “We also have to admit to ourselves that ultimately the growth of digital assets is a challenge that we have to address when it comes to our sanction regimes.”

Adeyemo added any investigations into illicit crypto sanctions would include collaboration with the FBI, the intelligence community, and other agencies. His comments come following an Oct. 18 report saying the department needed to do more to develop its infrastructure and policies in regards to digital assets, as they were hampering the implementation of sanctions while balancing funds from legitimate humanitarian organizations. The report suggested the U.S. Treasury should modernize to include the “right expertise, technology, and staff” to tackle digital assets.

Related: Rogue states dodge economic sanctions, but is crypto in the wrong?

The government department has been employing sanctions as part of the United States’ efforts to fight ransomware attacks threatening the country’s infrastructure, such as when Russia-based DarkSide hackers attacked the Colonial Pipeline system in May. Last month, the department announced it would impose sanctions on the Czech Republic as well as Russia-based business Suex OTC for allegedly allowing hackers to access cryptocurrency sent as payment for ransomware attacks.

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Valkyrie Bitcoin futures ETF to launch on Nasdaq on Oct. 22

Valkyrie’s Bitcoin futures ETF will go live on Nasdaq just a few days after ProShares debuted a similar product on NYSE.

Valkyrie’s Bitcoin (BTC) futures-based exchange-traded fund (ETF) is poised to follow the launch of ProShares' Bitcoin Strategy ETF this Friday.

Valkyrie Bitcoin Strategy ETF is finally effective and is set to start trading on Nasdaq under the ticker BTF on Oct. 22, Valkyrie confirmed to Cointelegraph on Thursday.

The launch comes after the United States Securities and Exchange Commission, or SEC, granted a notice of effectiveness to Valkyrie Bitcoin Strategy ETF on Oct. 20.

According to Valkyrie Funds' CEO Leah Wald, the upcoming launch of Valkyrie’s Bitcoin futures ETF marks an important milestone in the relationship between the cryptocurrency industry and U.S. regulators.

“This launch is important because it's further affirmation that U.S. regulators want to collaborate with the industry to regulate crypto assets rather than ban them,” she said.

“The more products that come to market, the more awareness they bring and, hopefully, more adoption. There are of course other filings for similar products, and it would make sense for them to come to market,” Wald added.

Related: JPMorgan says inflation concerns, not ETFs, driving Bitcoin price jump

As previously reported, ProShares’ Bitcoin Strategy ETF became the first Bitcoin futures-based ETF to ever launch in the United States, starting trading on the New York Stock Exchange on Oct. 19. Earlier in October, the SEC also approved a Bitcoin-linked ETF product by Volt Equity, providing investors with an instrument investing in companies with significant exposure to Bitcoin.

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