The Crypto Affair – POLITICO

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The Crypto Industry Has Been Hit by Its First Big Insider Trading Scandal Thursday. The most interesting part of the case does not involve the parties who were accused.

The Justice Department announced the arrest of former Coinbase product manager Ishan Wahi on charges of informing his brother, Nikhil Wahi, and his friend, Sameer Ramani – both also charged – about new digital tokens that were about to be listed on the popular trading platform. According to authorities, this non-public information allowed the conspirators to buy these tokens on other exchanges and flip them for a profit once their price jumped after hitting Coinbase’s high-traffic digital ecosystem.

An accompanying civil case filed by the SEC posits that at least nine of the tokens that were traded by the alleged conspirators were investment securities – a designation that could have significant implications for Coinbase because… it never registered as a national stock exchange movables.

“Whether it’s stocks, options, crypto assets or other securities, we will justify our mission by identifying and combating insider trading in securities wherever we see it,” he said. said Carolyn Welshhans, acting head of the SEC Enforcement Division’s Crypto Assets and Cyber ​​Unit, in a statement.

Other Regulators, Crypto Industry Advocates, and Oversight Groups are scratching their heads over what the SEC complaint could mean for the future of digital asset regulation. Congress has failed to pass legislation suitable for digital asset exchanges and there are – suffice it to say – differing opinions on the role of market regulators in controlling token offerings.

Coinbase simultaneously pushed back against any implication that securities had been offered on its platform while calling on the SEC to craft new rules that would allow it to do just that.

“No asset listed on our platform is a security, and the SEC charges are an unfortunate distraction from today’s proper enforcement action,” Coinbase CEO Brian Armstrong wrote. , in a blog post.

IT’S FRIDAY! “Victoria Guida will be here on Monday. Send tips to [email protected] Where [email protected]. And you can always reach me at [email protected].

RECESSION ALARM SOUNDS ON WALL STREET — NYT’s Joe Rennison: “Wall Street’s most talked about recession indicator is ringing the loudest alarm bells in two decades, heightening investor concerns about the slowing US economy. This indicator is called the yield curve, and it’s a way of showing how interest rates on various US government bonds compare, including three-month treasury bills and two-year treasury bills. and at 10 years old.

“Traditionally, bond investors expect to be paid more for locking in their money for a long time, so interest rates on short-term bonds are lower than on longer-term bonds. Plots on a graph, the different bond yields create an upward sloping line – the curve. But from time to time, short-term rates exceed long-term rates. This negative relationship distorts the curve in what is called an inversion and signals that the normal situation in the world’s largest government bond market has been turned upside down.

ECB RAISES RATES FOR FIRST TIME IN OVER A DECADE — From our colleagues in Europe: “The European Central Bank took a long-awaited step on Thursday to raise interest rates in response to record inflation that has inflicted a massive cost of living crisis in the region. By opting for half a percentage point, rather than the quarter of a percentage point it previously posted, the bank sought to send a clear signal of its determination to fight inflation. His decision came amid growing market jitters over Italy’s new political crisis following the resignation of Prime Minister Mario Draghi.

“The ECB has lagged behind most major central banks in tackling inflation, which hit a record high of 8.6% in the eurozone in June. Thursday’s 50 basis point move – the first hike of this size in more than two decades – aligns the Frankfurt institution more closely with its counterparts, which moved in steps of 50 and 75 basis points.

But some ECB officials initially favored a more modest hike — Bloomberg’s Carolynn Look and Jana Randow: ‘A small number of European Central Bank officials would have initially preferred a quarter-point interest rate hike at Thursday’s Governing Council meeting, people say close to the debate. The official proposal made by chief economist Philip Lane was for a half-point step, said the people, who asked not to be identified because the discussions were private. Officials eventually backed that up because they also agreed on a new instrument to prevent disorderly moves in the bond market, the people said.

INFLATION FORCES CENTRAL BANKS TO DROP MESSENGER TOOL – Reuters Sujata Rao and Dhara Ranasinghe: “If the US Federal Reserve killed forward guidance in June, the European Central Bank may have just driven the final nail into the coffin of a tool officials have long used to provide monetary policy signals to financial markets. . … The shift to what the ECB itself has described as “a meeting-by-meeting approach” is the latest warning to investors and traders who have seen policymakers from Australia to Switzerland to Sweden execute surprising reversals on the political signals they had sent only a few weeks earlier.”

HOUSING MARKET FEES — AP’s Ken Sweet, Michael Casey, and Alex Veiga: “The Federal Reserve has aggressively raised short-term interest rates to fight inflation, which is helping to drive up credit card rates, car loans and mortgages. Rising mortgage rates combined with already high home prices to discourage potential buyers. Mortgage applications fell sharply. Sales of previously occupied homes have fallen for five consecutive months, during what is typically the busiest time of the year in real estate.

“The rate on a 30-year mortgage averaged around 5.54% this week, according to mortgage buyer Freddie Mac; a year ago, it was close to 2.78%. Rising rates leave buyers with unwelcome options: pay hundreds of dollars more for a mortgage, buy a smaller home or choose to live in a less desirable area, or drop out of the market, at least until rates go down. »

UNEMPLOYMENT CLAIMS REACH NEW HIGH FOR THE YEAR – Rina Torchinsky of the WSJ: “New jobless claims rose again last week, reaching their highest level since late last year, a sign that the tight labor market is slowly loosening. Initial jobless claims, an indicator of layoffs, rose to a seasonally adjusted 251,000 in the week ended July 16 from 244,000 the previous week, the Labor Department said Thursday. Claims last week were above the 2019 pre-pandemic weekly average of 218,000, when the labor market was also strong, and their highest level since last November.

STOCKS END HIGH — AP’s Stan Choe and Alex Veiga: “Wall Street stocks closed higher Thursday, building on their winning week, as investors sifted through a deluge of news on the economy, interest rates interest and business profits.

The S&P 500 rose 1% after shaking off an early slide, returning to its highest level in six weeks. The Dow Jones Industrial Average also recovered from a mid-afternoon dip to end up 0.5%, while the Nasdaq composite rose 1.4% as Tesla and tech stocks dominated the market.

DEMOCRATS CONSOLATION PRIZE ON TAXES — From Pro’s Brian Faler: “Democrats are about to approve their first big tax break this year — but it’s not one they’ve spent so long talking about. Their attempt to expand the child tax credit and bolster green energy breaks, not to mention their plans to raise taxes on the rich, are all dead. But they are set to pass a new $24 billion special credit for the semiconductor industry, with legislation now on its way to President Joe Biden’s desk.

INFLATION HITS BIG INSURERS’ PROFITS – WSJ’s Leslie Scism: “Travellers Cos., a large auto, home and business insurer, reported a 41% drop in net income in the second quarter as inflation continued to drive up costs, including for repair and replace automobiles and pay for medical care for injured people.Allstate Corp., meanwhile, said inflation will worsen its second-quarter results ahead, in an announcement Wednesday that sent its shares down about 7 % as of early Thursday afternoon.Traveller stock was down about 2%.Both insurers said further premium rate increases were coming in a bid to improve their results. Higher catastrophe costs and lower investment income also hurt the year-over-year comparison at Travelers.

DOW CHEMICALS FORECASTS DISAPPOINT – Rithika Krishna of Reuters: “Chemicals maker Dow Inc. on Thursday projected third-quarter sales below market estimates, blaming a global surge in inflation for slowing demand and sending its shares down 3 %. The bleak outlook could be a barometer of price pressures as Dow chemicals are used in industries ranging from automotive and food packaging to electronics.

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