Category: Crypto

By Medha Singh and Lisa Pauline Mattackal

XRP has become the unlikely white knight of crypto, thwarting its regulatory foes and dragging the market out of the doldrums.

The price of XRP popped 78% after a U.S. judge ruled on July 13 that issuer Ripple Labs’ sales of the token on public exchanges didn’t violate securities law, and it’s still up about 47%. Its market cap has ballooned to $36 billion from $25 billion and its crypto market share to 3.5% from 2% before the ruling, according to CoinMarketCap.

Ripple’s landmark victory has galvanized the wider market for altcoins – cryptocurrencies excluding bitcoin – as much of the regulatory scrutiny on the sector focuses on whether some tokens should be classed as more tightly-regulated securities.

“It’s a big milestone for the altcoins sector, it is fair to assume that if XRP is not a security, barely any other digital asset can be considered that way,” said Matteo Greco, analyst at fintech and blockchain investment firm Fineqia International.

Indeed, the altcoin market cap has jumped to $665.2 billion from $636.38 billion before the ruling, according to CoinGecko, while a Cryptoquant index of the prices of the coins targeted as potential securities by the SEC has jumped 11%.

“For the first time, it seems like we have rules of the road for how to evaluate these tokens,” said Ben Weiss, CEO of crypto ATM network CoinFlip.

The cheer spread throughout cryptoland, with bitcoin – which is generally considered a commodity rather than a security – touching a 13-month high after the ruling though it has since dropped back down below $30,000.

XRP VS STABLECOINS

It’s certainly not all smooth sailing for Ripple, or altcoins more generally, though. The SEC is likely to appeal the ruling, according to some legal experts, while trading volumes for the crypto space in general are still low compared to a year ago.

The lawsuit, combined with the rise of competitors such as stablecoins also hurt the token’s use in practical applications like payment settlements and remittances.

Ripple Labs said last week that its pursuit of sound crypto regulation in the U.S. was far from concluded. In the meantime, it said it would continue to invest in jurisdictions that have embraced clear regulatory frameworks.

The company was relisted by several crypto exchanges in the wake of its legal win, and some institutional investors are taking note; a Coinshares survey of 51 digital asset managers managing $900 billion in assets found 10% of investors are investing in altcoins, versus 5% last month, with some reducing positions in ethereum and bitcoin in favor of smaller altcoins like XRP and polkadot.

“Legal clarity on the token itself opens the door again to Ripple’s long-stated use cases as a settlement layer,” said Joseph Edwards, head of research at Enigma Securities.

He pointed to the massive growth of U.S. dollar stablecoins since 2020 as a factor for eroding XRP’s usage in settlements and remittances, as those tokens became favored for use in cross-border payments.

“A lot depends on how much dry powder Ripple Labs has to deploy to new business development initiatives,” said Edwards.

(Reporting by Lisa Pauline Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)

By John McCrank and Michelle Price

WASHINGTON (Reuters) – Partnering with Coinbase Global may hinder rather than help Nasdaq’s bid to win regulatory approval for a bitcoin exchange-traded-fund it wants to launch with BlackRock.

Nasdaq last month filed a proposal with the U.S. Securities and Exchange Commission (SEC) to launch an ETF by BlackRock that would track the spot bitcoin market, triggering a flurry of similar filings from Cboe Global Markets for bitcoin ETFs by rivals including Fidelity and Invesco.

After a decade of SEC rejections, the proposal from BlackRock, the world’s largest asset manager, revived industry hopes that the SEC may finally be persuaded to greenlight a bitcoin ETF in what would be a watershed moment for the digital asset.

Speaking to FOX Business last week, BlackRock CEO Larry Fink said the ETF could make it easier for everyday people to invest in crypto. Bitcoin has gained more than 20% since the filing was unveiled.

The SEC has denied previous spot bitcoin ETF proposals on the basis that they would be vulnerable to manipulation. Nasdaq said last week that it would address that concern by working with Coinbase, the largest U.S.-based crypto exchange, to police trading in the underlying bitcoin market. The CBOE this week proposed a similar surveillance arrangement.

That could actually be a problem, according to some lawyers who follow the industry. The SEC last month sued Coinbase, escalating SEC chair Gary Gensler’s crackdown on the crypto industry. The SEC said Coinbase trades cryptocurrencies that qualify as securities and should be registered as a broker, exchange and clearinghouse and subject to the SEC’s risk management and investor protection rules.

The SEC’s allegations, which Coinbase denies, raised questions over its suitability as a partner for Nasdaq and CBOE.

“I don’t think it’s necessarily a badge of honor to say that you’re using an entity that the SEC is suing as providing you with critical investor protection services,” said John Reed Stark, former chief of the SEC’s Office of Internet Enforcement.

“The whole point of the SEC’s lawsuit is that there’s no transparency into what Coinbase does” as an exchange, he added.

Coinbase previously has said that as a listed company its business is subject to a slew of disclosure rules. And with roughly 56% of U.S. dollar bitcoin trading, according to Nasdaq’s filing, Coinbase is integral to the U.S. bitcoin market.

Sui Chung, CEO of CF Benchmarks, said the industry is trying to meet the SEC’s bar and is committed to the “highest possible standards of market integrity and transparency.” CF Benchmarks is the UK-regulated index provider for four proposed bitcoin ETFs, including BlackRock’s.

Representatives for BlackRock, Nasdaq and CBOE declined to comment.

When asked by Reuters about the arrangement on Wednesday, Gensler did not comment on Coinbase specifically but reiterated previous comments that investors should not expect the same level of integrity and fairness on crypto exchanges as in the traditional equity markets.

‘CALCULATED DECISION’

Gensler has said bitcoin is one crypto token that is outside the SEC’s jurisdiction, while cryptocurrency is not subject to the Coinbase litigation. The ETF proposals are unrelated to the Coinbase litigation and should be treated separately, according to Joseph Silvia, a lawyer with law firm Dickinson Wright.

“But ultimately it’s going to be Gensler who’s going to make the decision as to whether or not the litigation is going to affect the application,” Silvia added.

Gensler has said the crypto industry is rife with fraud and that crypto companies like Coinbase made a “calculated economic decision” to flout SEC rules. Most crypto companies dispute the SEC’s jurisdiction and contend that the rules are unclear.

All told, the SEC has 240 days after it accepts the bitcoin ETF filing applications to make a decision.

Chung said the industry would not spend the resources trying to meet the SEC’s bar if it believed the decision ultimately hinged “on the whim of one or two individuals that may be skeptical as to the merits of Bitcoin as an investment asset.”

Still, some lawyers said it would likely come down to that.

“The statements that Gensler has made don’t give me any sense that he’s going to be flexible,” said Richard Marshall, a partner at law firm Katten and a former SEC attorney.

“I don’t see that the SEC is going to open the gates,” Marshall added.

(Reporting by Michelle Price and John McCrank; additional reporting by Hannah Lang; Editing by Will Dunham)

LONDON (Reuters) – Top cryptocurrency bitcoin could reach $50,000 this year and $120,000 by the end of 2024 Standard Chartered said on Monday, predicting the jump in its price could encourage bitcoin ‘miners’ to hoard more of the supply.

Standard Chartered published a $100,000 end-2024 forecast for bitcoin back in April on the view the so-called “crypto winter” was over, but one the bank’s top FX analysts, Geoff Kendrick, said there was now 20% “upside” to that call.

“Increased miner profitability per BTC (bitcoin) mined means they can sell less while maintaining cash inflows, reducing net BTC supply and pushing BTC prices higher,” Kendrick said in a report.

(Reporting by Marc Jones; Editing by Amanda Cooper)

LONDON (Reuters) – Bitcoin hit its highest level in 13 months on Thursday rising as much as 3.28% to $31,500.

The world’s largest cryptocurrency has recently found support due to plans by fund managers, including BlackRock – the world’s largest asset manager – to launch a U.S.-listed spot bitcoin exchange-traded fund(ETF).

Nasdaq refiled its application to list BlackRocks’s ETF according to a filing made public on Monday after the U.S. securities regulator had reportedly raised concerns over initial filings.

(Reporting by Samuel Indyk, editing by Alun John)

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – What would Satoshi make of it all?

Bitcoin, the currency created to subvert the financial establishment, has shaken off weeks of sickness with the support of Wall Street’s finest.

The original crypto coin has leapt 20% to two-month highs at $30,182 over the past 11 days after BlackRock, the world’s largest asset manager, revealed hopes for a spot bitcoin exchange-traded fund (ETF) in the United States.

BlackRock filed for a prospective spot bitcoin ETF on June 15, undeterred by the Securities and Exchange Commission’s (SEC) past record of rejecting every such application. The news helped bitcoin bounce out of the doldrums and snap two consecutive weeks of losses.

Satoshi Nakamoto’s rebel child is invigorated by the prospect of an ETF that offers investors exposure to spot bitcoin on a regulated U.S. stock exchange without the hassle of custody.

Bitcoin’s market value has grown to comprise nearly half of the $1.1 trillion overall crypto market, its highest share in over two years, according to data tracker CoinMarketCap.com. Its share was around 40% at the start of the year, up from a low of 34% in 2018.

“The news of the ETF filing is evidence of adoption and interest from top global players, which is, of course, interesting to institutional investors and traders alike,” said Mikkel Morch, chairman at digital asset investment fund ARK36.

Fueling optimism among some crypto advocates is BlackRock’s strong track record of getting the SEC’s green light for ETFs more generally, although it hasn’t filed for a crypto one before. It boasts a 575-1 approval rate, according to Rosenblatt Securities analyst Andrew Bond.

Since the BlackRock filing, Invesco and WisdomTree have also reapplied for spot bitcoin ETFs after they had previous applications rejected by the regulator.

The mini-rush of pitches to the U.S. watchdog comes days after the SEC sued major crypto exchanges Coinbase and Binance for allegedly breaking securities laws, casting a chill over the cryptocurrency market.

Not everyone’s keen to jump in, though.

“You know what the rules of the road are in equities and bonds. But you don’t fully know what the rules are going to be for crypto,” said Rick Meckler, partner, Cherry Lane Investments in New Vernon, New Jersey.

“As a consequence, it has made it difficult to make an investment class for many people, myself included.”

ROLLING OVER FUTURES

At present, American investors currently looking to gain exposure to crypto on stock exchanges are limited to futures-based ETFs. These funds track bitcoin futures contracts, which come with the additional costs of rolling over contracts on settlement days.

For example, ProShares’ Bitcoin Strategy ETF has risen 62% this year, lagging bitcoin’s 82% jump.

Bryan Armour, director of passive strategies research for North America at Morningstar, said a spot bitcoin ETF could be a more cost-effective way for investors to trade.

“It doesn’t appear that most crypto ETF holders are institutional – assets are pretty spread out,” he added.

Crypto investment products are still a tiny part of the overall market. Excluding grantor trusts – limited to accredited investors – such as the Grayscale Bitcoin Trust, the current crypto ETF market totals about $2 billion, according to MorningStar Direct, less than 2% of overall crypto market.

BITO, the first bitcoin futures ETF and the fastest to notch $1 billion in market cap after its launch in 2021, ushered in a wave of other futures ETF launches.

About 48% of respondents in a survey this year of 549 international professional investors by TrackInsight, J.P. Morgan Asset Management and State Street said they would consider investing in single-cryptocurrency exchange-traded products, versus 37% who were interested in investing directly.

“I’d argue BlackRock is just as interested in retail as institutional,” said David Wells, CEO of Enclave Markets.

“They may start with institutions but potentially hope that bitcoin is an option that goes into investors’ retirement portfolios, and hoping the BlackRock name is a strong enough impetus to buy, and that’s a big draw for retail investors.”

(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Pravin Char)

By Jody Godoy

(Reuters) – Months before cryptocurrency exchange Coinbase became the biggest target of the U.S. crackdown on digital assets, the company launched an unusual legal offensive, recruiting top lawyers to try to shape court rulings in other cases.

Before the U.S. Securities and Exchange Commission sued Coinbase on June 6, the company had weighed in on two other crypto-related lawsuits brought by the regulator and urged judges to adopt views on open legal questions that are now at the heart of its own case.

In each case, Coinbase filed briefs as an “amicus,” or friend of the court.

While common at the U.S. Supreme Court, amicus briefs are filed in just 0.1% of cases in federal trial courts, according to law firm Gibson Dunn & Crutcher, although crypto industry groups have been filing an increasing number in SEC cases in support of defendants.

A ruling favoring another crypto defendant at the trial court level would not be binding on Coinbase’s own case, but the company could potentially point to it in its defense, legal experts said. The few judges who have previously ruled in similar cases have endorsed the SEC’s approach.

Filing amicus briefs in the trial court is about starting “the ball rolling in the right direction” on legal issues that the amicus cares about, said Akiva Shapiro, one of the authors of the Gibson Dunn study.

Gibson Dunn represents Coinbase as an amicus in one of the cases.

Spokespeople for the SEC and Coinbase both declined to comment.

For years, the regulator had pursued developers for selling digital tokens without registering them. But it has recently shifted focus to the bigger players like exchanges as it tries to corral what SEC Chairman Gary Gensler called “The Wild West.”

The SEC’s biggest U.S. target is now Coinbase, which it sued in Manhattan federal court. It accused the company of operating an unregistered exchange, broker and clearinghouse, saying at least 13 of the crypto assets it made available to U.S. investors, including Solana, Cardano and Polygon, were securities.

Paul Grewal, Coinbase’s general counsel, told Reuters the day the case was filed that the company is “absolutely committed to defending itself in court.”

LEGAL TEST

Coinbase began its broader legal push last year, after the SEC started investigating it, tapping major corporate defense law firms Gibson Dunn and Cahill Gordon & Reindel to file papers in the two cases.

In one instance, the company urged U.S. District Judge Tana Lin in Seattle to dismiss an insider trading case brought by the SEC against former Coinbase product manager Ishan Wahi.

Coinbase itself was not a defendant in the case.

Wahi and his brother settled with the SEC after pleading guilty to related criminal charges, so Lin never ruled.

The exchange’s main argument in its amicus brief, which could preview its defense in its own case, is that the SEC lacks authority to police the space because many digital assets are not securities.

The company argued the SEC has misapplied a legal test that says “an investment of money in a common enterprise with profits to come solely from the efforts of others,” is a kind of security called an investment contract.

Coinbase argued the digital assets on its platform do not pass that test, in part because they lack contractual agreements.

The SEC has argued that the test — which has been applied to investments in everything from whiskey casks to chinchillas — depends on the economic realities of transactions, not the labels applied to them.

The regulator has urged judges to focus on the way digital assets are marketed, pointing to promises by crypto developers that investors will profit if their projects succeed.

‘FAIR NOTICE’

Coinbase also argued in its brief that the SEC has not set clear guidelines that would give cryptocurrency industry participants “fair notice” that a particular digital asset is a security before suing, violating their right to due process under the U.S. Constitution.

Gensler has been dismissive of the argument, saying many companies in the space had made a “calculated economic decision” to flout the rules.

In its other amicus brief, Coinbase urged a federal judge in Manhattan to allow the fair notice defense in the SEC case against Ripple Labs, which was the industry’s highest-profile battle with the regulator prior to the Coinbase case.

The regulator sued in 2020, accusing the San Francisco-based blockchain company and its current and former chief executives of conducting a $1.3 billion unregistered securities offering by selling the crypto XRP, which Ripple’s founders created in 2012.

Coinbase argued to U.S. District Judge Analisa Torres that denying the Ripple defendants the fair notice defense “would jeopardize the validity of the defense in future cases.”

More than a dozen other cryptocurrency industry groups and market participants have also filed amicus briefs to persuade Torres that XRP is not a security.

A ruling is expected this year.

(Reporting by Jody Godoy in New York; editing by Tom Hals in Wilmington, Delaware, editing by Deepa Babington)

By Hannah Lang

WASHINGTON (Reuters) – Other U.S. crypto exchanges are likely to be in the firing line after the Securities and Exchange Commission (SEC) this week sued Coinbase and Binance, two of the world’s largest crypto exchanges, for allegedly breaching its rules.

The SEC on Tuesday alleged Coinbase traded at least 13 crypto assets that are securities that should have been registered, while on Monday it also accused Binance, the world’s largest cryptocurrency exchange, of offering 12 cryptocurrency coins without registering them as securities.

The lawsuits expand the overall number of cryptocurrencies that the SEC has explicitly identified as securities. That raises questions about other exchanges that have also allowed U.S. investors to trade those tokens, such as Kraken, Gemini, Crypto.com and OKCoin, and whether they could be at risk of SEC action, industry executives said.

“All U.S. exchanges should now be on notice that they may be subject to enforcement action if they permit, or have permitted, these tokens to be traded,” said Jason Allegrante, chief legal and compliance officer at Fireblocks, a digital asset infrastructure provider.

Both Coinbase and Binance deny the SEC’s allegations and have pledged to vigorously defend themselves in court. The SEC declined to comment.

While crypto companies started out in a regulatory gray area, the SEC under chair Gary Gensler has steadily asserted the agency’s jurisdiction over the industry, arguing most tokens meet the definition of a security and should be subject to the same strict disclosure rules.

The agency has brought more than 130 crypto lawsuits and settlements to date, according to data from consultancy Cornerstone Research and the SEC website, and in several of those cases has named specific tokens as securities.

The Coinbase and Binance suits this week expand that list to include some commonly traded tokens, such as Solana, Cardano and Polygon.

“We would not be surprised to see more lawsuits from the U.S. regulators, and possibly the Department of Justice, in the next few weeks,” said Scott Freeman, co-founder of JST Digital, a financial services firm focusing on digital assets.

A spokesperson for the Justice Department declined to comment.

Crypto companies, including Coinbase and Binance, dispute the SEC’s authority, saying many tokens are more akin to commodities, and have repeatedly called for regulators to create clear rules rather than assert their jurisdiction via enforcement actions.

“We do not list securities. For every asset we list, our teams conduct thorough risk and security evaluations which includes a comprehensive legal and compliance process. We will continue to closely monitor this case and others for precedential rulings,” a spokesperson for Kraken said.

Gemini, Crypto.com and OKCoin did not immediately respond to a request for comment.

‘DESTROY THE INDUSTRY’

The latest lawsuits will play out in court, which could take years. An SEC suit alleging Ripple’s XRP token is a security, for example, has been under litigation for more than two years.

But whether the SEC wins or loses, the suits send a strong signal to the industry that the agency is not going to let up, said executives. While big crypto companies can afford to fight the SEC, smaller companies have filed for bankruptcy following SEC enforcement actions, including crypto exchange Beaxy.

“I don’t think that this SEC under this leadership necessarily cares whether they win or lose in the courts. I think what they are engaging in is a coordinated campaign to essentially destroy the crypto economy in the United States,” Stuart Alderoty, chief legal officer at Ripple, told the Piper Sandler Global Exchange & Fintech Conference in New York on Wednesday.

Speaking to CNBC on Tuesday, Gensler suggested an industry shake-out would be good for investors.

“I think if there’s a real value in these crypto tokens, then compliance will build trust and the business model might change,” he said.

According to analysts at Bernstein, roughly 90% of crypto trading already takes place outside the U.S. Executives said they expected exchanges to continue to expand into international regions that have more favorable regulations.

Coinbase, for example, has previously said it would consider moving its global headquarters outside of the U.S.

“I would imagine that other firms spooked by the prevalent trend for regulation by enforcement will follow suit,” said Katharine Wooller, business unit director at Coincover, a provider of insurance for digital assets.

(Reporting by Hannah Lang in Washington; additional reporting by John McCrank in New York and Susan Heavey in Washington; Additional reporting and writing by Michelle Price; Editing by Stephen Coates)

By Tom Wilson and Hannah Lang

LONDON/WASHINGTON(Reuters) -The world’s biggest cryptocurrency exchange Binance and its CEO Changpeng Zhao have been sued by the U.S. Securities and Exchange Commission (SEC), which alleged in a June 5 court filing that the firm operated a “web of deception” that included artificially inflating its trading volumes and commingling customer funds.

The U.S. Commodity Futures Trading Commission (CFTC) also sued Binance over regulatory violations in March. Binance did not immediately respond to a request for comment for this story.

Here are some key facts about Binance:

THE COMPANY

Binance was founded in Shanghai in 2017, but later moved to Tokyo and then Malta. While its holding company is based in the Cayman Islands, Binance says it does not have a headquarters and has declined to state the location of its main Binance.com exchange.

The exchange offers spot and derivatives trading and a host of services from non-fungible tokens (NFTs) to crypto loans and asset management.

It has 120 million users, according to its website. Zhao said in November tweet that Binance has more than 7,400 employees across the world. The company also boasts a formidable social media presence, with over 10 million Twitter followers.

FINANCES

Binance’s global trading platform, Binance.com, is by far the world’s biggest cryptocurrency exchange. Last year it processed crypto trades worth about $65 billion a day, Binance said, dominating the crypto trading landscape with more than half of the market, CryptoCompare data shows.

Yet its finances are opaque. As a privately held company, it does not disclose basic financial information such as revenue, profit and cash reserves. Binance has also not raised outside capital since 2018, industry data show, which means it has not had to share financial information with external investors since then.

A Reuters analysis of Binance’s corporate filings last year found that the core of the business – the Binance.com exchange – remains mostly hidden from public view.

LEADERSHIP

Binance was founded by CEO Changpeng Zhao, a Canadian citizen born and raised age 12 in China, and Yi He, former host of a Chinese TV travel show. The pair were in a romantic relationship and have a son together who was born in the United States, Reuters reported in October.

Yi He is now one of Zhao’s most powerful deputies, running the company’s $7.5 billion venture capital arm as well as holding other key roles including marketing chief.

Zhao assigned top jobs to an inner circle of associates, many of whom had worked or studied in China, according to the Reuters report in October. The company has hired extensively from the traditional financial and regulatory worlds in recent years. In February, Noah Perlman, a veteran of Morgan Stanley, said he had become Binance’s chief compliance officer.

In late May, Binance appointed Richard Teng to head its regional markets outside the United States. Teng is seen as the most likely candidate to succeed Zhao as CEO, according to media reports.

INVESTMENTS

Binance’s venture capital arm has since 2018 invested in over 200 venture investments, the company says. PitchBook data shows that it has spend almost $2 billion across over 150 deals, including major data site CoinMarketCap.

Binance last year extended its reach beyond the crypto sector in 2022, investing $500 million in Tesla boss Elon Musk’s takeover of Twitter.

The company is also prominent in the world of sport, sponsoring Italian soccer team Lazio and the Argentina national team. It also sponsored the 2021 African Cup of Nations tournament. In 2022, Binance signed a partnership to promote its NFTs with Portuguese soccer star Cristiano Ronaldo.

LEGAL WOES

The CFTC in March sued Binance, Zhao and the firm’s former top compliance executive with “willful evasion” of U.S. law, alleging that from at least July 2019 to the present, Binance “offered and executed commodity derivatives transactions on behalf of U.S. persons” in violation of U.S. laws.

The commodities regulator also said Binance’s compliance program has been “ineffective” and the firm, under the direction of Zhao, told employees and customers to circumvent compliance controls. Zhao called the CFTC’s complaint “unexpected and disappointing.”

The SEC on June 5 filed 13 charges against Binance and Zhao for failing to restrict U.S. customers from its platform, misleading investors about its market surveillance controls and for operating an unregistered securities exchange.

The agency also alleged that Binance and Zhao secretly control customers’ assets, allowing them to commingle and divert customer funds, and that Binance created separate U.S. entities “as part of an elaborate scheme to evade U.S. federal securities laws.”

In a statement, Binance said it intends to defend its platform “vigorously,” and that any allegations that user assets on Binance’s U.S. platform have ever been at risk “are simply wrong.”

Binance is also under investigation by the Justice Department for suspected money laundering and sanctions violations, Reuters has reported, citing people familiar with the probe.

A top Binance executive told the Wall Street Journal in February that the company expected to pay penalties to resolve U.S. investigations.

(Reporting by Tom Wilson in London and Hannah Lang in Washington; Editing by Marguerita Choy and Nick Zieminski)

By Medha Singh and Lisa Pauline Mattackal

(Reuters) – Things are heating up on the bitcoin blockchain.

Daily transactions have rocketed to an all-time high of 682,000 this month, according to data from Glassnode, almost 40% higher than the previous peak in 2017. Bitcoin’s dominance, or its share of the overall $1.16 trillion cryptocurrency market, has swelled to 44% from 38% at the start of the year.

What’s going on?

Enter BRC-20, the first class of crypto tokens to be built on the bitcoin blockchain, besides bitcoin itself. Nearly 25,000 of the experimental coins have already been minted this year, sending transactions through the roof.

“BRC-20 tokens are a phenomenon we haven’t seen before,” said Gordon Grant, co-head of trading at Genesis trading.

Primarily due to the creation of these tokens, the average daily transactions over seven days stands at more than 531,000, nearly twice as high as a month ago, according to Blockchain.com data.

This new class of crypto has no specific use beyond speculation, akin to memecoins. Yet its nascent popularity points to interest in bitcoin not just as a store of value or payments method, but as the foundation for developing new coins and applications – previously considered the domain of more modern blockchains such as Ethereum and Solana.

Some investors and developers view bitcoin’s blockchain as a safer long-term basis for creating tokens and applications in the wake of the crypto carnage that followed the collapse of high-profile firms like FTX and a general flight from riskier assets, according to market players.

“People have seen what is possible with other blockchains and they want it on bitcoin, as the oldest network, bitcoin has a track record that people can trust,” said Alex Miller, CEO at bitcoin developer network Hiro.

Still, the BRC-20 frenzy has been volatile.

The total value of these tokens – which are typically traded in secondary markets, particularly decentralized exchanges – exceeded $1 billion in early May, but has since fallen back to $446 million, according to tracker BRC-20.io.

INSCRIBED ON SATOSHI

As bitcoin’s blockchain wasn’t originally developed to support a crypto ecosystem, unlike Ethereum and Solana, BRC-20 tokens are created using ordinals theory, which allows data to be inscribed on each satoshi – the smallest denomination of bitcoin, or one hundred millionth.

“There isn’t much utility when it comes to BRC-20 tokens and Ordinals,” said CJ Reim, contributor at blockchain firm CoreDAO, though he sees the trend as “promising” in terms of interest in building products on the bitcoin blockchain.

The race to create these new coins hasn’t had a significant impact on the price of bitcoin, which has been trading under $30,000 since mid-April.

The rapid creation of BRC-20 tokens hasn’t been without contention, with detractors saying the issuance of these tokens has made it more difficult for users who want to use bitcoin for its originally intended purposes.

“Gas” fees, or transactions costs on the bitcoin blockchain have soared over the past month, with the total dollar-denominated fees paid per day touching near a new all-time-high of $17.8 million per day, according to Glassnode data.

The median transaction fee spiked as high as $30.91 versus a range of 90 cents and $4.23 between January and May 1, Blockchain.com data showed.

The network has also slowed considerably. The congestion was so acute, that the world’s largest crypto exchange Binance had to briefly pause bitcoin withdrawals on May 7.

“Although congestion has eased somewhat, it is still elevated and at its peak users were waiting over 30 hours for transactions to be confirmed,” said Nauman Sheikh, head of treasury management at digital asset investment manager Wave Digital Assets.

“This has pushed the limitations of bitcoin’s technology.”

(Reporting by Lisa Mattackal and Medha Singh in Bengaluru; Editing by Pravin Char)

(Reuters) – Shares of crypto currency- and blockchain-related companies fell in premarket trading on Monday after Binance halted its bitcoin withdrawals for several hours due to heavy volumes and rising processing fees.

The halts pushed bitcoin, the world’s biggest cryptocurrency, down 2% to a one-week low of $27,900.

Crypto exchange Coinbase Inc fell 4%, while blockchain-farm operator Bitfarms Ltd dropped 4.3%. Crypto miners including Riot Platforms, Marathon Digital and Hut 8 Mining declined between 4.6% and 7.2%, tracking lower bitcoin prices.

Binance, the world’s largest crypto exchange, shut bitcoin withdrawals for an hour late on Sunday and for about three hours on Monday, saying there was a glut of pending transactions because it hadn’t offered so-called miners a high enough reward to log the trades on the blockchain.

The company said its set fees did not anticipate the recent surge in bitcoin-network gas fees – the payments made to crypto miners whose computing power processes transactions on the blockchain.

“To prevent a similar recurrence … our fees have been adjusted,” Binance had said.

In March, the company suspended deposits and withdrawals citing tech issues.

(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Devika Syamnath)