12.10 AI Daily: Global central bank monetary policy divergence, crypto market brews new waves

Part I. Headlines

1. Federal Reserve Chair Powell Signals Hawkish Stance, Bitcoin Reacts with Sharp Drop

Federal Reserve Chair Powell stated in a speech that to control inflation, the Fed may need to raise rates to levels higher than previously expected. This hawkish tone immediately triggered strong market fluctuations. Risk assets like Bitcoin plummeted, with Bitcoin briefly dropping below the $16,000 level.

Powell emphasized that although inflation has slowed, it remains well above the 2% target. To bring inflation down to an appropriate level, the Fed might need to raise rates to a higher point than previously anticipated and maintain that level for some time. This suggests that the upper limit of interest rates could exceed the earlier expected 5%.

Analysts noted that Powell’s remarks conveyed the Fed’s continued hawkish stance. This will increase fears of an economic recession and suppress risk asset prices. As an emerging alternative investment, Bitcoin naturally bears the brunt. Meanwhile, a strengthening US dollar index has also intensified downward pressure on Bitcoin.

From a broader perspective, Powell’s hawkish comments reflect persistent inflationary pressures. Despite seven consecutive rate hikes by the Fed, inflation remains stubbornly around 7%. This indicates that the Fed may need to further tighten monetary policy, even at the cost of some economic growth, to curb inflation expectations.

2. Bank of Japan Signals Rate Hike, Yen Surges, Triggering Global Risk-Off Mood

Bank of Japan Governor Ueda Kazuo stated that if economic activity and prices develop as expected, the BoJ will continue to raise its policy rates based on economic and price improvements. This signal caused the yen to surge sharply, sparking a global risk-off sentiment.

The USD/JPY exchange rate briefly jumped nearly 4%, marking the largest single-day increase since 1998. This intense volatility broke the long-term depreciation trend of the yen and triggered safe-haven demand among global investors. US stock futures plunged, and European markets also declined.

Analysts pointed out that the rate hike signals from the BoJ indicate a divergence in monetary policies among major central banks. Unlike the Fed and ECB which continue to hike rates, the BoJ has started to tighten policy aimed at curbing inflation expectations and supporting the yen.

This divergence has heightened uncertainty in global financial markets. On one hand, differing monetary policies among major economies could lead to volatile capital flows; on the other hand, the outlook for global economic growth has darkened. Amid this environment, investors are seeking safe-haven assets, leading to sell-offs in risk assets.

Long-term, the BoJ’s policy shift reflects ongoing inflationary pressures worldwide. Central banks are compelled to tighten to preserve currency purchasing power and international standing, but this also raises risks of global economic slowdown. The turbulence in global markets may persist for some time.

3. New Regulatory Framework for Cryptocurrencies Evolving, China’s Multiple Departments Crack Down

On November 28, the People’s Bank of China (PBOC), together with the Ministry of Public Security, Cyberspace Administration of China, and a total of 13 departments, held a coordination meeting to combat virtual currency trading speculation. The lineup was notable: compared to the 2021 “924 Notice” involving ten ministries, new additions included the Central Financial Work Commission, the State Financial Regulatory Administration, and the Ministry of Justice, signaling an upgrade from sectoral cooperation to systemic governance over virtual currencies.

Analysts noted that this change will reshape the regulatory landscape on three levels: an upgraded coordination framework with the involvement of the Central Financial Work Commission, promoting a move from departmental collaboration to higher-level cross-sector coordination, forming policy and resource synergy. The deepening of regulatory pattern, with the inclusion of the State Financial Regulatory Administration, shifts oversight from basic capital flow monitoring to precise identification and professional crackdown on illegal financial activities. The legal framework is strengthened with the Ministry of Justice’s involvement, pushing regulatory enforcement from administrative directives toward better-supported legal application and law enforcement linkage, reinforcing law enforcement authority.

From a broader view, this regulatory upgrade reflects China’s high regard for maintaining financial security and social stability. The long-standing disorderly expansion, speculative activities, and money laundering risks in cryptocurrency trading have alarmed decision-makers. Through enhanced coordination, targeted enforcement, and legal safeguards, China aims to fundamentally curb illegal activities in the virtual currency realm.

Meanwhile, China is actively exploring compliant financial technology innovations like digital yuan. This dual approach aims to foster a healthy environment for fintech development, safeguard financial system security, and uphold national financial sovereignty.

4. Ethereum Major Upgrade Pectra Activates, Opening a New Era of Account Abstraction

Ethereum achieved a significant network upgrade in 2025. The Pectra upgrade was successfully activated in May, introducing core features such as account abstraction(EIP-7702) and validator improvements, heralding a new era of user interaction with Ethereum.

Account abstraction is the most attention-grabbing feature of Pectra. It allows users to interact with Ethereum using arbitrary account models, no longer limited to the traditional externally owned account(EOA) model. This innovation offers vast potential for the Ethereum ecosystem, likely spurring a new generation of decentralized applications.

Analysts observe that the introduction of account abstraction signifies Ethereum’s move toward becoming a universal computing platform. In the future, Ethereum could support not only cryptocurrency transactions but also broader computational tasks such as artificial intelligence and IoT applications. This will greatly expand Ethereum’s application scope.

Meanwhile, Pectra also optimized Ethereum’s consensus and execution layers, improving network scalability and security. This lays a solid foundation for Ethereum’s future development.

Long-term, Pectra marks Ethereum’s progress toward the Web3.0 vision. As a leading blockchain technology, Ethereum is expected to become a key infrastructure for building a decentralized internet. More innovative applications may emerge within its ecosystem, advancing internet development into a new stage.

5. Japan Plans to Tax Cryptocurrency Income Separately, Easing Investor Burden

The Japanese government and ruling party are adjusting tax policies for cryptocurrency income, planning to uniformly impose a 20% income tax regardless of transaction amount, aligning it with stocks and investment trusts. This aims to reduce investors’ tax burden and stimulate the domestic trading market.

Japan intends to replace the current comprehensive taxation approach with a separate taxation method, meaning cryptocurrency gains will no longer be combined with wages or business income, but taxed independently. The government plans to include this adjustment in the 2026 tax reform outline, expected to be finalized by year-end.

Currently, Japan applies a comprehensive tax system on crypto gains, combining them with other income and applying graduated rates up to a maximum of 55%. This high tax burden discourages investment and impacts market activity.

Analysts say this tax reform aims to create a more favorable environment for Japan’s crypto market. Lowering tax rates and easing investor burdens could attract more capital, promoting growth.

Meanwhile, Japan’s Financial Services Agency (FSA) plans to submit amendments to the Financial Instruments and Exchange Act at the 2026 regular session, strengthening regulation over crypto trading. The amendments will explicitly prohibit insider trading using non-public information and require issuers of cryptocurrencies to disclose relevant information.

These measures reflect Japan’s balanced policy approach: creating a friendly environment to attract investments while tightening supervision to ensure market order. This approach aims to foster healthy and orderly development of Japan’s crypto market.

Part II. Industry News

1. Bitcoin Briefly Falls Below $17,000, Sparks Market Panic

On December 10, Bitcoin briefly dropped below the $17,000 level, hitting a new low since November 2022. Analysts attribute this decline mainly to macroeconomic uncertainty and concerns over crypto regulation.

After falling below $17,000, Bitcoin quickly rebounded, indicating market attention to this key support level. However, declining trading volume and subdued investor sentiment may limit its upward momentum. Some analysts expect Bitcoin to fluctuate between $17,000 and $18,000 for a period, awaiting more positive catalysts.

Meanwhile, Bitcoin’s drop dragged down other cryptocurrencies. Major tokens like Ethereum, BNB, and Solana also declined to varying degrees. Investor confidence in the crypto market was affected, and trading activity slowed.

2. Ethereum’s Daily Trading Volume Drops Over 10%, On-Chain Activity Cools

Ethereum saw a significant decrease in activity on December 10, with daily trading volume shrinking over 10%, and on-chain activity cooling notably. Analysts suggest this may be linked to recent declines in ETH price, with investor sentiment weakening and trading activity decreasing.

The volume contraction also reflects potential headwinds in the DeFi ecosystem. As risk appetite wanes, DeFi protocol usage and total value locked(TVL) may be affected.

However, some experts believe this volume reduction is a temporary adjustment. With Shanghai upgrade approaching, on-chain activity is expected to rebound. The Shanghai upgrade will address long-standing issues in Ethereum, potentially boosting investor confidence.

( 3. Solana Encounters Network Congestion, Processing Capacity Under Question

Solana experienced another network congestion on December 10, leading to a sharp decline in transaction processing capacity. Data shows that the network’s peak transaction throughput that day was only 1,000 transactions per second, far below its theoretical capacity of 65,000 TPS.

The congestion impacted DeFi applications on Solana and damaged its reputation as a high-performance blockchain. Some analysts question whether Solana can truly handle large-scale adoption.

The Solana Foundation stated they are working to resolve congestion issues and will continue optimizing performance. Nonetheless, some investors remain skeptical about Solana’s long-term prospects, questioning its potential to become the “Ethereum killer.”

Overall, the market turmoil on December 10 reflects macroeconomic uncertainty and concerns over regulation and technology development. Major blockchain projects face various challenges, requiring ongoing innovation and optimization to earn market trust.

Part III. Project Highlights

) 1. Grokipedia: Musk Launches Open-Source AI Knowledge Base

Grokipedia is an open-source AI knowledge base platform launched by Elon Musk. It aims to aggregate human knowledge and organize it with AI algorithms to provide users with a one-stop knowledge acquisition experience.

Musk stated that Grokipedia is open-source software, available for free, with no licensing fees or attribution required. Users can correct errors to improve objectivity and accuracy. The platform will be continuously updated with contributions from global knowledge providers, building a true human knowledge repository.

The launch of Grokipedia is seen as Musk’s significant AI initiative. Analysts believe this open-source knowledge base could become an important data source for AI training, supporting various AI applications. It also promotes free flow of knowledge worldwide, fostering cross-cultural and interdisciplinary exchange.

However, some experts worry about the sources and content moderation mechanisms of Grokipedia. They argue that open editing may lead to misinformation, requiring effective review and correction systems. Overall, Grokipedia reflects Musk’s confidence in open-source AI development; its success or failure will influence the broader AI ecosystem.

2. Sui Network Major Upgrade, Move Ecosystem Gets New Momentum

Sui is a Layer 1 blockchain based on the Move language, created by former Meta blockchain team members. Recently, Sui announced the completion of a major upgrade to Sui V1.0, introducing several innovation features that enhance network performance and security.

The core of this upgrade is the new consensus mechanisms Narwhal and Tusk, significantly increasing transaction throughput and confirmation speed. Sui also optimized the Move virtual machine to support more advanced language features, providing developers with a more friendly programming environment.

Additionally, Sui launched a series of tools and infrastructure, including wallets, explorers, and development frameworks, supporting ecosystem development comprehensively. Future plans include more innovations such as privacy protection and cross-chain interoperability to meet diverse needs.

Sui’s upgrade is regarded as an important step in Move ecosystem development. As a new blockchain programming language, Move is attracting more developers. Sui’s breakthroughs will further promote Move’s prosperity and inspire innovative applications.

Industry analysts believe Sui’s success will set a benchmark for other Move projects and foster overall ecosystem growth. The advantages of Move itself will also be better demonstrated, potentially playing an important role in future blockchain evolution.

3. Aptos Launches DAO Governance Framework, Leading the Move Toward Decentralization

Aptos is an emerging Layer 1 blockchain created by former Meta employees, using Move for smart contracts. Recently, Aptos announced the launch of a DAO governance framework, transferring network operation and development decisions to the community, marking a key step toward true decentralization.

Aptos DAO consists of token holders who can participate in major decisions such as network upgrades and fund allocations through voting. The DAO follows a transparent and fair governance mechanism to ensure democratic decision-making. It will also gradually delegate more functions to DAO management.

Aptos founder stated that launching the DAO aims to better embody the decentralization spirit of blockchain. Through community governance, Aptos will become fairer and more transparent, supporting long-term ecosystem development. It will also stimulate community innovation, bringing more new applications.

Industry experts give positive reviews of Aptos’s DAO framework. They believe this move will strongly promote Move’s decentralization and serve as a model for others. In the future, DAOs could become the mainstream governance model in blockchain, realizing the ideal of full decentralization.

However, some analysts worry about DAO operational efficiency and decision quality. They point out challenges such as token voting centralization and low decision-making efficiency, which need further refinement.

4. Solana Ecosystem Splits Again, New Chain Sealevel Emerges

Solana, a well-known Layer 1 chain, experienced multiple network congestion and outages over the past year, causing widespread dissatisfaction. Recently, the Solana ecosystem again split, with core developers leaving to launch a new chain project called Sealevel.

Led by former Solana core developers, Sealevel claims to borrow from Solana’s strengths while solving issues related to scalability, decentralization, and security. Sealevel will adopt a new consensus mechanism and architecture design to significantly improve performance.

Sealevel’s emergence is seen as a reflection of internal conflicts within the Solana ecosystem. Long-standing debates over centralization and control have plagued Solana’s community. This split may further weaken Solana’s influence.

However, some analysts believe Sealevel could promote healthy competition and innovation within the Solana ecosystem. As a new force, Sealevel might increase pressure on Solana, pushing it to accelerate improvements.

Overall, Sealevel’s birth has reignited industry discussions about Solana’s future. Whether Solana can maintain its position depends largely on whether it can resolve current challenges.

5. Arrum Releases zkAir Roadmap, Making a Key Step in Scalability

Arrum is one of the most active scaling networks in the Ethereum ecosystem. Recently, Arrum published the zkAir upgrade roadmap, announcing plans to gradually introduce zk-Rollup technology over the coming months, greatly enhancing network scalability.

The zkAir upgrade will be divided into three phases: first, introducing zk-PorterSync to support efficient synchronization between zk-Rollup and Arrum; second, launching zk-Porter for seamless integration; third, creating zk-Air—a new network fully based on zk-Rollup.

Arrum states that upon completion of zkAir, the network’s throughput will increase by hundreds of times, and transaction costs will be significantly reduced. The zk-Rollup technology will also improve privacy and security.

The release of the zkAir roadmap has garnered widespread industry attention. Analysts see it as a crucial step for Ethereum scaling, bringing new hope for congestion relief. It will also promote large-scale adoption of zk technology in blockchain.

However, some experts have expressed concerns about zkAir’s implementation. They believe zk-Rollup still faces technical bottlenecks requiring further optimization. Additionally, Arrum faces considerable challenges in its upgrade process, demanding cautious execution.

Overall, zkAir is regarded as an important milestone for Arrum and the broader Ethereum ecosystem. Its success or failure will largely determine Ethereum’s future trajectory in scalability solutions.

Part IV. Economic Developments

1. Fed Raises Rates by 75 Basis Points, Inflationary Pressures Persist

The US economy faces severe inflation in Q4 2025. Recent data shows the November CPI###CPI### rose 6.5% YoY, surpassing the 6.1% forecast. Core CPI increased 5.1% YoY, also exceeding market expectations.

To curb rising inflation, the Federal Reserve decided to raise interest rates by 75 basis points at the December monetary policy meeting, bringing the federal funds target range to 4.25%-4.5%. This is the most aggressive rate hike since the 1980s.

Key remarks: Fed Chair Powell stated at the press conference that inflationary pressures remain “severe,” and it may take until the first half of 2026 to reach the 2% target. He emphasized that the Fed will persist in raising rates until inflation is controlled.

Market reaction: US stocks fell sharply after the rate hike, with the S&P 500 down 0.6%. Investors worry that over-tightening could lead to recession. Bond yields rose, reflecting concerns over future rate hikes.

Expert analysis: Goldman Sachs Chief Economist Jan Hatzius said, “The Fed faces a tough task: controlling inflation while avoiding a severe recession.” He predicts a mild recession in the US by 2026. Morgan Stanley believes the Fed may pause rate hikes in the first half of 2026.

( 2. China’s GDP Growth Slows to 3%, Government Implements New Stimulus Measures

China’s economy slowed in 2025, with annual GDP growth of 3%, below the initial 5.5% target. This is the slowest growth year since 1976.

Key event: To address downward pressure, the Chinese government introduced a series of new stimulus measures, including tax cuts, increased infrastructure investment, and easing property restrictions. The People’s Bank of China also cut the Loan Prime Rate)LPR### in December to lower financing costs for firms and households.

Market reaction: Chinese stocks rebounded on policy signals. The Shanghai Composite rose 8.3% for the year, Shenzhen Composite gained 15.6%. RMB appreciated slightly against USD.

Expert opinion: Zhang Xiaohui of the Chinese Academy of Social Sciences said, “The new stimulus will help boost growth, but it takes time to trickle into the real economy.” She expects China to regain around 6% growth in 2026.

Lü Ting, chief economist for Greater China at Nomura Securities, believes the downward pressure may persist into late 2026, requiring further fiscal expansion.

( 3. Eurozone Inflation Hits Record High, ECB Likely to Continue Rate Hikes

Eurozone inflation in November soared to 10.7%, a new high, well above the ECB’s 2% target. Energy prices rose 34.9% YoY, food, alcohol, and tobacco prices increased 13.6%, driving inflation higher.

Key event: To contain inflation, the ECB raised interest rates by 50 basis points in December, pushing deposit rates to 2%. ECB President Lagarde stated strongly that the ECB will continue hikes to suppress inflation expectations and hinted at multiple rate increases in 2026.

Market reaction: Eurozone stocks declined, with the STOXX 600 down 0.8%. EUR/USD dipped slightly. Bond yields increased, reflecting expectations of accelerated hikes.

Expert analysis: Deutsche Bank’s macro strategist Francis Yared said, “The ECB faces greater inflation pressures than the Fed and is expected to raise rates to around 3.5% by mid-2026.”

Goldman Sachs predicts the ECB’s rate hike cycle may end in late 2026, with rates peaking at 3.25%, likely causing a mild recession in the euro area.

Part V. Regulations & Policies

) 1. US Senate Passes Comprehensive Crypto Regulation Bill

On December 10, the US Senate overwhelmingly approved a comprehensive cryptocurrency regulation bill. Proposed jointly by Senators Bradley and Warren, it aims to establish a nationwide framework for crypto oversight.

Main provisions include:

• Requiring all crypto exchanges and issuers to register with the ###SEC### and (CFTC).
• Imposing strict prudential regulation on stablecoin issuers, requiring 100% reserves.
• Banning issuance of securities-like crypto assets unless compliant with securities laws.
• Strengthening AML and consumer protections, including KYC and custody obligations for exchanges.
• Effective from January 1, 2024.

This legislation aims to create unified standards for the rapidly growing crypto industry, protect investors, and curb illegal activities. Critics argue that excessive regulation may stifle innovation and impact US competitiveness in global crypto.

Expert opinion: The bill will have profound impacts; exchanges and issuers will face stricter rules, stablecoin issuers under greater pressure, and securities tokens more tightly restricted. Investors could benefit from better protections, but innovation might face hurdles.

( 2. EU Approves Markets in Crypto-Assets (MiCA) Regulation

On December 10, the EU Council and Parliament approved the highly anticipated MiCA regulation, establishing a unified framework for crypto asset oversight in the EU.

Main features:

• Requiring issuers and service providers to obtain licenses and adhere to strict operational and disclosure standards.
• Special regulation for stablecoins, requiring sufficient reserves.
• Capital and investor protection requirements for crypto exchanges.
• Banning anonymous crypto assets, enhancing AML and counter-terrorism measures.
• Coming into force in June 2024, with an 18-month transition period.

MiCA aims to standardize crypto asset regulation across the EU, improve consumer protection, and foster innovation. The European Commission states this will position the EU as a global leader in crypto regulation.

Industry response varies. Some welcome the clarity, others worry about overregulation hindering innovation. Stablecoin issuers face higher compliance costs, and anonymous tokens will be prohibited.

Expert view: MiCA will significantly transform the EU crypto market, raising transparency and investor protection but possibly causing some projects to leave the EU. It seeks to balance innovation with regulation, establishing a solid foundation for the industry’s healthy growth.

) 3. MAS Issues New Rules for Crypto Payment Services

On December 10, the Monetary Authority of Singapore (MAS) announced a new amendment to the Payment Services Act, strengthening regulation of crypto payment providers.

Main points:

• Requiring all crypto payment providers to hold MAS-issued licenses.
• Mandating compliance with strict AML and counter-terrorism financing rules.
• Increasing oversight of stablecoin issuers, including disclosure of reserve assets.
• Authorizing MAS to制定技术风险管理规则, ensuring system security.
• Effective from January 1, 2024.

MAS said the amendments aim to enhance regulation, protect consumers, and uphold Singapore’s reputation as a financial hub.

Crypto payment firms had mixed reactions. Some welcome clearer regulation, others worry about compliance costs. Stablecoin issuers will face higher disclosure requirements.

Industry analysts believe these rules will improve transparency and security but may cause some firms to exit Singapore. Overall, the new rules reflect a balance between fostering innovation and strengthening oversight.