Firi Weekly: Mixed Signals on Interest Rates

Fed Cuts Rates Amid Rising Bond Yields:
- The Federal Reserve cut rates by 0.25% to a 4.0–4.25% range, but 10-year and 30-year bond yields paradoxically increased, creating conflicting pressures on crypto markets.
SEC Approves Crypto ETF Fast-Track:
- The SEC introduced “Generic Listing Standards,” enabling semi-automatic approval for crypto ETFs that meet specific criteria, potentially making 12 additional cryptocurrencies eligible for ETFs.
UK-US Crypto Regulatory Alignment:
- UK and US officials discussed aligning crypto regulations, including stablecoins, to boost London’s role in digital asset adoption.
FTX Distributes $1.6 Billion to Creditors:
- The bankrupt exchange FTX is scheduled to pay $1.6 billion on September 30, adding to the $6.2 billion already returned.

Last Week’s Big Three

U.S. Revolutionizes Crypto ETF Approval Process: Wednesday marked a watershed moment for cryptocurrency ETFs in the United States. The SEC approved Grayscale's first multi-asset crypto ETF—the Grayscale CoinDesk Crypto 5 ETF—which holds Bitcoin, Ethereum, XRP, Solana, and Cardano. While diversified across five assets, the fund maintains nearly 90% exposure to Bitcoin and Ethereum combined.

More significantly, the SEC simultaneously unveiled its "Generic Listing Standards" for commodity-based ETFs, including digital assets. This framework streamlines the approval process that Bitcoin and Ethereum ETFs previously navigated through lengthy individual applications—delivering on promises made by the SEC under President Donald Trump's administration.

The new framework requires assets to meet one of three criteria for expedited approval. The most accessible criterion mandates that the cryptocurrency must have traded on a regulated futures exchange for at least six months. Currently, approximately 12 digital assets satisfy this requirement. However, as the SEC will likely introduce additional criteria, the framework’s practical implementation remains untested.

This regulatory shift mirrors the traditional ETF framework introduced in late 2019, which catalyzed explosive growth in traditional ETF launches from an average of 117 annually to 370 per year. It is anticipated that crypto ETFs will also see approvals accelerate dramatically in both speed and scale. The first instruments under this new framework could emerge as early as October.

While the multi-asset ETF appeals to traditional investors seeking diversified crypto exposure through a single instrument, the Generic Listing Standards represent the more transformative development. However, it remains an open question whether potential ETFs for other cryptocurrencies can replicate the remarkable success of Bitcoin and Ethereum ETFs.

UK Pursues Deeper Crypto Cooperation with America: The Financial Times reports that the United Kingdom is actively working to strengthen its digital asset collaboration with the United States, particularly by adopting the crypto-friendly regulatory approach emerging under President Trump. According to sources, any agreement would likely encompass stablecoin regulations. These discussions gained momentum following Tuesday's London meeting between UK Chancellor Rachel Reeves and U.S. Treasury Secretary Scott Bessent.

Given London's status as Europe's premier capital market, a shift toward more accommodating crypto regulations—aligned with U.S. policy—could provide tailwinds for the digital asset sector in Europe.

Bank of Canada Weighs Stablecoin Strategy: Canada's central bank is sharpening its focus on stablecoins, joining a global trend among monetary authorities. Ron Morrow, the Bank of Canada's (BoC) executive director of payments, supervision and oversight, argued Thursday that Canada should evaluate the benefits of federal stablecoin regulation, following the path of other nations. Morrow emphasized the urgent need for faster, cheaper, more transparent, and more accessible cross-border payment solutions. While acknowledging stablecoins' potential, he cautioned about inherent risks requiring careful consideration.

The BoC appears to be adopting a constructive stance similar to the European Central Bank (ECB), which reportedly is exploring the possibility of issuing its digital euro as a stablecoin.

Behind the Charts

Chart 1: U.S. Dollar and EURO Interest Rates

The Federal Reserve delivered its widely anticipated 25 basis point rate cut Wednesday, bringing the federal funds rate to a 4.00-4.25% range. As we noted in last week's Firi Weekly, markets had fully priced in this move. This marks the Fed's first rate reduction of 2025, while the ECB has already delivered four cuts this year, each also 25 basis points.

Rate cuts typically benefit digital assets as long as the U.S. economy does not show marked weakness, since lower rates theoretically push investors toward higher-risk assets, including cryptocurrencies, as they search for returns.

Chart 2: Yields on 2-, 10-, and 30-Year U.S. Government Bonds

Despite the Fed's quarter-point cut, longer-duration U.S. government yields actually rose last week. Both 10-year and 30-year yields trade above their early 2024 levels, even after the Fed has delivered 125 basis points of cumulative easing since then.

Multiple factors explain the disconnect between short and long rates. Markets appear concerned that the Fed has shifted focus from inflation control to employment support. Consequently, bond investors demand higher yields to compensate for potential inflation risks stemming from monetary stimulus and other job-market initiatives. Additionally, soaring federal deficits increase both the credit risk and supply of government bonds—when supply rises without corresponding demand growth, yields must adjust higher to attract buyers.

These elevated long-term rates theoretically pressure digital assets, just as lower short-term rates provide support. Higher long-term yields can draw capital away from cryptocurrencies as investors find attractive returns in safer assets. The result: short-term and long-term rates are effectively pulling crypto markets in opposite directions.

A Number to Remember

$1.6 billion

FTX’s bankruptcy estate will carry out its third major payout to creditors on September 30, releasing approximately $1.6 billion. This payment comes on top of the nearly $6.2 billion that has already been returned to the failed exchange’s creditors.

On Our Radar

Key developments we are monitoring this week:

“Buy the Rumor, Sell the News”: Crypto markets appear to have front-run Wednesday's rate cut, with most digital assets experiencing selling pressure afterward. This week's price action will reveal whether risk appetite can overcome the mixed interest rate signals currently impacting markets.
ETF Pipeline Updates: Following last week's regulatory breakthrough, we are watching closely for additional details on crypto ETF applications. Further announcements could emerge within weeks.
BNB and Solana Momentum: Both tokens demonstrated remarkable strength recently, with BNB achieving a new all-time high above $1,000 and Solana reclaiming the $250 level. While Solana has since retreated substantially, we are monitoring whether capital might rotate from Bitcoin and Ethereum into smaller-cap cryptocurrencies.

Mads Eberhardt22/09/2025

Should not be considered financial advice. Crypto may involve high risk.