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Sen. Pat Toomey, who recently pushed for less-burdensome cryptocurrency regulations, has disclosed investments in Bitcoin and Ethereum.

The Pennsylvania Republican, the ranking member on the Senate Banking Committee, invested a total of as much as $30,000 in Grayscale Ethereum Trust (ticker: ETHE) and Grayscale Bitcoin Trust (GBTC). According to a disclosure Toomey filed Wednesday with the Senate Office of Public Records, he invested between $1,001 and $15,000 in each of the trusts on June 14.

On June 10, the senator wrote to Treasury Secretary Janet Yellen to raise concerns regarding recent proposals to regulate cryptocurrency transactions. Toomey noted that the proposals would have a detrimental impact on financial technology, the fundamental privacy of Americans, and efforts to combat illicit activity. He urged significant revisions to them.

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Toomeys office didnt immediately respond to requests for comment. It wasnt immediately clear if Toomey made the investments himself, or if they were made by a third-party advisor.

Toomeys cryptocurrency investments are his first on record; his annual financial report for 2019, the latest available, shows no crypto holdings.

The senator has met with cryptocurrency lobbyists as recently as 2019. Also that year, Toomey spoke against cracking down on Facebooks (FB) cryptocurrency plans.

Grayscale notes on its site that the Ethereum trust has rocketed 860% in the latest 12 months, while the Bitcoin trust has surged 260% in that time. The single-asset products are designed to track the market prices of Ethereum and Bitcoin, respectively.

Toomey said last year that he doesnt plan to run for re-election in 2022, setting up a scramble in Pennsylvania for his seat.

Inside Scoop is a regular Barrons feature covering stock transactions by corporate executives and board membersso-called insidersas well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.

Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.

Link:
Sen. Pat Toomey Invested in Bitcoin, Ethereum After Advocating for Less Crypto Regulation - Barron's

Belarus Legal

The Decree On the Development of Digital Economy the decree of Alexander Lukashenko, the President of the Republic of Belarus, which includes measures to liberalize the conditions for conducting business in the sphere of high technologies.

The provisions of the decree "On the Development of Digital Economy" create of a legal basis for the circulation of digital currencies and tokens based on blockchain technology, so that resident companies of the High-Tech Park can provide the services of stock markets and exchange offices with cryptocurrencies and attract financing through the ICO. For legal entities, the Decree confers the rights to create and place their own tokens, carry out transactions through stock markets and exchange operators; to individuals the Decree gives the right to engage in mining, to own tokens, to acquire and change them for Belarusian rubles, foreign currency and electronic money, and to bequeath them. Up to 1 Jan In 2023, the Decree excludes revenue and profits from operations with tokens from the taxable base. In relation to individuals, the acquisition and sale of tokens is not considered entrepreneurial activity, and the tokens themselves and income from transactions with them are not subject to declaration. The peculiarity of the introduced regulation is that all operations will have to be carried out through the resident companies of the High-Tech Park.

In addition, the decree includes:

Link:
Legality of bitcoin by country or territory - Wikipedia

China in recent weeks has stepped up efforts to rein in the countrys cryptocurrency industry, banning crypto mining operations and ordering major banks not to do business with crypto companies.

The latest move came Tuesday as the government acted against a company for allegedly providing cryptocurrency-related services. The company's business registration was cancelled by the authorities, and all the financial and payments institutions are warned not to provide virtual currency-related services directly or indirectly.

Despite Bitcoins promise of being a decentralized cryptocurrency that is based everywhere and nowhere, about 65% of the world's Bitcoin mining takes place in China. Thats because a handful of powerful Chinese mining hubs embraced the worlds biggest cryptocurrency by competing against other miners to solve the computational puzzles that create more bitcoin.

The Chinese miners helped raise Bitcoins value by more than 1,000 percent in a year to an all-time high of nearly $65,000 in April. After the Chinese miners began shutting down their machines, the value plummeted, closing out the first half of the year down almost 50% from its record.

Volatility vs stability

Bitcoin is the most popular of numerous new cryptocurrencies, which are not backed by precious metals or government credit. Instead, its price reflects only speculation on its future value. As a young currency, it is considered a risky investment with highly volatile value. Over the past ten years, Bitcoin suffered four separate losses of at least 50%, something other sectors rarely experience.

While there could be a wide range of factors that prompted China's crackdown, one thing was made repeatedly very clear by authorities: Bitcoin's wild price moves are a threat to the nations economic and financial stability.

The government said cryptocurrencies disrupt economic order and that it will "resolutely prevent the transmission of individual risks to the wider society, according to the State Council's Financial Stability and Development Committee, which held a meeting chaired by Vice Premier Liu He, president Xi Jinping's top representative on economic and financial matters.

China first moved in 2013 to restrict its banks from using Bitcoin as currency, citing concerns its inherently speculative nature threatens the country's financial stability. Over the years, the government has become even more wary. Since May, Beijing moved to effectively shut down all crypto mining operations in the country. In late June, the central bank also required payment firms and banks shut down the accounts of individuals involved in crypto transactions.

"The Chinese state in my reading has a fine-grained control over fluctuations in markets for important goods and assets," said Isabella Weber, an assistant professor of economics at the University of Massachusetts Amherst.

Weber noted in an interview with VOA that China not only bails out stakeholders after financial bubbles burst, but the government actively tries to prevent bubbles from bursting in the first place. As a result, authorities are also very sensitive towards rapid speculative expansions and price hikes such as the one that occurred in the Bitcoin sector in recent months.

"Currently, there is growing concern around financial stability in China. In this context, the crackdown on cryptocurrency is an attempt to contain a potential source of instability," she added.

Ross Darrell Feingold, a lawyer and political risk analyst who advises clients doing business in Asia, told VOA that if a governments political legitimacy does not come from elections, then it needs to come from other sources such as economic achievements.

"This applies even more in China, where the party organization, alongside other stake holders such as government agencies, has a significant role in economic policy making," said Feingold.

The right to mint money

Although protecting Chinas economic growth is a primary concern of Beijing, analysts believe the deeper reason the government carried out the sudden crackdown on Bitcoin is that cryptocurrency fundamentally represents a threat to state monetary sovereignty.

Established in 2009 by an anonymous programmer known as Satoshi Nakamoto, Bitcoin by design has no central authority making policy choices that affect its value, unlike traditional fiat currencies issued by governments. Many cryptocurrency advocates tout the currencys purely market-driven value as superior to government-issued currencies that fluctuate with central banks monetary policy.

"Central banks globally likely view cryptocurrencies as a threat to fiat currencies," said Brendan Ahern, the Chief Investment Officer of Krane Shares, a China-focused provider of exchange-traded funds. "It's outside of their purview, their jurisdiction. Their ability to pull the levers within the economy is threatened by it," he added in a telephone interview with VOA.

In this view, the more popular Bitcoin becomes among a countrys citizens, the less power their government has to shape economic policies.

China first declared that Bitcoin was not a currency in the real meaning of the word in 2013 when the virtual currency was beginning to gain popularity. In its most recent move to restrict the use of Bitcoin as currency, the government further stated that Bitcoin is not a real currency and should not and cannot be used as currency in the market.

This points to the question about who has the right to issue money, said Weber, the author of book "How China Escaped Shock Therapy."

Weber pointed out that the desire of the state for monetary sovereignty is not uniquely Chinese: "Once this private currency evolves into something more than a fringe phenomenon, states that have the power to do so will tend to step in to reclaim its monopoly over the right to issue money."

In the case of China, however, the issue goes beyond mere economics because the governments political legitimacy is heavily reliant on the success of the countrys economic growth, said Zennon Kapron, founder of Kapronasia, a fintech research and consulting firm. "Any challenge to that economic stability and development, or the financial system that supports it, is similarly challenging for the political system," Kapron told VOA in an email.

Kapron believes crypto does little to further China's growth agenda and may even undermine it by keeping a form of value outside of the governments control. "It then becomes a relatively straightforward decision for the government and regulators to alienate the likely few million people in China that are involved with Crypto rather than risk upsetting the entire economic system."

Read the original here:
Why China Is Cracking Down on Bitcoin - Voice of America

Chris Ratcliffe/Bloomberg via Getty Images

Bitcoin had a solid start to 2021, hitting an all-time high of nearly $65,000 in April. But the digital coin closed out the first half of the year down about 47% from its record and a number of looming risks could result in further pain ahead.

While proponents appear to be holding onto bitcoin for now, other investors are wary about wild volatility in the market and what it means for their portfolios. With that in mind, here are five of the biggest risks facing the cryptocurrency as we enter the second half of the year.

One of the biggest risks for bitcoin right now is regulation.

In recent weeks, China has clamped down on its cryptocurrency industry, shuttering energy-intensive crypto mining operations and ordering major banks and payment firms like Alipay not to do business with crypto companies.

Last week, the global crypto crackdown spread to the U.K., where regulators banned leading digital currency exchange Binance from undertaking regulated activities.

Simon Yu, co-founder and CEO of crypto cashback start-up StormX, told CNBC that China's moves should be viewed as a "positive" thing for bitcoin and other cryptocurrencies like ether as it will lead to more decentralization. However, he added that "over-regulation" of crypto in the United States could be a problem.

"As a country, the U.S. has too many departments regulating it from different angles is crypto a security? A commodity? A property?" Yu said. "As of now, the U.S. hasn't figured out how to properly regulate the industry, which oftentimes leads to decisions that are difficult for crypto to operate."

U.S. Treasury Secretary Janet Yellen and other officials have recently warned about the use of cryptocurrencies for illicit transactions.

Last year, former President Donald Trump's administration proposed an anti-money laundering rule that would require people who hold their crypto in a private digital wallet to undergo identity checks if they make transactions of $3,000 or more.

"We've long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets," UBS wrote in a note this week.

Another big risk is persistent, extreme swings in the price of bitcoin and other digital currencies.

Bitcoin rallied to an all-time record of around $64,829 in April this year, on the day of crypto exchange Coinbase's blockbuster debut. It then tumbled as low as $28,911 in June, briefly sliding below $30,000 and turning negative for the year. It's since risen back above $34,000.

Bitcoin bulls see it as a kind of "digital gold" an asset uncorrelated to the wider marker that could provide sizable returns in times of economic turbulence. But while volatility can be good when the price of an asset is going up, it goes both ways.

While you would have doubled your money if you bought bitcoin in January and cashed out in April, today those year-to-date returns would be 18%. Still, that's above the performance of the S&P 500 index, which is up 16% since the start of the year. And over the last 12 months, bitcoin has more than tripled in price.

"Limited, highly inelastic supply on single cryptos can exacerbate volatility," says UBS. "Limited real world use and extraordinary price volatility also indicate many buyers are seeking speculative gains."

Meanwhile, the trend of traders who have made highly-leveraged bets on bitcoin getting flushed out of the market has led to intense price fluctuations this year.

While continuous volatility could put off some investors, Ross Middleton, chief financial officer of decentralized finance platform DeversiFi, said that volatility in itself isn't a barrier to institutional adoption.

Volatility "can actually be a significant draw as the potential for large price movements means that funds can make significant profits with a relatively small allocation compared to the size of their overall portfolio," he told CNBC.

"The longer that Bitcoin moves sidewards in the $30-$40k range," Middleton added, "the greater the perceived 'base-building' and the sooner that new capital will flow into both the asset and the wider crypto market."

Musk's electric car firm stunned both fans and skeptics of bitcoin this year when it bought $1.5 billion worth of the digital currency and began accepting it as a method of payment. But he subsequently roiled crypto markets after deciding to halt bitcoin payments due to the currency's "insane" energy usage and a reliance on fossil fuels.

It raises some questions for asset managers who are under heightened pressure to limit their investments to ethically-conscious assets.

"At the very least it may deter some investors from holding Bitcoin," analysts at Citi wrote in a research note earlier this year, adding it could also "spur government intervention to ban mining, as seen in parts of China."

So-called stablecoins, whose prices are meant to be pegged to real-world assets like the U.S. dollar, are also facing growing scrutiny.

Last week, Federal Reserve Bank of Boston President Eric Rosengren said tether, a stablecoin that ranks among the world's largest digital currencies, was a risk to the stability of the financial system.

Tether maintains that each of its tokens are backed 1:1 by U.S. dollars held in a reserve, the idea being that this keeps the price stable. Crypto investors often use tether tobuycryptocurrencies, as an alternative tothe greenback But some investors worry tether's issuerdoesn't have enough dollar reservesto justify its dollar peg.

In May, the company behind tether broke down the reserves for the stablecoin, revealing that around 76% was backed by cash and cash equivalents but just under 4% of that was actual cash, while about 65% was commercial paper, a form of short-term debt.

Tether has been compared to traditional money-market funds but without the regulation and, with almost $60 billion worth of the tokens in circulation, has more deposits than that of many U.S. banks.

There havelong been concernsabout whether tether is being used tomanipulate bitcoin prices, withone studyclaiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.

"Tether is a massive problem," Carol Alexander, professor of finance at the University of Sussex, told CNBC. "Regulators seem unable to stop them so far."

"Traders need tether to open accounts and trade. Or other crypto. But since most large traders are U.S.-based, tether is the obvious choice."

Rising speculation in crypto markets could prove another risk for bitcoin.

Dogecoin, a cryptocurrency that started out as a joke, surged wildly earlier this year to record highs as growing numbers of retail investors piled into digital assets in search of outsized gains.

At one point, dogecoin was worth more than Ford and other major U.S. firms, thanks in no small part to support from celebrities like Musk. Its value has depreciated significantly since then.

Elsewhere in the crypto market, a decentralized finance, or DeFi, token called titan crashed to zero. Self-made billionaire investor Mark Cuban was a holder.

"Another concern is the number of scams that have appeared throughout the year," StormX's Yu said. "With certain meme coins, we've seen many pump and dump activities and have seen retail investors getting burned."

"Whenever retail gets burned, the government steps in. And if things are over-regulated to a point, as we have seen with 2018 and ICOs (initial coin offerings), the industry as a whole could be negatively affected."

Original post:
Bitcoin had a wildly volatile first half. Here are 5 of the biggest risks ahead - CNBC

Ransomware is to bitcoin as the Internal Revenue Service is to the dollar. Just as the taxman forces you to use dollars to pay your taxes, electronic ransom demands have been set in bitcoin, forcing companies, individuals and even some governments to use the cryptocurrency if they wish to regain control of their computer systems.

If this sounds wacky, bear with me. Before getting into the full explanation, we need a brief tour of theories of money. The most widely accepted is that money was created because early humans found it so inconvenient to barter with pigs, llamas or berries. It would be much easier to swap my llamas for widely accepted itemscowrie shells, fancy feather boas or carved stonesand then swap those items again for grain than it would be to find someone with grain who happened to want llamas.

Money was also a means of accounting for debts; easier still than using cowrie shells would be to take the grain now, get some notches on a tally stick, and later provide llamas, or grain, or whatever was promised to pay off the debt.

The first of these theories focuses on money as a means of exchange, an area where bitcoin has floundered because of the cost and hassle required to actually buy something in bitcoin. Only when its anonymity and international nature help enough to offset these disadvantages, such as in evading money-laundering laws, taxes and capital controls, is it much used. The rest of bitcoin trading is speculation and exchange arbitrage.

The second theory focuses on moneys role as a unit of account, an area where bitcoin hasnt had any success so far. Even in El Salvador, where bitcoin is being made legal tender, stuff will still be priced first in dollars, then translated into bitcoin for anyone paying in crypto.

More here:
Ransomware Is the IRS of Bitcoin - The Wall Street Journal