Spot bitcoin ETFs saw their second worst month since launching in the U.S., with an estimated $662 million of net outflows, the report said.

The total cryptocurrency market cap fell by 8% in June to around $2.25 trillion, giving back most of the gains from May, JPMorgan (JPM) said in a research report on Monday.

“Tokens, decentralized finance (DeFi) and non-fungible tokens (NFTs) all saw market cap contraction in June,” analyst Kenneth Worthington wrote.

The move is in contrast to traditional markets as the S&P 500 index gained 4% for the month, and the technology-heavy Nasdaq climbed 6%, the bank noted. The CoinDesk 20 index {{CD20}} fell almost 20% in June.

However, it’s not all doom and gloom for the digital assets sector. Stablecoins outperformed the rest of the crypto ecosystem in June, and their market cap was flat to slightly higher, the report said, with the appreciation driven primarily by tether (USDT).

Bitcoin miners were also an outlier. The total market cap of the publicly listed bitcoin (BTC) miners grew 19% as these companies benefited from gains due to “artificial intelligence-related power use cases.” Core Scientific (CORZ) recently inked a 12-year, 200 megawatt (MW) deal with cloud computing firm CoreWeave to provide AI-related infrastructure, which triggered a re-rating of the sector and a wave of mergers and acquisitions.

The bank noted that the data suggests that daily spot crypto trading volumes fell as much as 18% versus the previous month, and “it now appears that March 2024 was the peak for the crypto ecosystem in the current cycle both from a valuation and volume perspective.”

JPMorgan added that spot bitcoin ETFs saw their second worst month in terms of flows since launching, and estimates that the 10 U.S. spot ETFs saw $662 million of sales over the month.

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The Hong Kong Monetary Authority claims its retail central bank digital currency prototype safeguards flexibility and privacy.

A new experiment shows central bank digital currency (CBDC) can work with private stablecoins, even if intermediary operators go bust, the Hong Kong Monetary Authority said Friday.

Private stablecoins are designed to maintain stable values relative to a reference currency like the U.S. dollar or an asset like gold, while CBDCs are digital versions of sovereign currencies.

Project Aurum – named after the Latin word for gold – shows CBDC used by retail customers can be private and flexible, said its architects, who also include the Bank for International Settlements Innovation Hub and a research institute.

“Project Aurum has made a number of ground-breaking achievements,” said the study. “We have no doubt that the Aurum prototype will catalyze and inspire the global quest for the most suitable rCBDC [retail CBDC] architecture.”

Over 100 jurisdictions worldwide are looking into issuing a CBDC, according to the Atlantic Council, and experiments are taking place across the world.

Those projects often assume banks or other payment companies would intermediate the service. Crucially, Aurum also tested out a system where regular shoppers don’t get their hands directly on CBDC, but instead use private stablecoins – in the same way modern-day card payments use commercial bank money backed up by central bank guarantees.

“Bringing CBDC-backed stablecoins to life has never been done before,” the study said. “The system developed for the CBDC-backed stablecoins is unique and can be useful” for central banks, it added.

Funds were made traceable on the prototype so customers could get their money back if the intermediary goes bust – but it would still safeguard privacy through the use of pseudonyms, the study said.

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Market instability in stablecoins will need to be taken into account, the FCA’s executive director for markets said.

The U.K.’s financial regulator and its finance ministry, the Treasury, will scrutinize the collapse of the Terra ecosystem’s crypto tokens while creating new rules for crypto assets, Bloomberg reported on Friday.

Recent market instability in stablecoins “will absolutely need to be taken into account” when the Financial Conduct Authority works with the Treasury to create the rules later this year, Sarah Pritchard, the FCA’s executive director for markets, told Bloomberg.

On May 13, Terra’s UST algorithmic stablecoin slumped as low as 23 cents, and the LUNA token, created to prevent the UST algorithmic stablecoin from being volatile, fell 96% at one point. An algorithmic stablecoin is one that in theory maintains its peg using only software and rules, meaning it is not necessarily backed by collateral. Instead, the token’s programming, or smart contract, can increase supply if the price is falling or reduce supply if the price is increasing.

In March, the U.K. said it will work on a new crypto regulatory package and planned to regulate stablecoins. In its consultation, the government proposed that algorithmic stablecoins should not be regulated.

The Treasury and the FCA were not immediately available to comment when contacted by CoinDesk on Friday.

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• The report said “stablecoins could support faster, more efficient, and more inclusive payments options.”
• The White House has been working with economic advisors and regulators for months on the digital assets.

The Biden administration released a highly anticipated report Monday asking Congress to create regulations for stablecoins.

Stablecoins, which are cryptocurrencies tied to government-issued money like the US dollar, could become widely adopted, the report said, adding that a regulatory framework would increase confidence in using the digital assets for payment purposes.

“If well-designed and appropriately regulated, stablecoins could support faster, more efficient, and more inclusive payments options,” according to the report from the President’s Working Group on Financial Markets.

But rules around stablecoins are “urgently needed,” and Congress should impose certain laws like only allowing banks to issue the coins, it added.

“Failure to act risks growth of payment stablecoins without adequate protection for users, the financial system, and the broader economy,” the report warned.

Without stablecoin legislation from Congress, the report also recommended that the Financial Stability Oversight Council consider designating some activities as systemically important. Eventually, that could lead the Federal Reserve to crafting stablecoin rules.

Biden has long been working with top economic advisors and senior regulators such as Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell to propose rules regarding stablecoins. A separate report on digital currencies from the Fed is also expected soon.

Regulators have been grappling with how to manage digital assets in recent months as attention around them has grown. Stablecoins, though they account for only small piece of the more than $2 trillion digital-asset market, have caught the attention of regulators because of their rapid growth.

Well-known coins include ones from Tether, Circle, and Binance, whose tokens’ combined valuation has jumped to $110 billion from $11 billion last year, we reported previously.

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