by Samuel Mbaki | Jun 20, 2023 | Banking
Key Points
- It is a precarious situation worldwide as most economies face tough times necessitating action from Central Banks.
- Globally, different stances have been taken by respective Central Banks in June to cope with the rising inflation and recession fears.
Central Banks worldwide have showcased commitment to dealing with wild inflation and evading possible reversed GDP growth. These efforts are necessary as costs of living are increasing in the short term, and if no action gets taken, they could go wild in the future, crippling the basic functioning of the economies in question.
Central Banks keeping the fight against inflation alive
On Thursday last week, the European Central Bank increased interest rates while the U.S. Federal Reserve opted to pause it. These decisions came just days after China’s Central Bank lowered its key medium-term lending rates while Japan’s Central Bank left its ultra-loose policy unchanged.
From hawkish pauses to rate hikes and dovish tones, the world’s biggest Central Banks are taking different strides to deal with the almost ‘common’ economic threats. However, it doesn’t come without surprises or criticism as markets digest the new policies.
The hikes rates by the European Central Bank on June 14, 2023, surprised the markets with a worsening inflation outlook which led investors to consider even more rate hikes for the Eurozone.
This decision followed the federal reserve’s rates hike pause. It didn’t go without surprises and reactions from the market. Ruslan Lienkha, Chief of Markets at YouHodler, talked with Fintech Express and told us that Powell still has a long way to tame inflation rates and maintain market balance.
He added that while rates hike at later dates are not ruled out, the markets won’t be very happy with the tough decisions that must be made. In his words, he said:
“It is too early to say that Powell is winning the fight against inflation. I don’t think bringing inflation to 2% will be so smooth. The main concern is about the too-hot labor market at the moment. Therefore, the Fed can later decide to continue the rate increase or keep high rates for a significantly long time – such scenarios are quite possible and might disappoint financial markets in one or a few months.
As for crypto, the major cryptocurrencies will follow traditional markets. The only question is the degree of this correlation, which we still need time to figure out.”
In the Eurozone, inflation rates have plummeted, but it still is necessary to keep pushing as it’s far away from ECB’s target levels. This is also the same case in the U.K. BoE is expected to raise rates this Thursday as the country still has very strong labor data.
The markets are, however, different in Asia. China’s economy has lost the momentum hoped to be there for post-COVID-19 recovery. As such, it has stalled with falls n both external and domestic demand forcing policymakers to step up support measures to revive the growth momentum. These developments across the world show that there is still a lot to be done if Central Banks hope to regain control of economies and ease the costs of living.
Keep watching Fintech Express for updates on banking and other Fintech-related developments.
by Samuel Mbaki | Jun 19, 2023 | Finance
Key Points
- BlackRock iShares Spot Bitcoin ETF has caused a domino effect among TradFi institutions, with Fidelity wanting in
- Fidelity Investments is rumoured to want to file for a similar ETF with the U.S. SEC and or also look forward to submitting a bid for Grayscale, the largest digital assets manager.
Fidelity Investments is rumoured to be planning on filing for an iShares Bitcoin ETF on top of acquiring troubled digital assets manager Grayscale. The news comes at a time when the crypto space is anticipating the swarming of TradFi institutions into the crypto industry following an initial bold move by BlackRock.
BlackRock’s gravity pulls Fidelity into the crypto space
BlackRock’s June 15, 2023, move into the crypto space by applying for an iShares Bitcoin ETF might have caused a ripple effect in the traditional finance markets. As a result of the move, the third largest investment manager, Fidelity Investments ($4.3T in Assets Under Management), is reportedly planning on making a similar move.
However, Fidelity Investments could make a bigger shocker move by submitting a bid for troubled digital assets manager, Grayscale. Grayscale has been the largest digital assets manager in the world turmoil has rocked it lately owing to the ongoing bear market. As such, it could be available for sale, which is a move that could give Fidelity Investments an edge against other TradFi institutions that might enter the crypto market.
The news of the asset manager wanting to join the crypto industry hasn’t officially been confirmed, as Arch Public co-founder Andrew Parish broke it on Twitter. Parish claims an anonymous source presented it but does not go without expressing concern over the top TradFi institutions overbuying crypto assets as they have done with stock markets.
Keep watching Fintech Express for more updates on crypto, finance, and other Fintech-related developments.
by Samuel Mbaki | Jun 19, 2023 | Regulation
Key Points
- Binance faces more pain as its plan to get regulated in the U.K. following issues in the U.S. falls through
- The exchange has been on a rough patch lately, with several other nations expressing dissatisfaction with it, including Canada, Netherlands, and Australia.
Binance is set to endure more pain as its plan to get regulated in the United Kingdom as a replacement for the United States falls through. A report from its regional manager indicates that the exchange has had to de-register with the FCA but assured users that the process does not have an operational impact as it never did any regulated business in the U.K.
Regulators keep haunting Binance
Regulators keep going after the world’s largest exchange, Binance, for not complying with their set rules. On June 19, 2023, the exchange’s regional manager expressed that it had to de-register with the U.K. FCA. Binance Markets Limited is the exchange subsidiary forced to de-register with the Financial Conduct Authority (FCA) in the U.K. Following the de-registration, no Binance entity will be authorized to conduct any operations in the U.K. per information offered by the regulator on its official website.
According to the FCA, the operating license was canceled on May 30, with the exchange being required to leave. “Following the completion of the cancellation of licenses, the FCA no longer authorises the firm,” the regulator noted in an update on June 7.
However, Ilir Laro, Binance’s sub-regional manager for growth in the U.K. and Europe, has expressed that the exchange’s operations weren’t and won’t be impacted by the move as they never conducted any regulated business there.
“BML was successfully acquired back in 2020 by Binance Group, intended to launch a regulated business in the U.K. This attempt was not successful, however, and has since then remained dormant since its acquisition.”
Laro explained that Binance still holds five regulated entities in Europe in countries like France, Spain, Sweden, Poland, and Italy.
“As MiCA kicks into force in 2024/5, we are moving focus to getting ready which means some consolidating in order to passport throughout Europe,” he said.
Is it just FUD or a change of tides?
It is not the first time the exchange has landed on a rough patch with regulators. It has been forced to withdraw licenses in countries like the Netherlands, Nigeria, Holland, and Cyprus and stopped offering Australian Dollar services.
IlIr Laro has called out the FUD, saying it is nothing much to worry about as the company is bracing for changes in regulatory scope. He explained some of the developments saying they left Cyprus in anticipation of MiCA, left Holland due to not obtaining a license, and Nigeria is chasing away Binance Nigeria Limited, a company that is not owned or affiliated with Binance.
Keep watching Fintech Express for updates on this and other Fintech-related developments.
by Samuel Mbaki | Jun 19, 2023 | Banking
Key Points
- The Bank of England has researched with help from the Bank of International Settlements, finding out that digital Central Bank coins could make peer-to-peer payments faster.
- This research is a step closer to BoE’s launch of a CBDC named “Britcoin”.
Brits are set to receive Britcoin, a Central Bank Controlled Digital Currency (CBDC), as the Bank of England gets wowed by the potential of digital currencies. Following a successful trial study called Project Rosalind, BoE is more confident than ever in the functionality of Britcoin.
Brits to get “Britcoin” eventually
Project Rosalind is a study concluded by the BoE and the Bank of International Settlements that seeks to understand the place of a CBDC in a digital economy. It was used to evaluate how effective a CBDC would be in running the U.K. economy and assisting citizens in their usual day-to-day activities. It has been completed and achieved amazing results for the Bank of England.
Therefore, BoE plans to launch a CBDC of its own. This coin is to be named “Britcoin” after the words “British and coin”. This coin would not be the only one of its kind. China already uses a digital Yuan, with the U.S. and Russia researching theirs.
In addition to how Britcoin could be used by citizens digitally, the Rosalind Study also dived into the concept of “programmability” That means the U.K. government will get to program the coin to behave in a certain way when given conditions are met.
“The Rosalind experiment has advanced central bank innovation in two key areas: by exploring how an API layer could support a retail CBDC system and how it could facilitate safe and secure CBDC payments through a range of different use cases,” said Francesca Road, head of the BIS London Innovation Hub in a press release.
However, despite a successful study on Project Rosalind, BoE Deputy Governor Jon Cunliffe said that the decision on the introduction of a CBDC in the economy remains years away. This information is similar to the one offered regarding a digital dollar.
Last week, a treasury official expressed that it will take more than designing and using a digital dollar to harmonize the digital and traditional economies. The official said there are still some fears about things like the collapse of banks that keep the digital dollar launch decision years away though research will continue. Keep watching Fintech Express for updates on this and other Fintech-related developments.
by Samuel Mbaki | Jun 19, 2023 | Regulation, Follow up
Key Points
- Terra Ecosystem EX-CEO Do Kwon has denied the forgery of travel documents refuting any financial ties to Europe Now Party leader Milojko Spajic.
- Do Kwon told a Montenegro Court that he wasn’t aware that his traveling passport was fake, pinning the blame on a Chinese-named agency
Do Kwon, the former CEO of the collapsed crypto empire Terra Ecosystem has told a court in Montenegro that he is innocent of using forged documents. Kwon expressed that he was unaware of his travel documents being fake.
Do Kwon says he is innocent of forgery
Surprisingly, Terra Ecosystem Ex-CEO Do Kwon claims that he received his travel documents from third-party agencies and thus did not realize they had been faked. He said that a friend had recommended he reach out to the “agencies” to acquire a Costa Rican passport much faster.
“I received my Costa Rica passport after filling in the documents required by a Singaporean agency that was recommended to me by a friend. I received my Belgian passport through another agency.”
Kwon told the court that he had used the same traveling document for years to enter and leave Costa Rica; therefore, he did not see any issue. When asked for further details about the identity or functioning process of the “agencies” used to acquire the passport, Do Kwon said that he could not recall though the name was in Chinese.
In addition to denying the forgery of documents, Do Kwon expressed that he never made any financial donations to Montenegro’s former finance Minister Milojko Spajic who now serves as the Europe Now Party leader. Spajic also refuted the news of his ties with Do Kwon that had been spread heavily in Montenegro earlier.
Kwon now remains in extradition custody for up to six months as the local court considers the request for extradition to South Korea. Additionally, Judge Ivana Becici is set to rule on forgery claims against Do Kwon on June 19. Keep watching Fintech Express for updates on this and other Fintech-related developments.
