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Think twice before boarding Bitcoin bandwagon, central banks told :: Kenya

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Bitcoin digital cryptocurrency

Central banks should think hard about potential risks and spillovers before issuing their own cryptocurrency, the Bank for International Settlements (BIS) said in a report on Monday.

The report by two committees at the BIS, a forum whose members include the U.S. Federal Reserve and European Central Bank, is wary of central banks issuing their own central bank digital currency, or CBDC.

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“There are risks we do not fully understand at this point,” said Jacqueline Loh, chair of the BIS markets committee.

“Any step towards a possible launch of a CBDC should be subject to careful and thorough consideration,” added Loh, who is also deputy managing director of the Monetary Authority of Singapore.

The report looks at the possible impact of a “wholesale” digital currency only for a limited audience like banks, and a “retail” version for all.

Benoit Coeure, who chairs the BIS committee on payments and market infrastructure, said there was more caution with the “uncharted waters” of a retail CBDC.

It could impact deposits, a major source of funding for commercial banks, with implications for financial stability in times of market stress, the report said.

There was no evidence that digital currencies would allow central banks to implement monetary policy better than with tools they already have.

No bank has issued a digital currency, though the Riksbank in Sweden, where the use of cash has fallen, is studying a retail e-krona for small payments. It said last month its study won’t be finalised until late 2019, later than initially indicated.

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The BIS report said blockchain or the distributed ledger technology (DLT) that underpins cryptocurrencies, could make settling trades of securities and forex more efficient.

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“DLT is where the action is,” said Coeure, who is also an ECB executive board member.

Bank of England Governor Mark Carney said that while a CBDC needed careful consideration, a more immediate priority is how to use the new technologies to meet the current demand for fully reliable, real-time payments.

No concrete action

The BIS report comes at a time when privately issued cryptocurrencies like Bitcoin have seen huge price swings to trigger stark investor warnings from regulators.

This has not crimped the sector’s enthusiasm, however.

CaskCoin launched on Monday the “first” cryptocurrency that gives investors a chance to own a share in a 40 million pound portfolio of “world class” whisky stored in a Scottish warehouse.

 

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The BIS report is timed to inform discussion among central bankers and finance ministers from the Group of 20 Economies (G20). They meet in Buenos Aires early next week to discuss if new regulation is needed for private cryptocurrencies.

The Financial Stability Board, the G20’s regulatory watchdog headed by Carney, will report on the private cryptocurrencies.

“It’s clearly a learning curve and regulators across the world have addressed what are the immediate risks created by private digital tokens,” Coeure said.

Investor protection along with anti-money laundering and terrorist financing safeguards are the priority, while consideration of cryptocurrencies’ underlying and futures markets would come later, Coeure said.

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“So any discussion in the G20 next week will be likely to be forward looking, discussing the pros and cons of regulation, but don’t expect concrete action, it’s more about comparing experiences so far,” Coeure said.





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Canada PM says informal NAFTA talks likely in next few days at U.N.

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MONTREAL (Reuters) – U.S. and Canadian officials trying to reach a deal on NAFTA are “very likely” to hold informal talks on the sidelines of a major U.N. meeting in the next few days, Canadian Prime Minister Justin Trudeau said on Sunday.

Prime Minister of Canada Justin Trudeau waits for the Prime Minister of Spain Pedro Sanchez before a military welcoming ceremony at The Royal Canadian Hussars Armoury in Montreal, Quebec, Canada September 23, 2018. REUTERS/Dario Ayala

With time running out ahead of a U.S.-imposed deadline of the end of September, negotiators are making slow progress on updating the North American Free Trade Agreement.

U.S. President Donald Trump struck a side deal on NAFTA with Mexico last month and has threatened to exclude Canada if necessary. He also said he might impose a 25 percent tariff on Canadian autos exports, which would badly hurt Canada’s economy.

Trump took office last year vowing to tear up NAFTA unless major changes were made to a pact he blames for the loss of U.S. manufacturing jobs.

Canadian Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer – the two top officials at the talks – are due to be in New York on Monday and Tuesday for the U.N. General Assembly.

“Certainly the fact that many of our negotiators, many of our teams, will be in New York at the same time (means) it’s very likely that conversations continue in a constructive but less formal way,” Trudeau told reporters.

Trudeau, speaking after talks with Spanish Prime Minister Pedro Sanchez, said nothing had formally been arranged. A Freeland spokesman declined to comment.

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The United States and Canada are divided over the best way to resolve trade disputes and a U.S. demand for more access to Canada’s protected dairy market.

Markets are reacting nervously to uncertainty over the future of the 1994 pact, which underpins $1.2 trillion in annual trade. Over the past 25 years, the three countries’ economies have become increasingly integrated, especially the auto industry.

Canadian negotiators have said they will not be rushed and Trudeau reiterated on Sunday that he would not sign a bad NAFTA deal.

Freeland and Lighthizer met in Washington last Thursday and made little progress. Canada also made clear the United States needed to withdraw the threat of auto tariffs for a deal to be possible.

Reporting by Allison Lampert; Writing by David Ljunggren; Editing by Peter Cooney

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WPP preparing to merge Young & Rubicam and digital ad firm VML: WSJ

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(Reuters) – The world’s largest advertising company WPP Plc’s (WPP.L) is preparing to consolidate some of its businesses in a bid to keep pace with the industry’s digital shift, the Wall Street Journal reported on Sunday.

FILE PHOTO: A logo hangs on the wall outside the WPP offices in London, Britain April 30, 2018. REUTERS/Simon Dawson/File Photo

The company, under its new boss Mark Read, is considering a merger between Young & Rubicam and WPP’s digital-ad firm VML, putting the combined group under the leadership of VML CEO Jon Cook, WSJ reported, citing sources.

There are talks about having the group’s direct-marketing company Wunderman work with its creative firms to provide access to consumer data to help them craft more relevant ads, the WSJ reported, citing a source.

The market leader has been hit hard in the last year as clients have increasingly turn to online platforms such as Google and Facebook to reach consumers.

The group is also recovering from the departure of its founder and veteran CEO Martin Sorrell who left in April after complaint about personal misconduct, which he denied.

WPP was not immediately available to comment on the report.

Reporting by Mekhla Raina in Bengaluru; Editing by Edmund Blair

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European Banking Authority is asked to investigate oversight of Danske Bank

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COPENHAGEN (Reuters) – The European Commisssion has asked the European Banking Authority (EBA) to investigate what went wrong in the oversight of Danske Bank’s (DANSKE.CO) Estonian branch, which is at the center of a major money laundering scandal, it said on Sunday, confirming a report in Financial Times.

FILE PHOTO: Danske Bank sign is seen at the bank’s Estonian branch in Tallinn, Estonia August 3, 2018. REUTERS/Ints Kalnins/File Photo

The Commission has also sent letters, written at the request of justice commissioner Vera Jourova, to the Danish and Estonian governments to ask about the case and its supervision, the spokesman said.

Reporting by Foo Yun Chee; Writing by Teis Jensen; Editing by David Goodman

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