Coinbase will list Tether’s USDT (+0.06%) on its professional trading platform, allowing investors to deposit the dollar-pegged stablecoin immediately and to begin trading next week.

Coinbase Pro announced late Thursday it would immediately allow “inbound transfers” for USDT in its supported jurisdictions, except for the U.S. state of New York. The stablecoin has been fraught with controversy over questions of its backing and its role in the broader Bitcoin ecosystem, and at one point was the subject of an inquiry by the Office of the New York Attorney General (NYAG).

The NYAG settled the inquiry this year, stating that at previous points USDT was not fully backed by U.S. dollars but declined to bring any enforcement or regulatory action. Under the terms of the settlement, Tether will provide a periodic report to the NYAG indicating how the stablecoin is backed and what its reserves look like, starting in May.

Tether has since announced it would provide regular attestations, though these are different from the reports it will send to the NYAG and similar attestations from stablecoin issuers including Centre, Paxos and Gemini.

USDT is listed on the U.S.-based Kraken and Binance.US exchanges, but Coinbase is subject to closer regulatory scrutiny, having gone public last week on the U.S. Nasdaq exchange. The public listing subjects Coinbase to oversight by the U.S. Securities and Exchange Commission, which could include its token listings.

As such, Coinbase’s move Thursday could be read as a vindication of sorts for Tether, long criticized as less-than-forthright about the composition of the reserves backing USDT.

“Starting immediately, we will begin accepting inbound transfers of USDT to Coinbase Pro. Trading will begin on or after 6 p.m. Pacific Time (PT) Monday April 26, if liquidity conditions are met. Please note that Coinbase only supports ERC-20 USDT,” the announcement said.

The exchange will begin supporting trading against its order books after it has sufficient supply, with trading commencing in its usual post-only, limit-only and full trading phases.

“If at any point one of the new order books does not meet our assessment for a healthy and orderly market, we may keep the book in one state for a longer period of time or suspend trading as per our Trading Rules,” the blog post said.

While Coinbase Pro listed USDT, it’s unclear if or when the token will come to its consumer application. Typically, tokens listed on the professional platform are added to the retail side within a few days.

The move also follows a tough week for bitcoin (BTC, -4.83%), which has fallen 18% since Saturday. For the year to date, however, the bellwether cryptocurrency is still up a fulsome 75%.

As the largest stablecoin, USDT serves as integral plumbing for the $2 trillion global cryptocurrency market, allowing traders to easily shift dollars (or a good-enough substitute) between exchanges in order to capture arbitrage opportunities.

UPDATE (April 22, 23:50 UTC): Added context about bitcoin price and USDT’s systemic role and history.

The bitcoin (BTC, -4.83%) price was holding above $41,000, the highest since May, after a 10-day winning streak that was the longest in eight years for the largest cryptocurrency.

As of press time bitcoin (BTC) was changing hands at $41,344, up 6.2% over the past 24 hours. Other CoinDesk 20 digital assets were also in the green, with ether (ETH, -1.73%) (ETH) rising 4.5% to $2,453 and chainlink (LINK, -5.58%) (LINK) jumping 13% to $21.72.

Although the bitcoin price slipped after 0:00 coordinated universal time (UTC) on Saturday, it had notched 10 consecutive daily increases from July 21 through Friday, the longest winning streak since 2013.

Bitcoin reached an all-time high near $65,000 in mid-April as market euphoria peaked and the U.S. exchange Coinbase went public through a direct stock listing. But the price tumbled over the next few months as China cracked down on cryptocurrency mining and exchanges and regulators around the world moved to tighten industry rules. The Federal Reserve began to consider tapering its $120 billion-a-month of asset purchases – a form of extreme monetary stimulus that has been a big driver of the investment narrative that bitcoin could serve as an effective hedge against inflation and currency debasement.

Retail investors who had piled into bitcoin as prices soared early in the year rushed to exit positions, while big institutional investors grew reluctant to enter the market at lofty valuations. Prices traded in a range between $30,000 and $40,000 for about two months.

But after bitcoin briefly dipped below $30,000 on July 20, the cryptocurrency began a steady ascent that has put it on track for an 18% gain in July, the first monthly increase in three months.

“The incredible winning streak comes at a very strange time when the FUD is thick,” Mati Greenspan, founder of the cryptocurrency and foreign-exchange analysis firm Quantum Economics, wrote Friday in a newsletter. FUD is an acronym for “fear, uncertainty and doubt,” a term often used by crypto traders and analysts to refer to any negative news.

Bitcoin price resistance is still seen as stiff in the low-$40,000 range: “BTC is potentially rangebound until it breaks and closes above $42,000,” according to the digital-asset firm Eqonex. “Trendline support has moved up to $38,200, with $36,500 the next support.”

But some industry analysts are now wondering aloud if the worst of bitcoin’s recent bear market might have passed.

“Something feels different this week,” Coinbase wrote Saturday in a market analysis. “Max fear seems to have disappeared.”

On a year-to-date basis, bitcoin is up 43%, vastly outperforming the 17% year-to-date gain in the Standard & Poor’s 500 Index.

The Kentucky Department of Financial Institutions has become the fifth state regulator to claim that BlockFi’s interest service violates state securities laws.

Kentucky’s Division of Securities ordered the crypto lender to stop opening new accounts in the Bluegrass State. Kentucky joins New Jersey, Alabama, Vermont and Texas in alleging that BlockFi Interest Accounts (BIAs) violate state securities laws.

“‘Blockfi’s website offers cryptocurrency lending and borrowing services through ‘Blockfi Interest Accounts’ (BIAs) advertised on its website. Through these accounts, investors may deposit certain cryptocurrencies with the company in exchange for a specified interest rate.’ The company has accepted nearly $15 billion in these accounts from investors,” the regulator said in a press release.

In response, BlockFi announced it would “immediately” stop signing on new customers in Kentucky.

Existing customers remain unaffected. Kentucky joins Texas in filing for a cease-and-desist, while New Jersey, Alabama and Vermont have filed “show-cause” orders.

The company has come under fire on allegations that BIAs violate securities laws because customers pool their funds with the company, which then lends them to generate profit.

BlockFi, for its part, has maintained that in its view, BIAs do not violate securities laws in any of the states it operates in.

Many of the state regulators pursuing allegations against BlockFi have given the company an opportunity to provide evidence in support of its claim. New Jersey has given BlockFi until the beginning of September to respond, while Texas securities regulators have a hearing scheduled for early October.

Despite its regulatory woes, the company is still pursuing a $500 million Series E funding round ahead of a possible public offering, according to documents reviewed by CoinDesk. While the round was anticipated to close earlier this week, it’s unclear whether it has done so.

UPDATE (July 30, 2021, 23:40 UTC): Clarifies that while Kentucky is only the second state to file a cease-and-desist against BlockFi, while three other states filed show-cause orders.

After spending most of the day in negative territory, cryptocurrencies made a late surge on Friday with bitcoin hitting its highest level since mid-May. Bitcoin is currently trading above $41,000 at press time and is up more than 15% over the past week. Bullish sentiment has returned after a sharp sell-off in May and two months of consolidation above the $30,000 support level.

Some analysts are optimistic and expect buyers to remain active above the 50-day moving average, which is above $34,000 now.

Latest prices

Cryptocurrencies:

• Bitcoin (BTC) $41239.73 +3.66%
• Ether (ETH) $2439.5, +4.58%

Traditional markets:

• S&P 500: 4395, -0.54%
• Gold: $1813.5, -0.8%
• 10-year Treasury yield closed 1.236%, compared with 1.274% on Thursday.

“We have been talking about the market having lower liquidity during the summer for a few weeks now and we think this helps explain the sharp price action we saw that triggered the short squeeze of nearly $1 billion in futures liquidations,” David Grider, a strategist at FundStrat, wrote in a Thursday newsletter.

Grider stated that bitcoin’s spike could reflect a flight to safety from Chinese investors looking to “get out at any cost,” given the recent sell-off in Asian equities. “Bitcoin could have been trading as a proxy tool for investors looking for a hedge,” Grider wrote.

Next Fed rate-hiking cycle might be shallow

Federal Reserve Chairman Jerome Powell assured markets this week that the U.S. central bank is considering when to start winding down its program of purchasing $120 billion in bonds every month, but Wall Street analysts are already wondering what will come after that.

According to Bank of America, the Fed may not get around to raising interest rates anywhere close to the levels that were considered normal historically, anytime soon. That implies that monetary policy could stay loose for years, even after the Fed stops actively printing money to pay for the purchases of U.S. Treasuries and mortgage bonds. 

The dynamic might be bullish for bitcoin, because many investors see the cryptocurrency as a hedge against the inflation and dollar debasement that might come from easy-money policies. 

A similar shallow tightening pattern was seen toward the end of 2018, when the Fed pushed the benchmark interest rate up to around 2.5%, traditional financial markets went into a swoon, and by early 2019, the central bank had reversed course and started cutting rates again. 

According to the Bank of America analysts, bond market investors may already be anticipating the dynamic, which may explain why 10-year U.S. Treasury yields are at historically low levels of around 1.2%, well below the most-recent annual inflation rate of 5.4%

“We think the level of rates in the U.S. reflects a market expectation that the Fed will produce only a shallow hiking cycle,” the analysts wrote.

Bitcoin active entities

The active entities of bitcoin have surged over the last week, rising 30% to 325,000 active entities per day, according to Glassnode. The number has been in decline from January to mid-July. 

Entities refer to “a cluster of addresses that are controlled by the same network entity and are estimated through advanced heuristics and Glassnode’s proprietary clustering algorithms,” according to Glassnode. Active entities include those active either as a sender or receiver.

Ether resistance levels

Ether, the world’s second largest cryptocurrency, faces resistance near $2,500, where resistance is defined by the 100-day moving average. Ether is up about 10% over the past week and rallied nearly 30% after holding support at $1,720 on July 20. Lower support is seen at $2,000, which could stabilize a pullback.

Ether is consolidating relative to bitcoin and is on traders’ watch for a potential breakout. The ETH/BTC ratio has initial support at 0.054, which must hold in order to keep ETH’s relative uptrend intact.

Altcoin roundup

Flow soars: Flow, a token powering a blockchain network focused on non-fungible tokens (NFT), surged in price after the big cryptocurrency exchange Binance said Friday it would list the project. Binance said at 7:00 UTC (3 a.m. ET) that it would list the FLOW token; since then, the price has rallied 61% to $29 from $18. On a 24-hour basis, the cryptocurrency is up 30%.

Framework to Regulate Crypto, Stablecoins: Legislation before Congress to provide a “comprehensive legal framework” to regulate the digital asset market and possibly grant the federal government the ability to ban some stablecoins was introduced in the U.S. House of Representatives Wednesday. According to sponsor Rep. Don Beyer (D-Va.), chairman of the U.S. Congress Joint Economic Committee, the existing digital asset market structure and regulatory framework are too “ambiguous and dangerous for investors and consumers.”

Six Dapps to Go Live on SKALE: Ethereum scaling project Skale has announced which decentralized applications (dapps) will first go live on its network. Skale Labs CEO Jack O’Holleran told CoinDesk that teams will be releasing their dapps between now and the end of this summer. Boot.Finance, Covey, CurioDAO, Human Protocol, Ivy and Minds are the projects in the initial cohort. rm.

Relevant News:

Other markets

Most digital assets on CoinDesk 20 ended up higher on Friday. 

Notable winners of 22:45 UTC (6:45 p.m. ET):

chainlink (LINK) +14.73%

uniswap (UNI) +6.17%

tezos (XTZ) +3.76%

Notable losers:

the graph (GRT) -1.91%

algorand (ALGO) -1.19%

cardano (ADA) -0.04%

The New York State Department of Financial Services (NYDFS) is launching an initiative to promote diversity, equity and inclusion (DEI) in the banking and crypto industries. 

According to an industry letter published by NYDFS Superintendent Linda Lacewell on Thursday, under the initiative the department plans to collect and publish data from New York’s regulated banking institutions, non-depository financial institutions and virtual currency service providers that reflects the diversity of their corporate boards and management.

The issue of diversity in the crypto industry made headlines last year against the backdrop of nationwide Black Lives Matter protests, when the CEO of the U.S.-based cryptocurrency exchange Coinbase, Brian Armstrong, announced the exchange was taking a stance against employee-driven social activism. Within a month, 5% of its employees accepted a severance package. Later in the year, the New York Times published a lengthy report revealing racist and discriminatory treatment of African American employees in the company followed by another report that claimed the company paid women and minorities well under the tech industry average. 

Having considered a number of possible actions, the NYDFS determined that publishing management diversity data is the best way to support the finance industry’s diversity efforts, Lacewell explained in the letter.

“Given the limited availability of banking and non-depository financial institution-specific diversity data, making that information public will allow companies to assess where they stand compared to their peers and raise the bar for the entire industry,” Lacewell said. 

The letter also said the data will be collected in the fall of 2021 via a survey, and its results are to be published in the first quarter of 2022, categorized by the type of institution and other factors.  

NYDFS stepping in

In Thursday’s letter, Lacewell made it clear that applicable financial institutions will be required to participate in the upcoming NYDFS diversity survey. 

“Under Banking Law §37(3) the Superintendent may require any banking organization to make special reports to her at such times as she may prescribe,” the letter said. 

The letter explains the DSF will collect data from New York-regulated banking institutions with more than $100 million in assets and all regulated non-depository financial institutions with more than $100 million in gross revenue. 

The revenue threshold does not appear to apply to crypto entities, but the diversity survey will also seek to collect data from all authorised virtual currency service providers including “BitLicensees” and virtual currency trust companies, according to the letter.  

All qualifying institutions will provide data “related to the gender, racial and ethnic composition of their boards or equivalent body and senior management as of December 31, 2019 and 2020, including information about board tenure and key board and senior management roles.” 

This includes Coinbase, Genesis Global Trading, Paxos and others. (Genesis is a CoinDesk sister company.)

A timely response

The NYDFS letter, which included diversity statistics for institutions in the banking and crypto industries noted that female participation in the cryptocurrency community is very low.  

“The percentage of women in the sector, including developers, investors and interested individuals, usually hovers between 4% and 6%,” the letter said, citing data from crypto statistics and services platform CoinDance from 2018. 

That figure has since improved slightly: In 2020, engagement in the bitcoin (BTC, -4.83%) community by gender was 86% male. The letter adds that 92% of venture-backed cryptocurrency and blockchain companies founded around the world from 2012 to 2018 had a founding team that was entirely male, compared to the tech industry standard of 82% for that same period. 

On Thursday, as the NYDFS letter was published, the Black Women Blockchain Council (BWBC) a global benefit organization that aims to improve inclusion in the industry, announced it has partnered with ConsenSys to launch a global initiative to train 500,000 black female blockchain developers by 2030.  

According to Olayinka Odeniran, founder of BWBC, of the small number of software developers who are specifically focused on blockchain, a smaller percentage are part of the African diaspora, and an even smaller percentage are females. 

“We wanted to increase that number because we believe that being able to participate as a creator, as opposed to a consumer, is going to greatly benefit our community,” Odeniran said. 

According to the new partnership, BWBC and ConsenSys will be launching specialized programming for black women in blockchain by 2022. The details of the training programs and courses are still in the works, Odeniran said.  

Odeniran commended the NYDFS for taking steps to hold institutions accountable for what they say. 

“While the public statements from Regulated Banking Institutions and Regulated Non-Depository Financial Institutions in support of DEI initiatives are significant and necessary, it is time to act on those words and make good on good intentions to begin to achieve real change,” the letter said. 

As BWBC’s own initiative takes shape, Odeniran is not sure how the industry will respond to the diversity survey. 

“I think it’s a good attempt. Now, whether or not organizations will take it seriously, that’s up to those organizations,” Odeniran said. 

In a potentially hugely disruptive move, a last-minute provision of a major bipartisan infrastructure bill moving through the U.S. Congress would impose stricter reporting requirements on cryptocurrency transfers, which the bill estimates would raise an additional $28 billion in tax revenue.

But the legislation, according to at least two crypto-regulatory experts, is so badly flawed it might be unenforceable. Specifically, the rule as written appears to define any actor who participates in a transfer of cryptocurrency as a “broker.” That could impose transaction reporting requirements on a strange array of players, including miners and decentralized exchanges.

This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here. 

The creators of software wallets could even be required to track and report user transactions, according to both crypto lobbyist Jerry Brito of Coin Center and Blockchain Association head Kristin Smith. Software and hardware crypto wallets, of course, do not track or report user transactions, which would make the law impossible to comply with.

The disconnect highlights the shaky foundations of U.S. attempts to tax or regulate crypto. There are at least two separate bills in the House of Representatives attempting to establish basic definitions, jurisdictions and standards for crypto regulation. Having those in place before trying to rush through a poorly conceived tax might have been a good idea.

The case of software wallets is illustrative. They’re fundamentally tools for interacting with a database, not tremendously different from a web browser. They are not services, any more than your leather wallet is a “service” for holding dollar bills. There is in fact no “service” managing bitcoin (BTC, -4.83%) or any other legitimate cryptocurrency, a fact that fundamentally clashes with the regulatory framework legislators are trying to shove it into.

These flaws are particularly worrisome because the measure has been introduced as a revenue-generating element of the much larger bipartisan infrastructure bill, creating a rushed environment with little margin for subtlety or revision. On Twitter, Brito described the bill as “must-pass,” and said that Coin Center staff “worked all day [Wednesday] trying to fix” the measure, and continued into Thursday. The good news is the bill is still in process, so there’s at least the possibility for things to change.

Aside from their technical shortcomings, the new tax rules lean on near-universal monitoring and automated reporting, rather than on a privacy-protecting system of voluntary reporting, with investigation and enforcement for those who break the law. This potential law, much like the new European money laundering rules introduced this month, would likely create huge honeypots of personal and financial data to be targeted by hackers – including your data, whether you sought to evade taxes or not.

The sins of this poorly designed tax, though, shouldn’t be laid at the feet of taxation as a whole: Strange as it may seem, cryptocurrency development has been advanced to a huge degree by investments funded by past tax revenue. SHA-256 cryptography was developed by the National Security Administration. The internet itself was created largely by the Defense Department’s DARPA (Defense Advanced Research Projects Agency) program. David Chaum, one of the 10 or so most important pioneers of digital cash, earned a PhD at University of California, Berkeley in the 1970s, when public funding kept tuition costs to about $800 a year.

Most world-transforming innovations rely on a similar level of collective support, because basic or speculative research is usually not profitable fast enough for the private sector to invest in. So there’s nothing inherently objectionable about crypto being expected to give back to support the next generation of innovators. But the current rushed and technically flawed approach could significantly harm the very innovation that took so many years and resources to bring to life in the first place.