Saudi markets chief warns of dangers of ‘speculative’ cryptocurrencies

Mohammed Al-Kuwaiz, chairman of Saudi Arabia's Capital Market Authority warned the Euromoney Saudi Arabia Conference about the perils of cryptocurrency investment. (Reuters)
Updated 02 May 2018
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Saudi markets chief warns of dangers of ‘speculative’ cryptocurrencies

  • Blockchain technology holds huge positive potential
  • Possible inclusion in the MSCI index later this year a big boost for markets

Cryptocurrencies such as bitcoin are “speculative investments” that are very often a “source of fraud,” Saudi Arabia’s main market regulator warned yesterday.

Mohammed Al-Kuwaiz, chairman of the Capital Market Authority (CMA), told financial professionals on the opening day of the Euromoney conference in Riyadh that investors should beware of cryptocurrencies because of worries about value and potential abuse by criminals.

“We think that cryptocurrencies are currently a solution trying to find a problem. The global financial industry does not know how to treat them. They say they are a possible replacement for conventional currencies, but we do not see that.

“They also claim to be a store of value, but the jury is still out on that too. What they are today are just speculative investments, and we have warned investors about that. There is very little to justify them and they are often a source of fraud,” he said.

Al-Kuwaiz’s strong stance on cryptocurrencies is in contrast to the official attitude earlier this year, when the CMA said it was considering what the regulatory response should be to digital currencies such as bitcoin.

The CMA chairman drew a distinction between cryptocurrencies and the blockchain technology that many of them use. “Our belief is that blockchain can be truly transformational across many industries,” he said.

He said that the Kingdom had made big strides in developing a financial infrastructure and ecosystem to attract local and foreign investors. “In 2013, foreigners were effectively banned from the Saudi market. But just recently we moved from number 63 to the top 12 of the “ease of doing business” tables produced by the World Bank,” he said.

Al-Kuwaiz said that over the past two years CMA had put in place measures to facilitate ease of raising funds, and ease of investment. It had also helped to build confidence in the Saudi financial system by allowing electronic voting by shareholders and adopting measures to protect minority shareholders.

“The result is that in recent months we have seen the biggest increase in licenses granted since the CMA was started. There has been a rapidly accelerating pace of buy-in from foreigners since the start of the year,” he said.

The inclusion of Saudi Arabia in the FTSE Russell emerging market index, and the potential inclusion in the MSCI index later this year, would further speed the development of the Saudi financial industry, he said.

“We are offering the world a product, and if you want to sell your product successfully you have to have a certificate of value, a stamp of approval to show the buyers. That is what inclusion on the emerging markets indices is, a stamp of approval from the world,” he said.

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Oil prices near 2019 highs after US ends all Iran sanction exemptions

Updated 35 min 21 sec ago
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Oil prices near 2019 highs after US ends all Iran sanction exemptions

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

SINGAPORE: Oil prices were near 2019 highs on Tuesday after Washington announced all Iran sanction waivers would end by May, pressuring importers to stop buying from Tehran.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday.
US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
Barclay’s bank said in a note following the announcement that the decision took many market participants by surprise and that the move would “lead to a significant tightening of oil markets.”
The British bank added that Washington’s target to cut Iran oil exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel.”
ANZ bank said in a note on Tuesday that “the decision is likely to worsen the ongoing supply woes being felt with Venezuelan sanctions, the OPEC supply cut, and intensifying conflict in Libya.”
The move to tighten Iran sanctions comes amid other sanctions Washington has placed on Venezuela’s oil exports and also as producer club OPEC has led supply cuts since the start of the year aimed at tightening global oil markets and propping up crude prices.
Ellen Wald, non-resident senior fellow at the Global Energy Center of the Atlantic Council, said the United States “seem to expect” Saudi Arabia and the United Arab Emirates to replace the Iranian oil, but she added “that this is not necessarily the way Saudi Arabia sees it.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de-facto leader. The group is set to meet in June to discuss its output policy.
“Should OPEC decide to end their supply cut program going into the second half of the year, this could limit oil’s upside in the coming months,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Meanwhile, the Atlantic Council said the US move would hurt Iranian citizens.
“We’re going to see their currency collapse more, more unemployment, more inflation,” said Barbara Slavin, director for the Future of Iran Initiative at the Atlantic Council, adding that the US sanctions were “not going to bring Iran back to the (nuclear) negotiating table.”