Tag: sec

Bitcoin tops $60,000 again on ETF hopes, BFSI News, ET BFSI

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Bitcoin hit $60,000 for the first time in six months on Friday, nearing its alltime high, as hopes grew that US regulators would allow a futures-based exchange-traded fund (ETF), a move likely to open the path to wider investment in digital assets.

Cryptocurrency investors have been waiting for approval of the first US ETF for bitcoin, with bets on such a move fuelling its recent rally. The world’s biggest cryptocurrency rose 4.5% to its highest level since April 17, and was last at $59,290. It has risen by more than half since September 20 and closing in on its record high of $64,895 hit in April.

The US Securities and Exchange Commission (SEC) is set to allow the first US bitcoin futures ETF to be traded next week, Bloomberg reported on Thursday. Such a move would open a new path for investors to gain exposure to the emerging asset, traders and analysts said.

“ETFs open up a raft of avenues for people to gain exposure, and there will be a swift move to these structures,” said Charles Hayter, CEO of data firm CryptoCompare, which tracks ETF products.

“It reduces the frictions for investors to gain exposure and gives traditional funds room to use the asset for diversification purposes.” Bitcoin’s moves on Friday were spurred by a tweet from the SEC’s investor education office urging investors to weigh risks and benefits of investing in funds that holds bitcoin futures contracts, said Ben Caselin of Asiabased crypto exchange AAX.

Several fund managers, including the VanEck Bitcoin Trust, ProShares, Invesco, Valkyrie and Galaxy Digital Funds have applied to launch bitcoin ETFs in the US. Crypto ETFs have launched this year in Canada and Europe, growing in popularity amid surging interest in digital assets. The SEC did not immediately respond to a request for comment on the report.



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Invesco plans crypto-linked ETFs in bid to bypass SEC aversion, BFSI News, ET BFSI

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Invesco is planning to launch a pair of cryptocurrency-focused exchange-traded funds, even as regulators have repeatedly delayed the approval of a U.S. Bitcoin ETF.

About 85% of the Invesco Galaxy Blockchain Economy ETF and the Invesco Galaxy Crypto Economy ETF will be in crypto-linked equities, according to a filing with the U.S. Securities and Exchange Commission. The rest of the portfolio will be in other trusts and funds that hold cryptocurrencies.

The SEC has delayed making a decision on the pileup of Bitcoin ETF applications, though odds of approval this year have faded after skeptical comments from new Chairman Gary Gensler last month. At least 12 issuers including Fidelity Investments, Grayscale Investments and WisdomTree Investments are currently pursuing a Bitcoin ETF, and the SEC has acknowledged at least six applications, according to Bloomberg Intelligence. That means it has a limited amount of time to either approve or reject the proposals.

Invesco is the latest issuer to get creative as the SEC hits pause. An application for the Volt Bitcoin Revolution ETF was filed this week, which would target companies exposed to Bitcoin. Meanwhile, the Bitwise Crypto Industry Innovators ETF (ticker BITQ), which tracks companies such as crypto miners and payment firms, launched in May.



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US ETFs see record money inflow this year, BFSI News, ET BFSI

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Investment into US exchange traded funds (ETFs) has risen to record levels this year, driven by a rally in equities and investor preference for passive index-tracking funds over actively managed peers.

According to Refinitiv data, US ETFs attracted a record inflow of $324 billion in the first four months of this year, which was 180% higher than the same period of last year. At the same time, US mutual funds received an inflow of $318 billion, which was a 58% drop.

This surge in inflows is evidence of growing investor interest in ETFs, due to their lower fees and tax liabilities, and better returns compared with active funds in recent years.

Analysts said proposals by the Joe Biden administration to increase the US capital gains tax had also fuelled interest in ETFs.

“Over the last six months, flows have continued to be robust as the elevated savings pile of the private sector found its way into financial assets, benefitting ETFs,” said Komson Silapachai, vice president at investment management firm, Sage Advisory Services, based in Austin.

“The expected increase in capital gains tax later this year should result in a higher preference for ETFs versus mutual funds for the highest tax brackets.”

As most ETFs are passively managed, there is less amount of buying and selling taking place, which leads to lower capital gains and taxes.

Also, ETF redemptions take place through a mechanism called “in-kind transfer” in which ETFs have to deliver baskets of securities to authorized brokers instead of paying cash, which precludes them from being taxed.

According to Refinitiv data, U.S equity ETFs saw a cumulative inflow of $149.6 billion in the first four months of this year, while debt ETFs obtained $283.6 billion.

The Vanguard 500 index fund led this year’s inflows seeing net purchases of $20.7 billion, while iShares Core S&P 500 ETF and Financial Select Sector SPDR Fund procured $11.8 billion and $9.6 billion respectively.

Analysts said the higher inflows were also due to the availability of a variety of ETFs which are focused on certain themes or sectors.

The surge in ETFs was prompted by an SEC rule in 2019 that eliminated some exemptive relief requirements that has made ETF launches expensive and time-consuming.

“The relaxation of the exemption rule requirements has allowed ETFs to be structured to cover narrower segments of the market such as marijuna stocks, ‘high conviction’ stocks, crypto-focused, etc.,” said Warren Ward, founder of financial planning firm, Warren Ward Associates in Houston.

“I suspect this is the main driver of the higher inflows, he said.

“Why choose a single stock if you can utilize a small basket of them instead?”



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Why has the price of Bitcoin been falling?, BFSI News, ET BFSI

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Even by Bitcoin‘s standards, Wednesday was pretty wild.

The price of the famously volatile digital currency fell nearly 30% at one point after the China Banking Association warned member banks of the risks associated with digital currencies. The decline narrowed to below 10% in the afternoon, but Bitcoin had still lost about $70 billion in market value in 24 hours.

Bitcoin has lost about 38% of its value since April 13 when it hit a high of more than $64,600. The China warning was just the latest headwind: Before Wednesday, Tesla’s decision to not accept the digital currency as payment for cars – after it said it would – and murmurings in Washington about tighter regulation of digital currencies had put pressure on Bitcoin. The price is still up about 31% in 2021 and nearly 300% from a year ago.

Here’s a look at Bitcoin and digital currencies in general:

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HOW BITCOIN WORKS

Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive Bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients’ portfolios, but overall mainstream acceptance is still limited.

Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators – and criminals.

Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. According to Coinbase, there are about 18.7 million Bitcoins in circulation and only 21 million will ever exist. The reason for that is unclear, and where all the Bitcoins are is anyone’s guess.

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WHAT HAPPENED TO THE PRICE?

On Wednesday, a statement posted on the Chinese Banking Association’s website said financial institutions should “resolutely refrain” from providing services using digital currencies because of their volatility.

Virtually every cryptocurrency fell after the industry group’s statement.

As of 4:15 p.m. eastern time Wednesday, Bitcoin was down more than 7% at around $40,310 per coin. Most cryptocurrencies lost between 7% and 22% of their value and shares of Coinbase dropped 5.4%.

It’s not unusual for the value of Bitcoin to change by thousands of dollars in a short time period, though swings totaling around $20,000 in one day are extreme. On the last trading day of 2020, Bitcoin closed just under $30,000. In mid-April, it flirted with $65,000.

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DOESN’T ELON MUSK HAVE A ROLE HERE?

Yes, and a fairly big one. Musk announced in February that his electric car company Tesla had invested $1.5 billion in Bitcoin. In March, Tesla began accepting Bitcoin as payment. Those actions contributed to the run-up in Bitcoin’s price, and Musk also promoted the digital currency Dogecoin, which also spiked in value.

However, Musk reversed course in just a short time, saying last week that Tesla would stop accepting Bitcoin because of the potential environmental damage that can result from Bitcoin mining. The announcement sent Bitcoin falling below $50,000 and set the tone for the big pullback recently in most cryptocurrencies.

A number of Bitcoin fans pushed back on Musk’s reasoning. Fellow billionaire Mark Cuban said that gold mining is much more damaging to the environment than the mining of Bitcoin.

A 2019 study by the Technical University of Munich and the Massachusetts Institute of Technology found that the Bitcoin network generates an amount of CO2 similar to a large Western city or an entire developing country like Sri Lanka. But a University of Cambridge study last year estimated that on average, 39% of “proof-of-work” crypto mining was powered by renewable energy, primarily hydroelectric energy.

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BUT SOME COMPANIES ARE USING BITCOIN?

The digital payment company Square and its CEO Jack Dorsey – also the CEO of Twitter – have been big proponents of Bitcoin. Overstock.com also accepts Bitcoin, and in February, BNY Mellon, the oldest bank in the U.S., said it would include digital currencies in the services it provides to clients. And Mastercard said it would start supporting “select crypto currencies” on its network.

Bitcoin has become popular enough that more than 300,000 transactions typically occur in an average day, according to Bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards.

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THERE IS SKEPTICISM AROUND BITCOIN?

Yes, plenty of it. Tracking Bitcoin’s price is obviously easier than trying to figure out its value, which is why so many institutions, experts and traders are skeptical about it and cryptocurrency in general. Digital currencies were seen as replacements for paper money, but that hasn’t happened so far. Federal Reserve Chair Jerome Powell has said the central bank prefers to call crypto coins “crypto assets,” because their volatility undermines their ability to store value, a basic function of a currency.

While some banks and financial services companies are getting in on it, others are staying away.

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COULD A DIGITAL CURRENCY SELL-OFF CAUSE WIDESPREAD DAMAGE?

Regulators aren’t very worried about a possible crash in digital currencies dragging down the rest of the financial system or economy.

Even with the recent sell-off, digital currencies have a market value of about $1.72 trillion, according to the website coinmarketcap.com. But that pales compared with the $46.9 trillion stock market, $41.3 trillion residential real estate market and nearly $21 trillion Treasury market at the start of the year.

The European Central Bank said Wednesday that the risk of cryptocurrencies affecting the financial system’s stability looks “limited at present.” In large part, that’s because they’re still not widely used for payments and institutions under its purview still have little exposure to crypto-linked instruments.

Earlier this month, the Federal Reserve said a survey of market contacts found roughly one in five cited cryptocurrencies as a potential shock to the system over the next 12 to 18 months. That’s a turnaround from the fall, when a similar survey found none mentioning cryptocurrencies.

HOW MUCH OVERSIGHT IS THERE?

Washington officials have been talking about regulating digital currencies more, and worries about a heavier hand have played a role in the recent swoon in prices.

Gary Gensler, who took over as chairman of the Securities and Exchange Commission last month, has said that cryptocurrency markets would benefit from more oversight to protect investors.

In a hearing before the House‘s financial services committee earlier this month, Gensler said neither the SEC nor the Commodity Futures Trading Commission, which he used to head, has a “regulatory framework” for trading on cryptocurrency exchanges yet. He said he thought Congress would ultimately have to address it because “there’s really not protection against fraud or manipulation.”

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HOW BITCOIN CAME TO BE

It’s a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn’t matter: The currency obeys its own internal logic.

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How Shivalik Bank is transforming from cooperative to small finance bank, BFSI News, ET BFSI

Banking & Finance

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In a conversation with ETBFSI on its transition from an urban co-operative bank to a small finance bank. Shivali Mercantile Co-operative Bank’s Chief Executive Officer and Managing Director, Suveer Kumar Gupta talks about the reason behind the transition, how it’s relying and investing in digital capabilities and partnerships with FinTechs and MSMEs being a key focus customer base.

Journey from UCB to SFB

Shivalik Mercantile Co-operative Bank started in Saharanpur District in Uttar Pradesh is the first urban co-operative bank to transition into a small finance Bank. It acquired Bhoj Nagarik Sahakari Bank Maryadit in Dhar and became a multi-state co-operative bank and further expanded in Indore after acquiring Malwa Commercial Cooperative Bank Limited.

Suveer Kumar Gupta, Managing Director & Chief Executive Officer, Shivalik Bank

The bank has 31 branches and business size around Rs 2050 crore with a deposit base of Rs 1225 crore and advance of Rs 825 crore as of March 31, 2021.

Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank Ltd on the transition towards the small finance bank said, “Right from the very start we wanted to be a strong and well managed one of the larger co-operative banks in the country and had aspirations to grow and be professional. For the past few years we’ve been improving our systems, controlling measures, risk management practices and most of all working towards building a strong technology infrastructure. At the same time our focus was on financial inclusion and MSMEs.”

When the Reserve Bank of India in 2015 put forward the small finance bank vision the bank realised they’re in sync with the vision they had set for Shivalik Bank. Gupta said, “The synergies were significant towards a transition to SFB and then RBI came up with voluntary transition guidelines and we jumped to the opportunity and applied for the transition and got an in-principle approval in January 2020 and the final license was in January 2021 and are in the last leg of the journey and hope to go live very soon.”

While the SFB transition will bring in more regulatory oversight and compliance norms, the bank sees numerous benefits with the transition to SFB as existing SFB proven the business model of lending to priority sector with small ticket sizes is successful and as a co-operative bank they have been following for some time.

Gupta said, “We are clear and no two thoughts on how the business will progress. Becoming an SFB will allow us to raise capital for growth and becoming a commercial bank will make it easier to approach investors and infuse a greater trust among the customer base. Further as co-operative banks miss out on government and institutional business, becoming a scheduled commercial bank will help them to reach out for institutional business.”

The bank is eyeing MSMEs as the key are of the focus and 90% of its book is fully secured and about 10% of their portfolio is microfinance. Going forward they tend to retain the philosophy of secured lending and are not shy of unsecured lending as well and will be looking forward to introducing some products in the unsecured side but major focus will be on the secured part.

We are clear and no two thoughts on how the business will progress. Becoming an SFB will allow us to raise capital for growth and becoming a commercial bank will make it easier to approach investors and infuse a greater trust among the customer base. Further as co-operative banks miss out on government and institutional business, becoming a scheduled commercial bank will help them to reach out for institutional business.Suveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank

Ecosystem Partnerships

Gupta says as a bank they realised that the thought process of ownership mindset will not work for them because they are not experts in everything. He said, “ and have partnered with India Gold providing gold loan to customers at doorstep, Airtel Payments Bank for digital sourcing of loans, we’ve tied up Atyati, a microfinance banking correspondent partner and we are in discussion with other few fintechs as well some on customer onboarding side and some on digital sourcing side and invoice financing side where they’re using blockchain.”

They are very much open to digital partnerships and believe having a pan India license the best way to is by not being asset heavy with physical branches but can be done digitally too. “Any customer sitting anywhere can open and operate a Shivalik bank account just using a mobile phone and that is the way we want to go forward.”

We are bankers and will stick to banking. As for technology and other services, let’s seek experts and partner with them. We’ve been looking forward to partner with FinTechsSuveer Kumar Gupta, MD & CEO, Shivalik Mercantile Co-operative Bank


Physical Expansion

On Physical expansion, they want to be a global local bank. He adds, we would do it in the northern region and by physical I would not only consider bank branches but also digital assisted channels like banking correspondents moving around with micro-ATMs. We also have micro-ATMs which are being used by banking correspondents and are connected to the core-banking system in real time.

He explained, customers can withdraw by swiping card or Aadhar and deposit money too among other banking services like bank-in-a-box kind of thing. This would eventually help us in expansion.

Digital Savvy

As the bank is heavily relying on digital partnership and capabilities they’re adequately focusing on cyber-security. He said, “We are focused on the safety aspects of digital exposure. From a customer point of view, we’ve put in all safeguards like two factor authentication, info-sec testing before release, customer education programmes, vulnerability testing, applications have biometric logins. From an organisation perspective, there’s an information-security (info-sec) team in place and internal policy on info-sec has been designed by one of the Big 4 and are one of the first co-operative banks to get cyber-insurance much ahead of the RBI mandate. “

Gupta also said, The bank has hosted its data in a tier-4 data center which is considered to be the best in Asia and its core banking system provided by Infosys is on a hosted model making Shivalik Bank as the first bank to do it.

The bank is ready for the transition and is waiting for the final go-ahead from the regulator, concluded Gupta.



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bitcoin: Canadian regulator clears launch of world’s first bitcoin ETF

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By Fergal Smith and David Randall

TORONTO – Canada’s main securities regulator has cleared the launch of the world’s first bitcoin exchange traded fund, an investment manager said on Friday, providing investors greater access to the cryptocurrency that has sparked an explosion in trading interest.

The Ontario Securities Commission has approved the launch of Purpose Bitcoin ETF, Toronto-based asset management company Purpose Investments Inc. said in a statement. The OSC confirmed the approval in a separate statement to Reuters.

“The ETF will be the first in the world to invest directly in physically settled Bitcoin, not derivatives, allowing investors easy and efficient access to the emerging asset class of cryptocurrency,” Purpose Investments said.

Investors have been able to trade bitcoin using futures contracts on the CME derivatives exchange. They can also buy closed-end investment funds, such as the Bitcoin Fund on the Toronto Stock Exchange.

An ETF could offer some advantages to investors, such as buying at net asset value rather than at a premium, said Arthur Salzer, chief executive officer of Northland Wealth Management

“I think the OSC is doing the right thing allowing for an ETF,” Salzer said. “It gets rid of some of the negatives of the current funds.”

Bitcoin notched a record high of $48,975 on Friday. It has gained about 63% so far this year and soared roughly 1,130% since mid-March 2020.

Elon Musk’s Tesla revealed on Monday it had bought $1.5 billion worth of the cryptocurrency and would soon accept it as a form of payment for its cars, while the cryptocurrency has been gaining acceptance among mainstream financial firms.

In the United States, eight firms have tried without success since 2013 to create a bitcoin ETF, according to Todd Rosenbluth, director of ETF and mutual fund research at New York based CFRA.

Among issues the Securities and Exchange Commission appears to be focused on are the potential for market manipulation and the process of custody audits that verify that a fund holds its purported assets.

“While some expect that a Canadian ETF approval sets the stage for a near-term U.S. one, we expect the SEC under new leadership to take their time to review some of the new filings from VanEck and others,” Rosenbluth said.

VanEck is a New York-based investment management firm.

Gary Gensler, former chair of the Commodity Futures Trading Commission, was named chair of the SEC last month by U.S. President Joe Biden.



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XRP cryptocurrency tumbles as Coinbase exchange moves to suspend trading, BFSI News, ET BFSI

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Cryptocurrency XRP slumped 19% on Tuesday after Coinbase, a major U.S. virtual coin exchange, said it would suspend trading in the digital currency.

California-based Coinbase said on Monday it would suspend trading in XRP after the U.S. Securities and Exchange Commission (SEC) last week charged an associated blockchain firm, Ripple, with conducting a $1.3 billion unregistered securities offering.

Ripple has rejected the charges, saying XRP is a currency and does not need to be registered as an investment contract.

XRP, the third-biggest cryptocurrency, was last down 18.7% at an intra-day low of $0.20, its lowest since July. It has slumped by over half since the SEC move.

The move by Coinbase comes as it prepares for a stock market listing, with a confidential application to the SEC to go public. It would be the first major U.S. crypto exchange to list on the stock market.

Coinbase, one of the most well-known cryptocurrency platforms, said trading in XRP moved into limit only from Monday, and would be fully suspended on Jan. 19.

Financial regulators around the globe are still grappling with how to regulate bitcoin, XRP and rival cryptocurrencies. Investors are watching for regulatory developments that could determine whether cryptocurrencies leap from a niche to a mainstream asset.

XRP, which often moves in tandem with Bitcoin, had rocketed in November to hit its highest level since 2018 as a rally in cryptocurrencies gathered pace.



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