Crypto's structural flaws make it an unsuitable basis for a monetary system, according to the Bank for International settlements (BIS). Instead, monetary systems could be built around central bank digital currencies (CBDCs), which are digital representations of central bank money. CoinDesk reports: The BIS, an association of the world's major central banks, dedicates a 42-page chapter in its "2022 Annual Economic Report" to laying out a blueprint for the future of the global monetary system. In that vision, there is room for only some of crypto's underlying technical features, like programmability and tokenization, not for cryptocurrencies themselves. "Our broad conclusion is captured in the motto, "Anything that crypto can do, CBDCs can do better,'" said Hyun Song Shin, an economic adviser and head of research at the BIS, during a press briefing on Monday.

The chapter, which will be published Tuesday ahead of the full report, identifies a number of limitations of crypto, including the lack of a stable nominal anchor. In monetary policy that is a variable -- such as a currency peg -- that can be used to control price levels. Stablecoins, cryptocurrencies pegged to the value of assets like sovereign currencies, are the crypto world's search for such an anchor, Shin said. Stablecoins attempt to "piggyback on the stability of real money issued by central banks."

Shin said the recent crash of terraUSD, a dollar stablecoin with a market capitalization of $18 billion in early May that rapidly lost its peg, illustrated how stablecoins, despite their name, are unstable and don't make good units of account. Unlike other leading stablecoins, such as USDC and USDT, which are reportedly backed by dollar-denominated reserves, terraUSD is an algorithmic stablecoin backed by another cryptocurrency (in this case LUNA) with an algorithm in place to regulate supply and demand of the stablecoin and maintain its peg. "The second important finding is that crypto and stablecoins fail to achieve the full network effects that we normally expect of money," Shin said. Money, Shin said, is the perfect example of a virtuous circle of greater use and greater acceptance. Crypto's decentralized nature, on the other hand, achieves exactly the opposite, namely fragmentation.

A new report finds that blockchain systems might not be working as well as many crypto enthusiasts assume. From a report: The report was commissioned by the Defense Advanced Research Projects Agency, or DARPA, and the work was done by the software security research company Trail of Bits. Trail of Bits CEO Dan Guido says blockchain -- the public ledgers that keep track of cryptocurrencies, which are replicated on computers around the world -- isn't the egalitarian tech its advocates claim. "It's been taken for granted that the blockchain is immutable and decentralized, because the community says so," says Guido. But in practice, he says, these networks have evolved in ways that concentrate power in the hands of certain people or companies, including the large pools of "miners" whose computers earn virtual currency by maintaining the blockchains.

Guido's team calls these potential situations "unintended centralities" -- situations in which someone gains leverage over the decentralized system, creating opportunities for tampering with the record of who owns what. Another example in the report of this kind of concentration is the fact that 60% of Bitcoin traffic is handled by just three internet service providers. "Let's say somebody with great top-down control of the internet in their country starts to interfere with that network," Guido says. By slowing down or stopping legitimate blockchain traffic, an attacker could become the "majority" voice in the consensus of what's written to a blockchain at that moment. "They can rewrite history. They can censor transactions. They can make it so that you can't spend your Bitcoin," says Guido. "It's definitely something people would want to do if they want to 'grief' the network."

Crypto lending platform BlockFi announced that it has secured a $250 million revolving credit facility from FTX, BlockFi CEO Zac Prince said in a tweet on Tuesday, and the company subsequently announced in a press release. CoinDesk reports: Prince said the move "bolsters our balance sheet and platform strength." He added that "the proceeds of the credit facility are intended to be contractually subordinate to all client balances across all account types (BIA, BPY & loan collateral) and will be used as needed." This is not the first time FTX CEO Sam Bankman-Fried has stepped in to bail out a major crypto company impacted by the recent market downturn. Last week, crypto broker Voyager Digital (VOYG) secured a revolving line of credit with Bankman-Fried-founded quant trading shop Alameda Research.

Though it is now in the position of backstopping a broader market crash, FTX is reportedly one of the firms that liquidated Celsius -- the troubled decentralized crypto lending platform that was forced to halt all user withdraws last week. Celsius, one of BlockFi's competitors, reportedly ran out of funds to repay depositors due to a series of risky decentralized finance bets. In the press release, BlockFi said the credit facility is contingent on the execution of "definitive documents," which the two companies expect to be completed in "the coming days."

An anonymous reader quotes a report from CoinDesk: Investment product provider ProShares is set to list the U.S.'s first exchange-traded fund (ETF) allowing investors to bet against the price of bitcoin (BTC). The ProShares Short Bitcoin Strategy (BITI), which is designed to deliver the inverse of bitcoin's performance, will start trading on the New York Stock Exchange (NYSE) Tuesday, ProShares announced Monday. The ETF will allow investors to hedge their bitcoin exposure, which may prove particularly pertinent given the sharp downturn in crypto markets of late.

ProShares was the first firm to list a bitcoin futures ETF in October, a factor which saw the world's largest crypto hit an all-time high of around $68,900 in the subsequent weeks. Bitcoin investors will be hoping the listing of a short bitcoin futures ETF does not have a similar effect on the world's largest crypto in reverse. Bitcoin's price dropped below $20,000 for the first time since Dec. 20 on June 18, falling as low as $17,800 the following day.

CNN reports: "The price of bitcoin breached $19,000," reports CNN, "and ethereum fell below $1,000 Saturday morning, extending the brutal crypto bear market to new lows." Bitcoin plunged nearly 10% in less than 24 hours, adding to a series of sustained losses over the last several months. It now sits below $20,000 for the first time since November 2020, down more than 70% from an all-time high of $68,000 per coin in November 2021. Bitcoin has lost $900 billion in value since that peak. Ether is also experiencing a so-called crypto winter. The second-largest digital token plummeted 10% on Saturday to $975, its lowest level since January 2021. The coin has lost 80% of its value from its record high last November.... The crypto world is reeling from the $60 billion collapse last month of two other major tokens, Terra-Luna and Celsius. Those losses have increased doubts about the general stability of digital currency.... Still, even at $20,000, about half of all bitcoin wallets are still sitting on profits, according to an analysis by the Columbia Business School cited by The New York Times. The study also found that 61% of bitcoin addresses had not sold anything in the last 12 months, suggesting that a total run on crypto may be avoidable.
Bitcoin has now lost more than 70% of its value in about seven months. But CBS News notes that even then, "many in the industry had believed it would not fall under $20,000." The overall market value of cryptocurrency assets has fallen from $3 trillion to below $1 trillion, according to coinmarketcap.com, a company that tracks crypto prices. A spate of crypto meltdowns has erased tens of billions of dollars of value from the currencies and sparked urgent calls to regulate the freewheeling industry. Last week, bipartisan legislation was introduced in the U.S. Senate to regulate the digital assets.

For the first time since 2020, Ethereum mining has become unprofitable for many miners connected to a traditional energy grid. CryptoSlate reports: The price of Ethereum has dropped below $1,250 while energy prices are skyrocketing. The average cost of electricity in states such as New England, Connecticut, Maine, Massachusetts, New Hampshire, and Rhode Island is over $0.22 per kWh. Using a single Nvidia 3090 overclocked to generate 130mh/s will cost miners around $1.85-$2.13 per day in electricity. The Ethereum reward for the same GPU is just (0.001625 ETH) $2.03 at today's price. Therefore any miner paying more than $0.245 for electricity is now paying more for electricity than the value of Ethereum being mined. At this point, it becomes more cost-effective to turn off the mining rig and buy Ethereum spot using the money that would otherwise be used on electricity. [...]

There are plenty of alternative cryptocurrencies that can be mined with a GPU. However, the others are also down considerably. At $0.245kwh, Ergo yields -$0.06, RavenCoin -$0.58/day, Ethereum Classic -$0.66, and Firo -$0.70 using a single Nvidia 3090. These are the contenders for GPU hashrate when Ethereum finally goes to proof of stake. The issue is that an increase in miners on the network will dramatically increase the mining difficulty meaning that, to be remotely profitable, the price of the tokens will also have to increase considerably. For Ethereum to become profitable again, either the difficulty needs to decrease or the price needs to rise above $1,400. Alternatively, should energy prices drop below $0.24kwh to match average costs in other parts of the United States, Ethereum would also become profitable.

With crypto prices tumbling precipitously, traders have begun increasingly turning against one another to eke out ever-elusive profits. From a report: Many shark traders scour blockchains -- digital ledgers for recording transactions -- seeking information on other traders, particularly those with highly leveraged positions, an anonymous user known as Omakase, a contributor to the Sushi decentralized exchange, said in an interview. The sharks then attack the positions by trying to push them into liquidation, and earning liquidation bonuses that are common in decentralized finance (DeFi), where people trade, lend and borrow from each other without intermediaries like banks. Related strategies may have contributed to the collapse of the TerraUSD stablecoin, with shark traders making money off price arbitrage between the Curve decentralized exchange and centralized exchanges, according to Nansen, a blockchain analytics firm.

Recent troubles at crypto lender Celsius Network were exacerbated by arbitragers as well. The price of stETh token that Celsius has a large position in started trading at a large discount from Ether, to which it's tied. "As stETH goes down, arbitragers buy stETH and short ETH against it, sending ETH lower, which again lowers collateral values across DeFi," effectively worsening Celsius's position, according to a recent Arca note. As Omakase put it, "In a downtrend environment, where yields are harder to access, what we are going to see is some actors utilize some more aggressive strategies, and that may not be necessarily good for the community." Omakase added: "The environment has become more player vs player."

Three Arrows Capital failed to meet demands from lenders to stump up extra funds after its digital currency bets turned sour, tipping the prominent crypto hedge fund into a crisis that comes as a credit crunch grips the industry. Financial Times reports: The group's failure to meet margin calls this past weekend makes the group the latest victim of an acute fall in the prices of many tokens like bitcoin and ether that is rippling across the market. Singapore-based Three Arrows is among the biggest and most active players in the crypto industry with investments across lending and trading platforms. Lenders have sharply tightened up how much credit is on offer following tremors over the past month.

Celsius, a major crypto financial services company, blocked withdrawals last week, while a pair of major tokens collapsed in May. US-based crypto lender BlockFi was among the groups that liquidated at least some of Three Arrows's positions, meaning it reduced its exposure by taking collateral the fund had put down to back its borrowing, according to people familiar with the matter. Three Arrows, which made a "strategic" investment in BlockFi in 2020, had borrowed bitcoin from the lender, the people said, but had been unable to meet a margin call. One of the people said the liquidation had occurred by mutual consent.

Crypto staking and yield generation platform Finblox has imposed a $1,500 monthly withdrawal limit and paused rewards in light of uncertainty surrounding crypto hedge fund Three Arrows Capital, which made a $3.6 million investment in the Hong Kong-based platform last December. From a report: According to a statement shared on Twitter, Finblox has made the changes as it evaluates the impact of Three Arrow Capital's reported issues. It was reported on Wednesday that Three Arrows Capital is facing possible insolvency after incurring at least $400 million in liquidations.

Don't count Bill Gates among the fans of cryptocurrencies and NFTs. From a report: Those digital asset trends are "100% based on greater fool theory," the Microsoft co-founder said Tuesday at a TechCrunch conference, referencing the notion that investors can make money on worthless or overvalued assets as long as people are willing to bid them higher. Gates added that he's "not long or short" crypto. And he mocked Bored Apes NFTs, joking that "expensive digital images of monkeys" will "improve the world immensely." Instead, Gates said he prefers old fashioned investing. "I'm used to asset classes, like a farm where they have output, or like a company where they make products," he said.

The UK's digital minister reiterated the government's ambition to make Britain a global crypto hub while sounding a cautious note about the potential criminal uses of digital assets. From a report: "We do intend the United Kingdom and London to be crypto centers," Chris Philp said in an interview with Bloomberg Radio on Wednesday. "But of course we've got to do that in a way that protects the public and in particular pays attention to issues concerning for example money laundering, and making sure that crypto is not used as a way to circumvent things like sanctions." The UK Treasury in April announced plans to make the country a global crypto hub, soothing an industry that had sparred with the financial regulator over what it considered to be overly strict guardrails. Retail investors in the UK are barred from using crypto derivatives, and authorities are imposing tougher rules on marketing. [...] "The Treasury are working closely with the Bank of England, the Financial Conduct Authority and the Prudential Regulation Authority to make sure that balance is struck in the right way," said Philp.

The Block reports: The future of crypto hedge fund Three Arrows Capital hangs in the balance as the firm faces potential insolvency after being liquidated by its lenders. According to well-placed sources, the investment firm -- which counts the likes of options exchange Deribit and financial services firm BlockFi among its venture bets -- is in the process of figuring out how to repay lenders and other counter-parties after it was liquidated by top tier lending firms in the space. Sources declined to share the names of those firms on the record for fear of reprisal, but three people said the liquidation totaled at least $400 million. They added that the firm has maintained limited contact with its counter-parties since being liquidated. The liquidation event is just one of several setbacks by the firm, which has backed projects like Avalanche, Polkadot, and Ether which are all down 57%, 38.8%, and 47% over the last 30 days respectively. The fund sustained significant losses during the collapse of the Terra ecosystem last month, after investing heavily in its native token LUNA. The firm, which reportedly managed approximately $10 billion at market peak by some estimates, is led by former classmates Su Zhu and Kyle Davies.

Bitcoin plunged to the lowest in about 18 months after the freezing of withdrawals by the Celsius lending platform added to concern that systemic risk in the crypto ecosystem will accelerate the digital-asset market meltdown. From a report: The world's largest digital token tumbled as much as 17% to $22,603 -- its lowest since December 2020. Other cryptocurrencies also declined as a broader sell-off continued. The MVIS CryptoCompare Digital Assets 100 Index, which measures 100 of the top tokens, dropped as much as 17%. And the total market value, which topped $3 trillion in November, dropped below $1 trillion as of 10:54 a.m. New York time on Monday, according to CoinGecko. "The fundamentals to support stabilization and recovery just aren't there," said Steven McClurg, co-founder and CIO at crypto fund manager Valkyrie Investments. "Things can and likely will get worse before they get better."

Celsius Network, one of the biggest crypto lenders, told customers Sunday evening that it is pausing withdrawals, swap, and transfers between accounts in a move that has sparked discussions and prompted the price of the firm's token to take a 60% tumble in the past one hour to as low as 19 cents. From a report: "We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations," wrote Celsius, which counts stablecoin-issuer Tether International, growth equity fund WestCap Group and Canadian pension fund Caisse de Depot et Placement du Quebec among its investors. [...] Celsius, which was valued at $3.25 billion when it extended its "oversubscribed" Series B financing round to $750 million in November, allows users to deposit their Bitcoin, Ethereum and Tether and receive weekly interest payments. Depending on the time horizon and the token, the platform offers as much as 18% interest a year. On its website, Celsius says 1.7 million people call "Celsius their home for crypto."

The European Union is nearing an agreement on key legislation to regulate the cryptocurrency sector that would set common rules across the 27 member states, Bloomberg reported Friday, citing people familiar with the matter. From a report: France, which currently chairs the EU, and the European Parliament are optimistic about resolving remaining issues holding up the Markets in Crypto-Assets (MiCA) package and reaching a deal this month, according to the people. Negotiators are expected to meet on June 14 and June 30. MiCA, first presented in 2020, will put European regulators at the forefront of supervising cryptocurrencies by creating unified rules across the $17 trillion economy. Addressing issues such as investor protection and crypto's impact on financial stability has taken on added urgency after last month's collapse of the TerraUSD algorithmic stablecoin.

Member states and the parliament still disagree on several key aspects of MiCA. According to the people, areas of disagreement include:
Whether to include nonfungible tokens in the new set of rules
How to regulate significant stablecoins
Supervision of the largest crypto-asset service providers, or CASPs

Both sides are also discussing how to limit the use of stablecoins as a payment method by introducing a ceiling, in particular for transactions not denominated in euros, the people said, asking not to be identified discussing confidential information.

Nigerian Exchange, plans to start a blockchain-enabled exchange platform next year to deepen trade and lure young investors to the market. From a report: The move follows the introduction of regulations to guide trade in digital assets by the Nigerian Securities and Exchange Commission, and the growing interest to adopt the distributed-ledger technology by businesses and policy makers across the continent including in Kenya and South Africa. The exchange looks to deploy the blockchain technology in settlement of capital market transactions, Temi Popoola, the chief executive of Nigeria Exchange, said in an interview. "For a lot of young and upcoming Nigerians, that is the kind of technology they adopt and we want to see how we can deploy it to grow our market," Temi said. The plan is unfolding in the wake of a rout in cryptocurrency markets following the collapse of the Terra blockchain in May. Bitcoin has plunged more than 50% since reaching a record high last November.

Jack Dorsey's beef with Web3 has never been a secret. In his view, Web 3 -- blockchain boosters' dream of a censorship resistant, privacy-focused internet of the future -- has become just as problematic as the Web2 which preceded it. Now, he's out with an alternative. From a report: At CoinDesk's Consensus Festival here in Austin, TBD -- the bitcoin-focused subsidiary of Dorsey's Block (SQ) -- announced its new vision for a decentralized internet layer on Friday. Its name? Web5. TBD explained its pitch for Web5 in a statement shared with CoinDesk: "Identity and personal data have become the property of third parties. Web5 brings decentralized identity and data storage to individual's applications. It lets devs focus on creating delightful user experiences, while returning ownership of data and identity to individuals."

While the new project from TBD was announced Friday, it is still under open-source development and does not have an official release date. A play on the Web3 moniker embraced in other corners of the blockchain space, Web5 is built on the idea that incumbent "decentralized internet" contenders are going about things the wrong way. Appearing at a Consensus panel clad in a black and bitcoin-yellow track suit emblazoned with the numeral 5, TBD lead Mike Brock explained that Web5 -- in addition to being "two better than Web3" -- would beat out incumbent models by abandoning their blockchain-centric approaches to a censorship free, identity-focused web experience. "This is really a conversation about what technologies are built to purpose, and I don't think that renting block space, in all cases, is a really good idea for decentralized applications," Brock said. He continued: "I think what we're pushing forward with Web5 -- and I admit it's a provocative challenge to a lot of the assumptions about what it means to decentralize the internet -- really actually is back to basics. We already have technologies that effectively decentralize. I mean, bittorrent exists, Tor exists, [etc]." The full presentation is here.

A 29% rate hike for hydroelectric power in Chelan County, created specifically for cryptocurrency miners, went into effect on June 1. Decrypt reports: The miners used to pay a lower, high-density load rate for their electricity. Now they'll pay a newly-created cryptocurrency rate, known as Rate 36. Washington state accounted for about two-thirds of all hydroelectric power generated in the U.S. in 2020, according to the Energy Information Administration. The state's Grand Coulee Dam, located on the Columbia River in Grant and Okanogan counties, powers a 6,809-megawatt. The cheap and renewable hydropower has made Washington state a popular destination for Bitcoin miners too. Washington state accounted for 4% of the total U.S. hashrate in December, according to the Cambridge Centre for Alternative Finance. [...]

KPQ also reported that nearby Douglas County has stopped allowing new Bitcoin miners to set up operations there because they already consume 25% of the county's available energy. Still, the Chelan County rate hike won't ban crypto miners. For companies that have made substantial investments in their mining facilities, officials have approved transition plans to gradually increase energy rates over the next two years. "We need to have some sort of transition. That's important for business," PUD Commissioner Ann Congdon told the Wenatchee World on Tuesday. "I understand how businesses need that in order to plan."

Malachi Salcido, CEO of Salcido Enterprises, told the local news outlet that the new rate will force him to reconfigure his three Chelan County crypto mining facilities into data farms. He has four other crypto mining facilities, two in Douglas County and two in Grant County. Under the new pricing plan, Salcido can keep his Chelan facility on the lower, high-density energy rate if he processes data instead of mining crypto. The data processing uses the same amount of power as crypto mining, he told the Wenatchee World. "Do you really want to be in the business of regulating what kind of processing happens on servers in your territory," Salcido said.

An anonymous reader quotes a report from ZDNet: Lead researcher Alyssa Blackburn of Baylor and Rice, along with team-mates Christoph Huber, Yossi Eliaz, Muhammad S. Shamim, David Weisz, Goutham Seshadri, Kevin Kim, Shengqi Hang, and Erez Lieberman Aiden, used a technique called "address linking" to study the Bitcoin transactions in the first two years of its existence: January of 2009 to February of 2011. Their key discovery is that, in those first two years, "most Bitcoin was mined by only sixty-four agents [] collectively accounting for B2,676,800 (PV: $84 billion)." They are referring to the process of minting new coins by solving computer challenges. That number -- 64 people in total -- "is 1000-fold smaller than prior estimates of the size of the early Bitcoin community (75,000)," they observe. Those 64 people include some notable figures that have already become legends, such as Ross Ulbricht, known by the handle Dread Pirate Roberts. Ulbricht is the founder of Silk Road, a black-market operation that used Bitcoin for illicit means -- until it was shut down by the FBI.

For Blackburn and team, the point was to study the effects of people participating in game-theoretic situations as anonymous parties. Surprisingly, they found early insiders like Ulbricht could have exploited the relative paucity of participants by undermining Bitcoin to double-spend coins, but they did not. They acted "altruistically" to maintain the integrity of the system. That's intriguing, but a more pressing discovery is that addresses can be traced and identities can be revealed. To find out who was doing those early transactions, Blackburn and team had to reverse-engineer the entire premise of Bitcoin and of all crypto: anonymity.

As outlined in the original Bitcoin white paper by Satoshi Nakamoto, privacy was to be preserved by two means: anonymous public key use and creating new key pairs for every transaction [...]. Blackburn and team had to trace those key pairs to reveal early Bitcoin's transacting parties. To do so, they developed what they called a novel address-linking scheme. The scheme finds two patterns that point to users: one is the presence of recurring bits of code, and one is duplicate addresses for certain transactions. [...] The consequence of that, they write, is that it is possible to "follow the money" to expose any identity by following a chain of relatedness in a graph of addresses, starting from a known identity [...]. Further, they hypothesize that "many cryptocurrencies may be susceptible to follow-the-money attacks." Blackburn told The New York Times's Siobhan Roberts, "When you are encrypting private data and making it public, you cannot assume that it'll be private forever." As the team concludes in the report, "Drip-by-drip, information leakage erodes the once-impenetrable blocks, carving out a new landscape of socioeconomic data." The new paper, titled "Cooperation among an anonymous group, protected Bitcoin during failures of decentralization," has been posted on the researchers' server (PDF).

U.S. law enforcement have announced the takedown of SSNDOB, a notorious marketplace used for trading the personal information -- including Social Security numbers, or SSNs -- of millions of Americans. From a report: The operation was conducted by the FBI, the Internal Revenue Service (IRS), and the Department of Justice (DOJ), with help from the Cyprus Police, to seize four domains hosting the SSNDOB marketplace -- ssndob[dot]ws, ssndob[dot]vip, ssndob[dot]club, and blackjob[dot]biz. SSNDOB listed the personal information for approximately 24 million individuals in the United States, including names, dates of birth, SSNs, and credit card numbers, and generated more than $19 million in revenue, according to the DOJ. Chainalysis, a blockchain analysis company, reports separately that the marketplace has received nearly $22 million worth of Bitcoin across over 100,000 transactions since April 2015, though the marketplace is believed to have been active since at least 2013. These figures suggest that some users were buying personally identifiable information from the service in bulk, according to Chainalysis, which also uncovered a connection between SSNDOB and Joker's Stash, a large dark net market focused on stolen credit card information that shut down in January 2021.