The cryptocurrency sector witnessed significant developments today, marked by substantial ETF outflows, a major government adoption of Ethereum, and new regulatory action on artificial intelligence in the United States.
Major Outflows Hit US Bitcoin and Ether ETFs
US spot Bitcoin and Ether exchange-traded funds opened the week under pressure, recording a combined outflow exceeding $755 million following last weekend’s severe market crash. Data from SoSoValue showed Bitcoin ETFs alone shed $326.52 million.
Fidelity’s Wise Origin Bitcoin Fund (FBTC) experienced the largest withdrawal at $93.28 million. Grayscale’s Bitcoin Trust (GBTC) followed, facing outflows of $145.39 million. Ark 21Shares Bitcoin ETF (ARKB) and Bitwise Bitcoin ETF (BITB) also posted losses of $21.12 million and $115.64 million respectively. In contrast, BlackRock’s iShares Bitcoin Trust (IBIT) attracted $60.36 million in inflows, showing selective investor confidence.
Despite the downturn, total net assets across all spot Bitcoin ETFs remain substantial at $157.18 billion, representing 6.81% of Bitcoin’s market capitalisation. Overall cumulative inflows have reached $62.44 billion.
Ether funds also experienced strain, with spot Ether ETFs seeing $428.52 million in outflows. BlackRock’s iShares Ethereum Trust (ETHA) led the decline with $310.13 million leaving the fund. Grayscale’s Ethereum Trust (ETHE) lost $20.99 million, and Fidelity’s Ethereum Fund (FETH) reported $19.12 million in redemptions.
Bhutan Shifts National ID System to Ethereum
In a significant blockchain adoption milestone, Bhutan has begun migrating its national self-sovereign identity (SSI) system from Polygon to Ethereum. The upgrade is designed to provide nearly 800,000 residents secure access to digital identity verification and public services.
Ethereum Foundation President Aya Miyaguchi confirmed the integration is complete, with full credential migration expected by the first quarter of 2026. She noted it as a world-first achievement in national digital identity powered by Ethereum. The move highlights growing trust in blockchain for critical infrastructure due to its transparency, permanence and enhanced privacy options through zero-knowledge proofs.
California Targets AI Chatbot Safety
The State of California has enacted new laws to regulate AI companion chatbots and social media platforms, aiming to increase protection for minors. Governor Gavin Newsom signed several bills that introduce age verification requirements, self-harm protocols and safety warnings for AI interactions involving children.
Senator Steve Padilla, co-author of the AI bill SB 243, referenced alarming cases where AI bots allegedly encouraged harmful behaviour. He stressed the need for clear disclosure that chatbots are AI-generated and may present risks to younger users. The bill seeks to hold technology platforms accountable by limiting claims of autonomous AI actions used to evade liability.
The legislation, which will take effect in January 2026, may impact both centralised and decentralised platforms, including blockchain-based social networks and Web3 gaming services.
Industry Implications and Market Sentiment
Market analysts suggest that the heavy ETF withdrawals reflect continued uncertainty after the recent liquidation wave. Institutional investors appear to be rotating positions rather than abandoning the sector entirely, as indicated by inflows into select funds like IBIT.
Meanwhile, Bhutan’s blockchain initiative adds weight to arguments supporting real-world utility for Ethereum. It demonstrates how decentralised infrastructure is gradually entering public administration.
California’s regulatory stance highlights increasing global attention on AI ethics, signalling that governments are prepared to act where vulnerable users are involved.
Outlook
Despite market volatility, technological and regulatory changes continue to shape the future of digital assets. With sovereign adoption rising and policy frameworks evolving, the crypto sector faces both scrutiny and opportunity in equal measure.
