Crypto meltdown is wake-up call for many, including lawmakers

Crypto meltdown is wake-up call for many, including lawmakers
A representation of virtual currency bitcoin and a US one dollar banknote are seen in front of a stock graph in this illustration. (REUTERS)
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Updated 08 June 2022

Crypto meltdown is wake-up call for many, including lawmakers

Crypto meltdown is wake-up call for many, including lawmakers
  • Roughly 16% of adult Americans, or 40 million people, have invested in cryptocurrencies, survey shows
  • Stablecoin TerraUSD's collapse has led to an estimated $40 billion in investor funds erased

NEW YORK: Meltdowns in the cryptocurrency space are common, but the latest one really touched some nerves. Novice investors took to online forums to share tales of decimated fortunes and even suicidal despair. Experienced crypto supporters, including one prominent billionaire, were left feeling humbled.
When the stablecoin TerraUSD imploded last month, an estimated $40 billion in investor funds was erased — and so far there has been little or no accountability. Stablecoins are supposed to be less vulnerable to big swings — thus the name — but Terra suffered a spectacular collapse in a matter of days.
The Terra episode publicly exposed a truth long-known in the always-online crypto community: for every digital currency with staying power, like bitcoin, there have been hundreds of failed or worthless currencies in crypto’s short history. So Terra became just the latest “sh— coin” — the term used by the community to describe coins that faded into obscurity.
Terra’s quick collapse came just as bitcoin, the most popular cryptocurrency, was in the midst of a decline that has wiped out nearly half of its value in a couple of months. The events have served as a vivid reminder that investors, both professionals and the mom and pop variety, can be rolling the dice when it comes to putting money into digital assets.
After being mostly hands-off toward crypto, it appears that Washington has had enough. On Tuesday, two senators — one Democrat and one Republican — proposed legislation that seeks to build a regulatory framework around the cryptocurrency industry; other members of Congress are considering more limited legislation.
What’s surprising, however, is that the cryptocurrency industry is signaling its cooperation. Politicians, crypto enthusiasts, and industry lobbyists all point to last month’s collapse of Terra and its token Luna as the possible end of the libertarian experiment in crypto.
Stablecoins are typically pegged to a traditional financial instrument, like the US dollar, and are supposed to be the cryptocurrency equivalent of investing in a conservative money market fund. But Terra was not backed by any hard assets. Instead, its founder Do Kwon promised that Terra’s proprietary algorithm would keep the coin’s value pegged to roughly $1.00. Critics of Terra would be attacked on social media by Kwon and his so-called army of “LUNAtics”
Kwon’s promise turned out to be worthless. A massive selling event caused Terra to “break the buck” and collapse in value. Reddit boards dedicated to Terra and Luna were dominated for days by posts referencing the National Suicide Prevention Hotline.
Terra’s ascendance attracted not only retail investors but also better-known cryptocurrency experts. One notable “Lunatic” was billionaire Mike Novogratz, who tattooed his upper arm with the word Luna and a wolf howling at the moon. Novogratz told his followers that the tattoo “will be a constant reminder that venture investing requires humility.”
Michael Estrabillo entrusted his crypto investments to stablegains, an investment vehicle that he says had assured him and other investors that the funds were secured in USD Coin, one of the largest stablecoins. Then, on May 9, he said he was informed his money was locked up in Terra.
“Had I known I was involved in a currency that was backed by an algorithm, I would have never invested in that,” Estrabillo lamented.
Washington may also be waking up to the fact that what used to be niche part of the Internet and finance has gone mainstream and can no longer be ignored.
The total value of crypto assets hit a peak of $2.8 trillion last November; it’s now below $1.3 trillion, according to CoinGecko. Surveys show that roughly 16 percent of adult Americans, or 40 million people, have invested in cryptocurrencies. Retirement account giant Fidelity Investments now offers crypto as a part of a 401(k) plan. Sen. Cory Booker, D-New Jersey, has repeatedly pointed out that crypto is particularly popular among Black Americans, a community long distrustful of Wall Street.
Further, crypto has permeated popular culture. Numerous Super Bowl ads touted crypto. Sports arenas are now named after crypto projects and the Washington Nationals baseball team took a sponsorship deal from Terra before it collapsed. Celebrities routinely shill crypto on social media, and YouTube personalities generate millions of views talking about the latest crypto idea.
Terra’s collapse was a bridge too far, it seems.
On Tuesday, Sen. Kirsten Gillibrand, D-New York, and Sen. Cynthia Lummis, R-Wyoming, proposed a framework to start regulating the industry, which would include giving the Commodity Futures Trading Commission full regulatory jurisdiction over cryptocurrencies such as bitcoin and rewriting the tax code to include crypto. It would also fully regulate stablecoins for the first time ever.
This comes after the Biden administration’s working group on financial markets issued a 22-page report last November, calling on Congress to pass legislation that would regulate stablecoins. One recommendation includes a requirement that stablecoin issuers become banks that would hold sufficient cash reserves.
Treasury Secretary Janet Yellen has also called for stablecoin regulation, saying “we really need a regulatory framework to guard against the risks,” during a House committee meeting in May.
Further, it appears that the cryptocurrency industry — with its libertarian leanings and deep skepticism of Washington — might also be on board.
“I do think this is a bit of a wake-up call. A lot of people were taken aback by Terra’s failure,” said Perianne Boring, founder of the Chamber of Digital Commerce, one of the top lobbyists for the cryptocurrency industry.
Other crypto lobby groups, like the Association for Digital Asset Markets, have announced support for the Lummis-Gillibrand bill.
One idea that Washington seems to be coalescing around is that entities that issue stablecoins — often used as a bridge between traditional finance and the crypto world — need to be transparent about the assets backing them and be as liquid as any other instrument playing a key role in finance.
Sen. Pat Toomey, R-Pennsylvania, is circulating a separate bill that would require stablecoin providers to have a license to operate, restrict the types of assets they carry to back those stablecoins, as well as be subject to routine auditing to make sure they are complying.
Describing Terra as a “debacle,” Toomey said in an interview that Terra’s collapse made it even more important that Washington build some guardrails around stablecoins. Toomey is the top Republican on the Senate Banking Committee.
“It’s always difficult to get anything across the goal line in the Senate, but there’s nothing politically polarizing about creating a statutory regime for stablecoins,” Toomey said.
After Terra’s collapse there are two remaining big stablecoins: USD Coin issued by the company Circle, and Tether, created by the Hong Kong-based company Bitfinex. Both hold hard assets to back their value, but Bitfinex is less transparent about the assets it holds and is not audited. There are also a host of smaller stablecoin issuers, which in the world of crypto could become the latest hot item overnight.
“It’s not just urgent that Washington step in, it’s urgently urgent,” said Jeremy Allaire, founder and CEO of Circle, in an interview.
 

Decoder

What are Stablecoins?

Stablecoins are cryptocurrencies supposedly pegged to a cryptocurrency, fiat money, or to exchange-traded commodities. They are supposed to be less vulnerable to big swings, but Terra suffered a spectacular collapse in a matter of days, publicly exposing a truth long-known in the always-online crypto community: for every digital currency with staying power, like bitcoin, there have been hundreds of failed or worthless currencies in crypto’s short history.


Oil prices up 2 percent on supply outages

Oil prices up 2 percent on supply outages
Updated 01 July 2022

Oil prices up 2 percent on supply outages

Oil prices up 2 percent on supply outages

LONDON: Oil prices rose about 2 percent on Friday, recouping most of the previous session’s declines, as supply outages in Libya and expected shutdowns in Norway outweighed expectations that an economic slowdown could dent demand, according to Reuters.

Brent crude futures were up $2.20, or 2 percent, at $111.23 a barrel by 1348 GMT, having dropped to $108.03 a barrel earlier in the session.

WTI crude futures gained $2.25, or 2.1 percent, to $108.01 a barrel, after retreating to $104.56 a barrel earlier.

Both contracts fell around 3 percent on Thursday, ending the month lower for the first time since November.

We “still see risks to prices as skewed to the upside on tight inventories, limited spare capacity and muted non-OPEC+ supply response,” Barclays said in a note.

Libya’s National Oil Corporation declared force majeure on Thursday at the Es Sider and Ras Lanuf ports as well as the El Feel oilfield. Force majeure is still in effect at the ports of Brega and Zueitina, NOC said.

Production has seen a sharp decline, with daily exports ranging between 365,000 and 409,000 bpd, a decrease of 865,000 bpd compared to production in “normal circumstances,” NOC said.

Elsewhere, 74 Norwegian offshore oil workers at Equinor’s Gudrun, Oseberg South and Oseberg East platforms will go on strike from July 5, the Lederne trade union said on Thursday, likely halting about 4 percent of Norway’s oil production.

Ecuador’s government and indigenous groups’ leaders on Thursday reached an agreement to end more than two weeks of protests which had led to the shut-in of more than half of the country’s pre-crisis 500,000 bpd oil output.

On Thursday, the OPEC+ group of producers, including Russia, agreed to stick to its output strategy after two days of meetings. However, the producer club avoided discussing policy from September onwards.

Previously, OPEC+ decided to increase output each month by 648,000 barrels per day in July and August, up from a previous plan to add 432,000 bpd per month.

US President Joe Biden will make a three-stop trip to the Middle East in mid-July that includes a visit to Saudi Arabia, pushing energy policy into the spotlight as the United States and other countries face soaring fuel prices that are driving up inflation.

Biden said on Thursday he would not directly press Saudi Arabia to increase oil output to curb soaring prices when he sees the Saudi king and crown prince during a visit this month.

A Reuters survey found that OPEC pumped 28.52 million bpd in June, down 100,000 bpd from May’s revised total.

Oil prices are expected to stay above $100 a barrel this year as Europe and other regions struggle to wean themselves off Russian supply, a Reuters poll showed on Thursday, though economic risks could slow the climb.

India introduced export duties on gasoil, gasoline and jet fuel on Friday to help maintain domestic supplies, while also imposing a windfall tax on oil producers who have benefited from higher global crude oil prices. 


Russia seizes control of partly foreign-owned energy project

Russia seizes control of partly foreign-owned energy project
Updated 01 July 2022

Russia seizes control of partly foreign-owned energy project

Russia seizes control of partly foreign-owned energy project

MOSCOW: Russian President Vladimir Putin has handed full control over a major oil and natural gas project partly owned by Shell and two Japanese companies to a newly created Russian firm, a bold move amid spiraling tensions with the West over Moscow’s military action in Ukraine, according to Associated Press.

Putin’s decree late Thursday orders the creation of a new company that would take over ownership of Sakhalin Energy Investment Co., which is nearly 50 percent controlled by British energy giant Shell and Japan-based Mitsui and Mitsubishi.

Putin’s order named “threats to Russia’s national interests and its economic security” as the reason for the move at Sakhalin-2, one of the world’s largest export-oriented oil and natural gas projects.

The presidential order gives the foreign firms a month to decide if they want to retain the same shares in the new company.

Russian state-controlled natural gas giant Gazprom had a controlling stake in Sakhalin-2, the country’s first offshore gas project that accounts for about 4 percent of the world’s market for liquefied natural gas, or LNG. Japan, South Korea and China are the main customers for the project’s oil and LNG exports.

Kremlin spokesman Dmitry Peskov said Friday that there is no reason to expect a shutdown of supplies following Putin’s order.

Shell held a 27.5 percent stake in the project. After the start of the Russian military action in Ukraine, Shell announced its decision to pull out of all of its Russian investments, a move that it said has cost at least $5 billion. The company also holds 50 percent stakes in two other joint ventures with Gazprom to develop oil fields.

Shell said Friday that it’s studying Putin’s order, which has thrown its investment in the joint venture into doubt.

“As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements,” the company said in a statement. “We are aware of the decree and are assessing its implications.”

Seiji Kihara, deputy chief secretary of the Japanese cabinet, said the government was aware of Putin’s decree and was reviewing its impact. Japan-based Mitsui owns 12.5 percent of the project, and Mitsubishi holds 10 percent.

Kihara emphasized that the project should not be undermined because it “is pertinent to Japan’s energy security,” adding that “anything that harms our resource rights is unacceptable.”

“We are scrutinizing Russia’s intentions and the background behind this,” he told reporters Friday at a twice-daily news briefing. “We are looking into the details, and for future steps, I don’t have any prediction for you at this point.”

Asked during a conference call with reporters if Putin’s move with Sakhalin-2 could herald a similar action against other joint ventures involving foreign shareholders, Peskov said, “There can’t be any general rule here.”

He added that “each case will be considered separately.”

Sakhalin-2 includes three offshore platforms, an onshore processing facility, 300 kilometers of offshore pipelines, 1,600 kilometers of onshore pipelines, an oil export terminal and an LNG plant.
 

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Riyadh no longer one of the 100 most expensive cities for expats: Mercer

Riyadh no longer one of the 100 most expensive cities for expats: Mercer
Updated 01 July 2022

Riyadh no longer one of the 100 most expensive cities for expats: Mercer

Riyadh no longer one of the 100 most expensive cities for expats: Mercer

RIYADH: Saudi Arabia’s capital, Riyadh, has dropped 72 places in a ranking of the world’s most expensive cities for expats as it tumbled out of the top 100, according to a report issued by Mercer.

Riyadh was positioned at 103 in Mercer's Cost of Living Index 2022, falling from 29 in the previous year’s list. 

Commenting on Riyadh’s fall, Khaled Al-Mobayed, CEO of Menassat Reality Co., a Riyadh-based real estate developer, said: “The results came in contrary to the expectations, due to the pandemic’s ongoing consequences and the rising cost of logistics and supply chain.”

“Being out of the 100 top expensive cities is a good sign despite the challenges that the economy has gone through,” he added.

UAE's Dubai took over Lebanon's capital, Beirut, as the most expensive city among Arab countries in the region, ranking 31.

Despite being placed third in 2021, Beirut was not even on this year’s list of 227 cities due to the country’s economic turmoil.

The city’s fall reflects the severe drop in value of the Lebanese pound, according to Lebanese economic analyst Bassel Al-Khatib, who pointed out the minimum wage is now worth $20, while it was $450 before the economic crisis gripping the country. 

“Lebanon is extremely expensive to those who get paid in Lebanese pounds yet very cheap for those who get pain in US dollars,” he told Arab News, adding: “Lebanon was expensive for both citizens and foreigners, and with the currency dropping 95 percent and the dollar reaching record levels, the situation changed.”

“Everything has become expensive but not for foreigners who have dollars. All services by the government such as water, electricity fees, or internet are still the same but food prices skyrocketed,” he added.

Abu Dhabi was the second highest Arab city from the region, ranked at 61, while Jeddah came in at 111 this year compared to 94 in 2021.

Jordan's capital Amman ranked 115, followed by Bahrain's Manama at 117, Oman's Muscat at 119 and Kuwait city at 131.

Egypt's capital, Cairo, was placed at 154 while Rabat, Algiers and Tunis came as the least expensive in the region, ranking 162, 218 and 220 respectively.

Hong Kong topped the list as the most expensive city in the world in 2022, moving from second rank last year and taking the top spot from Turkmenistan’s capital, Ashgabat.

Switzerland’s Zurikh and Geneva followed as second and third most expensive cities, replacing Hong Kong and Beirut respectively.

Turkey’s capital, Ankara, came in as the least expensive city, ranking 227, taking the spot from Kyrgyzstan’s capital Bishkek.


France eyes ‘good investment opportunities’ in Saudi Arabia: Official

France eyes ‘good investment opportunities’ in Saudi Arabia: Official
Updated 01 July 2022

France eyes ‘good investment opportunities’ in Saudi Arabia: Official

France eyes ‘good investment opportunities’ in Saudi Arabia: Official

RIYADH: France is intensifying efforts to take advantage of Saudi investment opportunities in all sectors, mostly energy, technology, water and other industrial services, the country's Ambassador in Saudi Arabia said.

Saudi Arabia is an attractive region and a suitable environment for investments in all its vital sectors, Ludovic Pouille told a press conference.

The French government and the private sector are working to expand the number of companies operating in the Kingdom, which currently stands at about 135, Aleqtisadiah reported citing Pouille.

The aim is to gain large investment spaces, and to benefit from the reforms and economic developments undertaken by Saudi Arabia, which constitute a good opportunity for French companies, he said. 

The French ambassador said France will take the model of agreements between the Al-Ula Authority and his country’s institutions in the fields of infrastructure and culture, as a starting point for expanding the map of investments in the future.


New Saudi smart city AlNama to be zero-carbon

New Saudi smart city AlNama to be zero-carbon
Updated 01 July 2022

New Saudi smart city AlNama to be zero-carbon

New Saudi smart city AlNama to be zero-carbon

RIYADH: Saudi Arabia’s new AlNama smart city will be a zero-carbon community, according to the company charged with designing the development.

The hospitality hub, located on a 10 sq. km area in Riyadh, will create 10,000 jobs in various sectors, including green-tech industries to create a ‘green circular economy’, Construction Week reported. 

The project is planned to provide 11,000 residential units and an eventual population of 44,000 people.

ALNAMA will be designed by Dubai's URB, and the firm’s CEO Baharash Bagherian said: “AlNama aims to be the next generation of self-sufficient city, producing all the city’s renewable energy needs, as well as the resident’s caloric food intake on site.

“Biosaline agriculture, productive gardens, wadis, and carbon-rich habitats are key features of the development’s innovative and resilient landscape design.

“The city was planned through the design of its landscape, rather than its buildings. This creates an urbanism that is more socially inclusive, more economically valuable, and more sensitive to the environment.”

AlNama will consist of eco-friendly glamping lodges, eco resorts and a nature conservation center to promote ecotourism, while an autism village, wellness center and clinics within the medical hub will help promote medical tourism.

The green-tech hub will provide an innovative ecosystem for urban-tech companies related to food, energy, water, waste, mobility, and building materials