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U.S. Treasury seeks input on cryptocurrency risks, benefits

The U.S. Treasury building is seen in Washington, September 29, 2008. REUTERS/Jim Bourg/File Photo

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July 12 (Reuters) – The U.S. Treasury on Tuesday said it was seeking comment on the on the risks and opportunities posed by digital assets as it seeks to prepare a report for President Joe Biden on the implications of developments such as cryptocurrencies.

The official query builds on an executive order Biden signed in March, which directed government agencies to study cryptocurrencies and other digital asset products, including central bank digital currencies.

“For consumers, digital assets may present potential benefits, such as faster payments, as well as potential risks, including risks related to frauds and scams,” Treasury Under Secretary for Domestic Finance Nellie Liang said in a statement.

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The crypto market, including bitcoin and other products, has rapidly grown in popularity in recent years, despite concerns from regulators and some policymakers that the market lacks sufficient oversight, transparency and consumer protections.

The crypto market has been wracked by turmoil in recent weeks, with a number of high-profile firms and tokens collapsing or refusing to allow customers to withdraw funds in a bid to stabilize themselves.

The Treasury’s query is far-ranging, asking for input on a host of questions, including how businesses are using cryptocurrency, where consumers may not be sufficiently protected, and how the nation’s poorest could benefit or face risk from broader cryptocurrency adoption.

The Treasury is accepting comments until Aug. 8.

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Reporting by Costas Pitas in Los Angeles; Editing by Tim Ahmann and Marguerita Choy

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CFTC eyes potential oversight of cryptocurrencies, carbon trading – commissioner

HOUSTON, June 8 (Reuters) – Cryptocurrency developers and U.S. lawmakers are moving toward putting the Commodity Futures Trading Commission in charge of regulating digital currencies, said CFTC Commissioner Summer Mersinger.

The designation would expand the CFTC’s mandate to oversee agricultural, energy and financial options markets and pave the way for the agency to regulate other digital assets such as non-fungible tokens, or NFTs.

Separately, the CFTC is considering how carbon trading markets operate, with a view toward their use in hedging and risk management.

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Mersinger, one of five commissioners on the independent board that oversees commodity and financial futures markets, was speaking on Tuesday on the sidelines of the Reuters Commodities Trading USA conference in Houston.

Major crypto companies have backed the CFTC and on Tuesday U.S. senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, filed a bill that would make CFTC the industry’s main overseer.

“You’re seeing the industry coalesce around the CFTC becoming the primary regulator,” said Mersinger.

Lawmakers have not decided which agency would oversee cryptocurrencies but the proposed Lummis-Gillibrand bill offers a starting point for Congressional debate. read more

The CFTC has begun its own review of a potential role over cryptocurrencies, with staff looking for opportunities in areas such as spot-market crypto trading “where we could have some expanded role making,” Mersinger said. She cautioned that the agency historically has not regulated spot markets and its reviews are preliminary.

“We’re still a strong regulator but our registrants have a lot of flexibility,” she said. “They have been very interested in that approach versus the top-down way of some other financial regulators,” she said.

Carbon trading is another area where the CFTC has an interest. Its regulation now is largely policed by industry groups and voluntary on the part of participants.

“We have interest in that space but we don’t regulate that space,” Mersinger said. One consideration is what changes may be needed for the voluntary markets to work properly, she added.

In 2020, when U.S. oil futures prices turned negative for the first time on fears of a lack of physical storage amid collapsing demand, CFTC issued an advisory warning of the risks that not enough people took seriously, she said.

One lesson it learned was that there was a need for broader inter-agency collaboration and discussion of contract settlement terms with the exchanges and traders, she said.

“At the end of the day, storage wasn’t as big an issue” as feared, but it was not well communicated, she said.

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Reporting by Gary McWilliams and Arathy Somasekhar; Editing by Richard Chang

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G7 countries urge swift regulation of crypto assets – draft

Souvenir tokens representing cryptocurrency networks Bitcoin, Ethereum, Dogecoin and Ripple plunge into water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic/Illustration

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KOENIGSWINTER, Germany, May 19 (Reuters) – The world’s top financial leaders called on Thursday for the swift and comprehensive regulation of cryptocurrencies following turmoil that has seen the demise of the Terra stablecoin last week, a draft communique showed on Thursday.

“In light of the recent turmoil in the crypto-asset market, the G7 urges the FSB (Financial Stability Board)…to advance the swift development and implementation of consistent and comprehensive regulation,” finance ministers and central bankers from the Group of Seven industrialised nations said in the document.

They were meeting in Koenigswinter, near Bonn (Germany), on Thursday and Friday.

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Reporting By Francesco Canepa and Jan Strupczewski; Editing by Angus MacSwan

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Bitcoin’s 2021 gains wiped out in stablecoin rout

HONG KONG, May 12 (Reuters) – Cryptocurrencies extended their sell-off on Thursday, with Bitcoin falling to its lowest levels in 16 months as a stampede out of so-called stablecoins sent shockwaves around broader markets.

The latest blow to Bitcoin and its smaller rival Ether , which has shed more than half its market value so far this year, came from a meltdown this week in TerraUSD, also one of the world’s biggest cryptocurrencies.

Bitcoin dropped to a low of $25,401.05, its lowest level since Dec. 28, 2020. In the past eight sessions, it has lost a third of its value, or $13,000, and is down more than 45% so far this year read more

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From a peak of $69,000 in November 2021, it has lost nearly two-thirds of its value.

TerraUSD, also known as “UST”, slipped below its 1:1 peg to the dollar this week, roiling cryptocurrency markets already under pressure alongside tumbling stock markets. read more

“The collapse of the Peg in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins,” said Richard Usher, head of OTC trading at BCB Group, adding that the moves are reminiscent of the bank runs during the 2008 financial crisis.

Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar. They are popular in times of turmoil in crypto markets and are often used by traders to move funds around and speculate on other cryptocurrencies.

On Thursday, TerraUSD was quoted around 50 cents, according to CoinGecko price data.

A representation of cryptocurrency Bitcoin is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic

Unlike most stablecoins which are backed by reserves, TerraUSD is an algorithmic, or “decentralised”, stablecoin. It was supposed to maintain its peg via a complex mechanism which involved swapping it with another free-floating token.

But even reserve-backed stablecoins, which say they have sufficient assets to maintain their pegs, were showing signs of stress on Thursday.

Major stablecoin Tether slipped below its dollar peg, hitting as low as 98 cents around 0732 GMT on Thursday, according to CoinGecko. USD Coin was trading at around $1.04 while Binance USD was at $1.07 – a significant breakout of its usual range.

“The Terra incident is causing an industry-based panic, as Terra is the world’s third-biggest stable coin,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. But TerraUSD “couldn’t hold its promise to maintain a stable value in terms of U.S. dollars.”

Market players are still assessing the fallout of the collapse of TerraUSD to identify whether major companies or investors have been badly hurt. That would be a possible clue to wider contagion.

Ether , the world’s second-largest cryptocurrency, tumbled nearly 15% on Thursday to $1,700, its lowest since June 2021.

Unlike previous sell-offs in broad financial markets, when cryptocurrencies have been largely untouched, the selling pressure in these assets this time has undermined the broader argument that they are dependable stores of value amid market volatility.

Bitcoin
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Reporting by Alun John and Elizabeth Howcroft in London; Additional reporting by Samuel Indyk; Writing by Saikat Chatterjee; Editing by Clarence Fernandez, Bradley Perrett and Kim Coghill

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U.S. adds cryptocurrency mixer Blender to sanctions list over alleged North Korea links

WASHINGTON, May 6 (Reuters) – The United States on Friday imposed sanctions on virtual currency mixer Blender, accusing it of being involved in one of the largest cryptocurrency heists on record and being used by North Korea, the U.S. Treasury Department said.

The Treasury also identified new virtual currency addresses it said were used by North Korean hacking group Lazarus to launder illicit proceeds, accusing it of stealing hundreds of millions of dollars’ worth of cryptocurrency tied to popular online game Axie Infinity.

“We are taking action against illicit financial activity by the DPRK (North Korea),” Brian Nelson, the Treasury’s under secretary for terrorism and financial intelligence, said in the statement.

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Reuters could not immediately reach Blender for comment. The North Korean mission to the United Nations in New York did not immediately respond to a request for comment.

The Treasury said it was the first time the U.S. imposed sanctions on a virtual currency mixer – a software tool that pools and scrambles cryptocurrencies from thousands of addresses – and said it would continue to investigate the use of mixers for illicit purposes.

North Korea has stepped up efforts to launder stolen cryptocurrency, significantly increasing its use of mixers, blockchain analytics and cybersecurity firm Chainalysis said.

The Treasury said Blender was used in the laundering process for North Korea’s Axie Infinity heist, accusing it of processing over $20 million in illicit proceeds.

The Treasury said Blender also facilitated money-laundering for Russian-linked malign ransomware groups, among others.

Hacks have long plagued crypto platforms. Ronin, a blockchain network that lets users transfer crypto in and out of Axie Infinity, said digital cash worth almost $615 million was stolen on March 23. read more

The U.S. Treasury has said Lazarus is controlled by the Reconnaissance General Bureau (RGB), North Korea’s main intelligence agency, which is already subject to U.S. and United Nations sanctions.

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Reporting by Daphne Psaledakis and Kanishka Singh in Washington and James Pearson in London; Editing by Chizu Nomiyama and John Stonestreet

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Panama passes bill to permit use of crypto assets

A representation of cryptocurrency Bitcoin is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic/Illustration

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PANAMA CITY, April 28 (Reuters) – Lawmakers in Panama’s National Assembly on Thursday approved a bill to regulate the use and commercialization of crypto assets in the Central American country renowned as a hub of offshore financial services.

The bill opens the door to private and public use of crypto assets, and will make it possible for people to pay their taxes with cryptocurrencies. Experts warned it could heighten Panama’s reputation as a place lacking financial transparency.

The legislation is broader in scope than measures passed by El Salvador, which last year made bitcoin legal tender, said independent lawmaker and promoter of the bill Gabriel Silva.

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“We’re seeing the emergence of many different types of crypto assets like works of art,” he said. “That’s why we didn’t want to limit ourselves only to cryptocurrencies.”

The bill covers the trading and use of crypto assets, issuance of digital securities, new payment systems and the tokenization of precious metals. Tokenization is when rights to an asset are converted into digital formats.

Under the new legislation, Panamanians may use crypto assets as means of payment for any civil or commercial operation not prohibited by law in the country.

Panama is on the European Union’s list of tax havens, and Romain Dromard, chief executive officer at financial investment advisory firm K&B Family Office, said the crypto bill would not help it appear more transparent.

“Panama was already in a bad position and these payment methods skip the due diligence processes that international organizations are asking Panama to embrace,” he said.

The bill, which now passes to President Laurentino Cortizo to be signed, was approved in the assembly with 38 votes in favor, two abstentions and no votes against.

Belisario Castillo Saenz, chief executive officer of tokenization firm Feänor Corp, argued that crypto assets could help the unbanked, given that internet penetration is high in Panama but only one in four people have bank accounts.

The bill could also make banks that have created barriers to using cryptocurrencies more cooperative, said Jose Fabrega of CryptoSPA, a hub for crypto and blockchain services.

Still, K&B’s Dromard said the role banks will play under the new rules is unclear and forecast that it will take years for traditional institutions to use the assets.

In addition, small and medium businesses would not be able to switch to such highly volatile assets, he argued.

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Reporting by Elida Moreno and Valentine Hilaire; Editing by Cynthia Osterman

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Cryptoverse: Ether prepares for epic ‘merge’ in quest to eclipse bitcoin

April 26 (Reuters) – Ether has promised to do better. It has promised to go to the next level, edging out crypto rivals and even outshining the godfather, bitcoin. But the clock’s ticking.

The No.2 cryptocurrency was supposed to be weeks away from the “merge”, a transformative June upgrade of its blockchain Ethereum to make it faster, cheaper and less power hungry, holding out the prospect of a meaner and cleaner crypto future.

The anticipation had supported ether this year, even as inflation and monetary tightening shackled bitcoin. But that merge – which would see ether mining transition away from the energy-intensive proof-of-work method to proof-of-stake – has been delayed, frustrating investors.

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“The timeline for seeing this launch continues to extend,” said Brendan Playford, founder and CEO of decentralized financial data platform Masa Finance.

“It’s certainly plausible that Ethereum’s highly anticipated upgrade to a proof-of-stake system could be delayed again given that this transition is highly complicated and still uncertain as to whether it can actually deliver on its promise of lowering costs and increasing transaction speeds.”

Ether fell 8% from $3,215 to $2,947 on April 11, the day Ethereum lead developer Tim Beiko said on Twitter that the June rollout had been pushed back as tests continued. It is down 13% this month, at $2,844.

“It won’t be June, but likely in the few months after,” Beiko wrote in his tweet. “No firm date yet, but we’re definitely in the final chapter.”

The timing of the merge – Ethereum’s EH1 chain will meld with a new chain to create ETH2 – remains unclear, although many crypto watchers expect it to happen some time this year. Beiko didn’t reply to a request for comment via Twitter and LinkedIn.

Ether’s market capitalization of $363 billion is less than half bitcoin’s , and together the two make up 60% of the crypto market.

Yet bitcoin remains just an investment without any real ability to be used for contracts in decentralized finance applications. For this reason, many investors believe a flipping of the market is inevitable – dubbed “the flippening” in crypto circles – with the merge acting as a catalyst for Ethereum becoming the dominant platform.

“We are seeing funds rotate into Ethereum in preparation for the merge, even though we don’t know when it’s going to be,” said Noelle Acheson, head of market insights at Genesis Trading. The buying interest, she said, did “hint that more funds seem to be appreciating that (Ethereum) is perhaps undervalued at this stage”.

Both bitcoin and ether are mined, or produced, using a proof-of-work (POW) method, where thousands of miners, or network nodes, compete to solve complex mathematical puzzles.

This is a massively power-thirsty process that’s estimated to cause more pollution than a small country every year, fostering fears about crypto in a low-carbon world.

The alternate proof-of-stake (POS) method uses much less power because, rather than have millions of computers race to process puzzles, it allows nodes that stake the most coins to validate transactions.

Ethereum has long been hobbled by issues of speed and processing costs. It only processes 30 transactions per second as a proof-of-work blockchain, but expects to process as many as 100,000 transactions per second once it moves to POS.

That will allow it to compete with other, smaller altcoins such as Solana and Cardano , which use POS partly or entirely, for decentralized finance applications such as trading, investing, borrowing and even non-fungible tokens.

That’s provided Ethereum gets its upgrade.

“Ethereum maxis, people who believe in ‘the flippening’, believe it will come very soon,” said Acheson at Genesis Trading. “But it is only a theory and it remains to be seen.”

Ethereum vs ethereum killers
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Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru
Editing by Vidya Ranganathan and Pravin Char

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.


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Biden orders government to study digital dollar, other cryptocurrency risks

WASHINGTON, March 9 (Reuters) – U.S. President Joe Biden signed an executive order on Wednesday requiring the government to assess the risks and benefits of creating a central bank digital dollar, as well as other cryptocurrency issues, the White House said.

Bitcoin surged on the news as the administration’s holistic and deliberative approach calmed market fears about an immediate regulatory crackdown on cryptocurrencies. In midday trading, bitcoin rose 9.1% to $42,280, on track for its largest percentage gain since Feb. 28. read more

Biden’s order will require the Treasury Department, the Commerce Department and other key agencies to prepare reports on “the future of money” and the role cryptocurrencies will play.

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Wide-ranging oversight of the cryptocurrency market, which surged past $3 trillion in November, is essential to ensure U.S. national security, financial stability and U.S. competitiveness, and stave off the growing threat of cyber crime, administration officials said.

Analysts view the long-awaited executive order as a stark acknowledgement of the growing importance of cryptocurrencies and their potential consequences for the U.S. and global financial systems. read more

“The growth in cryptocurrencies has been explosive,” Daleep Singh, deputy national security adviser for economics, said in an interview with CNN.

Cryptocurrencies and digital assets can affect how people access banking, whether consumers are safe and protected from volatility, and the primacy of the U.S. dollar in the global economy, he said.

The executive order is part of an effort to promote responsible innovation but mitigates the risk to consumers, investors and businesses, Brian Deese, director of the National Economic Council, and Jake Sullivan, White House national security adviser, said in a statement.

“We are clear-eyed that ‘financial innovation’ of the past has too often not benefited working families, while exacerbating inequality and increasing systemic financial risk,” they said.

One key objective is to redress inefficiencies in the current U.S. payments system and boost financial inclusion, especially of poor Americans, about 5% of whom do not currently have bank accounts due to high fees, one official said.

Another key measure directs the government to assess the technological infrastructure needed for a potential U.S. Central Bank Digital Currency (CBDC) – an electronic version of dollar bills in your pocket.

But it could take years to develop and introduce a “digital dollar,” administration officials cautioned on Wednesday, noting that the Federal Reserve in January had referred the issue to Congress. read more

Administration officials said the United States was taking great care to decide whether – and how – tomove forward with developing a digital dollar, given the dollar’s role as the world’s primary reserve currency.

“We’ve got to be very, very deliberate about that analysis because the implications of our moving in this direction are profound for the country that issues the world’s primary reserve currency,” one of the officials said.

The order also encourages the Federal Reserve to continue research and development efforts.

Nine countries have launched central bank digital currencies, and 16 others – including China – have begun development of such digital assets, according to the Atlantic Council, leading some in Washington to worry that the dollar could lose some of its dominance to China.

The U.S. dollar remains underpinned by key fundamentals, including a commitment to transparency, the rule of law and the full independence of the Federal Reserve, the official said.

“The dollar’s role has been and will continue to be crucial to the stability of the international monetary system as a whole. Foreign central bank digital currencies and their introduction by themselves do not threaten this dominance,” the official said.

Asked whether China could develop a competitive advantage if it moved sooner, one administration official said U.S. officials would monitor developments with an eye to maintaining the centrality of the dollar in the global economy.

The order asks for over a dozen reports, including by the Securities and Exchange Commission and the Consumer Financial Protection Bureau, to assess issues raised by cryptocurrencies, including systemic risk and consumer protection.

One key objective is to redress inefficiencies in the current U.S. payments system and boost financial inclusion, especially of poor Americans, about 5% of whom do not currently have bank accounts due to high fees, an official said.

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Reporting by Andrea Shalal and Katanga Johnson; Additional reporting by Doina Chiacu; Editing by Michelle Price, Simon Cameron-Moore and Mark Porter

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Biden to order studies on regulating, issuing cryptocurrency -source

WASHINGTON, March 7 (Reuters) – U.S. President Joe Biden is expected to sign a long-awaited executive order this week directing the Justice Department, Treasury and other agencies to study the legal and economic ramifications of creating a U.S. central bank digital currency, a source familiar with the matter said on Monday.

The White House last year said it was considering a wide-ranging oversight of the cryptocurrency market – including an executive order – to deal with growing threat of ransomware and other cyber crime.

Biden’s order sets an 180-day deadline for a series of reports on “the future of money” and the role that cryptocurrencies will play in the evolving landscape.

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“We could see a significant shift in policy in 180 days. This is a likely step toward creation of a central bank digital currency,” the source said, citing significant momentum behind such a move within the Biden administration.

However the reports being ordered could still raise concerns about such a move, or conclude that it would require congressional approval, the source cautioned.

The Biden order, likely to come on Wednesday, comes amid heightened concern about the use of cryptocurrencies by Russian elites to circumvent Western sanctions that have cut Russia off from large portions of the global economy, and moves by China and other economies to create their own cryptocurrencies.

The timing of the order was first reported by Bloomberg.

The Financial Crimes Enforcement Network (FinCEN) on Monday warned financial institutions to watch out for potential attempts by Russian entities to evade sanctions imposed by Washington over Moscow’s invasion of Ukraine. read more

Biden’s order will ask the Justice Department to look at whether a new law is needed to create a new currency, with the the Federal Trade Commission, the Consumer Financial Protection Commission and other agencies to study the impact on consumers.

Other studies will be ordered on the impact of a cryptocurrency on competitiveness, the market and technical infrastructure needed, and the environmental impact of bitcoin mining, the source said.

U.S. Treasury Secretary Janet Yellen last year warned about an “explosion of risk” from digital markets, including the misuse of cryptocurrencies, but said new financial technologies could also help fight crime and reduce inequality.

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Reporting by Andrea Shalal; editing by Jonathan Oatis

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Cryptocurrencies in a time of war

A representation of the virtual cryptocurrency Bitcoin is seen in this picture illustration taken October 19, 2021. REUTERS/Edgar Su/

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LONDON, March 4 (Reuters) – Cryptocurrencies have been close to the headlines since Russia invaded Ukraine, with the ever-volatile bitcoin in demand in Russia and beyond.

Here are some charts that look at how cryptocurrencies have fared during the largest attack on a European country since World War Two.

CORRELATION CONUNDRUM

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Correlated or not? That’s long been the question for bitcoin , with the original cryptocurrency at times marching to the equity beat — and at other times not.

Bitcoin initially slumped after Russia launched its assault on Ukraine as investors dumped riskier assets, falling as much as 8% on Thursday before clawing back losses on the day. European stocks (.STOXX) fell 3.3% while the S&P 500 (.SPX) added 1.5%.

The paths of bitcoin and stocks have since entwined again, albeit to differing degrees.

Bitcoin jumped 14.5% on Monday in its best day in a year, and now stands up 12% since the day before the invasion began on Feb. 24. U.S. stocks have made smaller gains, with the S&P 500 (.SPX) edging up 3.3%. MSCI’s world index (.MIWD00000PUS) is down slightly.

“It’s still largely been correlated with U.S. equities throughout this crisis,” Joseph Edwards, head of financial strategy at crypto firm Solrise Group, said of bitcoin.

Cryptocurrencies during Russia’s war
Bitcoin and stocks

A SAFE HAVEN?

Crypto aficionados see bitcoin as “digital gold,” a handy place to store cash during war or disaster. Bitcoin, the argument goes, has a limited supply and runs on a global computer network beyond the reach of governments and is therefore safer than traditional currencies.

Things are never that simple. Bitcoin’s safe-haven chops are unclear: It often behaves more like risk-on assets such as stocks.

Investors say that during the war bitcoin’s characteristics have stoked demand and helped it outperform other traditional havens. Gold is up 2.6% while the U.S. 10-year Treasury yield has fallen 8.7% since last Wednesday.

Yet the moves may do little to settle arguments over bitcoin’s safe-haven credentials, analysts said.

“We don’t think BTC is being viewed as a safe haven, nor should be, but instead its appeal is it’s a supply capped, credit free, digital bearer asset that is proving to be a viable alternative to traditional finance in this current environment,” said Richard Usher at crypto firm BCB Group.

“If the situation continues to escalate and risk markets badly suffer it will struggle to rally further, but in our view still outperform.”

Bitcoin and safe havens

ROUBLE ROUTED, BITCOIN BOUNCES

Crypto trading in Russia has soared as the rouble was battered by Western sanctions which aim to squeeze Russia’s economy and sever it from the global financial system.

The Russian currency hit an all-time low of 118.35 per dollar on Thursday. read more

Trading volumes between the rouble and major cryptocurrencies hit 15.3 billion roubles ($140.7 million) on Monday, a three-fold jump from a week earlier, according to researcher CryptoCompare.

Rouble-denominated trades with Tether — a so-called stablecoin designed to keep a steady value — hit 3.3 billion roubles on Monday, their highest this year and almost five times more than a week earlier, the data showed.

The figures suggest that people are scrambling to covert savings to crypto in Russia.

The war has contributed to the narrative that bitcoin “is not just a speculative asset, it is also a seizure-resistant, policy-independent, longer-term store of value,” said Noelle Acheson, head of Market Insights at New York-based Genesis.

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Reporting by Tom Wilson and Elizabeth Howcroft; editing by Jonathan Oatis

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