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Cryptocurrency, the Taliban, and capital flight

Cryptocurrency, the Taliban, and capital flight

Crypto trader and vlogger Farhan Hotak traveling to the Shah Wali Kot District in Afghanistan.

Farhan Hotak isn’t your typical 22 year-old Afghan.

In the last week, he helped his family of ten flee the province of Zabul in southern Afghanistan and travel 97 miles to a city on the Pakistani border. But unlike others choosing to leave the country, once his relatives were in safe hands, Hotak then turned around and came back so that he could protect his family home – and vlog to his thousands of Instagram followers about the evolving situation on the ground in Afghanistan. 

He has also been keeping a very close eye on his crypto portfolio on Binance, as the local currency touches record lows and nationwide bank closures make it next to impossible to withdraw cash.

“In Afghanistan, we don’t have platforms like PayPal, Venmo, or Zelle, so I have to depend on other things,” said Hotak. 

Afghanistan still mostly operates as a cash economy, so money in Hotak’s crypto wallet won’t help him put dinner on his table tonight, but it does give him peace of mind that some of his wealth is safeguarded against economic instability at home.

It also offers bigger promises down the road: Access to the global economy from inside Afghanistan, certain protections against spiraling inflation, and crucially, the opportunity to make a bet on himself and a future he didn’t think was possible before learning about bitcoin. 

“I have very, very, very limited resources to do anything. I’m interested in the crypto world, because I have earned a lot, and I see a lot of potential in myself that I can go further,” he said.

Run on the banks

For many Afghans, this week has laid bare the worst-case scenario for a country running on legacy financial rails: A nationwide cash shortage, closed borders, a plunging currency, and rapidly rising prices of basic goods.

Many banks were forced to shutter their doors after running out of cash this week. Photos featuring hundreds of Kabul residents crowding outside branches in a futile effort to draw money from their accounts went viral. 

Afghan people line up outside AZIZI Bank to take out cash as the Bank suffers amid money crises in Kabul, Afghanistan, on August 15, 2021.

Haroon Sabawoon | Anadolu Agency | Getty Images

“There’s no bank I can go to right now, no ATM,” said Ali Latifi, a journalist born and based in Kabul. “I live above two banks and three ATM machines, but they’ve been off since Thursday,” said Latifi, referring to the Thursday before the palace ouster. 

Without an authority helming the Central Bank, it appears that printing cash to cover the shortfall isn’t an option, at least in the short-term. 

The Western Union has suspended all services and even the centuries-old “hawala” system – which facilitates cross-border transactions via a sophisticated network of money exchangers and personal contacts – for now, remains closed.

Sangar Paykhar, a Kabul native currently living in the Netherlands, has been in constant touch with relatives there in recent weeks. He said that many who live paycheck to paycheck were, at first, borrowing money from others to get by, but now, those able to lend out cash have started conserving their funds.

“They’ve realized the regime has collapsed” and that those they are lending to “might not have a job tomorrow,” said Paykhar.

A few days before the Taliban entered Kabul, Musa Ramin was among the people who queued outside a bank in a fruitless attempt to withdraw cash. But unlike other Afghans in line with him that day, months earlier, he had invested a portion of his net worth into crypto. Ramin had been burned before by a rapidly depreciating currency, and decentralized digital money had proven to be a trusted safeguard. 

In 2020, on what was meant to be a brief layover on a trip from London to Kabul, Ramin got stuck in Turkey. A one-week, mandatory Covid quarantine ballooned into six months.

“I converted all my money to the lira,” he said. After the Turkish currency began to spiral, Ramin said his capital was cut in half, and he was forced to conserve it. “That is when I discovered bitcoin.”

With all flights cancelled and no other options for departure, Ramin realized he needed to find alternative ways to support himself while stranded in Turkey during the pandemic-related shutdown. That’s when he started trading crypto. 

“At first, I lost a lot of money,” he said. But he’s since gotten the swing of managing his digital assets, thanks to Twitter and tutorials on YouTube. 

Musa Ramin at the Royal Opera House in London, just before his six-month quarantine in Turkey.

Even after returning to Kabul, the 27 year-old says he put all his focus into trading crypto. 80% of his crypto capital is in spot exposure, primarily in major coins, like bitcoin, ethereum, and binance coin. The other 20% he uses to trade futures. 

“I was making more money in crypto in a month than in construction in a year,” said Ramin, though he did acknowledge the risk that’s involved. “It’s easy making money in crypto but keeping that wealth is the difficult part.”

Despite that volatility, Ramin still sees crypto as the safest place to park his cash. “If a government isn’t formed quickly, we might see a Venezuela-type situation here,” Ramin told CNBC. He feels virtual tokens are his safest hedge against political uncertainty and plans to increase his exposure to digital currencies in the coming year to as much as 40% of his total net worth.

Ramin isn’t alone in his thinking. Google trends data shows that web searches in Afghanistan for “bitcoin” and “crypto” rose sharply in July just before the coup in Kabul. That said, because this tool is a measure of interest, the spike could be referring to 10 searches or it could be 100,000.

But in a country that has long relied on physical cash for virtually all transactions, not many people have the option to let their savings sit in a bank account, let alone a digital wallet. 

Just take Hotak. He lives in a remote part of Afghanistan where there are no ATMs or bank branches nearby. That means he has to keep a lot of physical cash on hand, in order to cover daily expenses. “Afghanistan is an unexpected country, and you have to be ready for anything,” he said.

While Hotak thinks that crypto is his future, for now, the bulk of his income comes from day labor jobs, like shoveling, brick work, digging wells, and running a tailor shop that makes clothes.

“Zabul is not a very developed city. It’s a village, so that’s how I earn,” he said.

Signs of a growing crypto economy

It’s hard to get insight into crypto adoption in Afghanistan.

Beyond the fact that measuring cryptocurrency adoption at the grassroots level isn’t easy, people actively go out of their way to hide who they are.

Some Afghans, for example, will conceal their IP address by using a virtual private network, or VPN, in order to mask their geographic digital footprint.

And unlike many crypto boosters – who tend to be vocal and community-driven – digital currency supporters inside Afghanistan often don’t want others to know they exist.

“The crypto community in Afghanistan is very small,” said Hotak. “They actually don’t want to meet each other.” He thinks that could change if the political situation normalizes, but “for now, everyone just wants to stay hidden until things are nice.”

However, new research from blockchain data firm Chainalysis is offering fresh optics on the country’s apparently burgeoning peer-to-peer (P2P) crypto network, which is increasingly the most telling metric of adoption in Afghanistan. Hotak, as well as his friends, use Binance’s P2P exchange, which allows them to buy and sell their coins directly with other users on the platform.

Chainalysis’ 2021 Global Crypto Adoption Index gives Afghanistan a rank of 20 out of the 154 countries it evaluated in terms of overall crypto adoption. And when you isolate for its P2P exchange trade volume, Afghanistan jumps up to seventh place. That’s a big move in just 12 months: Last year, Chainalysis considered Afghanistan’s crypto presence to be so minimal as to entirely exclude it from its 2020 ranking.

“Afghanistan on top makes sense from a capital controls point of view, given it’s hard to move money in and out,” explained Boaz Sobrado, a London-based fintech data analyst.

And some experts tell CNBC that Chainalysis could actually be underestimating its overall adoption.

“Unlike many other countries, sanctioned nations don’t have good and clear data on P2P markets,” explained Sobrado. He says that is partly to do with the fact that it is harder to track those transactions.

Afghan currency traders at a central money market in Kabul.

Getty

There are other anecdotal signs of adoption across the country.

Nearly a decade ago, sisters and Afghan entrepreneurs Elaha and Roya – both of whom had a focus on computer science at Herat University – founded the Digital Citizen Fund, an NGO that helps women and girls in developing countries gain access to technology. The organization has 11 women-only IT centers in Herat and another two in Kabul, where they teach 16,000 females everything from essential computer skills to blockchain technology.

Before classes were suspended earlier this week, creating a crypto wallet was also part of the curriculum. Elaha Mahboob tells CNBC that some students have chosen to secure their money in crypto accounts and a few have specifically started investing in bitcoin and ethereum in order to achieve their long-term financial goals.

“This is especially important as they don’t have to worry about not having access to their money, because major banks in Afghanistan have closed,” Mahboob said.

A few Digital Citizen Fund participants have left the country and used the crypto accounts they made in class as a way to transfer their money out.

Afghanistan’s exposure to the cryptosphere was also taking place inside the presidential palace. Blockchain company Fantom told CNBC it had been working in tandem with the previous government.

One such project with the Ministry of Health involved piloting blockchain technology to track counterfeit pharmaceuticals. Fantom says the pilot “concluded successfully,” and they had been preparing for national rollout before the Taliban took over.

Then there’s Sweden-based Bitrefill, an online marketplace that helps customers live on cryptocurrency by exchanging digital coins like bitcoin or dogecoin for gift cards with partner merchants. In Afghanistan, the card offerings include multiple mobile phone service providers, games such as Fortnite and Minecraft, Hotels.com, and Flightgift, which can be redeemed for flights with 300 international airlines.

While the company wouldn’t share sales numbers on the record with CNBC, Bitrefill does have the endorsement of Janey Gak, who uses it to top up her phone. Her Twitter account has become a must-follow for those who want to understand the situation on the ground through her eyes, but she’s also evangelizing the power of bitcoin to transform the country.

“I’m just an ordinary person. I’m not anyone special,” she said. “I am just someone who discovered bitcoin a couple of years ago.”

In 2018, Gak — who goes by the name “Bibi Janey” — started a Facebook page as a hobby to see what Afghans thought of bitcoin. “I remember getting a lot of comments and questions like, ‘Can you explain more?'” she said. “People would be fascinated by it, but they would be so confused.” She also got lots of questions about where to buy bitcoin.

Since entering this world, she has learned how to code and reads as much as she can about bitcoin. “I don’t trade, I don’t do any of that,” she said. “I just make some money here and there and save it in bitcoin.”

Through her research, she’s come to the conclusion that in order for Afghanistan to be a truly sovereign state, it must never borrow money – and adopt a bitcoin standard. To foment wider adoption, Gak commissions articles to be translated to local languages.

“It’s not much, but it’s a start,” she told CNBC.

DIY crypto rails

The on-ramp to participating in the crypto economy in Afghanistan is complicated and there are still multiple barriers to entry.

Access to the internet, while growing, remains low. There were 8.64 million internet users in Afghanistan in January 2021, according to DataReportal.com and internet penetration stood at 22%.

Unreliable electricity poses another major issue, as power outages are common. “Power goes out once every day for a couple of hours,” said Ramin, though he noted that it happens in some parts of Kabul more often than others.

When CNBC first spoke to Hotak, he was seated near one of the land-crossings into Pakistan, tapping into a WiFi network across the border. “We don’t have proper internet on the Afghanistan side,” he explained. 

Hotak also uses solar power to charge his phone, given the country’s long-standing issue with electricity outages. 

Electricity and a stable internet connection are two essential rails for widespread crypto adoption. Also critical is having access to some form of online banking or a credit card that is recognized internationally – which again, poses a big problem for many Afghans. Eighty-five percent of the country is unbanked, according to one U.N. estimate, meaning they do not have a bank account.

So people wishing to deal in crypto have to get creative.

Hotak and some of his contacts enlist the help of family and friends in neighboring Pakistan or across the Gulf of Oman in the United Arab Emirates, where they have easier access to global markets.

“It’s very easy in Pakistan,” he said. “Most people have relatives in Dubai, who buy crypto for them using their credit cards.”

When the person then wants to liquidate their crypto stake, relatives will sell it for them and use the hawala system, an honor-based system of credit common in Asia and the Middle East, to transfer the funds across the border to Afghanistan. The strategy requires a great deal of trust. In the case of Hotak, his friend in Pakistan doubles as his crypto broker.

“He is a very, very close friend. He has his details on the account that I use, so we could say that it’s his account, but I use it,” Hotak said of the arrangement.

The Salma Hydroelectric Dam in Herat, Afghanistan, is close to the Iran border.

Getty

Trust is also key when it comes to judging the quality of trading tips. “There’s a lot of scammers on YouTube and Twitter,” warned Ramin. When he first started off, he would spend most of his money buying coins promoted by people looking for exit liquidity. “That’s why I stopped trading small-cap coins.”

Hotak, on the other hand, has found a reliable online community that offers him sound trading advice.

“There’s a few groups on Telegram, WhatsApp, and there’s even a Pakistani community on Facebook I follow that gives me the signals to sell. I follow them, and it’s been good so far,” said Hotak.

Brokers advertising crypto services on Facebook appear to be operating across the country. Hotak visited one in Herat in early 2020. He went to interview for a job there and says the two-story data center was packed with boys, mostly aged 20 to 25.

“They were all university people,” he said. “They all had smartphones in their hands, and they were just scrolling down and down.”

CNBC has not spoken with any of these brokerages directly, but Hotak says the site he visited in Herat is still going. Hotak also says that Herat is home to a bitcoin mining farm.

“They had these very big CPUs. Very advanced,” he said. But Hotak tells CNBC he didn’t get to see the entire operation. “I just got a little glimpse of it.”

Blockchain analysts Lorne Lantz and Rieya Piscano say they looked at various data sources and found no sign of bitcoin or ethereum nodes running in Afghanistan, so it is unclear whether this miner in Herat has covered his online footprint, or whether he’s cut off his rigs.

Even with all of these workarounds, the political turmoil of the last few weeks doesn’t make it easy to find time to think about crypto.

“The reality is I cannot focus on crypto trading when the ongoing events in Afghanistan are this intense,” said Hotak. “With no electricity and bad internet, crypto trading is near to impossible, so we just hold.”

Crypto trader and vlogger Farhan Hotak in Herat, Afghanistan.

Path to mass adoption

On Aug. 15, an hour and a half before Ramin’s flight bound for Turkey was due to take off, then-President Ghani arrived to the airport in Kabul. After that, Ramin says that all flights were halted and everyone was kicked out. 

Ramin still has plans to leave, along with his family. But finding a flight is proving to be difficult. He’s used his now dwindling supply of afghanis to purchase flights for ten members of his family. He’s done this three times, and all three times, the flights were canceled. With travel agencies shut, he remains in a bit of a holding pattern on the ground in Kabul. 

Ramin is one among many looking to leave the country. Every media outlet on the planet has been circulating the same photos of Afghans clinging to planes, fleeing the country with whatever possessions they can carry. For several, this has meant having to leave a lot behind.

Ramin estimates that around 5-10% of his net worth is in crypto, which makes it easier to plan an exit, knowing that there is some money in the bank to tide him over, especially since he doesn’t know if he will ever see the money in his bank accounts in Kabul.

“If some type of government doesn’t come to existence, then I could potentially see the majority of my wealth being wiped out,” he said. For now, he and his family are just sitting tight, waiting to catch a flight out.

But many people are staying put, in part because they want to foment positive change at home.

“In these circumstances, one can fully appreciate the censorship-resistance property of blockchain-based assets. I believe this is the main driver of the fundamental value of bitcoin and other cryptos,” said Andrea Barbon, Assistant Professor of Finance at the University of St. Gallen.

Gak, for example, thinks that using legacy financial rails like the hawala system might be one of the most effective ways to foster mass adoption. It is a vision she detailed in a prescient story she wrote for Hacker Noon in 2018.

She’s also thinking about opening her own exchange shop in Kabul. “The idea is that anyone with bitcoin can exchange it for fiat and then use that to buy goods like always. Anyone who is unable to receive can have their family for example, send the bitcoin to me with a unique address that only the recipient would know just like hawala,” she explained in a tweet.

Ramin has a similar plan to make crypto more accessible to Afghans. “I hope once I gain more knowledge in blockchain technology to create a team and develop an easily accessible trading platform which Afghans can use,” he said.

There are promising trends on their side. The number of social media users in Afghanistan increased by 22% from 2020 to 2021, and 68.7% of the total population now has a mobile phone connection, according to DataReportal.com. It helps that more than 60% of the population is under 25 and hungry to be a part of the modern economy. Shakib Noori, previously the CEO of a mobile money company in Afghanistan, says this younger demographic also tends to be more tech savvy.

Ultimately, CNBC is told that grassroots adoption comes down to one Afghan teaching another about how cryptocurrencies like bitcoin work. Hotak has already mentored three students, and that’s just the beginning.

“The Afghan people – they’re very complicated. And it’s very hard convincing them that digital currency exists,” he said. “I have plans to teach people about cryptocurrency in the future…but for now, people are just laying low and waiting to see what happens next.”

Evacuees crowd the interior of a U.S. Air Force C-17 Globemaster III transport aircraft, carrying some 640 Afghans to Qatar from Kabul, Afghanistan August 15, 2021.

Courtesy of Defense One | Handout via Reuters

Categories
Politics

FTX, Cryptocurrency Chief, Strikes to Curb Excessive Threat Trades

FTX, Cryptocurrency Leader, Moves to Curb High Risk Trades

A popular cryptocurrency exchange announced on Sunday that it was curbing some type of high-risk trading, partly due to the sharp fluctuations in the value of Bitcoin and the. is held responsible Casino-like atmosphere on such platforms worldwide.

Switching the exchange, FTX, would reduce the amount of bets investors can place by lowering the leverage offered from 101 to 20 times. Leverage multiplies the trader’s chance not only of profit, but also of loss.

“We will take the first step here,” said Sam Bankman-Fried, 29, the billionaire and founder of the platform, which operates from Hong Kong, on Twitter on Sunday. “Today we are removing the high leverage from FTX. The maximum permissible value will be 20x. “

The announcement came after the New York Times, in an article posted online on Friday, described the risky trades offered on FTX and other global exchanges such as Binance and BitMEX that accelerated a global crash in May. This month, those bets worth more than $ 20 billion were liquidated on cryptocurrency exchanges around the world.

Bankman-Fried said lowering leverage “is a step in the direction the industry has been headed and has been for a while,” adding, “Although we believe many of the arguments in favor of With high leverage, we don’t miss the mark either, believing it’s an important part of the crypto ecosystem, and in some cases it’s not a healthy part of it. “

Global platforms like FTX allow traders to borrow big when betting on price fluctuations – traders don’t buy and sell cryptocurrencies, but instead predict where the prices of the underlying assets will go. These bets, known as derivatives, mean that the exchange will grant them credit when they raise $ 1,000 so they can wager on the future price of the cryptocurrency worth up to $ 101,000 on FTX. Now, with the new cap, the maximum on this transaction would be $ 20,000.

This type of transaction should not be available to professional investors in the United States, but – at least historically – some of these investors have used workarounds to trade on the sites.

Leverage makes investors much more susceptible to their accounts being liquidated due to an automated margin call if the price of the cryptocurrency goes against their prediction and they do not have enough collateral on their accounts to support their bets.

It happened in May. When cryptocurrency prices began to fall due to market-moving events such as China’s announcement of regulatory action or Tesla’s decision to suspend Bitcoin payments, it prompted exchanges to automatically liquidate the accounts of the most leveraged investors before their collateral were no longer sufficient to cover their positions.

“These liquidations are obviously a big factor in the price crash,” said Clara Medalie, head of research at Kaiko, a provider of cryptocurrency market data in Paris, and recalled the sudden fall in value of the cryptocurrency in mid-May. “It is a doom-loop.”

Bankman-Fried said on Sunday that only a small percentage of traders are taking advantage of the maximum leverage available. He also argued that FTX had fewer liquidations than other exchanges and that he had long sought to “promote responsible trading”.

Still, he predicted in an interview last week that some investors would not welcome a move to reduce debt. “We’d get a consumer outcry if we got rid of it and we’d get very bad press,” he said. “But it could be the right thing.”

Mr Bankman-Fried also admitted that high leverage created the impression that exchanges like him were promoting risky trading, although he claimed it was not a fair conclusion.

Binance, the world’s largest cryptocurrency exchange, offers up to 125x leverage. Changpeng Zhao, the Sino-Canadian founder of Binance and a developer who traces his professional roots back to Wall Street, has said that the extreme leverage numbers were just a “marketing gimmick” and that most traders don’t use them.

Timothy Massad, the former chairman of the Commodity Futures Trading Commission, which regulates derivatives in the U.S., said he welcomed FTX’s decision and hoped other platforms like Binance would follow suit.

The change, he said, could be motivated in part by FTX’s success last week in raising $ 900 million in venture capital, the highest ever value for a cryptocurrency exchange. FTX’s high leverage offerings are more likely to damage its reputation as Mr Bankman-Fried seeks to expand the global reach of its platform, Mr Massad said.

“Sam has bigger visions, and this step removes a focus that might be in the way,” said Massad. “Take it off the table.”

Categories
Business

Cryptocurrency poses a major danger of tax evasion

Cryptocurrency poses a significant risk of tax evasion

R. Tsubin | Moment | Getty Images

Crypto tax evasion

But how does cryptocurrency lead to tax evasion?

According to tax experts, it largely comes down to lax reporting requirements.

The IRS may not be able to track crypto earnings or transactions if they are not reported by exchanges, corporations, and other third parties. And that means the income may not be taxed.

“Nobody has set clear rules about it, so a lot is not reported,” said Jon Feldhammer, partner at law firm Baker Botts and former senior litigator at the IRS.

“Every time you create a path of non-reporting, you create an opportunity to capitalize on tax fraud in incomprehensible or much elusive ways,” he said.

Crypto is fast becoming an alternative to cash as more and more merchants accept Bitcoin and other virtual currencies as a means of payment. However, cash is more regulated.

For example, a company that receives more than $ 10,000 in cash from a customer must file a currency transaction report. This can happen when a consumer buys a car for more than $ 10,000 in cash, when someone wins big at the casino, or when a bank receives a large cash deposit.

These reports tell the government that a buyer has a lot of money that may or may not be reported on a tax return.

However, the same rules don’t apply to crypto. A used car company that receives $ 20,000 worth of Bitcoin from a customer does not need to file a report of currency transactions. This income can also remain untaxed if it is not reported on the business owner’s tax return, Feldhammer said.

“Although cryptocurrency transactions are a relatively small part of business income today, they are likely to grow in importance over the next decade, especially given a broad system of reporting financial accounts,” the financial report said.

Additionally, virtual currencies do not have to be bought or sold through an exchange, making these transactions more opaque to government officials.

Biden crypto proposal

Al Drago / Bloomberg via Getty Images

About 80% of the “tax gap” in the US is due to underreported income, according to the Treasury Department, especially the wealthy who hide income in opaque structures.

Stricter reporting standards – including “full reporting” for cryptocurrency – are among the most effective ways to improve tax compliance.

Biden’s tax agenda would treat crypto transactions like cash and require companies to report if they received more than $ 10,000 in virtual currency.

Financial institutions, payment processing companies and stock exchanges and custodians for digital assets would also have to report crypto transactions above a certain threshold, according to an analysis of the proposal published by the law firm Greenberg Traurig.

The IRS has already shown a greater interest in learning more about taxpayers’ crypto activities. The agency asked a question about cryptocurrency holdings on page 1 of the 2020 tax returns.

Biden’s compliance agenda would have to be passed by Congress. The overall plan would raise $ 700 billion in the first decade and an additional $ 1.6 trillion in the second decade, according to Treasury.

The White House would use these funds to fund action in the American Families Plan. This proposal includes additional funding for two years of free universal preschool, two years of free community college, heavily subsidized childcare for middle-class families, federal paid family vacations, and expanded child tax credits.

Categories
World News

U.S. Treasury requires stricter cryptocurrency compliance with IRS

U.S. Treasury calls for stricter cryptocurrency compliance with IRS

Treasury announced Thursday that it is taking steps to crack down on cryptocurrency markets and transactions and that a transfer of $ 10,000 or more must be reported to the Internal Revenue Service.

“Cryptocurrency already poses a significant identification problem as it makes illegal activities by and large, including tax evasion, easier,” the finance department said in a press release.

“Because of this, the president’s proposal includes additional resources for the IRS to address the growth of cryptoassets,” the department added. “The new financial account reporting system would cover cryptocurrencies and cryptoasset exchange accounts, as well as payment service accounts that accept cryptocurrencies. As with cash transactions, companies receiving cryptoassets with a fair market value of more than $ 10,000 would also be reported.”

Bitcoin reversed course shortly after the Treasury Department’s announcement and was last traded 1.6% according to Coin Metrics. Before that, it was up more than 9% in the session.

A growing number of Wall Street analysts raised the alarm last month that regulators from the Treasury Department and the Securities and Exchange Commission could soon play a more active role in regulating cryptocurrency.

The Treasury Department’s release came as part of a broader announcement of the Biden government’s efforts to fight tax evasion and promote better compliance. Among the proposals officials are considering include strengthening IRS funding and technology, as well as stricter penalties for those who evade their commitments.

The Treasury Department estimates the difference between taxes owed by the U.S. government and taxes actually paid was nearly $ 600 billion in 2019.

Tighter regulation is likely to anger some cryptocurrency investors, who have seen Bitcoin drop around 25% in the last month and talk about surrender creeping in online forums.

With longtime cryptocurrency expert Gary Gensler at the helm of the SEC, Raymond James expects it will only be a matter of time before Congress gives the regulator broader jurisdiction.

He told lawmakers earlier this month that allowing the SEC to regulate the exchange of cryptocurrencies will help keep investors safe and prevent market manipulation.

“Chairman Gensler is seen as a potential ally for cryptocurrencies as a former professor on the subject, but these statements are likely to reopen the debates over regulatory risk for cryptocurrencies and exchanges,” Raymond James analyst Ed Mills wrote in early May.

“In the short term, this could create a headline risk,” he added. “In the medium to long term, however, regulation of the asset class would give the asset class further legitimacy and could form a regulatory ditch around existing cryptocurrency exchanges.”

Treasury Secretary Janet Yellen speaks during the daily press conference on May 7, 2021 in the Brady Briefing Room of the White House in Washington, DC.

Saul Loeb | AFP | Getty Images

While the Treasury and SEC involvement can ultimately be a boon for cryptocurrency investors, short-term regulatory hurdles for investors in Bitcoin, Dogecoin, and the like are likely to present another problem.

These assessments were confirmed by Miller Tabak last month when the company told its customers that “the cryptocurrency markets do not adequately account for legal risk.”

“Gary Gensler’s confirmation as SEC chairman and the volatility of the cryptocurrency over the weekend following rumors of stricter regulation underscore the regulatory risks this industry is facing,” wrote strategic economist Paul Shea in April.

“The difference in regulatory risk and advancement as a means of payment raises an important question: Are the recent successes of other coins a result of good news, or piggybacking them on the positive sentiment around Bitcoin?” he added.

Democrats and Republicans have made regulating cryptocurrency a top priority in 2021 as the price hike for Bitcoin and other digital assets over the past year sparked concerns of market manipulation and uninformed retail investment.

– CNBC’s Michael Bloom contributed to the coverage.

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Categories
World News

Goldman Sachs banker quits after making tens of millions on cryptocurrency

Goldman Sachs banker quits after making millions on cryptocurrency

A collection of Bitcoin, Litecoin, and Ethereum tokens.

Chris Ratcliffe | Bloomberg | Getty Images

LONDON – A Goldman Sachs executive has resigned after making a fortune on a cryptocurrency investment, according to industry reports.

Aziz McMahon, Goldman’s chief executive officer and head of emerging markets sales in London, quit after making millions of pounds on a wager on the digital currency ether, three former investment bank employees told CNBC.

The former employees, who all know McMahon personally, preferred to remain anonymous because of the sensitivity of the discussions. McMahon is believed to have redeemed cryptocurrency worth at least 10 million pounds ($ 14 million).

Previous reports from eFinancial Careers and The Guardian said McMahon left Goldman after making money from Dogecoin.

It is possible that McMahon had some stakes in Dogecoin as well. According to eFinancialCareers, he is now said to have set up his own hedge fund.

When approached by CNBC, Goldman Sachs confirmed McMahon’s departure but declined to comment. McMahon wasn’t immediately available for comment when CNBC contacted him via LinkedIn.

Ether, the digital asset McMahon is said to have invested in, has grown more than 400% since early 2021. Ether was developed about six years after Bitcoin and is based on another technology known as Ethereum. Ether and Ethereum are often used interchangeably to describe the currency.

Bitcoin and other cryptocurrencies have fluctuated a lot lately. On Wednesday, the entire market lost as much as $ 365.85 billion after a tweet from Elon Musk that said his electric car company Tesla would no longer accept bitcoin payments due to environmental concerns about the cryptocurrency.

Musk’s preferred crypto is Dogecoin, a token that started out as a joke in 2013. Inspired by the meme “Doge”, which contains a Shiba-Inu dog and cartoon-style text, Dogecoin was thought of by its creators as a “fun” alternative to Bitcoin.

It has since gained a growing online community and is now the fourth largest digital asset by market value on CoinMarketCap. While proponents like to refer to it as “folk crypto,” investors warn that Dogecoin is a sign of foaming in the crypto market.

Categories
Business

Second Cryptocurrency Platform in Turkey Shuts Down: Dwell Updates

Outside a cryptocurrency exchange in Istanbul. Dozens of online cryptocurrency trading platforms have sprung up in Turkey in recent years, and the business is little regulated.

Here’s what you need to know:

Credit…Chris Mcgrath/Getty Images

Turkish authorities arrested four employees of a cryptocurrency trading platform on suspicion of fraud after customer accounts were frozen, authorities said, the second collapse of a digital currency firm in Turkey within a week.

The collapse of Vebitcoin, one of dozens of cryptocurrency trading platforms that have sprung up in Turkey in recent years, came after the Thodex trading platform shut down last week, more than 60 of its employees were arrested, and its chief executive left the country.

Vebitcoin was a relatively small operation and the losses from it are unlikely to be big, said Turan Sert, who advises BlockchainIST, a cryptocurrency research center affiliated with Bahcesehir University in Istanbul.

Ilker Bas, the chief executive of Vebitcoin, told police after his arrest that the platform has 90,000 registered users and had a trading volume of 600 million lira to 800 million lira, or $72 million to $96 million, per month, the private news agency Demiroren reported. Customer losses are probably much smaller, because the same assets are typically traded repeatedly during the course of a month.

“Due to the recent developments in the crypto money industry, our transactions have become much more intense than expected,” Vebitcoin said on its website. “We have decided to cease our activities in order to fulfill all regulations and claims.”

Cryptocurrency trading is little regulated in Turkey, and the number of platforms has proliferated because of the relatively low cost of setting up. Off-the-shelf trading software costs around $100,000, said Mr. Sert, who also advises Paribu, one of the largest cryptocurrency trading platforms.

Mr. Sert estimated that there were more than 90 platforms, mostly “very small mom-and-pop shops.”

The phenomenon is by no means limited to Turkey. Cryptocurrencies like Bitcoin or Dogecoin have attracted the attention of serious investors and become a hot topic on Wall Street. Coinbase, a U.S.-based cryptocurrency trading platform, sold shares to the public for the first time this month and is valued by the stock market at $58 billion. Regulators in the United States and other countries have struggled to keep up with the fast growth of digital money.

The Turkish Central Bank barred the use of cryptocurrencies for purchases this month, citing their riskiness and popularity with criminals, and signaled that more regulation of the sector is coming. The prospect of greater scrutiny could be prompting some platforms to shut down, Mr. Sert said.

Customers of Thodex may have lost $2 billion, a lawyer for the firm’s clients said last week, but Mr. Sert said that figure probably referred to the site’s trading volume and greatly overstated the potential losses. Many platforms exaggerate their trading volume to attract customers, he said.

The total losses to cryptocurrency investors, while devastating to some individuals, are not large enough to push Turkey’s already shaky economy into crisis, Mr. Sert said.

“I don’t think this will create any instability in the system,” he said.

The gap between executive compensation and average worker pay has been growing for decades. Chief executives of big companies now make, on average, 320 times as much as their typical worker, according to the Economic Policy Institute. In 1989, that ratio was 61 to 1.

The pandemic compounded these disparities, as hundreds of companies awarded their leaders pay packages worth significantly more than most Americans will make in their entire lives, David Gelles reports for The New York Times.

In the course of his reporting, corporate public relations teams employed various tactics to justify their bosses’ big paydays:

  • A Hilton spokesman stressed that the figure in its latest proxy filing did not represent take-home pay for Chris Nassetta, because the company restructured several stock awards. “Said directly, Chris did not take home $55.9 million in 2020,” the spokesman said. “Chris’s actual pay was closer to $20.1 million.” Hilton lost $720 million last year.

  • Boeing wanted to make clear how much money Dave Calhoun “voluntarily elected to forgo to support the company through the Covid-19 pandemic” — some $3.6 million, according to a spokesman. Nonetheless, Mr. Calhoun was awarded $21.1 million last year, while Boeing lost $12 billion.

  • Starbucks, which awarded Kevin Johnson $14.7 million, was among many companies making the case that their chief executive was essential to future success. “Continuity in Kevin’s role is particularly vital to Starbucks at this time,” said Mary Dillon, a member of the compensation committee. The company made a $930 million profit in its latest fiscal year, down three-quarters from the previous year.

Technical glitches marred the Small Business Association’s first attempt at accepting applications for the grant program.Credit…Zack Wittman for The New York Times

Music club operators, theater owners and others in the live-event market have been waiting nearly four months for a $16 billion federal grant fund for their industry to start taking applications. Their hopes were briefly raised two weeks ago when the program’s application website opened, then dashed as a technical malfunction prevented the site from accepting any applications.

Now, the Small Business Administration, the federal agency that runs the program, plans to try again on Monday at noon — but only after one last round of confusion and frustration.

Late Thursday, the agency announced that it would reopen its application system for the Shuttered Venue Operators Grant on Saturday. After heavy pushback from angry applicants — especially Jewish business owners who do not use electronics on Saturdays in observation of the Sabbath — the agency changed course Friday night and rescheduled the reopening for Monday.

“We understand the challenges a weekend opening would bring, and to ensure the greatest number of businesses can apply for these funds, we decided to reschedule,” the agency said in a statement. “We remain committed to delivering economic aid to this hard-hit sector quickly and efficiently.”

The money will be awarded on a first-come-first-served basis and is widely expected to run out fast. That means many applicants will feel pressure to submit paperwork as soon as the application system opens — even if it is at an inconvenient time.

Applicants were generally relieved by the shift to Monday, but annoyed by the whiplash.

“It’s been a mess on so many levels. I feel like they’re torturing us,” said Dani Zoldan, the owner of Stand Up NY, a comedy club in Manhattan. Mr. Zoldan is Jewish and had been vocal on Twitter about the obstacles of a Saturday start.

The National Independent Venue Association, an industry group that lobbied for the relief fund, said it endorsed the decision to postpone the start.

“While we’re all anxious to apply as soon as possible, we support the S.B.A.’s decision to reopen the portal Monday and encourage a fair and equitable process for all,” said Audrey Fix Schaefer, a spokeswoman for the group. “The S.B.A. has responded to our desperate need and we’re grateful for that.”

The Small Business Administration is also preparing to open a second grant program, the Restaurant Revitalization Fund, which is a $28.6 billion support fund for bars, restaurants and food trucks. That program is planning a seven-day test to help the agency avoid the kind of technical problems that plagued the venue program.

A Meituan delivery worker in Shanghai. Last year the firm made more than 27 million food-delivery transactions per day.Credit…Aly Song/Reuters

China’s fast-moving campaign to rein in its internet giants is continuing apace with an antitrust investigation into Meituan, a leading food-delivery app.

The investigation, which the country’s market regulator announced with a terse, one-line statement on Monday, focuses on reports that the company blocked restaurants and other merchants on its platform from selling on rival food-delivery sites.

Earlier this month, the regulator imposed a record $2.8 billion fine on the e-commerce titan Alibaba for exclusivity requirements of this sort. In a statement on Chinese social media, Meituan said that it would cooperate with the authorities and that its operations were continuing as usual.

Meituan is a powerhouse in China. It made more than 27 million food-delivery transactions a day last year and reported around $18 billion in revenue, making it larger than Uber by sales. Meituan’s main rival in takeout delivery in China is Ele.me, a service owned by Alibaba.

Alibaba has been an early major target in China’s efforts to curb what officials describe as unfair competitive practices in the internet industry. But Beijing has made clear that it will be keeping a much closer eye on all of the sector’s biggest and richest companies.

Meituan was one of 34 Chinese internet firms that were summoned to meet with the antitrust authority this month. The following day, the regulator began publishing on its website statements from the companies, Meituan included, in which they vowed to obey laws and regulations.

Bodies awaiting cremation on Friday in East Delhi.Credit…Atul Loke for The New York Times

NEW DELHI — With a devastating second wave of Covid-19 sweeping across India and lifesaving supplemental oxygen in short supply, India’s government on Sunday said it had ordered Facebook, Instagram and Twitter to take down dozens of social media posts critical of its handling of the pandemic.

The order was aimed at roughly 100 posts that included critiques from opposition politicians and calls for Narendra Modi, India’s prime minister, to resign. The government said that the posts could incite panic, used images out of context and could hinder its response to the pandemic.

The companies complied with the requests for now, in part by making the posts invisible to those using the sites inside India. In the past, the companies have reposted some content after determining that it didn’t break the law.

The takedown orders come as India’s public health crisis spirals into a political one, and set the stage for a widening struggle between American social media platforms and Mr. Modi’s government over who decides what can be said online.

On Monday, the country reported almost 353,000 new infections and 2,812 deaths, marking the fifth consecutive day it set a world record in daily infection statistics, though experts warn that the true numbers are probably much higher. The country now accounts for almost half of all new cases globally. Its health system appears to be teetering. Hospitals across the country have scrambled to get enough oxygen for patients.

In New Delhi, the capital, hospitals this weekend turned away patients after running out of oxygen and beds. Last week, at least 22 patients were killed in a hospital in the city of Nashik, after a leak cut off their oxygen supplies.

Online photos of bodies on plywood hospital beds and the countless fires of overworked crematories have gone viral. Desperate patients and their families have pleaded online for help from the government, horrifying an international audience.

Mr. Modi has been under attack for ignoring the advice of experts about the risks of loosening restrictions, after he held large political rallies with little regard for social distancing. Some of the content now offline in India highlighted that contradiction, using lurid images to contrast Mr. Modi’s rallies with the flames of funeral pyres.

People waiting to get vaccinated in New Orleans this month.Credit…Emily Kask for The New York Times

More than five million Americans, or nearly 8 percent of those who got a first shot of the Pfizer or Moderna vaccines, have missed their second doses, according to the most recent data from the Centers for Disease Control and Prevention. That is more than double the rate among people who got inoculated in the first several weeks of the nationwide vaccination campaign.

Even as the country wrestles with the problem of millions of people who are wary about getting vaccinated at all, local health officials are confronting a new challenge of ensuring that those who do get inoculated are doing so fully, Rebecca Robbins reports for The New York Times.

The reasons that people are missing their second shots vary. In interviews, some said they feared the side effects, including flulike symptoms, which were more common and stronger after the second dose. Others said they felt that they were sufficiently protected with a single shot.

Those attitudes were expected, but another hurdle has been surprisingly prevalent. A number of vaccine providers have canceled second-dose appointments because they ran out of supply or didn’t have the right brand in stock.

Walgreens, one of the biggest vaccine providers, sent some people who got a first shot of the Pfizer or Moderna vaccine to get their second doses at pharmacies that had only the other vaccine on hand.

Several Walgreens customers said in interviews that they scrambled, in some cases with help from pharmacy staff members, to find somewhere to get the correct second dose. Others, presumably, simply gave up.

A makeshift ward for Covid-19 patients in Delhi. The rollout of vaccinations has been uneven around the world, allowing the disease to run rampant in some countries.Credit…Atul Loke for The New York Times

  • U.S. stocks were expected to fall on Monday with oil prices amid a surge in coronavirus cases, led by the outbreak in India. More the one billion vaccinations have been administered globally, but the uneven rollout has allowed the virus to continue spreading rapidly in some countries. And so, the daily average number of cases globally has reached a new high.

  • Futures on West Texas Intermediate, the U.S. crude benchmark, fell 1.8 percent to $61 a barrel. The S&P 500 index was set to open 0.3 percent lower when trading begins, after falling 0.3 percent last week.

  • European stocks are mixed and the benchmark Stoxx Europe 600 index was little changed.

  • Still, stocks remained close to recent record highs, and on Monday, yields on U.S. Treasury bonds rose. The yield on 10-year notes climbed 3 basis points to 1.59 percent. Later this week, the Federal Reserve will announce its latest monetary policy decisions, but forecasters aren’t expecting a change. Policymakers have promised to telegraph any pull back in monetary stimulus well in advance.

  • Late last week, stocks on Wall Street rebounded from the news that the Biden administration was considering raising taxes on the wealthy, including nearly doubling the capital gains tax.

  • “With a lot of good news already priced into markets, stocks could be vulnerable to negative surprises, whether from growth disappointments, higher inflation, or policy missteps,” strategists at UBS Global Wealth Management wrote in a note.

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Business

Potential Cryptocurrency Fraud Is One other Blow to Turkey’s Stability

Possible Cryptocurrency Fraud Is Another Blow to Turkey's Stability

A cryptocurrency exchange in Turkey shut down this week on charges of fraud and frozen an estimated $ 2 billion in investor money. Authorities said they were looking for the company’s founder.

Turkish authorities raided offices in Istanbul The private news agency Demiroren reported that it was connected to Thodex, a cryptocurrency trading platform, and arrested more than 60 people on Friday morning.

The 27-year-old founder of Thodex, Faruk Fatih Ozer, left Turkey for Albania on Tuesday.

According to Oguz Evren Kilic, an Ankara attorney who represents Thodex investors, the cryptocurrency firm has nearly 400,000 active users, whose accounts were nominally valued at $ 2 billion. If their money were lost, the losses would add another element of instability to the already shaky Turkish economy.

The standard of living in Turkey is suffering from double-digit inflation and a shaky currency. Although cryptocurrencies are inherently risky, many Turks have turned to them to protect their savings as the Turkish lira has lost more than a quarter of its value against the dollar in the past year.

Last week, Turkey’s central bank banned the use of cryptocurrencies for purchases, citing the “significant risks” involved.

Thodex had applied with advertisements in which Turkish celebrities in bright red outfits hung over a highly polished black car.

“Certainly the economic situation has an influence on it,” said the lawyer Kilic in an interview. “In times of crisis like this, people want to reduce the depreciation of their assets.”

The falling lira has increased the cost of imported goods and fueled inflation, which has led to a steady erosion of living standards. According to official figures, the annual inflation rate in March was 16 percent. Many economists say they underestimate the real rate of inflation.

In a statement posted on Thodex’s website, the company’s founder, Mr. Ozer, insisted that he had only left the country to consult with overseas investors and would be returning. He said the allegations were a “smear campaign” and accused the shutdown of the trading platform as a cyberattack.

Thodex “didn’t make anybody a victim,” he said, adding that only about 30,000 accounts “have a suspicious situation”.

Mr. Kilic noted that none of Thodex’s customers could gain access to their accounts. “If you can’t access the account, you are a victim,” he said.

On Twitter, people responded to a statement by Thodex with crying facial emojis. “There are people who trust you and invest everything in you,” wrote one user.

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Business

A dangerous bitcoin purchase in greater bull market than the cryptocurrency

A risky bitcoin buy in bigger bull market than the cryptocurrency

All commodity markets have their leverage investment bets. Crude oil has wild exploration and production companies; Gold and precious metals let mining do the dirty work in the ground. A future commodity, bitcoin, is no exception to the rule that when there is a scarce resource in the world to be exploited and investors increasingly value it, miners will make their claim to the riches.

The recent wins on what is possibly the riskiest Bitcoin bet of all led Leeor Shimron, Vice President, Digital Asset Strategy at Fundstrat Global Advisors, to take a look at the “digital gold rush” in Bitcoin miners trading.

These mining companies are fairly new and young, they lack a track record, and some came to market through “detours” – and some of the largest, like Riot Blockchain, were scrutinized by regulators in their early days. They have also faced losses, but Shimon found they hit over $ 1 billion in market cap after investing heavily in the hardware and facilities that helped them in the current Bitcoin during the Bitcoin downturn -Bull market cycle “make it big”.

High beta, high risk bitcoin trading

Shimron described the miners in a note last week to customers who expressed interest in the rising stocks as a “high beta play” for Bitcoin. During the recent bull run for the cryptocurrency, which saw Bitcoin jump 900%, the average return among the largest publicly traded miners was 5,000%, according to his analysis.

Bitcoin miners form the core backbone of the Bitcoin blockchain, according to Shimron, as they “burn electricity to make computer-generated guesses to solve cryptographic puzzles” and generate income in the form of mined Bitcoin. While the bitcoin is being mined, the miners sell the assets to cover their expenses. Many are also choosing to keep some of their mined bitcoin on their corporate balance sheet, a trend that is gaining traction among the digitally-minded, disruptive CEO class in the broader market, like Jack Dorsey at Square and Elon Musk at Tesla . Musk just added “Technoking” to his leadership title, and Tesla’s CFO recently added “Master of Coin” to his. North American mining company Marathon Digital Holdings recently announced that it had purchased $ 150 million worth of Bitcoin to help keep it on its balance sheet.

The largest publicly traded mining companies the Fundstrat analyst examined include the two Nasdaq-listed companies Riot Blockchain and Marathon Digital Holdings, as well as the two over-the-counter market stocks Hive Blockchain and Hut 8.

In the past year, Bitcoin miners clearly outperformed Bitcoin, a momentum that Fundstrat Global Advisors said will continue as the bull market progresses but could turn violently downward with any correction.

Fundstrat Global Advisors

Shimron’s analysis shows that the beta that these Bitcoin mining companies have generates a return of 2.5% for every 1% movement of the cryptocurrency. While there isn’t enough historical data to draw firm conclusions, the miners’ performance is clearly tied to the price of bitcoin and their trading profile amplifies the up and down movements, he said.

It’s a “notoriously competitive industry,” as Shimron puts it, where the ability to be profitable may be due to cheap electricity and access to specialized mining hardware. As Bitcoin prices rise, “miners are building new oil rigs or upgrading their hardware with more powerful and efficient machines.”

Marathon recently closed a $ 170 million deal for 70,000 Bitmain S-19 ASIC miners that, when fully deployed later this year, will increase its mining output to 103,000 machines.

These high costs of doing business in Bitcoin mining result in low or negative free cash flow and subdued earnings, writes Shimron. However, for the time being, the mining companies have captured the growth of the current Bitcoin bull cycle due to their spending. (You also saw wild trading in the 2017 bitcoin boom.)

Now they have also caught the attention of some of the latest forces in the market, as a recent Bloomberg article on the Bitcoin miners discussion on the WallStreetBets forum on Reddit noted, which fueled the mania in GameStop stocks.

“For investors seeking exposure to miners, this beta is a great opportunity in the midst of a roaring bull market. … There are seizures and setbacks, but we still have plenty of room to grow here,” Shimron said in an interview with CNBC.

Investing in Bitcoin in 2021 and beyond

It is the broader cryptocurrency bull market that has fueled the miners, and Shimon believes it can continue in 2021, driven by macroeconomic and demographic factors. Fears of inflation will prop up bitcoin prices, and even with the recent pressure on returns from the 10-year Treasury Department that can impact cryptocurrency like tech stocks, the Fed signals suggest that the central bank intends to maintain its cautious policy in place until 2023.

Another driving force is the continued adoption of new digital technologies and digital assets among younger investors. “You can see that younger people are interested in Bitcoin and other digital currencies as opposed to gold and commodities, and that speaks for a demographic shift. … It is not crazy for them to interact with money purely digitally,” he said opposite CNBC.

Last week, Morgan Stanley became the first major Wall Street bank to offer Bitcoin to its wealthy clients. Due to the risks involved, access to customers with at least USD 2 million was restricted.

There are already other avenues into the crypto market than the underlying currencies, such as the exchanges that trade coins and that will soon be available to more investors. Coinbase was recently valued at $ 68 billion in the private market and plans to list directly on the Nasdaq.

Waiting for a Bitcoin ETF in the US

There are three Bitcoin ETFs in Canada, and at some point a Bitcoin ETF may be available in the US. The most recent attempt at the Securities and Exchange Commission was filed by VanEck ETFs in mid-March, but investors don’t have high hopes that the SEC will soon approve a Bitcoin fund. You’re looking elsewhere for cryptocurrency investment ideas that go beyond buying Bitcoin itself.

Shimon, who ran an early cryptocurrency and blockchain venture fund prior to joining Fundstrat, said he viewed the miners as the foundation of the crypto space. “The top companies will stay here,” he said, citing the economies of scale in investing in equipment that newer entrants will face tougher.

After taking the “smart move” during the Bitcoin bear market to build operations, the current supply chain bottlenecks in the technology sector caused by Covid may further aid these miners’ positioning after the capital they have already invested in special purpose machinery for space.

However, like many traders and hedge funds with gold miners and small cap oil explorers, he tends to trade the bitcoin miners in a bull market run rather than viewing them as long term investments.

The performance of the SPDR Gold Shares ETF compared to the VanEck ETF is an index of gold mining companies in recent history.

Shimron continues to prefer Bitcoin as a long-term investment, as well as any ETF that has ultimately been approved by the SEC for US investors. “It is only a matter of time before the SEC approves a Bitcoin ETF,” he said. “When a BTC ETF hits the market, the fees are low and it’s the safest and easiest way to get into Bitcoin using traditional rails,” he said.

The miners have been criticized for the enormous amount of electricity required to run Bitcoin, but Shimron’s view depends on financial data and market performance. (He says there is also much to be criticized about the impact of the fiat monetary system on the world.)

“It’s pretty clear that the US dollar as a global reserve currency is on its last legs and not disappearing anytime soon, but we are in the later stages of the US dollar as reserve currency and decentralized is the next stage.”

While Bitcoin mining stocks pose too high a risk for most investors, he is confident that everyone should be talking about the cryptocurrency world. “This is where everything runs. Finances were the last holdover that the internet didn’t touch,” said Shimron.

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Janet Yellen on Jobs, Debt, Taxes, Local weather and Cryptocurrency

Janet Yellen on Jobs, Debt, Taxes, Climate and Cryptocurrency

Private equity managers should also take note of the following: She implied that she would like to deal with “interest income” which allows some financiers to pay taxes on their income at capital gains rates as if they had invested the money themselves.

Ms. Yellen seemed less convinced of a financial transaction tax, which some have suggested could bring in $ 80 billion a year by imposing a small fee on every trade that would hit Wall Street especially.

“It might deter speculation, but it could also have negative effects,” she said.

Ms. Yellen duplicated the “buyers watch out” message to Bitcoin investors. “I don’t think Bitcoin – I’ve already said that – is widely used as a transaction mechanism. I’m afraid it is often used for illegal finance, ”she said. “It’s an extremely inefficient way to conduct transactions. And the amount of energy that goes into processing these transactions is staggering. But it’s a highly speculative advantage and I think people should be careful. It can be extremely volatile and I am concerned about possible losses that investors could take. “

Ms. Yellen is more interested in the prospect of the Federal Reserve developing what is known as a digital dollar than she has first made public comments on the prospect. Crypto backers might interpret this as confirmation of the idea – Ms. Yellen’s immediate predecessor, Steven Mnuchin, seemed less interested – that shares some of the technologies underlying Bitcoin and other cryptocurrencies.

“It makes sense for the central banks to look at this,” she said. “We have a financial inclusion problem. Too many Americans really don’t have access to basic payment systems and bank accounts, and I think this is something that a digital dollar – a central bank digital currency – could help with. I think this could lead to faster, safer, cheaper payments. “

There are a number of “problems” that need to be resolved before central banks move into digital currencies, she said. “What would be the implications for the banking system? Would this lead to a huge movement of bank deposits into the Fed? Would the Fed deal with retail customers or try to do so at the wholesale level? Are there any concerns about financial stability? How would we deal with money laundering and illegal financial problems? There’s a lot to consider here, but it’s definitely worth checking out. “

Ms. Yellen said dealing with climate change is part of a broader mandate for the Treasury Department, as well as other departments under President Biden. One of the most intriguing comments she made was about the role of financial institutions and the risk they are exposed to by investing in or lending to companies exposed to climate change.

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World News

Bitcoin hits $1 trillion in market worth as cryptocurrency surge continues

Bitcoin hits $1 trillion in market value as cryptocurrency surge continues

Yuriko Nakao | Getty Images

Bitcoin price passed another major milestone on Friday as the cryptocurrency’s market value surpassed $ 1 trillion, according to Coindesk.

The digital currency was trading at just under $ 54,000 per coin on Friday as it hit new levels, up more than 3% in the past 24 hours. The price of Bitcoin has increased by around 350% in the past six months. Before its recent surge, the digital asset never traded above $ 20,000.

The move was driven in part by the increased adoption of cryptocurrency by major investors and corporations. The oldest bank in the United States, the Bank of New York Mellon, announced earlier this month that it would be moving into space. Elon Musk’s Tesla converted part of its balance sheet money into Bitcoin earlier this year and announced that it would accept the digital tokens as a means of payment.

Bitcoin “has started to get so big that it is arguably creating its own demand as companies and institutions begin to move into an area they would not have touched a few months earlier,” said Deutsche Bank research strategist Jim Reid , in a note. “Ironically, it is turning into a credible asset class for many by rebounding so much lately and also increasing institutional buy-in.”

The market value is calculated by multiplying the Bitcoin price by the number created. While this is not a perfect comparison, its market value of $ 1 trillion would make Bitcoin’s value higher than all but a handful of stocks in the world. For example, Tesla has a market capitalization of around $ 700 billion, while Apple is valued at more than $ 2 trillion.

Pro-Bitcoin investors and entrepreneurs celebrated the milestone on social media.

“From the white paper to $ 1 trillion. #Bitcoin eats gold alive,” Gemini’s Cameron Winklevoss said on Twitter.

“RIP bears,” tweeted Anthony Pompliano, co-founder of Morgan Creek Digital Assets.

Of course, not everyone on Wall Street was convinced of Bitcoin’s future prospects. Citadel Securities founder Ken Griffin said Friday he was not interested in cryptocurrency while researchers at JPMorgan said Bitcoin’s rally was unsustainable.