Facebook to unveil new cryptocurrency

Facebook will outline the details of the cryptocurrency on Tuesday. (File/AFP)
Updated 17 June 2019
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Facebook to unveil new cryptocurrency

  • Companies and venture capitalists will invest around $10m each in the new cryptocurrency
  • Facebook faced a series issues regarding privacy abuses and fake news

LONDON: Facebook is set Tuesday to unveil a bid to bring cryptocurrency payments into the mainstream, reportedly with the endorsement of governments and financial giants.
The world’s biggest social network is expected to outline details of a virtual currency launching next year that it hopes will avoid the rollercoaster volatility of “blockchain” technologies such as bitcoin.
Facebook is setting up a consortium called “Libra” which, according to the Wall Street Journal, has been joined by more than a dozen companies including Visa, Mastercard, PayPal and Uber.
The companies along with venture capitalists and telecommunications firms will reportedly invest around $10 million each into the consortium.
Facebook has been trying to ward off hostile regulatory scrutiny after a series of privacy abuses and the spread of fake news.
The consortium will be managed externally and will seek to build trust among consumers by pegging the virtual coin to a basket of currencies including the dollar and euro, the Journal said.
Facebook has already sought blessings from the US Treasury and the Bank of England, the BBC reported last month.
Regulators have been reticent about cryptocurrencies, not only due to potential abuse by criminals but the wild swings in their value harming consumers.
With more than two billion users across its platforms, which include WhatsApp and Instagram, Facebook could have the clout to bring cryptocurrency out of the fringes and emulate the likes of WeChat in China, where the US site is banned.
WeChat allows its users to chat, shop and play games without leaving its platform, generating more revenue by offering a one-stop portal.
Buffeted by the privacy storms, chief executive Mark Zuckerberg has promised a new direction for Facebook built around smaller groups, private messaging and payments.
But it will need to overcome questions of trust and privacy, not least over how financial data will be stored. Some analysts are betting that the heavyweight Libra consortium will help to do that.
Facebook’s crypto initiative could facilitate shopping, applications and gaming, and would leverage its broad user base in Asia, RBC analyst Mark Mahaney said in a research note last week.
It “may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams,” he wrote.


China central bank moves to support financial institutions

Chinese 100 yuan banknotes are seen on a counter of a branch of a commercial bank in Beijing, China, March 30, 2016. (REUTERS)
Updated 24 July 2019
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China central bank moves to support financial institutions

  • Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31

BEIJING: China’s central bank offered medium-term loans to financial institutions on Tuesday in an attempt to get more affordable funds to struggling smaller firms, as it steps up efforts to support a slowing economy.
With growth in China sliding to a near 30-year low, global financial markets are closely watching to see if the People’s Bank
of China (PBOC) will trim interest rates soon in line with expected easing by other central banks.
While the PBOC left rates on the medium-term loans unchanged on Tuesday, and the injection had been expected, it funneled more lower-cost funds into a credit program aimed specifically at reducing strains on small and medium-sized businesses.
The PBOC lent 497.7 billion yuan ($72.31 billion), including 200 billion yuan through one-year medium-term lending facility (MLF) loans and another 297.7 billion yuan through targeted medium-term lending facility (TMLF) loans, it said in a statement.
The size of the TMLF funding was 11 percent larger than the last such injection in April.
Interest rates for both liquidity facilities were unchanged from previous levels. The one-year MLF and TMLF remained at 3.30 percent and 3.15 percent, respectively.
The total amount roughly offset 502 billion yuan of MLF loans that were set to expire on Tuesday,
ensuring a steady supply of cash.
“Replacing some MLF with TMLF effectively cut funding costs. We should focus on the lower rate, instead of the net drainage on the day,” said Frances Cheung, head of Asia macro strategy at Westpac in Singapore.

BACKGROUND

China is keeping all its policy tools within reach as the trade war with the US gets longer and costlier, but sees more aggressive action like interest rate cuts as a last resort given concerns about rising debt.

The central bank said banking system liquidity will be “reasonably ample” after the lending operations.
About 160 billion yuan in reverse repos were also set to expire on Tuesday, according to Reuters calculations based on official data. The PBOC did not say in its statement whether it had drained funds from money markets on Tuesday.

BACKGROUND

China is keeping all its policy tools within reach as the trade war with the US gets longer and costlier, but sees more aggressive action like interest rate cuts as a last resort given concerns about rising debt.

Some traders said Tuesday’s moves were in line with the PBOC’s support measures since last year, which have been aimed at getting more affordable financing to small and private companies.
While Chinese regulators have urged banks to keep lending to distressed firms, such companies are often considered higher credit risks than big, state-owned enterprises.
Traders and analysts still expect the PBOC to cut rates on some of its liquidity tools in coming months.
The PBOC has already slashed banks’ reserve requirement ratios (RRR) six times since early 2018 to free up more money to lend, while guiding short-term market rates lower through liquidity injections in various forms.
Many market watchers believe the PBOC will adjust its money market rates in early August if the US Federal Reserve cuts its key rate, as widely expected, on July 31.
Cheung from Westpac said it was still possible the PBOC could lower the MLF rate after the Fed’s policy decision.
She also has pencilled in a 50 basis-point RRR cut this quarter, and another in the fourth quarter.