News Updates October 09 & 10, 2022
1. The UN Urges Central Banks Against Raising Interest Rates: What About Crypto?
The United Nations Conference on Trade and Development (UNCTAD) has warned that tightening monetary policy and raising interest rates could lead to a recession worse than the one experienced following the global financial crisis.
The UNCTAD Trade and Development Report 2022 expressed "concerns that an unduly rapid tightening of monetary policy in advanced economies, combined with insufficient multilateral support, could turn a slowdown into a recession."
According to the body, this would cause "vicious economic circles in the developing world, with the damage lasting longer than after the global financial crisis or COVID shock."
The report specifically blamed the Federal Reserve, also known as the Fed, for slowing growth: "This year's interest rate hikes in the United States are set to cut an estimated $360 billion of future income for developing countries (excluding China) and signal even more trouble ahead."
Instead of raising interest rates to combat inflation, policymakers should impose price caps funded by one-time taxes on huge profits of energy companies, according to lead author Richard Kozul-Wright. Like the Bank of England, the Fed stated late last month that it was committed to lowering inflation to 2% by raising interest rates to 4.4% by the end of 2022 and 4.6% in 2023. Higher interest rates make debt repayment more expensive, such as mortgages and credit card payments.
The global economic expansion rate could be less than predicted
According to UNCTAD research, the global economy will expand 2.5% overall this year, less than the estimated 3.5% growth predicted in 2021. As growth is predicted to slow down to 2.2% next year, actual gross domestic product (GDP), which measures the market value of goods and services generated, will be below its pre-Covid trend by the end of 2023, the report said.
According to the research, the UK's GDP "increased significantly" by 7.4% in 2021. However, this was still insufficient to make up for the 9.3% contraction brought on by COVID-19. Even while "a number of challenges, some coming from Brexit and others from worldwide conditions, are influencing the outlook," the economic momentum persisted throughout the first quarter of this year.
Would a Recession Benefit Crypto?
Meanwhile, forecasts for how cryptocurrency prices will behave during a recession vary widely. While it is widely assumed that the value of crypto assets will fall in the event of a stock market crash, an opposing viewpoint is gaining traction.
According to American investor Stan Druckenmiller, a recession, which he believes will occur next year, would benefit the cryptocurrency sector as a whole. According to Druckenmiller, a growing lack of trust in governments and central banks could be good news for cryptocurrencies. Bitcoin is decentralized, and market participants believe it will diverge from the pack and rise in value. Some analysts believe that as Bitcoin rises, other major cryptocurrencies such as Ethereum, Tether, and Dogecoin will follow suit, regardless of whether the Fed raises interest rates. The Fed easing its current interest rate stance could benefit the crypto markets' overall health.
The Federal Reserve will decide whether to allow interest rates to rise again when it meets again on November 4. And, with the United Nations breathing heavily down its neck, the Fed must return to the drawing board and plan its next move.
2. Russian Businesses are Circumventing Sanctions by Using Cryptocurrencies.
Russian businesses operating within the Russian Federation have begun to use cryptocurrencies to circumvent sanctions in cross-border transactions, according to the Ministry of Finance.
Russian businesses are already getting around sanctions with the help of cryptocurrencies. This is despite the fact regulation of the crypto scene in the Russian Federation has not yet been properly configured.
This was stated in an interview by the director of the financial policy department of the Ministry of Finance, Ivan Chebeskov.
Russian Businesses and ‘Unfriendly’ Countries
Vladimir Gamza is the head of the Chamber of Commerce and Industry of the Russian Federation. He said that business in the Russian Federation mainly uses cryptocurrency for transactions with unfriendly countries (USA, Ukraine, Norway, Singapore and others).
Digital Ruble
Despite the Russian authority’s positive sentiment towards using cryptocurrencies abroad, the Central Bank of the Russian Federation is not as optimistic. Instead of cryptocurrencies, the Central Bank of the Russian Federation wants to see the use of the digital ruble, which is currently being tested among a limited group of Russian banks.
3. Indian Crypto Companies Criticize The Concept Note On CBDC By RBI.
RBI Accused Of Using Conservative Crypto Strategy
India's Stand Over Crypto
After the Reserve Bank of India (RBI) released its concept note on a central bank digital currency (CBDC), the organization faced criticism from several crypto firms. According to a story in the Economic Times on October 9, executives of crypto companies operating in the nation referred to RBI's plan to replace digital assets with a CBDC as a "comparing apples and oranges" situation.
RBI Accused Of Using Conservative Crypto Strategy
Another executive pointed out that RBI's concept note revealed its constrained, conservative, and out-of-date view of cryptocurrencies. Khaleelulla Baig, the CEO of the cryptocurrency investing platform Koinbasket, asserted that the strategy showed the central bank's need to keep control of the fiat currency market. When RBI proclaimed that its CBDC could displace digital assets, cryptocurrency companies responded by saying that the regulator "was comparing apples to oranges."
According to an unidentified executive, a differentiating characteristic between CBDCs and cryptocurrencies was their names themselves. The RBI, he claimed, was trying to compare stocks to Indian rupees.
India's Stand Over Crypto
For many people, India's position on cryptocurrency is unclear. Even though the nation wished to outlaw it outright, it is not possible without the cooperation of international authorities. Despite the confusion and dubious regulation of cryptocurrency in India, the number of currency users is growing in the nation.
4. Prosecutors Raid Three Bithumb ‘Affiliates’ as Shareholder Scrutiny Intensifies.
A number of South Korean firms related to the crypto exchange Bithumb – including the firm that owns a controlling share of its stock – have been raided by the prosecution service on embezzlement charges.
Per MBC, officers searched the offices of Vidente, a publicly listed video equipment-making company that owns a majority 34% tranche of Bithumb’s shares. They also raided INBIOGEN, a footwear and accessories producer, and Bucket STUDIO, a firm that produces entertainment-related content.
The media outlet added that executives from the firms are being investigated on suspicion of embezzling company funds.
While none of these companies appears to have a link with the crypto sector, they are believed to be owned by Kang Jong-hoon, a man widely believed to be the owner and “secret” chairman” of Bithumb.
Kang has reportedly been attempting to sell Bithumb for over a year after acquiring the exchange – and the other three companies – back in 2020. Some firms have also enquired about the possibility of buying Vidente, a move that would grant them control over Bithumb.
A leading South Korean media outlet earlier this month published a comprehensive exposé of Kang earlier this month, alleging that he had appointed the older sister of his celebrity girlfriend, the actress Park Min-young, as an INBIOGEN director. Park's sister has recently stepped down from her role at INBIOGEN, but prosecutors appear to believe that financial wrongdoings may be afoot at the companies.
5. OECD Releases New Global Tax Reporting Framework for Crypto Assets
The framework's scope will include stablecoins, crypto derivatives and certain NFTs.
The Organization for Economic Co-operation and Development (OECD) has released its new tax reporting framework, the Crypto-Asset Reporting Framework (CARF), according to a press release Monday.
The framework, which was approved in August, ensures "the collection and automatic exchange of information on transactions for relevant crypto," the report said. The definition of crypto assets "includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens," the report said.
The OECD has released a new crypto asset reporting framework. (Shutterstock)
The Organization for Economic Co-operation and Development (OECD) has released its new tax reporting framework, the Crypto-Asset Reporting Framework (CARF), according to a press release Monday.
The framework, which was approved in August, ensures "the collection and automatic exchange of information on transactions for relevant crypto," the report said. The definition of crypto assets "includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens," the report said.
Intermediaries and other service providers facilitating exchanges between relevant crypto assets, such as exchanges, brokers and ATM operators, will also be included in the scope.
"The current scope of assets, as well as the scope of obliged entities, covered by the Common Reporting Standard (current standards) do not provide tax administrations with adequate visibility on when taxpayers engage in tax-relevant transactions in, or hold, relevant crypto assets," the report said. Hence, the OECD has created this new framework.
