The U.S. Federal Reserve, along with other government entities and officials, is struggling to deal with the financial disruption brought on by cryptocurrency’s move into banking and other financial services, according to an article in the New York Times.

The daily issuance of the world's second-largest cryptocurrency has gone negative for the first time since the Ethereum network's EIP-1559 upgrade.

Cover’s collapse follows an infinite minting hack in December 2020 that left its customers markedly uncovered by its insurance policies, and investors in the COVER token high and dry.

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Top stories in the Crypto Roundup today:

• As More Consumers Bank With Crypto, Washington Sounds the Alarm
• Ethereum Records Negative Daily Issuance for the First Time Since EIP-1559
• DeFi Insurance Protocol Cover Shuts Down, Token Value Plummets
• Chart of the Week: Bitcoin Treasuries
• Sponsored: Crypto.com - The World’s Fastest Growing Crypto App

As More Consumers Bank With Crypto, Washington Sounds the Alarm

The U.S. Federal Reserve, along with other government entities and officials, is struggling to deal with the financial disruption brought on by cryptocurrency’s move into banking and other financial services, according to an article in the New York Times.

The article says officials are trying to figure out how to curb what they see as the potential dangers from an industry “whose short history has been marked as much by high-stakes speculation as by technological advances.”

The Times story notes efforts by the U.S. Securities and Exchange Commission (SEC) to staff up with experts to help it deal with the exploding industry. Observing that as it could take at least a year to write rules or get Congress to act, regulators could issue guidance in the interim.

The article compares BlockFi’s offers of up to 8% annual interest rates on cryptocurrency deposits with U.S. banks’ average rate of 0.06% for savings deposits but makes no mention of the macro factors behind the latter, such as the Fed’s unprecedented monetary expansion policy. The article quoted U.S. Sen. Elizabeth Warren (D-Mass.), a vocal crypto critic saying:

“Crypto is the new shadow bank. It provides many of the same services, but without the consumer protections or financial stability that back up the traditional system.”

Ethereum Records Negative Daily Issuance for the First Time Since EIP-1559

The daily issuance of the world's second-largest cryptocurrency has gone negative for the first time since the Ethereum network's EIP-1559 upgrade.

The Block's Data Dashboard shows that the daily net emission of ether (ETH) on September 3rd was -333, which became negative about 30 days after the EIP-1559 upgrade was activated on August 5.

The upgrade changes Ethereum's monetary policy by burning part of the transaction fees in every new block that previously belonged to Ethereum miners in an effort to alleviate the fees for network users.

Since August 5, the daily issuance of ETH has been on a deflationary trend. While Ethereum's mining revenue managed to hold up in August by dollar terms mainly due to ETH's price rally and the surge of on-chain activities relating to the NFT markets.

DeFi Insurance Protocol Cover Shuts Down, Token Value Plummets

Cover’s token has fallen $45 since Ted’s announcement, from $269 to $224. Daily trading volume has soared from $3.5 million to $19 million as traders grapple with the news.

Launched about a year ago, Cover created a decentralized market for investors in decentralized finance protocols. By locking up tokens on Cover as collateral, users received tokens that would cover them in case a DeFi protocol they invested in was hacked, rug-pulled or exploited. The value of these tokens depended on the risk of the smart contract.

Cover’s collapse follows an infinite minting hack in December 2020 that left its customers markedly uncovered by its insurance policies, and investors in the COVER token high and dry. 

“It is with conflicted emotions that I announce the end of RULER & COVER Protocol. The decision to do this did not come easy and is a final decision the remaining team made after reviewing the path forward after the core developers suddenly left the projects,”  said DeFi Ted as he laid the troubled DeFi insurance project to rest.

The hacker returned the 4350 ETH they stole and Cover managed to redistribute the funds to its customers, however, the value of the token fell by 96%.

“Compensation will be as of block number 13162680, this will be used as the snapshot to distribute funds to holders from the treasury. Founders including myself will not take part in this.”

Chart of the Week: Bitcoin Treasuries

Over the past year, institutions, funds and countries have looked to gain exposure to Bitcoin and other popular cryptocurrencies - but which treasury actually holds the most BTC? 

Last week MicroStrategy announced the continuation of its Bitcoin purchasing spree by adding an additional 3,907 Bitcoins to its balance sheet. It is the public firm with the largest Bitcoin holdings, owning almost as much as all other public companies combined.

This remains well below Grayscale Bitcoin Trust, however, whose $30.9b AUM means it owns over 650,000 Bitcoins.

Bulgaria and Ukraine are the only countries to have publicly stated they own Bitcoin, accumulating 1.2% of all Bitcoin in circulation.

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