LONDON/NEW YORK - Trade tensions between the United States and China and a weakening yuan are boosting demand for cryptocurrencies among Chinese investors, market players from Asia to New York said.
Exchanges, researchers and brokers told Reuters they have seen an uptick in activity at crypto trading venues popular with Chinese. They said over-the-counter (OTC) brokers, which act as middlemen for buyers and sellers, have seen much of the activity.
Measuring crypto trading volume in China or elsewhere is highly difficult.
While digital wallets used to send and receive coins can be tracked on the blockchain technology that underpins most coins, the geographical location of senders cannot. And the Chinese government's 2017 ban on crypto platforms means there is little data on the sector in the country.
Still, the impact of the US-Sino trade war on China's economy and its falling currency are driving some larger investors to shift money from the yuan to cryptocurrencies, said Andy Chung, head of operations at OKEx, a Malta-based platform popular among Chinese.
China's economy has been hit by simmering trade tensions between Washington and Beijing. Data on Wednesday showed the slowest growth for Chinese industrial output in 17 years, suggesting tariffs are impacting demand in the world's second-largest economy.
And last week, China allowed the yuan to break through the key 7-per-dollar level for the first time since 2008, prompting Washington to label Beijing a currency manipulator and upsetting markets.
The yuan's sharp fall on Aug. 5 coincided with a 7 percent gain for bitcoin and a 9 percent surge in cryptocurrencies' market capitalization, leading analysts to speculate that some Chinese investors were selling the yuan and buying digital currencies.
"People worry about not just the yuan but the overall economy in China. We see a lot of internet companies freezing hiring, and they are actually laying off people already because of the trade war," said Chung, who is based in Hong Kong.
China maintains heavy capital controls, leaving few options for Chinese people seeking to move money offshore. That means cryptocurrencies are, in theory, an attractive vehicle for moving assets out of China.
Indeed, there has been a correlation between a weaker yuan and stronger bitcoin during times of lower volatility in crypto markets this year.
Mati Greenspan, an analyst at the eToro exchange, said as the US dollar surpassed 7 yuan the venue saw significant increases in crypto and commodities trading, alongside a moderate drop-off in stocks and fiat currency volumes.
"Crypto assets saw a particularly pronounced spike on the day of the People's Bank of China's (yuan) decision: Volumes across all cryptos on eToro's trading platform doubled from their levels a week prior, both globally and in China and Hong Kong," he added.
Still, Greenspan could not say whether crypto buying came from Chinese investors.
ARBITRAGE CHANCES
Chinese investors have stayed active in cryptocurrencies despite the prohibition of exchanges. Most Chinese crypto trading has shifted to OTC venues, as well as WeChat groups since the ban, market participants said.
"We just know that there is a lot of activity, and for regulatory reasons it's under the radar a bit," said Garrick Hileman, head of research at digital wallet firm Blockchain.
Local OTC desks were seeing an increase of more than two times in Chinese trading volume over the past three months as trade jitters percolated, said Jehan Chu, managing partner at Hong Kong-based crypto fund Kenetic.
For individual investors, the motivation to trade crypto is also down to chances to make money via arbitrage between the yuan, the Hong Kong dollar, and Tether - a so-called stablecoin backed by US dollars, market players said.
Digital currency research firm Diar said in a recent report Tether flows into exchanges catering primarily to Chinese traders totalled $10 billion in the year to June, it said. Last year's transactions were worth $18 billion.
"A lot of people trying to move capital in and out of borders try to use Tether as a medium," said Anthony Wong of Hong Kong-based crypto investment firm Orichal Partners.
(Reporting by Tom Wilson and Gertrude Chavez-Dreyfuss; Editing by Toby Chopra)
source: news.abs-cbn.com
SAN FRANCISCO - Apple is working with financial giant Goldman Sachs on a credit card that would carry the iPhone maker's digital wallet logo, according to a report Thursday in the Wall Street Journal.
The move comes as Apple puts increasing focus on revenue from online services and content, and as Goldman Sachs seeks to make more money from consumer banking operations.
Apple declined to comment on the report, which cited unnamed people close to the matter.
A joint credit card bearing the Apple Pay brand could launch early next year, and replace a rewards-card partnership Apple has with Barclays, according to the Journal.
Apple, which still gets most revenue from the iPhone, reported a hefty rise in earnings during the first three months of this year, alleviating worries about the iPhone's prospects and a hit from US-China trade tensions.
Analysts praised a big jump in revenues in Apple's services business, which is seen as an important element of diversification away from having revenues tied to gadgets.
A 31 percent rise in services to $9.2 billion was credited to revenue gains from Apple Pay, Apple Music and other programs.
Goldman Sachs Bank USA last month acquired personal finance startup Clarity Money. Financial terms of the deal were not disclosed.
Free-to-use Clarity Money is a leading app that uses artificial intelligence to help people manage their finances with personalized, "actionable insights" such as saving money or finding better credit cards, according to Goldman Sachs.
"Consumers want a better way to manage their finances," GS Bank chief executive Stephen Scherr said in a release.
source: news.abs-cbn.com
SINGAPORE - Bitcoin broke above the $10,000 mark for the first time on Wednesday as the virtual currency continued a stratospheric rise that has seen it increase more than tenfold this year.
The cryptocurrency surged to a high of $10,059 in early Asian hours, according to Bloomberg News, though the recent surge in the volatile unit has fuelled fears of a bubble.
Launched in 2009 as a bit of encrypted software written by someone using the Japanese-sounding name Satoshi Nakamoto, Bitcoin has had a roller-coaster ride that has taken it from just a few US cents to its current sky-high valuation.
Traded on specialist platforms, with no legal exchange rate and no central bank backing it, Bitcoin is monitored and regulated by its community of users, and is used to buy everything from pizza to a pint in a London pub.
But it has attracted widespread criticism, from financial industry titans to governments.
JP Morgan Chase boss Jamie Dimon in September slammed the unit as a "fraud" and said he would fire his employees if they were caught trading it, while China has shut down Bitcoin trading platforms and South Korea's prime minister Tuesday voiced fears it could lead the young to get involved in fraudulent crime.
Analysts say the popularity has been driven by growing interest from major investors and a decision last month by exchange giant CME Group to launch a futures marketplace for the currency, which has not been listed on a major bourse before.
But there is growing unease with the rate of growth, which has seen it increase in value from a 2017 low of $752 in mid-January.
"This is a bubble and there is a lot of froth. This is going to be the biggest bubble of our lifetimes," warned hedge fund manager Mike Novogratz at a cryptocurrency conference Tuesday in New York, according to Bloomberg News.
Commentators also suggest some are buying it as an alternative bet in times of global economic uncertainty.
But critics point to its volatility, an apparent vulnerability to theft and its use in illicit purchases online.
In one of the most high-profile scandals to hit the currency, major Tokyo-based bitcoin exchange MtGox collapsed in 2014 after admitting that 850,000 coins -- worth around $480 million at the time -- had disappeared from its vaults.
Bitcoin's use on the underground Silk Road website, where users could use it to buy drugs and guns, was also presented as proof it was a bad thing.
Despite concerns, most observers believe it is unlikely to suffer heavy falls soon.
source: news.abs-cbn.com
FRANKFURT - Central bankers say the success of bitcoin and other cryptocurrencies is just a bubble.
But it keeps them awake at night because these private currencies threaten their control of the banking system and money supply, which could undermine the monetary policies they use to manage inflation.
With bitcoin smashing through the $8,000 level for the first time this week after a 50 percent climb in eight days, they are also worried they will be blamed if the market crashes.
This is why several central banks are advocating regulations to impose control. Others are even looking at whether to introduce their own digital currency and are testing payment platforms.
"The problem with bitcoin is that it could easily blow up and central banks could then be accused of not doing anything," European Central Bank policymaker Ewald Nowotny told Reuters.
"So we're trying to understand whether bank activity in relation to cryptocurrency trading needs to be better regulated."
The global cryptocurrency market is worth $245 billion which is tiny compared to the trillion dollar plus balance sheets of the Bank of Japan, the U.S. Federal Reserve or the ECB.
These institutions issue yen, U.S. dollars and euros, both by creating physical cash or by crediting banks' accounts, as is the case with their bond-buying programs.
Cryptocurrencies, however, are not centralized. They do not pass through regulated banks and traditional payment systems. Instead, they often use blockchain, an online ledger of transactions that is maintained by a network of anonymous computers on the internet.
This has raised concerns about their vulnerability to hackers, as underlined by a score of incidents in recent months, and their use to finance crime.
Cryptocurrencies holders also have a claim on a private, rather than a public entity, which could go bust or stop functioning.
For these reasons, and given their low adoption by retailers, central banks have dismissed cryptocurrencies as risky commodities with no bearing on the real economy.
“Bitcoin is a sort of tulip,” ECB Vice President Vitor Constancio said in September, comparing it to the Dutch 17th century trading bubble. “It’s an instrument of speculation."
LEGAL TENDER
China and South Korea, where cryptocurrency speculation is popular, banned fundraising through token launches, whereby a newly cryptocurrency is sold to finance a product development.
Russia's central bank said it would block websites selling bitcoin and its rivals while the ECB told European Union lawmakers last year "they should not seek... to promote the use of virtual currencies" because these could "in principle affect the central banks' control over the supply of money" and inflation.
Yet Japan in April recognized bitcoin as legal tender and approved several companies as operators of cryptocurrency exchanges but required them register with the government.
The ECB, the Bank of Japan and Germany's Bundesbank are already testing blockchain, admitting it may have a future use for the settling of payments.
The BOJ last year set up a section in charge of fintech to offer guidance to banks seeking new business opportunities, and joined up with the ECB to study distributed ledger technology(DLT) like blockchain. They concluded that blockchain was not mature enough to power the world’s biggest payment systems.
LUKEWARM
Commercial banks have so far been lukewarm to existing digital currencies.
But with electronic payments already supplanting cash, they're alert to the danger that they would lose business if their clients decided to switch to them.
For this reason, Swiss banking giant UBS is leading a consortium of six banks trying to create its own digital cash equivalent of each of the major currencies backed by central banks.
This would allow financial markets to make payments and settle transactions more quickly.
This poses risks for central bankers, as the guardian of the banking and payment system.
"(We could) wake up one day and most of the big banks have been eviscerated and most of that activity has moved elsewhere," St. Louis Fed President James Bullard told Reuters in a recent interview.
This could lead to a financial crisis if regulators lost sight of the activity, he said.
Some central banks such as Sweden's Riksbank and the Bank of England are also looking at the merits of introducing their own digital currency.
Holders would have a direct claim on the central bank - just like with banknotes but without the inconvenience of storing large amounts of cash.
In Sweden, where most retail payments are electronic, the Riksbank said it was looking into an e-krona for small payments between consumers, companies and authorities.
"An e-krona would give the general public access to digital complement to cash guaranteed by the state and several payment services suppliers could connect to the e-krona system," the Riksbank said.
A central bank digital currency (CBDC) could also change the way monetary policy is carried out by allowing central banks to inject liquidity directly into the real economy, bypassing the financial sector, if they want to boost inflation.
This could help make monetary policy more effective, according to a study by economists at the Bank of England.
But it could also be risky if depositors were tempted to convert their bank deposits into central bank money during a banking crisis, accelerating any run on commercial banks.
A senior Bank of Japan (BOJ) official said on Wednesday that although technology is revolutionizing banking, digital currencies will not replace physical money any time soon.
"It's too far off," Hiromi Yamaoka, head of the BOJ's payment and settlement systems department, said on the sidelines of a forum on financial innovation hosted by Thomson Reuters.
"It would change the banking system too drastically." (Additional reporting by Balazs Koranyi in Frankfurt, Howard Schneider in Washington, David Milliken in London and Leika Kihara in Tokyo; editing by Anna Willard)
source: news.abs-cbn.com
