Russia to embrace crypto as Fitch downgrades El Salvador, KPMG Canada bets on BTC and ETH

Tuesday 15 February 2022 3:16 pm

Data from CryptoCompare shows that the price of Bitcoin started last week at around $42,500 and moved up steadily to the $45,000 mark, which it failed to breach. The cryptocurrency has since entered a downtrend and is now trading at $42,200.

Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, started the week trading at around $3,000 and moved up to $3,2000, before entering a similar downtrend. ETH is now changing hands for close to $3,125.

Bitcoin’s price dropped over the week even after Russian authorities revealed they’re set to recognise cryptoassets as a form of currency after the government and the Bank of Russia reportedly reached an agreement on how to regulate the nascent asset class.

Both the government and the country’s central bank are now working on a draft law that is expected by February 19. It’s set to define crypto as an “analog of currencies” rather than as digital financial assets.

Pushing the cryptocurrency’s price down could have been the US Securities and Exchange Commission (SEC) delaying its decision on Grayscale’s Bitcoin exchange-traded fund (ETF) proposal. The firm is looking to convert its Grayscale Bitcoin Trust (GBTC) into an ETF.

The SEC previously delayed its decision on the matter in December. Its recent delay means that a final decision is set to come in early July. On top of that, Kazakh authorities are considering a 500% tax hike on electricity for cryptocurrency miners, from one tenge to five tenge ($0.0023 to $0.012). The country’s vice-minister of finance, Marat Sultangaziev, also suggested crypto miners could pay a monthly tax on equipment.

The vice-minister compared to the idea to a tax similar to the one casino operators pay on their machines. The equipment tax would be levied whether or not miners earn block rewards or even use their machines.

Adding to the downward pressure, agency ratings Fitch downgraded El Salvador’s long-term foreign currency issuer rating to ‘CCCC’ from ‘B-‘ weeks ahead of the issuance of the country’s bitcoin bond. The country currently faces close to $1.2 billion in external debt amortizations in 2023, with $800 million due in January.

El Salvador was the first country in the world to officially make BTC legal tender. As of September last year, the Central American nation’s businesses are required to accept bitcoin as payment, with the Salvadoran government contributing millions to facilitate dollar conversions.

Fitch noted there is a “high degree of uncertainty surrounding other sources of external financing, such as additional multilateral funding, given doubts surrounding an IMF program” and the capacity to issue its Bitcoin bond.

Over the week, Brazilian asset manager QR Capital launched an ETF focusing on cryptoassets associated with the decentralized finance (DeFi) space. The ETF started trading on the Brazil stock exchange B3 on Tuesday.

The ETF trades under the ticker QDFI11 and follows the Bloomberg Galaxy DeFi index, a modified market cap-weighted benchmark tracking the largest DeFi protocols. The index includes Uniswap (UNI), Aave (AAVE), Compound (COMP), Curve (CRV), and 0x (ZRX), among other blue-chip DeFi assets.

DOJ Seizes $3.6 Billion in Bitcoin Tied to Bitfinex Hack

Headlines in the cryptocurrency space this week were also marked by an announcement made by the US Department of Justice (DOJ), which revealed it seized around $3.6 billion worth of Bitcoin tied to the 2016 hack of the popular cryptocurrency exchange Bitfinex. A New York couple was also arrested for allegedly conspiring to launder the stolen cryptocurrency.

Officials revealed they arrested Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31 in connection with the incident. The pair is being accused of trying to launder the proceeds of 119,754 BTC stolen from Bitfinex in 2016 in more than 2,000 unauthorized transactions. Prosecutors say these transactions sent the funds to Lichtenstein’s wallet.

In total, the DOJ says it seized more than 94,000 BTC after accessing “files within an online account controlled by Lichtenstein”. The files, officials said, contained the keys required to “access the digital wallet that directly received the funds stolen from Bitfinex”.

Bitfinex’s Unus Sed Leo (LEO) saw its price surge more than 50% after the DOJ’s announcement. The exchange sold its LEO token in 2019 to raise $1 billion, with the token allowing users to get lower trading fees.

In its whitepaper, Bitfinex pledged to use most of any recovered BTC from the hack to purchase LEO on the open market and burn it.

KPMG Canada adds BTC and ETh to balance sheet

KPMG Canada has added Bitcoin and Ethereum to its corporate treasury as part of a commitment to emerging technologies and asset classes. The firm hasn’t revealed how much of the cryptocurrencies it purchased.

The auditing, tax and advisory firm also added carbon offers to keep its environmental, social and governance (ESG) commitments. The cryptocurrency purchases were made through Gemini Trust Company’s execution and custody services.

It also established a governance committee to oversee and approve the treasury allocation. The committee reviewed tax and accounting implications while assessing risk.

The world’s largest asset manager, BlackRock, is preparing to offer a cryptocurrency trading service to its investor clients.

The New York-based company manages over $10 trillion in assets for institutions and is planning to enter the cryptocurrency space with “client support trading and then their own credit facility”.

Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.

Featured image via Unsplash.

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