Europe

World’s Largest Banks Losing Stock Value During Weeks Marked by Pandemic

25/03/2020 by Idelto Editor

The spreading coronavirus infection is taking a toll on the global economy and traditional financial institutions are already hurting. The world’s largest banks have seen their stocks losing value over the past weeks and months while facing cash withdrawal pressure and preparing to deal with a shrinking asset base.

Also read: US Cash Crisis: Withdrawal Limits Spark Bank Run Fear

China’s ‘Big Four’ See Their Stocks Tumble

No one has a clear idea where this is going or what comes next for the planet’s financial system. What’s obvious, however, is that some of its elements are already under stress. Reports of banks imposing withdrawal limits in parts of the U.S. indicate a cash crisis is brewing. New interest rate cuts, more money printing and the flight of capital towards assets they don’t manage, such as cryptocurrencies, are going to limit the value banks have under their control.

China, where the covid-19 outbreak started, is home to the world’s largest banking sector in terms of assets. In mid-2019, the official figure stood at over $40 trillion, despite liquidity problems with some small regional banks and a credit crunch on the interbank market that required intervention from the People’s Bank of China. The big four state-owned commercial banks, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China, are topping the 100 largest banks list, according to the latest edition of the S&P Global Market Intelligence report.

These financial behemoths have been watching the prices of their stocks drop over the last few months. From this year’s high of 6.01 yuan (approx. $0.85) in early January, ICBC shares are now trading at a little over 5.10 yuan ($0.72), and CCB stocks dropped from 7.49 yuan ($1.06) on Nov. 7 to a low of 6.17 yuan ($0.87) this past Monday, before bouncing back to 6.37 yuan ($0.90) on March 25.

The shares of the other two major Chinese banks also lost value, especially during the last month as authorities were struggling to contain the spread of the deadly coronavirus and deal with the economic fallout of the epidemic. Japan’s Mitsubishi UFJ Financial Group, another Asian banking giant, saw a steep decline in the value of its shares, from 566 yen ($5.08) on Feb. 21 to 384 yen ($3.45) on March 19. Its shares are currently trading for around 450 yen ($4.04).

Western Banks Affected by the Spreading Virus

The last several weeks brought similar results for the leading banking institutions in the United States, which now has over 50,000 confirmed covid-19 cases. JP Morgan’s stock fell to $79.03 from $137.49 per share on Feb. 20. Bank of America shares dropped from a monthly high of close to $33 to around $18 on the first day of the week before rising back to around $20 on Tuesday, when stock markets reacted to the Federal Reserve’s latest announcement. The Fed pledged to an open-ended quantitative easing in response to the economic challenges posed by the epidemic.

Other banks that have been hurt by the crisis which led to a slowdown in economic activity around the world include the European HSBC and BNP Paribas. The shares of the London-based investment bank and financial services holding company, which were selling for over $35 about a month ago, started this week at a little over $28. Paris-headquartered BNP Paribas saw its stocks plunge by almost 50% to €25.43 ($27.40), from €48.70 ($52.69) on Feb. 25. Deutsche Bank’s shares registered similar losses, dropping from close to €9 ($9.74) in late February to a monthly low of under €5 ($5.39) in mid-March.

What do you think of the world’s leading banks losing stock value? Tell us in the comments section below.

The post World’s Largest Banks Losing Stock Value During Weeks Marked by Pandemic appeared first on Bitcoin News.

How the Latest German Regulations Target Bitcoin Exchanges and Custodians

25/02/2020 by Idelto Editor

A new German law requires every entity that holds private keys for others (e.g., bitcoin exchanges and/or bitcoin custodians) and that actively addresses the German market must become licensed as early as January 1, 2020. And to address the most common misconception right at the beginning: No, it absolutely not matter where your company is based. What matters is if you are addressing the German market with your services.

“The law implementing the amendment to the fourth EU money laundering directive (Federal Law Gazette I of December 19, 2019, p. 2602) included the crypto deposit business as a new financial service in the KWG . Companies that want to provide these services require BaFin’s permission when the law comes into effect on January 1, 2020. However, the law provides for transitional provisions for companies that have already performed the transactions that are now subject to authorization before they came into force.”

[Citation: Kryptoverwahrgeschäft (BaFin), translated from German]

Despite the many open questions that are still unresolved, let me start this piece by stating that I am a general supporter of regulation if executed right. And I believe this new law could pave the way for Germany to become the “Crypto Heaven” of Europe, as especially large financial institutions and investors are in favor of regulated entities. But to also be honest right from the start, this will heavily depend on how regulators finally deal with questions as they arise. Even the best of intentions can still backfire on the German ecosystem if executed poorly. But, I am full of hope that this will not be the case, as the regulators and the industry appear to be working together more and more. And by working with, instead of against, each other, good regulatory decisions seem possible.

Taking everything into account, here are the four things I believe to be the main challenges regarding the new regulations:

1. Lack of Clear Definition

There is no clear definition of what “actively addressing” the German market means; this will be decided on a case-by-case basis. By one possible interpretation, anyone operating a designated German website or offering German marketing material is likely to be actively addressing the German market. But if someone — for whatever reason — has a growing number of German customers without any “official” marketing, it could also be concluded you somehow MUST be actively addressing the German market (as otherwise you simply wouldn’t be able to gain this many new customers from Germany).

2. Lack of “Passporting”

As the French are currently sorting out their regulations as well, it would have been great if both countries would have agreed on potentially “passporting” their respective licenses, meaning that if you are licensed in Germany, you could also operate in France without applying for a new license (or registering, to be exact). Although we strongly believe that this will come soon, it would have been great to have this agreement right from the start.

3. Lack of Clarity

For an outsider not familiar with German regulations and law, the means of implementation and the timelines might seem strange (although they are very clever in fact). In short, you are deemed to be a licensed provider as of January 1, 2020, provisionally and retroactively, if you state to the officials that you plan to apply for a license before March 31, 2020, and then hand in your application before November 30, 2020 (yes, it appears to ask you to go back in time). This also means that if you say you are going to apply for a license before March 31, 2020, and then don’t hand in your application before November 30, 2020, you are deemed to have been illegal since January 1, 2020.

Furthermore, it also means that if you are conducting your business as you always have, you will most likely be deemed illegal since January 1, 2020. And that is a felony and not a misdemeanor. Although this is the case, some market players really seem to rely on a tactic called “reverse solicitation” (which means that basically a customer is free to choose whatever supplier he or she wants) and not apply for such a license.

I strongly believe that this is not the best idea, given the massive political implications of this new rule. As we’ve seen in the past, I would assume that Germany’s Federal Financial Supervisory Authority (BaFin) will regulate pretty strictly in this case, as otherwise the new law would simply make no sense and would harm the German economy, which would make little sense from a German point of view.

4. Lack of Communication for International Stakeholders

Big improvements are needed on the communication side, especially regarding the international community as this is an international topic. Up until now, I have seen neither a direct translation of the law nor any advice in English from the regulators. Although this is advantageous for those of us who work in consultancy and advise exchanges and custodians in exactly these matters, this lack of clear communication from regulators is problematic in general.

A Strangely “Un-German” Lack of Structure

I sometimes laugh at a very funny “cultural” thing. Germans are known to have a form and a rule for pretty much everything. And it is true, that is how we are (with all the pros and cons that come with it). So it feels bizarre that, in this instance, it is not the case; hence the need for us to work together with regulators in order to establish proper rules and regulations on the fly.

For example, MPC (multi-party computation) is not addressed in the new law yet; the question of multisignature issues is also still open – among a myriad of different other, sometimes very specific issues. This lack of clarity makes a typical German feel pretty uncomfortable, as we are simply not used to that. What we have, at best, is a step-by-step approach with educated guesses and a lot of communication still to come.

The Role of Custodial Service Entities

Another interesting fact is the way custodians (tech providers) are dealing with these issues. According to a study carried out by Digital Assets Custody (to my knowledge the largest digital assets custodian comparison website on the internet), it seems as if most specialized infrastructure providers for digital assets custody seem to be avoiding regulation like the plague by stating that they would only serve as a tech provider and not as a custodian that needs to be regulated.

While I understand this avoidance approach, as regulation comes with its very own challenges, it seems shortsighted. On the one hand, I believe that regulation will ultimately evolve, concentrating on exchanges as a first step, but then they will come to focus on custodial services.

Depending on each entity’s respective tech stack and business model, it seems possible to me that not only the exchange but also the custodian will ultimately be deemed regulated entities. So it is basically just a matter of time before the regulators come knocking. And as seen in the past, it’s usually a good idea to be ahead of the game.

Solutions for Custodial Dilemmas

It is interesting to see that the new law around custodianship functions as kind of a wake-up call for the industry, although the respective players should have been alert in regards to Germany beforehand. This goes back to the view of the BaFin that judged Bitcoin as a so-called “Unit of Account,” making it a financial instrument; therefore, everybody dealing with these financial instruments should already have the proper licenses. This means that if you were to operate a bitcoin exchange you would — depending on the business model — need a license as a multilateral trading facility, for example. The Berlin Court of Appeal expressed a different view of this in a court case, resulting in some confusion here.

With the introduction of the newly created term “Krytowerte” (direct translation would be “crypto values”), it is now clear that bitcoin is indeed considered to be a financial instrument and that every entity dealing with it will have to be regulated in the same manner as firms dealing with any other financial instruments.

As the respective licenses are subject to the specifics of the business model, it is hard to give some “general information” about what is needed. The custodian licensing will most likely require two “fit and proper” managing directors, €125,000 (≈$136,000) in starting capital plus setup costs of around €250,000–€350,000 (≈$272,000–$380,000) and recurring yearly costs of €350,000 (≈$380,000). (These are rough estimations and can vary widely depending on your business model and various costs.)

All in all, the new law makes operating a digital assets business harder. But on the flipside, it also brings some degree of clarity and security to the people who interact with providers in the digital asset space.

Will everybody be happy with this new direction? No. But it’s a start.

This is an op ed by Dr. Sven Hildebrandt. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

The post How the Latest German Regulations Target Bitcoin Exchanges and Custodians appeared first on Bitcoin Magazine.

Brussels Asks Europeans How to Regulate Bitcoin, Public Consultation Continues Into March

11/02/2020 by Idelto Editor

The European Commission is gathering feedback from EU citizens, businesses, regulators and other interested parties to establish a regulatory framework for crypto assets and markets on a European level. The public consultation which started in December will continue until March 19, 2020, with the finalized proposal expected in the third quarter.

Also read: Swiss Financial Watchdog Proposes $1,000 Client Identification Threshold for Crypto Transactions

EU Legislative Process for Crypto Assets in Progress

The legislative process in the European Union can be long and complicated – initiatives, roadmaps, assessments, and discussions must take into account various and diverse interests. The common market needs a common regulatory framework with investors, companies, customers and regulators speaking the same language, which takes time as stakeholders have already learned.

The European Commission has the right of legislative initiative in the EU. The process of planning and preparing a new law or policy involves putting out a roadmap that describes the problem, sets out objectives, outlines policy options, and defines the scope of the proposed legal framework. A more detailed inception impact assessment replaces the roadmap when the potential impact of the legislation is significant. Citizens, businesses, civil society and public authorities are invited to express opinions about the proposal before it’s finalized.

The lack of regulatory clarity and legal certainty in the crypto space is what prompted the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (Fisma) to launch an initiative for the adoption of a European regulatory framework for crypto assets and related financial services. Initiating and implementing the EU policy in the area of banking and finance is the DG’s main responsibility.

European Commission Issues Inception Impact Assessment of Crypto Regulation

Fisma published an inception impact assessment in December to inform citizens and interested parties about the Commission’s plans that will result in a legislative proposal. The directorate is seeking their feedback on the initiative as well as their views on its understanding of the problem. The assessment will also serve as an opportunity to identify crypto assets and related services that are not covered by EU’s Fifth Anti-Money Laundering Directive to provide the basis for future amendments to AMLD5 taking into account the latest recommendations of the Financial Action Task Force (FATF).

The move comes after the Commission adopted a Fintech Action Plan in March 2018 mandating the European Securities and Market Authorities (ESMA) and the European Banking Authority (EBA) to assess the suitability of the current EU legislation to crypto assets and initial coin offerings (ICOs). On their advice received in January 2019, the EC is now working in two directions: assessing the applicability of the existing framework for those digital coins that qualify as financial instruments and establishing if a new regulatory approach is needed for the rest. A letter by EC President Ursula von der Leyen to Fisma Commissioner and Vice-President Valdis Dombrovskis describes the task in a sentence:

Ensure a common approach with Member States on cryptocurrencies to ensure we understand how to make the most of the opportunities they create and address the new risks they pose.

There is no definition of crypto assets in the EU at the moment, the directorate notes. It’s unclear how existing regulations apply and the absence of dedicated rules leaves consumers and investors exposed to risks. Stablecoins could pose additional challenges, in terms of monetary policy and sovereignty, due to their capacity to be an alternative to fiat currency. The lack of legal certainty, according to Fisma, is a major hurdle to the development of a sustainable crypto asset ecosystem. Furthermore, national regulatory regimes implemented by some member states can make the cross-border provision of crypto-related services difficult, the directorate remarks.

Regulatory Proposal Expected in Third Quarter

The European Commission has so far received feedback from several organizations. The Spanish Bolsas y Mercados Españoles (BME), which integrates companies operating securities markets and developing blockchain solutions for them, welcomes the Fisma initiative. It has expressed its views regarding several aspects such as the definition of crypto assets and the financial market infrastructure supporting innovation. The Belgium-based European Savings and Retail Banking Group (ESBG) insists on implementing a licensing regime for crypto service providers and a set of rules to protect ordinary consumers and investors.

Two Italian entities have also shared their opinions. According to Links Foundation, the deflationary nature of crypto assets may help the European society to migrate from a debt-based economy while Digital Ledger Technologies (DLTs) can raise trust in the financial sector and introduce “shorter value chains with fairer remuneration logic.” The research institution calls for reducing the difficulty for startups dealing with crypto assets to open traditional bank accounts, promoting access to crypto assets without requiring accredited investor status, and facilitating the payment of wages in cryptocurrencies. A small consultancy firm operating in the sector, Coinlex, stresses the need for a European crypto directive to avoid fragmentary national regulations.

The public consultation on the initiative was launched on Dec. 19, 2019 and will continue until March 19, 2020. The European Commission expects more feedback and alternative views on all aspects of the initiative from citizens, blockchain experts, market participants such as crypto exchanges and wallet providers, representatives of the traditional financial sector and fintech startups, member states and competent national authorities. They can contribute to the consultation by filling in an online questionnaire after registering with the EU’s Transparency Register. The finalized regulatory proposal is expected in the third quarter of 2020.

Do you think that opinions expressed by members of the crypto community and industry will be taken into account by the European Commission? Share your expectations in the comments section below.

Images courtesy of Shutterstock.

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The post Brussels Asks Europeans How to Regulate Bitcoin, Public Consultation Continues Into March appeared first on Bitcoin News.

Paris Saint-Germain Teams up With Cryptocurrency Exchange Platform CoinCasso

29/01/2020 by Idelto Editor

Paris Saint-Germain and cryptocurrency exchange platform CoinCasso have joined forces in a multi-year international partnership, with the virtual currency giant becoming an Official Partner of the Parisian club in all markets outside of France. CoinCasso is a blockchain specialist and will now be in a position to capitalise on Paris Saint-Germain’s high profile in its key regions of Europe, Asia and the USA, where the company is hoping to establish itself as a benchmark platform.

“The cryptocurrency exchange market is both young and innovative,” said Luke Ozimski, Founder and CEO of CoinCasso. “We are delighted to be one of the first specialists to reach out to the general public and team up with one of the most popular football clubs in the world. Paris Saint-Germain is an innovator, having been one of the first to engage with blockchain players back in 2018. Together we share a leading position that will allow us to showcase the quality of our service around the world.”

“We are delighted to welcome CoinCasso into the Paris Saint-Germain partner family,” said Marc Armstrong, Chief Partnerships Officer of Paris Saint-Germain. “The club continually strives to be an innovation leader and we are monitoring the development of cryptocurrency very closely, along with its potential to further enhance the experience enjoyed by our supporters across the world. This partnership with CoinCasso will allow Paris Saint-Germain to further strengthen its position in this market.”

A cryptocurrency exchange platform available for the general public and professionals, CoinCasso offers a new way of using digital currencies, among them in the future the purchase of real goods. These services are available online, and a mobile app is also currently under development.

Contact Email Address
[email protected]

Supporting Link
coincasso.com

This is a press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.

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ECB Keeps Subzero Interest Rates and Open-Ended QE Worth €20B a Month But Launches Policy Review

24/01/2020 by Idelto Editor

The European Central Bank (ECB) has launched an extensive review that will examine a wide range of its policies by the end of this year. Under its new president, Christine Lagarde, the bank will try to establish why its monetary stimulus has failed to achieve the Eurozone’s goal of close to 2% inflation. Sharing few details, Lagarde indicated the ECB will go on pushing towards the threshold as the institution’s governing body kept a key interest rate below zero and pledged to continue to inject billions into Europe’s economy.

Also read: 6 Bankers Accused of Earning €30M in Bonuses From German Fraud, Tax Lawyer Out on €4M Bail

ECB Maintains Interest Rate at Record Low -0.5%

During a Governing Council meeting on Thursday, the Eurozone’s central bank decided to keep in negative territory the benchmark deposit rate, the one banks face when leaving money at the ECB. The record low level of -0.5% was approved in September 2019 when the financial institution also announced the restart of its stimulus program.

The monthly buying of €20 billion ($22 billion) worth of bonds, which began in November, will continue indefinitely. The quantitative easing effort is an open-ended commitment to pump more money into the system which struggles to maintain inflation above 1%. The ECB started buying bonds in early 2015 and spent over €2.6 trillion in the previous program, which ended in December 2018.

Although Christine Lagarde noted a “moderate increase in underlying inflation” and remarked that downside risks to the Eurozone’s economic outlook are “somewhat less pronounced,” she was quoted by Bloomberg stating that the monetary policy must remain “highly accommodative” and that governments which can afford to increase spending should be prepared to do so.

The improved economic prospects are due to the easing tensions between the United States and China, which signed a preliminary trade deal. However, the storm has not subsided for the European Union yet. On Wednesday, U.S. President Donald Trump warned during the World Economic Forum in Davos that if there’s no deal with the EU, he will have to impose “very high tariffs” on cars and other European imports.

Policymakers at the European Central Bank are determined to make sure borrowing costs for EU businesses will remain at their current levels or be lowered even further. This state of mind and status quo are likely to persist until the inflation outlook converges with the 2% goal, they say, while quantitative easing will be practiced for the foreseeable future. No one has a firm idea of how long that could possibly be.

Review to Cover Monetary Policy, Climate Change and Anything in Between

After years of monetary stimulus that saw interest rates in Eurozone countries drop to historically low levels and billions of euros printed, the ECB will now try to find out and explain why the measures didn’t work. It will attempt to do so after the policies evoked strong criticism that led to lawsuits in some Eurozone member states. In Germany, which is Europe’s economic and financial locomotive, a political initiative to curtail negative rates has been gaining traction in the past months. Its backers point out that savers are losing money due to ECB’s policy. A ban to prevent the passing of negative rates onto small savers has been proposed in the Federal Republic.

The review announced by the ECB represents the first rethink of its policies since 2003. Its former president, Mario Draghi, left the post in late 2019 after an eight-year term at the helm of the important institution during which key interest rates were never raised. The bank’s new management now wants to conduct a wide-scope assessment of its policies but it hasn’t shared many details about it. At a press conference after the Governing Council meeting, Christine Lagarde stated:

We are going to review a whole host of issues. It will have to do with how we deliver, how we measure, what tools we have and how we communicate… It’s a broad exercise. My commitment was really to be able to listen to the expectations of ordinary people, to better understand the economic concerns and the imperatives and how we can deliver on them. It is going to be our task and our goal to listen.

The process will involve the central banks of all 19 Eurozone member states which, as Lagarde acknowledged, don’t always speak the same language. Besides studying the ECB’s economic and monetary policy toolkit, the assessment will focus on tackling other issues such as concerns related to financial stability in general, employment in the single currency area as well as environmental sustainability.

The Eurozone is not in perfect shape but the world’s other leading economies are experiencing similar challenges. The U.S. Federal Reserve, for example, is also conducting an appraisal of its strategy despite certain improvements due to the fiscal policy applied in the United States. The results of the Fed’s review are expected this year too. And in Japan, where inflation has hovered around and below 1% since 2015, an extremely accommodative policy hasn’t helped to significantly improve the economy.

What do you think will be the results of ECB’s policy review? Share your expectations in the comments section below.

Images courtesy of Shutterstock.

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