G20 kicks off debate to regulate 'stablecoins' in hit to Facebook's Libra

WASHINGTON - Group of 20 finance leaders on Friday agreed to set strict regulations on cryptocurrencies such as Facebook's Libra, warning that issuance of such "stablecoins" should not be allowed until various global risks they pose have been addressed.

The agreement came after a G7 working group warned that when launched on a wide scale, stablecoins - digital currencies usually backed by traditional money and other assets - could threaten the world's monetary system and financial stability.

Finance chiefs of the G20 major economies agreed that while stablecoins could have potential benefits of financial innovation, they give rise to a set of "serious" public policy and regulatory risks.

"Such risks, including in particular those related to money laundering, illicit finance, and consumer and investor protection, need to be evaluated and appropriately addressed before these projects can commence operation," the G20 finance leaders said in a statement issued after their meeting.

Bank of Japan Governor Haruhiko Kuroda said the G20 will kick off debate on how to regulate stablecoins based on proposals it receives from standard-setting bodies like the Financial Stability Board (FSB) and the Financial Action Task Force (FATF).

The FSB and the FATF are expected to report their findings on stablecoins to the G20 next year. That reduces the chance Facebook will meet its goal of rolling out Libra in 2020.

"Policymakers have expressed concerns over various risks stablecoins pose. Until they are addressed, stablecoins should not be issued. That was something agreed by the G20 members," Kuroda told a news conference hosted by Japan, which chaired this year's G20 gatherings.

BROADER MONETARY IMPLICATIONS

The G20 has also asked the International Monetary Fund (IMF) to examine the economic implications, including monetary sovereignty issues, according to the group's press release.

"Some emerging countries have concerns on what could happen if stablecoins backed by a huge customer base become widely used globally," said Kuroda, who was among the global finance leaders gathered in Washington this week for the IMF and World Bank fall meetings.

"But this is not just a problem for emerging economies. It could have a broader impact on monetary policy and financial system stability," he said.

The G20 agreement underscored concerns among global policymakers about stablecoins such as Libra, which suffered a defection of a quarter of its original members that had initially backed the project.

German Finance Minister Olaf Scholz on Friday redoubled his criticism of Libra, saying creation of a new world currency should be prevented.

"We now know that both the G7 and G20 are quite cautious about stablecoins," a Japanese Ministry of Finance official who attended the G20 talks told reporters.

"Personally, I feel that such strong concerns held by policymakers may have been among reasons why some companies decided to pull out of the Libra project," the official said.

While setting regulations on stablecoins, policymakers will also debate ways to make existing cross-border settlement and payment systems more efficient, BOJ's Kuroda said.

But such efforts will be confined to private-sector settlements, he said, adding that the G20 did not discuss the idea of central banks issuing digital currencies.

"The BOJ, too, has no plans for now to issue digital currencies," Kuroda said.

source: news.abs-cbn.com

Bank of Japan keeps rates steady

TOKYO - The Bank of Japan kept monetary policy steady on Thursday and maintained its upbeat view of the economy, signalling its conviction that a solid recovery will gradually accelerate inflation towards its 2 percent target without additional stimulus.

But new board member Goushi Kataoka dissented to the BOJ's decision to maintain its interest rate targets, saying current monetary policy was insufficient to push inflation up to 2 percent during fiscal 2019.

In a widely expected move, the BOJ maintained the 0.1 percent interest it charges on a portion of excess reserves that financial institutions park at the central bank.


At the two-day policy meeting that ended on Thursday, it also kept its yield target for 10-year Japanese government bonds around zero percent.

The decision was made by an eight-to-one vote.

BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

The BOJ revamped its policy framework last year to one targeting interest rates rather than the pace of money printing, after three years of huge asset purchases failed to drive up inflation to its 2 percent target.

source: news.abs-cbn.com

BOJ launches negative rates, already dubbed a failure by markets

TOKYO - The Bank of Japan (BOJ) implements negative interest rates on Tuesday in a radical plan already deemed a failure by financial markets, highlighting Tokyo's lack of options to spur growth as global markets sputter.

The central bank, putting into effect a Jan. 29 decision that stunned investors, will charge banks 0.1 percent for parking additional reserves with the BOJ - in a bid to push down interest rates and encourage banks, businesses and savers to spend and invest.

While the negative-rate announcement briefly drove down the yen and buoyed Japanese share prices, markets quickly reversed as the policy backfired with investors.

"It's getting clearer that Abenomics is a paper tiger," said Seiya Nakajima, chief economist at Office Niwa, a consultancy, referring to Prime Minister Shinzo Abe's policy mix of monetary easing, spending and reform.

"The impact of monetary easing is similar to currency intervention. The first time they do it, there's a huge impact. But as they repeat it, the impact will wane," said Nakajima.

Though senior BOJ officials were at pains to say they had calibrated only a minor impact on Japanese banks, their stock prices plunged, contributing to a global meltdown in financial shares that drove the latest leg down in the global market rout.

BAD TIMING

To some extent, the BOJ was beset by bad timing, as global markets were already in a tailspin over concerns about China's slowdown, U.S. rate hikes and cratering oil prices. Still, the reaction appeared to fly in the face of BOJ Governor Haruhiko Kuroda's assertion that his policy was having its intended effects.

"It seems as though the BOJ's action triggered the market moves," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management. "But a better explanation would be that concerns elsewhere overwhelmed the BOJ action."

In the 11 days since the BOJ board's announcement, the benchmark Nikkei index has fallen 8.5 percent, despite a sharp rebound on Monday, while the yen has climbed 6.5 percent against the dollar.
Japanese bank shares have slumped by as much as 30 percent as it is considered unpalatable for them to pass on negative rates as a surcharge on depositors, who already barely get any interest on their savings. Negative rates could push down bank operating profits by 8-15 percent, Standard and Poor's said.

The 10-year Japanese government bond yield initially fell below zero on the easing - a first among Group of Seven economies. But it has recovered from minus 0.035 percent last week to 0.090 percent above zero, with Japanese markets becoming more unstable as investors are at a loss on how to reckon fair value.

Prices on 10-year JGB futures imply volatility above 5 percent, a 2.5-year high and more than triple the level at the start of the year. This high volatility could persist, and the BOJ has only itself to blame, some market players say.

IN DEFENSE

Kuroda told parliament it wasn't the BOJ's policy but "excessive risk aversion" that was behind the global market turbulence.

And BOJ Deputy Governor Hiroshi Nakaso told a New York audience on Friday that the new, three-tiered rate scheme "is carefully designed to mitigate aggressive impact on banks' profitability while ensuring the effect of negative rates on prices in financial markets."

But a former BOJ official who retains close contact with central bankers said this "is essentially saying that the effect of its policy itself is limited," adding: "If the move was aimed at weakening the yen, it failed completely."

Some BOJ officials privately worry whether the central bank can keep gobbling up JGBs at the current pace of $700 billion a year, as negative rates would discourage financial institutions from piling up the cash they would earn by selling JGBs to the BOJ. Japan's three 'megabanks' have scrambled to buy JGBs and corporate bonds, seeking whatever meagre interest they can earn without taking on much risk.

While Kuroda notes the BOJ can cut rates deeper below zero, market participants say there's little hope that more of the same would have a beneficial effect.

source: www.abs-cbnnnews.com

Asian shares tread water as Fed meeting looms

TOKYO - Asian shares and the dollar inched higher on Tuesday but caution reigned after Wall Street skidded as investors awaited this week's U.S. Federal Reserve policy decision.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1 percent, after Wall Street logged losses, with U.S. trading volume at its lowest in a month as markets awaited the Fed outcome.

Japan's Nikkei stock index .N225 rose 0.6 percent as investors awaited the outcome of the Bank of Japan's two-day policy meeting later this session, as well as BOJ Governor Haruhiko Kuroda's post-meeting speech.

A few investors were betting that Japan's central bank would muster additional easing measures. But the majority believe that the BOJ will simply warn of heightening global risks while holding off on actual stimulus, holding its fire in case the Fed's long-awaited rate hike, whenever it comes, triggers a fresh wave of market turmoil.

"It seems logical that they would want to see the wash up from this week's Federal Reserve meeting and hold the ability to be reactionary," Chris Weston, chief market strategist at IG, said in a note.

"If we see anything from Mr. Kuroda and the BOJ today, it will be setting the scene for additional measures if they so need," he said.

The Japanese yen edged down slightly ahead of the BOJ outcome, with the dollar trading at 120.35 yen JPY=, up about 0.1 percent from late U.S. trade.

The euro inched down about 0.1 percent to $1.1308 EUR=, while the dollar index, which tracks the greenback against a basket of six major rivals, added about 0.1 percent to 95.302, moving away from a three-week low of 94.913 touched overnight.

The conclusion of the Fed's two-day meeting on Thursday remained the market's key focus, with many economists now believing that volatile global markets and increasing evidence of slowing momentum in China will prevent the U.S. central bank from raising interest rates for the first time since 2006.

A Reuters poll of 72 economists last week showed a slight majority expect an interest rate rise from the current 0-0.25 percent, but a smaller sample saw just a 50-50 chance.

In commodities, crude oil futures clawed back some ground lost in the previous session.

U.S. crude rose about 0.8 percent to $44.33 a barrel, underpinned by data showing a drop in U.S. supplies. It shed 1.4 percent on Monday.

Brent crude added about 0.7 percent to $46.69, after skidding 3.7 percent to its lowest settlement in two weeks.

Spot gold edged up slightly to $1,108.86 an ounce, moving away from last week's one-month low.

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