FreeCryptoCurrency.Me

No stablecoin currently meets the standards set for the digital asset category by central bankers of the world’s largest economies, and many stablecoins “do not have credible mechanisms to support their promise of price stability,” a report issued by the Financial Stability Board concluded today.

The board also cast doubt as to how “stable” stablecoins actually are.

The financial research and policy organization, which is led by senior central bankers and regulators from various large economies, does not make binding rules. But a set of high-level recommendations around crypto assets, and warnings about stablecoins and other digital currencies, will carry weight with policymakers and financial institutions across the globe.

The organization released two reports Tuesday. One centers around high-level recommendations for crypto assets, which the regulatory body plans to finalize next year after a public comment period. The other is an assessment of how broadly stablecoin issuers would meet the “High-Standard” criteria set by the group in 2020.

According to the FSB: None.

Citing limits on redemptions, including the ability to delay or deny them, the FSB found that most users have to sell stablecoins on exchanges in order to liquidate them, and the price could drop below the value of the currency that the coin is pegged to.

The FSB also cast doubt on how most stablecoins would be able to maintain their pricing under market stress, concluding that, “most stablecoins enable arbitrage activities of market participants and to a considerable extent rely on them,” and that it’s unclear how that would hold up under adverse financial conditions, “raising questions about the effectiveness of the stabilization mechanisms in supporting a stable price at all times.”

The research on stablecoins comes in the context of the European Central Bank, U.S. Federal Reserve and other central banks weighing whether or not to issue their own digital currencies, as well as the collapse of the algorithmic stablecoin Terra, which the FSB cites as indicative of, “the inherent difficulty of designing a robust stabilization mechanism based on an algorithm and arbitrage strategy involving assets with no inherent value.”

The board recommends applying similar rules to stablecoins as what banks must currently follow, an approach the U.S. Congress has also discussed. A report on crypto asset regulations, shorter in length than the stablecoins findings, also prescribes a “same activity, same risk, same regulation,” approach to digital assets, also similar to the approach taken by U.S. regulators, including the Securities and Exchange Commission and Commodity Futures Trading Commission.

The comment period for the FSB’s crypto asset regulations will be open until Dec. 15, and the organization plans to issue comprehensive final recommendations in mid-2023.

With additional reporting by Inbar Preiss.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Almost every bitcoin mining stock tracked by The Block trended downward on Monday.

The cryptocurrency plunged close to $19,100 in the early morning after the latest mining difficulty update was posted but recovered in the following hours, settling at around $19,200 at market close, according to data from TradingView.

Greenidge Generation fell 24.14%, followed by Argo (-23.36% on Nasdaq), SAI.TECH (-11.38%) and Bit Digital (-7.63%).

TeraWulf fell 4.41% after announcing in the morning that it raised $17 million in equity and debt.

Here’s how crypto mining companies performed on Monday, Oct. 10:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Federal Reserve will continue to tighten monetary policy in a bid to tame inflation, the central bank’s Vice Chair Lael Brainard told members of an annual economic meeting. 

The strength of U.S. dollar inflation follows shocks from a global pandemic, constrained supply chains due to Russia’s invasion of Ukraine, and high economic uncertainty, said Brainard in a speech at the 64th National Association for Business Economics Annual Meeting in Chicago. The Federal Reserve accounts for high interest rate spillovers, as well as the strength of the dollar and that of foreign economic demand, she said. 

The cross-border effects of unanticipated changes to interest and exchange rates may amplify a lower risk tolerance, given fragile liquidity in core financial markets, said Brainard. This could pose challenges to policymakers if those risks materialized.

“Monetary policy will be restrictive for some time,” said Brainaird, who added that it will require a cumulative effort to reduce inflation rates.

GDP is down

Although supply is coming into better alignment with demand thanks to higher interest rates, real gross domestic product (GDP) has declined at an annual rate of nearly 1%, and real private domestic purchases also ticked down from an annual rate of 6.4% last year to only 1.3% so far this year, Brainard said.

Diminished consumer spending may be a result of lower household savings, which are estimated to be almost 25% down from previous quarters, Brainard said. It is also projected that the policy level rate will more than double by year’s end when compared with expectations seven months prior. That, factored in with increases in interest rates and tightened broader financial conditions, means a limited rebound in the second half of the year with relatively flat GDP growth.

Signs of rebalancing

There are some silver linings. Brainard indicated strong wage growth and high rental and housing costs are expected to reduce high inflation. With demand moving from goods to services, declining core import prices and unsnarled supply chains, core goods are expected to return to some semblance of pre-pandemic pricing.

The pandemic brought margin increases for trade sectors that are anticipated to rebalance with increased inventories, eased supply constraints and cooling demand that Brainard said will help to reduce goods inflation.

Amid differing views on future inflation, a quarter of those surveyed expected prices to be around or less than current levels in the next 5-10 years, Brainard said.

In addition, tentative signs of a labor market rebalancing come from anecdotal reports that suggested the labor market is loosening, Brainard said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The government of Portugal proposed a 28% income tax on cryptocurrencies in its 2023 budget draft, released on Monday.

The tax would apply only to cryptocurrencies owned for less than a year, with gains from crypto held for longer than that period of time still exempt.

Free crypto transactions would also be taxed, and a 4% rate would apply to commissions charged by intermediaries.

The budget is still subject to discussions and approval within the Parliament in the coming weeks. Given that the ruling party (PS) has an absolute majority, it has the power to single-handedly see it through.

The Parliament struck down two separate proposals from minority political parties for a crypto tax, during a 2022 budget voting session in May.

Earlier that month, Fernando Medina, Portugal’s minister of finance, declared his commitment to start taxing crypto, stating that the government would work on the regulatory framework. He also argued that there shouldn’t be any “gaps” resulting in certain gains not being taxed in the country.

The government said that these measures would provide a sense of “safety and legal certainty,” by creating a framework to “foster the cryptoeconomy.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Organisation for Economic Co-operation and Development’s long-in-the-making crypto tax framework was published Monday. The document is meant to formalize information sharing between the 38 member countries, through automatically sharing crypto-related taxpayer information between jurisdictions. 

The information sharing intends to, “target any digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions,” though the group intends to draft carve-outs for assets that cannot be used for payments or investment purposes, or might be covered by a separate tax-reporting agreement between member countries, known as the Common Reporting Standard, or CRS. Today’s digital asset rules, known as the Crypto-Asset Reporting Framework, are meant to complement that existing agreement on tax information sharing between countries. 

In addition to information sharing between countries, the framework also contains model rules for domestic taxation of digital assets. 

The CARF has been nearly two years in the making for the group, an international trade body founded in the 1960s. A draft proposal was made public earlier this year. 

“The Common Reporting Standard has been very successful in the fight against international tax evasion. In 2021, over 100 jurisdictions exchanged information on 111 million financial accounts, covering total assets of EUR 11 trillion,” OECD Secretary-General Mathias Cormann said in a release. “Today’s presentation of the new crypto-asset reporting framework and amendments to the Common Reporting Standard will ensure that the tax transparency architecture remains up-to-date and effective.”

The framework will be formally unveiled during a G20 meeting of central bankers and finance ministers in Washington, D.C. this week, per a press statement.  

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Popular Solana NFT project DeGods has switched to a 0% royalty model, meaning it will no longer earn royalties on the sales of its NFTs.

DeGods said that while it still believed that royalties are an “incredible use case” for NFTs and that it will support creators that want to find solutions to enforce them, this is the best decision for its business at this time.

DeGods spinoff collections t00bs and y00ts will also switch to a 0% royalty model, the company announced on Twitter.

NFT royalties have sparked an ongoing debate within the digital art industry. Proponents argue they are a necessary source of revenue for creators, particularly for smaller collections, and an artists’ ability to continue earning after the initial sale is one of the key advantages NFTs have over physical art. Others argue that royalties undermine the idea of true ownership and that holders shouldn’t have to pay out additional funds.

DeGods founder, who is known as Frank, previously called royalties “the best alignment of incentives between founders and holders (right now)” and warned those circumventing royalties not to be mad when “mints become more expensive and more projects rug.” The team also floated the idea of removing some utility from NFTs not sold through approved marketplaces.

But now the company is switching course, with Frank citing data showing the growing popularity of 0% royalty marketplaces as a major factor. 

“No good solutions are really out there for enforcing royalties and 0% markets are literally growing like weeds in terms of how many there are, pure user growth and volume growth filtered for wash trading. When you look at the data, it’s just kind of hard to believe in my mind that most of these [other] marketplaces will not go to 0% royalties,” he said in a Twitter Space following the announcement.

While the likes of OpenSea and Magic Eden have remained steadfast in their support of royalties, new marketplaces and competitors have taken a more flexible approach. Platforms that have popped up in the past year, like SudoSwapAMM and YAWWW, allow users to purchase NFTs without paying royalties.

Low-fee marketplace X2Y2, which flipped OpenSea by monthly sales volume in July, introduced a flexible royalty option in August that allows buyers to choose how much they wish to give back to creators.

Frank argued that as 0% royalty marketplaces grow their market share, other marketplaces may ultimately remove royalty requirements in order to remain competitive. Without any way to prevent people circumventing royalties, he added that the model was “already broken” for the DeGods project, as it is bringing in decreasing revenues even as popularity grows.

The question that remains is what impact dwindling royalty revenues could have on creators. Larger brands are already courting VCs. Doodles raised $54 million in September which it will used to grow out its team. In March, Bored Ape Yacht Club creators Yuga Labs raised $450 million at a huge $4 billion valuation. 

Dust Labs, a project created by the DeGods community that builds NFT tooling products, also announced a $7 million raise recently from Metaplex, Jump, FTX Ventures, Solana Ventures, Foundation Capital and Chapter One. It plans to use the funds to build out its ecosystem.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Polygon is launching a public testnet for Ethereum scaling solution Hermez, as the race for a dominant Ethereum Layer 2 solution gets underway.

Polygon acquired the Ethereum Layer 2 scaling solution Hermez late last year for $250 million. Hermez runs on top of Ethereum and boosts its scalability by allowing it to process more transactions for a cheaper price. This is the first time anyone will be able to test out the new network.

Hermez is a type of Layer 2 scaling solution known as a zkEVM, which offers benefits that other Layer 2s do not, mainly around security and application customization.

“It was widely believed that zkEVM will take several more years to ship, which makes this an even more groundbreaking milestone, not only for Polygon but for the whole Web3 industry,” said Polygon Co-founder Mihailo Bjelic.

ZkEVMs enhance all the benefits of Layer 2s, while allowing developers to create Zero Knowledge (ZK) applications using the industry standard coding language Solidity. What this means is that applications and developers receive all the security and scaling benefits of ZK provides, without having to learn a new coding language.

Upon launch, DeFi protocols such as Aave and Uniswap will be deployed on the testnet. This will allow these protocols and users to experiment with Hermez. It also enables the teams behind Aave and Uniswap to test for bugs that could occur, well ahead of the mainnet launch.

“Ultimately, Polygon zkEVM is the next step in Ethereum’s journey, and we are moving towards giving our users the full benefits of a working zkEVM — scalability without compromise. We have some work to do before we fully achieve those goals, and we’re eager to find out exactly what needs improvement and receive feedback,” said Polygon Hermez Co-founder David Schwartz.

Polygon stated that all applications, tools, and user wallets built on its Polygon proof-of-stake network will work on Hermez.

This announcement comes right before zkSync will be launching its mainnet on Oct. 28. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Art Gobblers is the product of a collaboration between investment firm, Paradigm, and Rick and Morty’s co-creator, Justin Roiland.
• The experiment aims to cultivate a self-sustaining ecosystem that focuses on the proliferation of art through an on-chain game.
• A synergistic relationship between Gobbler NFTs and the GOO token is facilitated through innovative mechanisms that could be repurposed by other projects.

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

The highly-anticipated Markets in Crypto-Assets legislation passed the European Parliament on Monday, after a two-year long debate and drafting process.

The final vote tallied up to 28 in favor and 1 against. The entire European Parliament will vote on final approval of the legislation later in October. 

Alongside MiCA, the Members of the European Parliament are also voting on the Transfer of Funds Regulation, an anti-money laundering bill that obliges transfers made in crypto to include data on the payer and payee. The measure is expected to pass as well. 

Both texts are anticipated to be approved by the entire European Parliament and become law. Once the adoption process is finalized, as expected, a 12-to-18-month rulemaking process starts with guidelines on implementation of the new laws around stablecoins and crypto exchanges set to be completed sometime in 2024.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin miner TeraWulf raised $17 million in equity and debt.

The company sold $9.5 million in common stock shares via a non-brokered deal with existing investors and drew an additional $7.5 million from an already existing $50 million loan closed in July.

“With this funding, we are well positioned to continue the value creating deployment of our mining facilities and move the Company a step closer to self-sustaining operations,” said Patrick Fleury, TeraWulf’s chief financial officer.

The loan closed in July and was meant to help complete the build-out of TeraWulf’s sites in New York and Pennsylvania.

While the latter is in the final stages of construction and is projected to begin mining this quarter, the first 50-megawatt building of Lake Mariner was recently fully energized. The second one is on target to come online by the end of the year.

The company expanded its total operational capacity to 1.6 EH/s in September.

“We are pleased to achieve such a significant ramp of mining operations at Lake Mariner, and look forward to further expanding our operating capacity in the months ahead,” said CEO Paul Prager.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.