Crypto Currents: Investors exercise caution ahead of Powell speech

Regulation continues to dominate the crypto landscape, as U.S. investors pull hundreds of millions from bitcoin ETFs in anticipation of a keynote speech by Fed Chair Powell and lobbyists clash with banks over new stablecoin laws. In a potential policy shakeup, China is reportedly considering a reversal of its crypto ban to launch its own yuan-backed stablecoins. Amid the volatility, industry giants like Coinbase are pushing forward into AI-powered payments while Cathie Wood’s ARK Invest capitalizes on the dip. Stay up on the crypto news that matters with “Crypto Currents,” from The Fly. Join us 2 PM daily for your essential briefing on the fast-moving world of cryptocurrency on FlyCast radio. Also, subscribe to our YouTube channel for the Crypto Fly By weekly recap.

BITCOIN ETFS SEE $645M IN OUTFLOWS AS INVESTORS DE-RISK AHEAD OF POWELL SPEECH: Investors pulled a total of $645M from spot bitcoin (BTC) ETFs over the last two trading sessions as institutional investors pulled back ahead of Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium. Data sourced from Farside Investors showed that Fidelity’s FBTC fund led the redemptions. Analysts attributed the withdrawals to tactical de-risking by investors who are exercising caution amid uncertainty about the future direction of interest rate policy. The outflows represent a sharp reversal of the trend from July and August, when the funds attracted $4.7B in new capital.

CHINA CONSIDERS YUAN-BACKED STABLECOINS IN MAJOR POLICY SHIFT: China is considering a significant reversal of its policy on digital assets by allowing the use of yuan-backed stablecoins to increase the global adoption of its currency, Reuters reported, citing sources familiar with the matter. The country’s State Council is expected to review a new roadmap this month that will set targets for the yuan’s use in international markets. The potential move marks a major strategic pivot, coming just four years after Beijing banned all cryptocurrency trading and mining activities in 2021 due to concerns over financial stability. The plan, if approved, would signal a new effort by China to use financial technology as a tool to internationalize the yuan and compete with the growing influence of U.S. dollar-linked stablecoins.

COINBASE BETS ON AI-POWERED MICROPAYMENTS WITH NEW PROTOCOL: According to a report from Bloomberg, Coinbase (COIN) is betting that stablecoins will become the core payment infrastructure for the artificial intelligence economy. The company is promoting a strategic shift from speculative trading toward real-world utility, highlighted by a recent “Crypto x AI” hackathon it hosted in Brooklyn. To advance this vision, Coinbase has launched x402, a new open-source payments protocol designed to enable applications and AI agents to instantly settle micro-transactions using stablecoins. The initiative comes as the U.S. implements its first clear legal framework for stablecoins, though Coinbase faces significant competition from established fintech players like PayPal (PYPL), which recently introduced its own stablecoin.

ARK INVEST BUYS THE DIP IN BULLISH, ROBINHOOD SHARES AMID SELL-OFF: Cathie Wood’s ARK Invest acquired additional shares of crypto-linked companies during a broad market sell-off on Tuesday. The firm purchased $21.2M worth of shares in the newly-public crypto exchange Bullish (BLSH) and another $16.2M in trading platform Robinhood Markets (HOOD). The move came as most crypto-exposed stocks fell, with Coinbase and Strategy (MSTR) also closing lower on the day.

CRYPTO LOBBY CLASHES WITH BANKS OVER NEW US STABLECOIN LAW: Crypto industry advocates are pushing back against efforts by banking groups to amend the new U.S. stablecoin law. In a letter to Senate Banking Committee leaders, the Crypto Council for Innovation and the Blockchain Association argued against rewriting key provisions of the GENIUS Act. The banking lobby has called for the repeal of a section that allows state-chartered institutions to support stablecoin activities across state lines, warning it could create regulatory arbitrage. The banks also oppose provisions allowing affiliates of stablecoin issuers to offer yield programs, claiming it could drain deposits from the traditional banking system. The crypto groups contend that these changes would stifle competition and unfairly favor legacy financial institutions.

PRICE ACTION: As of time of writing, bitcoin (BTC) was trading at $113,825.13, while ether (ETH) was trading at $4,209.67.