Fed hikes, Arc goes live, DNB brings the krone onchain — Thu 17 Sep

Good morning. The Fed raised rates for the first time in three years, and the agencies in Washington made clear they will write crypto's rules themselves after Tuesday's failed vote. Meanwhile the institutions that clear the world's markets started producing blocks on a public blockchain, and DNB took the krone onto one in Europe.

💎 The Fed lifts rates to 3.75–4.00 per cent, with another expected before year-end
💎 Selig and Atkins say they will regulate crypto without Congress
💎 $571 million in long positions force-closed after the Clarity Act vote
💎 Arc goes live with BlackRock, DTCC and Visa among the validators
💎 DNB joins CBMT and makes the krone the fourth currency in the network

— Morten

The Federal Open Market Committee lifted the target range to 3.75–4.00 per cent on Wednesday, its first increase since 2023, on a unanimous vote. The updated projections show 16 of 18 participants expecting another rise this year. The dollar had its best day in three months, and two-year Treasury yields climbed to their highest since 2024.

Why it matters: Chair Kevin Warsh has now put a rate rise behind his inflation rhetoric, and the market is pricing the next one for December.

Source: Shares tick higher as Fed hikes rates, dollar jumps with short-term yields — Reuters

Michael Selig and Paul Atkins posted statements within two hours of each other on Wednesday. Selig said the CFTC is ready to ship rules using its existing authority. Atkins said the SEC will act decisively within its own. The SEC already has a crypto offering rule out for comment until 20 October. The CFTC has proposed none.

Why it matters: A rule an agency writes can be unwritten by the next chairman through the same process, which is the certainty problem the bill was meant to solve.

Source: SEC and CFTC chairmen say they will write crypto rules without CLARITY Act — The Defiant

About $571 million in long positions were force-closed across derivatives exchanges after the vote, the largest single session since 22 August. Bitcoin and ether longs took roughly $190 million each. Short positions accounted for only about $100 million, leaving six dollars long for every dollar short caught in the cascade.

Why it matters: The positioning was lopsided going in, which is why a widely expected outcome still produced a forced unwind.

Source: $570M in crypto longs liquidated as Clarity Act fails — Altcoin Buzz

Arc opened to the public on Wednesday with more than 100 institutional and ecosystem builders. Fees are paid in USDC, and the founding validators include BlackRock, DTCC, Visa, Mastercard and ICE. Circle also minted 10 billion ARC tokens this week, the first listed company to mint a network token for a new Layer 1. It says that is not a commitment to launch one publicly. (Source: press release)

Why it matters: Minting the supply before deciding whether to release it keeps the option open for a move to proof of stake in 2027, without asking anyone's permission first.

Source: Circle launches Arc mainnet, an economic operating system for the internet — Circle

Analysts point to predictable fees as the reason institutions can use Arc at all: gas paid in a stablecoin rather than a volatile token. The opt-in privacy layer that would let banks run treasury and confidential payments on it is still in development. One analyst put the other objection plainly — a public blockchain has no call centre when something goes wrong.

Why it matters: The validator list is what gives the network credibility, and the feature banks say they need to use it properly has not shipped.

Source: Circle publicly releases Arc blockchain to institutions — American Banker

DNB has joined CBMT, where European banks test tokenised bank deposits across borders under existing banking rules. The Norwegian krone becomes the fourth currency after the euro, dollar and yen. The network is German-led, with Commerzbank, DZ Bank, UniCredit, ABN Amro and BNP Paribas taking part. DNB will test transfers, currency exchange and securities settlement.

Why it matters: Tokenised deposits keep the money as a bank deposit, which is a different answer from a stablecoin to the same question about how money moves.

Source: DNB tests tokenised deposits in kroner with European banks — Kaupr

UK Payments Delivery Co has begun raising around £50 million to build a domestic payments utility, with funding intended to carry it to 2028. Barclays, HSBC, Lloyds and NatWest are among the sponsors, alongside Citigroup, JPMorgan, PayPal, Nationwide and Wise. The technical architecture and governance have not been disclosed.

Why it matters: Card scheme fees have been under scrutiny in Britain for years, and this is the first time the largest banks have put money behind an alternative.

Source: UK banks reportedly launch GBP 50 million fundraising for payments utility — The Paypers

The bank moved money between its North American and European entities using USBDC, its dollar stablecoin, on Stellar. The pilot covered the full lifecycle: minting, payment, redemption, freezing and clawback, with the controls built into the protocol. It ran through the bank's own platform, connected to its compliance, risk and finance systems.

Why it matters: Most bank blockchain pilots run on private networks the bank controls. This one settled on a public chain with a validator set it does not.

Source: U.S. Bank moves money in first public pilot on Stellar — Token Relations

Kraken Wallet users can now reach DeFi Earn from inside the wallet, finding yield opportunities and managing positions onchain without leaving the app. The same infrastructure underpins Kraken's new xStocks vaults, where tokenised equities are lent out through a curated strategy running across Ink, Solana and Kamino.

Why it matters: The exchanges are competing for the whole onchain lifecycle now, not the trade, and the wallet is where that fight is being held.

Source: Kraken launches xStocks vaults that borrow against tokenized equities — The Defiant

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Wishing you a great Thursday — and welcome back tomorrow morning for the next edition of Kaupr Daily.

Best regards Morten Myrstad Founder & Editor