The Financial Crimes Enforcement Network (FinCEN), the top financial crimes watchdog within the U.S. Treasury Department, is hiring two policy officers to help draft regulations for the cryptocurrency space.

Disclosed in Dec. 11 job postings, these “Strategic Policy Officers” will “assist in the development of policy responses” to “threats” posed by cryptocurrency, issue advisories to financial institutions and collaborate across government and the private sector on crypto policy.

The timing of the listings is notable. Just two weeks prior, Coinbase CEO Brian Armstrong stoked rumors that Treasury Secretary Steven Mnuchin would rush out self-hosted wallet regulations that Armstrong speculated could cripple the industry.

The Block further illustrated what those regulations might look like late Thursday night. As soon as Friday, Mnuchin could mandate that crypto companies file a “currency transaction report” with FinCEN on individuals moving over $10,000 in cryptocurrency to or from a self-hosted crypto wallet in a single day.

Whether those regulations will actually arrive, what they would actually look like and if they’d survive after President-elect Joe Biden and his designated Treasury Secretary nominee, Janet Yellen, take office is yet to be determined.

But the minutiae of the Dec. 11 listings indicate FinCEN is eager to boost its crypto base chops regardless of who runs Treasury. Both top secret-clearance level jobs are permanent, full-time positions. Given the requirements that candidates have experience drafting, strategizing and researching crypto policy, it’s safe to say FinCEN is only interested in subject-matter experts.

That could be the difference between crafting effective cryptocurrency regulations and the type of knee-jerk crackdowns Armstrong warned against. Crypto industry lobbying group the Blockchain Association told CoinDesk at the time of Armstrong’s tweet that it was “actively educating” policymakers to fix “misconceptions” around self-hosted wallets.

“To properly regulate emerging industries, especially the crypto economy, in the most nimble and responsive way requires officials in government to have true 21st-century expertise and experience,” Executive Director Kristin Smith told CoinDesk Thursday. “We’ve been encouraged by the type of talent FinCEN has attracted over the past several years and it’s encouraging that they’re looking to add even more relevant expertise with this new hire.”

Bitcoin hits a new high at $23,770 on higher-than normal volume; DeFi’s total value locked has also hit a record on the strength of ether.

• Bitcoin (BTC) trading around $22,818 as of 21:00 UTC (4 p.m. ET). Gaining 9% over the previous 24 hours.
• Bitcoin’s 24-hour range: $20,756-$23,770 (CoinDesk 20)
• BTC below its 10-hour moving average but well above the 50-hour on the hourly chart, a bullish-to-sideways signal for market technicians.

The price of bitcoin continued its rise to all-time highs, going up to $23,770 as of press time in a highly bullish run that had lots of volume-fueled momentum. 

Read More: Bitcoin Drops Nearly 7% After Setting New Record High of $23,770

The $23,800 level may be a spot of exhaustion for the world’s oldest cryptocurrency, according to Constantin Kogan, partner at financial firm Wave Financial. “There’s some strong selling resistance at $23,800. Let’s see if bitcoin can break it,” Kogan told CoinDesk.

Volumes on Thursday were higher than on Wednesday, with the eight major exchanges tracked by the CoinDesk 20 seeing over $3.5 billion in volume so far as of press time versus $2.9 billion the day previous.

“Breaking the $20,000 psychological barrier was a strong bullish signal allowing bitcoin to set a new record high,” said Elie Le Rest, partner at crypto quant trading firm ExoAlpha. However, Le Rest cautioned about crypto’s classic gyrations possibly affecting the market. “Volatility is very high and small pullbacks have been witnessed along the way.” 

Indeed, bitcoin’s 30-day volatility has been picking up and will be something to watch over the balance of December.

“Traders should be careful and on the lookout for stronger pullbacks, especially with year-end approaching and traders looking to close their 2020 profit-and-loss,” added LeRest. 

Chris Thomas, head of digital assets Swissquote Bank concurred, saying the most recent move feels too strong for his taste. “I’m just waiting for a few big sellers to come back to the market and take profits,” Thomas said. “Let’s look ahead to the next few weeks. Institutional volumes will drop significantly through Christmas so the market will be driven by retail until early January.”

“This should cause us to keep the high volatility, but we’ve got to also be aware there may be a chance of testing $20,000 to the downside,” added Thomas. 

Read More: Coinbase Files With SEC in Preparation for Landmark Public Offering

Henrik Kugelberg, a crypto over-the-counter trader, noted “fear of missing out” or FOMO as a factor playing into the market’s fervor. “There is of course an element of FOMO in this but the fundamentals are stable as pyramids,” Kugelberg said. “I have said $30,000 before summer but by the looks of this, that might be a very low bid.”

Ethereum network locked value at all-time high

The second-largest cryptocurrency by market capitalization, ether (ETH) was up Thursday trading around $640 and climbing 2.7% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of crypto “locked” in decentralized finance, or DeFi, is at $16 billion as of press time, increasing over 2,200% from the $690 million locked at the start of 2020.

Meanwhile, the amount of ether locked in DeFi is going up, over 7.1 million ETH total.

Yet the amount of bitcoin locked in DeFi has actually fallen during the market’s price run, down to 142,652 BTC.

Nicholas Pelecanos, head of trading for blockchain ecosystem provider NEM, told CoinDesk many investors continue to overlook the Ethereum network and its alternative assets, also known as altcoins. 

“While bitcoin has largely dominated the narrative, I believe investors should look to altcoins that have tremendous amounts of development in both the core technology and usership, yet are still a fair way off their all-time highs,” said Pelecanos. “I am expecting to see the price of these altcoins, such as ETH and XEM, rally hard when the BTC price inevitably slows down.”

Other markets

Digital assets on the CoinDesk 20 are mostly green Thursday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

• xrp (XRP) + 14%
• litecoin (LTC) + 13%
• stellar (XLM) + 5.5%

In addition, prices for COMP, the governance token for the Ethereum-based lending protocol Compound, jumped on the news that Compound Labs will build a new blockchain to provide money market services across multiple networks.

As CoinDesk reported, the new blockchain could be significant because those new supported assets won’t be limited to blockchains – it is designed to also support the forthcoming and rumored central bank digital currencies. Like Compound v1, the new blockchain will also be governed by the COMP token. Once it goes live, it will add more value to COMP holders. At the time of writing, prices for COMP were traded at $167.14, up 9.43% in the past 24 hours, according to Messari.

Notable losers:

• orchid (OXT) - 2%
• algorand (ALGO) - 1.8%
• omg network (OMG) - 1%

Equities:

Read More: Robinhood Pays SEC $65M to Settle Allegations It Misled Customers

Commodities:

• Oil was up 1.1%. Price per barrel of West Texas Intermediate crude: $48.40.
• Gold was in the green 1.1% and at $1,884 as of press time.

Treasurys:

• The 10-year U.S. Treasury bond yield climbed Thursday jumping to 0.933 and in the green 1.2%.

The U.K. financial services regulator admitted defeat this week in its effort to register all of the country’s crypto-asset firms by Jan. 10, too late for firms that already racked up costs preparing for that deadline while they awaited registration.

Back in January 2020, the Financial Conduct Authority (FCA) announced that no firm would be allowed to engage in “crypto-asset activity” in the U.K. after Jan. 10, 2021, unless it was registered. But with less than a month until that date, the FCA’s website only lists four registered firms, of which two are subsidiaries of Gemini. Zero new registrations have been processed in the last three months.

On Dec. 16, the FCA backed down by emailing more than 100 unregistered applicants that it “may not be able to complete the assessment by 9 January.” Those firms have been granted temporary registration until July 9, 2021. In the email, the FCA emphasized their applications had still not been processed and they had not been assessed as “fit and proper.” 

By leaving it so late to back down, the FCA raised the fear that a large number of firms would have to stop trading temporarily in January. That forced firms to accept now-unnecessary expenses to prepare to protect themselves from that outcome. 

“We would lose all of our client base,” said the boss of an over-the-counter crypto trading desk based in Mayfair, London, who asked to remain anonymous, “something which we probably couldn’t recover from.” 

For the sole purpose of preparing for this possibility, he “had a parallel offshore structure set-up and was arranging an appointed agent for the U.K.” The costs of these measures stretched into six figures.

By leaving it so late to back down, the FCA raised the fear that a large number of firms would have to stop trading temporarily in January.

As late as Dec. 1, the FCA still actively stood by its January deadline. It refused to respond to any questions for this article except to comment: “We are working hard to process applications before the 10 January 2021 deadline and continue to review our progress as this date approaches.”

Even though digital asset custody service Copper, also based in London’s Mayfair, submitted its application more than nine months ago, marketing director Tyler Kenyon says the company is still involved in a slow dialogue with the FCA. There have been long periods of “radio silence” in the meantime, punctuated by occasional fresh questions. 

Cryptocurrency brokerage BC Bitcoin also applied promptly and diligently. It, too, has made sure to meet the FCA’s requirements, according to sales manager Tyler Smith, but has received no verdict on its application.

Kenyon says he feels some sympathy for the FCA because his understanding is the Treasury – the U.K.’s finance ministry – was responsible for setting the January deadline. The coronavirus pandemic might have caused certain delays. On top of that, he suspects FCA staff has had to learn about the crypto asset sector on the job and on the clock. This could be why some applicants are being asked for up to 80 documents and three-hour interviews, to the surprise of seasoned compliance consultants.

The FCA has kept some interested groups in the loop about its slow progress. According to people with access to that communication, the regulator received 160 applications. It admits it does not know how many firms should have applied except that the number might be several hundred. That implies it does not know how many firms could be flouting its rules by continuing to trade after July next year. It also refused to say what would happen to firms that did so.

FCA blamed its slow progress on the poor standard of applications. Less-experienced firms may have underestimated the complexity of regulatory requirements. London-based financial services regulatory consultancy Bovill comments that these cover “the business plan, organizational charts, IT arrangements … policies and procedures as well as governance provisions.” Copper’s Kenyon says that some probably thought it would be a tick-box exercise, but they were wrong.

Firms and regulators alike are having to contend with a real and major threat of money laundering and other illicit activity. “It is safe to say that there is a relatively high inherent risk of money laundering in the virtual asset space,” according to Bovill. Rapid growth has brought its own risks, too. Firms that expand quickly can find themselves facing compliance responsibilities for which they were not prepared. 

See also: UK FCA Grants Crypto Firms Temporary Registration as It Deals With Applications Backlog

But if this explains the FCA’s failure to approve more than four of the robust applications, it only means that conscientious firms were forced to take costly precautions as the deadline loomed just because of the shortcomings of their peers. 

The FCA finally granted the temporary registrations and effectively extended the deadline because of the magnitude of the damage it would do by forcing legitimate crypto-asset businesses to suspend trading. Copper’s Kenyon speculates about the impact of a temporary stop: “The knock-on effects would be substantial, because a lot of firms rely on our infrastructure.”

The boss of the Mayfair over-the-counter (OTC) desk explains a temporary halt would have necessitated redundancies in the short term followed by expensive recruiting later on. The impact on client relationships would probably have ended the business.

That company is keeping its costly precautions in place in case of “any more speed bumps” with the registration process going forward. 

Unless the FCA accelerates its progress significantly in the coming months, the U.K.’s crypto-asset firms could face another tense countdown next summer – or another regulatory U-turn.

Compound Labs released a white paper Thursday detailing its plans to create Compound Chain, an application-specific blockchain that can provide money market services across multiple networks.

“We want to announce the designs for a blockchain that can scale Compound over the next century,” Compound founder Robert Leshner told CoinDesk on a phone call. The decentralized finance (DeFi) firm isn’t committing to a timeline yet but it is at work on a testnet now.

The new white paper, a draft of which was shared with CoinDesk in advance, authored by Leshner and Compound Labs staffers Geoffrey Hayes, Jared Flatow and Max Wolff, cites three limitations of the current version of Compound on Ethereum: gas costs, inability to serve assets on other chains and the fact that all supported assets aggregate the risk of each supported asset.

Those new supported assets aren’t envisioned to be limited to blockchains of the trustless, permissionless variety either. The new project is meant to support the forthcoming and rumored digital assets from central banks and investment banks.

The white paper states: 

"Compound Chain is a reimagination of the Compound Protocol as a stand-alone distributed ledger, capable of solving these limitations and proactively preparing for the rapid adoption & growth of digital assets on a variety of new blockchains, including Eth2 and central bank digital currency ledgers."

Compound Chain joins the chorus of blockchain interoperability efforts, but it’s somewhat unique in that it’s attempting to do so in an application-specific way. Not many similar attempts have preceded it, though Leshner did credit the stablecoin and payments chain, Terra (which just added synthetic equities), as one of them.

While this is an entirely new and standalone blockchain, it will be governed by the same Ethereum-based system that runs Compound v1 – the COMP token. Once the Compound Chain goes live, this will be a considerable new set of powers accruing to COMP owners. 

Within an hour of the product’s announcement, COMP surged by as much as 10% in price, according to Messari data.

CASH

While the Compound Chain will be governed by COMP – the token that spurred the yield farming craze over the summer – it also introduces a new cryptocurrency called CASH.

Compound Chain’s native CASH token will be used to pay for transactions on the network. CASH will be minted in much the same way as DAI, as a debt against locked collateral held on the Compound Chain.

Like DAI (+0.1%), CASH will start arbitrarily pegged to the U.S. dollar, but its peg can be changed by governance decisions. Unlike DAI, all CASH will earn some kind of yield from a portion of interest paid against loans originated on the blockchain. The precise amount will be one of many parameters determined by COMP holders who participate in governance votes.

The whole purpose of the chain is to function like Compound but in a cross-blockchain fashion. 

A new interoperability play

As soon as an asset is uploaded to Compound Chain, it’s available for lending to others. It’s up to users if they want to borrow against their assets or not.

As on Compound, they will be able to borrow any supported asset but they will also be able to borrow assets, starting with CASH, that are unique to the Compound Chain.

Compound Chain should ship ready to support Ethereum. As for the next chains to be integrated, “This is really up to the community,” Leshner said. “I suspect the first additional chains would be things like Solana and Polkadot and Tezos.” 

The only real prerequisite is the blockchain needs to be able to support smart contracts. The smart contracts for moving assets between Compound and smart contract chains are referred to as “starports.”

While this might be seen as a major break from Ethereum to some, the chain that kicked off DeFi will continue to maintain control of the new chain, at least for now. 

As the white paper explains, “The Compound Governance system on Ethereum established a distributed decision-making process, and is capable of streaming governance actions to the Ethereum starport, which Compound Chain validators receive instructions from.”

Further, Leshner expects those who are long Ethereum will see an advantage to incorporating other chains, because it will enable Ethereum to port value created on other chains into the world computer’s DeFi applications, in the form of CASH.

The chain can also mint new assets, but early users’ ability to upload assets from other blockchains will likely be seen as more important. Assets will be uploaded by moving the asset into a smart contract on layer-one chains (such as Ethereum or Cosmos), which the Compound Chain validators will witness and then mint on the corresponding Compound Chain wallet.

Details pending

Compound Labs has not indicated what technology it will be built on at this point, only that it will use a proof-of-authority architecture. All the parameters will be set through governance decisions of the participating COMP holders.

Proof-of-authority is similar to proof-of-stake in some ways, but it’s important to point out that all validators are selected by COMP holders. “If you can appoint malicious validators, it’s the same as being able to steal all the funds in Compound,” Leshner said.

Proof-of-authority is just the launch setup. “Governance can remove itself and switch to a fully open proof-of-stake system,” Leshner said, though he doesn’t expect it will for some time.

The main intent appears to be to broaden DeFi into all parts of the crypto ecosystem. 

“The Compound Chain is designed from the ground up to enable bridging value between its connected ‘peer’ chains,” the white paper states.

Some of those peer chains may be more cumberbund classical (see: CBDCs) than punk rock, but therein lies the opportunity for a company like Compound Labs.

The team there is already looking at new business lines that could be enabled by the new chain. For example, certain centralized digital currencies, such as jpm coin, may require known liquidators who have been through compliance checks. This could be a role the team behind Compound could play,for certain more-restricted assets.

“At launch, the goal is to replicate the user experience of Compound but with a really clear path to be able to support every blockchain and every asset,” Leshner said.

Update (Dec. 17, 20:50 UTC): Adds information on COMP price activity following the Compound Chain announcement.

Coinbase is getting ready to go public. On Thursday, the major cryptocurrency exchange filed preliminary documents with the U.S. Securities and Exchange Commission (SEC).

Coinbase has been the subject of IPO speculation for months. But the timing, coming just one day after bitcoin (BTC, +0.78%) broke $20,000 for the first time ever, cannot be ignored. The major exchange is positioning itself as Wall Street’s most accessible bet yet on cryptocurrency. In October 2018, Coinbase was valued at $8 billion. Given the stratospheric increase in the price of bitcoin since then and the recent demand for initial public offerings, it’s expected Coinbase’s current valuation will be significantly higher.

“The Form S-1 is expected to become effective after the SEC completes its review process, subject to market and other conditions,” the firm wrote in a sparse blog post.

Coinbase said it filed confidentially with the Securities and Exchange Commission. That’s the first formal step on the long road to a public offering. The document, which likely includes target raise, was not available at press time.

A Coinbase spokesman declined to comment further.

The company’s influence touches all corners of the cryptocurrency industry. It is a major hub for retail bitcoin trading and a gateway for alternative cryptocurrencies. Its institutional business is growing faster than MicroStrategy’s sats pile. It has an analytics team, a stablecoin in partnership with Circle, a ventures wing and a commerce department.

All of that could appeal to a Wall Street class eager for exposure to the cryptocurrency markets.

It’s unclear whether Coinbase is looking to go public via an IPO or a direct listing. Coinbase was first rumored to be exploring a stock market listing in July 2020, when Reuters reported it had begun the process of taking its shares public. Unnamed sources told the wire service at the time that Coinbase was looking at a direct listing, rather than an initial public offering.

Both IPOs and direct listings require form S-1s, according to a blog post from Andreessen Horowitz, a key Coinbase investor.

The form Coinbase filed is confidential, meaning its contents won’t be made public until three weeks prior to the exchange’s roadshow, when the firm tries to woo potential investors.

This story will be updated.

Zack Seward and Nikhilesh De contributed reporting.

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