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Treasury Secretary reportedly against amending crypto language in infrastructure bill

The Washington Post reported Treasury Secretary Janet Yellen raised objections to an amendment to the proposed infrastructure bill in regards to the language used on crypto, mining, and blockchain.

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Janet Yellen’s position on a “compromise” amendment proposed yesterday is unclear, but she reportedly raised objections to the language on crypto put forth by Senators Wyden, Lummis, and Toomey.

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Treasury Secretary reportedly against amending crypto language in infrastructure bill

On Wednesday of this week, several U.S. senators proposed an amendment to an infrastructure bill which would clarify language concerning crypto. Even though that proposal seemingly has the support of the white house, U.S. Treasury Secretary Janet Yellen has reportedly come out against the measure.

According to a Friday report from the Washington Post, Yellen raised objections to the proposed amendment with lawmakers on Aug. 5. She lobbied Senator Ron Wyden regarding the changes which, if added to the bill, would exclude certain crypto companies from the reporting requirements for brokers. Wyden is one of three senators behind the amendment with Cynthia Lummis and Pat Toomey.

The original infrastructure bill currently being considered in the Senate, HR 3684, proposes implementing tighter rules on businesses handling cryptocurrencies and expanding reporting requirements for brokers, mandating that digital asset transactions worth more than $10,000 are reported to the Internal Revenue Service, or IRS. It also suggests that anyone in the business of “validating distributed ledger transactions,” “developing digital assets or their corresponding protocols,” or dealing with mining software or hardware would likely be subject to more tax reporting requirements for digital transactions.

However, the amendment proposed by Wyden, Lummis, and Toomey suggests changing the bill’s definition of a broker, likely allowing many players in the crypto space to avoid the additional reporting requirements. The amendment initially received support from major figures in the crypto space as well as Senator Rob Portman, one of the lead Republican voices for negotiations behind the bill.

On Aug. 5, Portman and Senators Mark Warner and Kyrsten Sinema proposed a modified amendment to the infrastructure deal that would exclude proof-of-mining and sellers of hardware and software wallets. However, the language suggests crypto developers and proof-of-stake validators would still be subject to expanded reporting and taxation that some have described as “unworkable.”

Later that day, White House deputy press secretary Andrew Bates said the Biden administration would support the amendment from Warner and Portman, but not the changes proposed by Wyden, Lummis, and Toomey. According to Bates, the former “strikes the right balance and makes an important step forward in promoting tax compliance.” Yellen’s position on the modified amendment is unclear.

Yellen’s position on the modified amendment is unclear. However, she has previously said that the misuse of cryptocurrencies and virtual assets has been a growing problem in the United States.

Related: Law professor calls for crypto mining regulation during US Senate hearing

The role of language used on cryptocurrencies, mining, and blockchain in the infrastructure plan may play a large part on whether the bill passes in the Senate. Lawmakers have yet to resolve the proposed amendments — the most recent “compromise” from Portman and Warner, the original from Wyden, Lummis, and Toomey, and one reportedly from Texas Senator Ted Cruz.

Many senators will not be in session today as they attend the funeral of former Wyoming Senator Mike Enzi, who died in a bicycle accident last week. The government body is also scheduled to be in recess starting on Aug. 9.

Source: https://cointelegraph.com/news/treasury-secretary-reportedly-against-amending-crypto-language-in-infrastructure-bill

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Sri Lanka appoints committee to implement crypto mining and blockchain

The Sri Lankan committee will report its crypto and blockchain-related findings to the Cabinet of Acts, Rules and Regulations.

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The committee plans to propose a suitable framework for Sri Lanka after studying the regulations followed by international markets.

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Sri Lanka appoints committee to implement crypto mining and blockchain

Sri Lanka joins the global crypto adoption drive after setting up a committee for exploring and implementing blockchain and crypto mining technologies.

A letter shared on Oct. 8 by Sri Lanka’s Director General of Government Information, Mohan Samaranayake, shows that the authorities have approved a recent proposal that aims to attract investments in the country’s blockchain and cryptocurrency initiatives.

According to Samaranayake, the Sri Lankan authorities have identified the need of developing “an integrated system of digital banking, blockchain and cryptocurrency mining technology” as a means to stay on par with global partners and international markets. He added:

“This committee will be mandated to study the regulations and initiatives of other countries such as Dubai, Malaysia, Philippines, EU and Singapore etc, and propose a suitable framework for Sri Lanka.”

The proposal was made by Namal Rajapaksa, Minister of Project Coordinating and Monitoring, which requires the committee to report its crypto and blockchain-related findings to the Cabinet of Acts, Rules and Regulations.

Out of the eight members in the committee, two members represent international fintech giants including Mastercard’s Sandun Hapugoda and PricewaterhouseCoopers’ (PwC) Sujeewa Mudalige. Members from traditional finance include Colombo Stock Exchange CEO Rajeeva Bandaranaike and the Central Bank of Sri Lanka Director Dharmasri Kumarathunge.

The remaining four members represent various national authorities including Sri Lanka Computer Emergency Readiness Team (SLCERT), Department Of Government Information, Information and Communication Technology Agency (ICTA) and the President’s Council.

Supporting this initiative, the committee will also monitor laws and regulations implemented by other nations to establish rules against Anti-Money Laundering (AML), terror financing and criminal activities.

Related: Crypto transactions surge 706% in Asia as institutional adoption grows — Chainalysis

A recent Cointelegraph report highlighted a 706% surge in Central and Southern Asia and Oceania between July 2020 and June 2021. Based on data shared by Chainalysis, the value of the transactions in the region amounted to 14% ($572.5 billion), with India representing the highest global transaction value.

Back in April, Sri Lanka’s central bank issued a public notice against the risks associated with cryptocurrency investments, citing a lack of legal or regulatory recourse. However, just a month after the notice, the central bank shortlisted three banks for developing a proof-of-concept for a shared Know Your Customer facility using blockchain.

Related: Crypto transactions surge 706% in Asia as institutional adoption grows — Chainalysis

Source: https://cointelegraph.com/news/sri-lanka-appoints-committee-to-implement-crypto-mining-and-blockchain

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

Pension funds, the most cautious of institutional investors, are now giving the booming crypto and blockchain sector a closer look.

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There are good reasons why pension funds should not invest in the crypto and blockchain space. The industry is too new, too volatile, and stultifyingly technical. Moreover, the rules and regulations to govern the sector have yet to be settled.

But the fixed-income financial instruments that pension funds typically favor — like long-term government bonds — are scarcely paying anything these days, so the traditional caretakers of employees’ retirement funds have a dilemma: Where to find investment yield in a world where inflation is looming?

It may not be entirely surprising, then, that pension funds — the most cautious of institutional investors — are now giving the booming crypto/blockchain sector a closer look.

“Family offices led the charge into crypto funds several years ago, but we’ve seen increasing interest from pensions, and there are many pensions that now have exposure to crypto,” Stephen McKeon, a finance professor at the University of Oregon and a partner at Collab+Currency, told Cointelegraph.

“We’ve seen increased interest from pensions” in the past year, added Christine Sandler, head of sales, marketing and research at Fidelity Digital Assets — part of an uptick among all institutional segments — “which we believe reflects the growing sophistication and institutionalization of the digital assets ecosystem, combined with a strong macro narrative driven by response to the pandemic.”

Pension funds tend to be “more conservative, risk-averse investors relative to other segments,” according to Sandler, and they mostly favor investments that have exhibited long-term growth and low volatility, which might arguably make them leery of the crypto/blockchain space.

An early adopter

One of the first United States-based pension funds to invest in blockchain firms was the Fairfax County Police Officers Retirement System, based in Fairfax, Virginia. It tested the waters back in 2018 with an 0.5% allocation in a fund that was investing in blockchain-related enterprises, Katherine Molnar, the fund’s chief investment officer, told Cointelegraph at the recent SALT conference in New York City.

The fund raised its allocation to 1% in 2019, and in spring 2021, it added two new blockchain-related investment funds. The current target allocation is 2%, but because crypto and crypto-based companies have been rising in value, 7% of overall fund assets are now crypto-related — again, mostly “pick-and-shovel” type enterprises that support the industry — like crypto exchanges and custodians.

The pension fund can’t rebalance because it is invested in venture capital funds, Molnar explained, but in mid-September, Fairfax signaled its intent to invest $50 million with Parataxis Capital, a crypto hedge fund that invests in digital tokens and cryptocurrency derivatives. “It’s not a directional bet, but it’s not totally illiquid either,” she told Cointelegraph.

The fact that the police officers’ pension fund has invested until recently in crypto-related companies as opposed to cryptocurrencies — Coinbase rather than, say, Bitcoin (BTC) — isn’t uncommon, either. U.S. institutional investors surveyed by Fidelity Digital indicated a greater propensity for digital asset investment products rather than direct ownership of cryptocurrencies, Sandler told Cointelegraph, adding:

“From our study, we also know that pension funds and defined benefit plans, like many other institutional investor segments surveyed, favor active management of an investment product containing digital assets.”

More pension funds may now travel this road. “We’ve started to see participation not just from the hedge fund segment, which we’ve long seen participation from, but now it’s recently from other institutions, pensions and endowments,” Michael Sonnenshein, CEO of Grayscale Investments — the largest manager of digital assets — told Bloomberg earlier this year, adding he anticipated that pension funds and endowments would drive much of his investment firm’s future growth.

Even pension-fund giants like the California Public Employees Retirement System (CalPERS) have dipped a toe in the crypto/blockchain sea. CalPERS invested in Bitcoin mining firm Riot Blockchain LLC some years back and has since raised the stake to about 113,000 shares — worth about $3 million in early October — though that is minuscule compared with CalPERS’ $133.3 billion in equity assets under management, as of its 13F filing in August.

How much is enough?

What sort of crypto allocation is appropriate for a pension fund today? Jim Kyung-Soo Liew, assistant professor at Johns Hopkins University’s Carey Business School, co-authored one of the earliest academic papers on crypto and pension funds back in 2017. That paper found that a 1.3% Bitcoin allocation would be “optimal” to fully reap the cryptocurrency’s diversification benefit.

What is appropriate today? “Going forward, an institutional investor should be looking at a 10%–20% allocation,” Liew told Cointelegraph, and he expects large pension funds to be investing as much as one-fifth of their total assets in the crypto/blockchain space within the next three to five years.

98% of retirement accounts in the US can’t access #Bitcoin.

That’s $36,800,000,000,000.

What happens when they do?

— Dan Held (@danheld) October 7, 2021

“We’ll see more institutional investors,” Liew said, adding, “Their horizons are long.” Today’s $2 trillion in cryptocurrency market capitalization could swell to $20 trillion in the next three to five years, he added, assuming a favorable regulatory environment.

Asked if this doesn’t fly in the face of pension funds’ traditional conservatism, Liew answered, “Pension funds have boards; they have investment committees,” and yes, “they’re often accused of being overly conservative and wanting to understand things 100% before acting.”

From an education standpoint, it will take some time and effort to bring them along, but chief investment officers are quite intelligent as a group, and they will be able to grasp the concepts, Liew said. One problem, he allowed, “They’re not rewarded for risk-taking.”

Obstacles remain

There may be other impediments. “One challenge is that pensions tend to require large tickets,” McKeon told Cointelegraph, “so the space had to mature a bit to accept that amount of capital. As funds continue to scale up, we expect to see more participation by pensions.” Volatility remains a concern, said Sandler, pointing to data:

“‘2021 Institutional Investor Digital Assets Study’ found that 73% of U.S. pension funds, defined benefit plans, and endowments and foundations surveyed cited volatility as the top barrier to adoption.”

U.S. pension funds and defined benefit plans still hold a fairly negative view of digital assets, according to the survey, “but I think we’ll continue to see that negative perception decrease as the market continues to mature and these investors get more comfortable with the technology, infrastructure and channels for exposure and have a more fully developed investment thesis about these assets,” she added.

As such, pension funds, like other institutional investors, are striving to find investment opportunities. As The New York Times noted, “U.S. Treasuries have been the bonds of choice for safe retirement income. But they could deliver no real return for the next decade.”

Related: The long game: Institutional interest in crypto is just getting started

Meanwhile, on the positive side, pension funds have long horizons, and they can withstand short-term volatility. Another plus, “Crypto talent is spread uniformly around the world, and we can source that talent,” Liew added.

Fiduciary constraints won’t disappear, of course. Many pension funds represent municipalities, and they are holding many people’s late-life financial well-being in their hands. That’s a lot of responsibility. But you “can’t get a ton of reward if you don’t take on some risk,” Liew said.

A while back, the president of Molnar’s board said, “I understand the need to do this” — the police officers’ pension fund, like most institutional investors, was struggling to grow its money in a continuing low-interest-rate environment — but some officers “are off the reservation,” he claimed. With the fund’s recent 7.25% rate of returns on its crypto investments, it’s probably safe to assume that some of those officers are back on the reservation now.

Pension funds tend to be “more conservative, risk-averse investors relative to other segments,” according to Sandler, and they mostly favor investments that have exhibited long-term growth and low volatility, which might arguably make them leery of the crypto/blockchain space.

Source: https://cointelegraph.com/news/crypto-and-pension-funds-like-oil-and-water-or-maybe-not

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3 warning signs suggest the Bitcoin price rally is overextended

Bitcoin traders’ “extreme greed” threatens to unravel the latest BTC price surge.

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It’s a classic euphoria setup on Bitcoin markets Thursday as traders flip long BTC in ever larger numbers.

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3 warning signs suggest the Bitcoin price rally is overextended

Bitcoin (BTC) faced fresh doubts over the strength of its bull run on Oct. 7 as analysts eyed a potential reversal of Wednesday’s short squeeze.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingViewFunding rates in the red zone

Data from Cointelegraph Markets Pro and TradingView tracked BTC/USD as it hovered near $54,000 after failing to establish support at the $55,000 mark.

The previous day had seen an abrupt surge to highs of $55,700 for Bitcoin, which was accompanied by major buying pressure.

As funding rates flip positive across exchanges, however, concerns on Thursday focused on what could end up being an opposing move lower.

Funding rates turning overly positive suggest that the market is expecting further upside and that significant value is long BTC. Under such circumstances, a mass unwinding of positions could hasten and intensify a downward move, should it begin.

Bitcoin funding rates vs. BTC/USD chart. Source: Bybt

The mood among investors was echoed by sentiment data, with the Crypto Fear & Greed Index hitting 76/100 on the day, representing “extreme greed.”

“Investors are extremely greedy towards BTC right now,” trader and analyst Rekt Capital warned.

Crypto Fear & Greed Index as of Oct. 7. Source: Alternative.mePreparing for profit-taking

While under $10,000 from all-time highs at one point, Bitcoin additionally faces significant resistance levels at $58,000, $60,000, and more on the way to returning to price discovery.

Related: Price spike: Are whales front-running the approval of a Bitcoin futures ETF?

As Cointelegraph reported, October is slated to close just below the highs, while November could see a return to lower levels before a December finale obliterates current records.

Nonetheless, longtime market participants are already advising an exit strategy this week, among them John Bollinger, creator of the popular Bollinger Bands trading indicator.

Second target achieved, $BTCUSD. UpperBB expanding with the rally. Keep a trailing stop like BBstop or a Chandelier going. All clear for now, but starting looking for signs of a top / exit. I am off for a couple of weeks of travel. Good trading! #Bitcoin

— John Bollinger (@bbands) October 5, 2021

Bollinger bands track upward and downward volatility of an asset and are currently hinting that calmer conditions should prevail. When the bands narrow, however, volatility follows.

BTC/USD 1-day candle chart (Bitstamp) with Bollinger bands. Source: TradingView

Altcoins, meanwhile, are not expected to deliver definitive cycle gains until next year.

Funding rates turning overly positive suggest that the market is expecting further upside and that significant value is long BTC. Under such circumstances, a mass unwinding of positions could hasten and intensify a downward move, should it begin.

Source: https://cointelegraph.com/news/3-warning-signs-suggest-the-bitcoin-price-rally-is-overextended

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