The urgent need for regulators to control the crypto industry has triggered a wave of lobbying in Washington.
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Authors: Andrew Ross Sorkin, Jason Karaian, Sarah Kessler, Stephen Gandel, Lauren Hirsch, Ephrat Livni and Anna Schaverien
Financial regulators are racing to supervise stablecoins. These digital currencies linked to stable assets such as the U.S. dollar are used in encrypted transactions, banking, and decentralized finance to solve the price fluctuation problems that plague Bitcoin and others. Stable coins have become an important bridge connecting digital currencies with the traditional financial system.
But despite their names, stablecoins may be shaky. Regulators urgently need to control the industry, which in turn triggered a series of crypto industry lobbying in Washington, Eric Lipton, Jeanna Smialek, and DealBook's Ephrat Livni report.
From boom to bank run? In their short history, issuers of stablecoins that have been slightly regulated have shown that they do not always have the cash reserves they claim. Tether, the company behind the most popular stablecoin, resolved an investigation by the New York Attorney General this year that claimed that it covered up its reserves. Officials worry that if new rules are not formulated for the booming stablecoin industry as soon as possible, bank runs in the digital age may be imminent.
“When the risks faced by society become greater, regulators really start to care more,” said Jeremy Allaire, CEO of Circle, a payment and digital currency company. Helped to create a fast-growing stable currency USD Coin through the cryptocurrency exchange Coinbase. In general, stablecoins linked to the U.S. dollar have jumped from 30 billion U.S. dollars in circulation in January to approximately 125 billion U.S. dollars in mid-September.
Executives are pushing their views. Before the Treasury Department expects to release a report on stablecoins this fall, crypto companies have held dozens of meetings with cabinet members, White House staff, federal lawmakers, and financial regulators in recent weeks. The industry believes that strict supervision may promote foreign innovation, hinder financial inclusion, risk the dominance of the dollar, and stifle the prospects of digital finance. Every company is proposing a regulatory view that, if accepted, will put them ahead of the competition.
"If we think back to the 20th century, first of all, there are key innovations such as aviation or automobiles," Biden used to be Joe Biden's assistant when he was a senator, but now works for the venture capital firm Andreessen Horowitz (Andreessen Horowitz) Tomicah Tillemann (Tomicah Tillemann) said. That is a major cryptocurrency investor. "Then you invest in the regulatory framework to help bring the benefits of these technologies to more people."
In other crypto news, the Chinese government agency today reiterated that all cryptocurrency-related activities are illegal in the country and vowed to crack down more severely. The price is falling.
There will be a government cash crunch in a few weeks. In a report today, the Bipartisan Policy Center stated that the U.S. government may run out of cash on October 15 but no later than November 4 and begin to default on social security checks and other payments. The White House has begun recommending that federal agencies prepare for the first government shutdown since 2019.
The director of the CDC said that workers in high-risk jobs can also be vaccinated against the coronavirus. Dr. Rochelle Walensky rejected the recommendation of her institution, recommending additional Pfizer vaccines for health care workers, teachers, and other people whose jobs put them at higher risk. The agency only recommends the use of boosters for people over 65 and those with underlying diseases.
New York City has instituted new regulations for delivery workers. This pioneering legislation requires app-based delivery companies such as Grubhub to disclose their tipping policies, allowing delivery workers to better control their work locations, and requires restaurant owners to provide delivery workers with bathrooms.
The U.S. Securities and Exchange Commission is flexing its muscles on the issue of market abuse. In the past week, the commission charged 14 individuals in 8 different cases involving millions of dollars in fraud. Yesterday, a former Oppenheimer Fund trader was accused of conducting more than 3,000 illegal transactions in the "preemptive" program, generating $8.5 million in proceeds.
Delta Air Lines has called for a national "no-fly" list of unruly passengers. The company stated in a memo to other airlines that it had banned 1,600 people and called on airlines to merge their internal lists. A congressional group heard yesterday that since January, the FAA has recorded 4,284 "unruly passenger reports," of which approximately three-quarters are related to wearing masks.
The troubled Chinese real estate developer Evergrande yesterday made investors wonder about the fate of interest on the US$83 million dollar-denominated bond when it matures. A bondholder told DealBook that they were not paid, but the contract stipulated a grace period of 30 days before default.
Evergrande’s share price fell more than 10% today, but it is still at a recent low. The global market is also giving back some of its recent gains, but not all. How worried are investors about the possible bankruptcy of Evergrande? This is a review of where we are and what might happen next.
How did Evergrande grow? The company's billionaire founder Xu Jiayin belongs to the Communist Party of China, which is likely to give creditors more confidence to continue lending during China's epic real estate boom. In the end, however, Evergrande’s accumulated debt—about 300 billion U.S. dollars—was beyond what it seemed to be able to repay. Now, as the Chinese real estate market cools, Chinese regulators are cracking down on developers’ aggressive borrowing habits.
Will its problems harm the Chinese economy? Chaotic restructuring or defaults may undermine confidence, drag down real estate prices and weaken household wealth. This may also make it more difficult for other Chinese companies to finance their businesses through foreign investment. Avoiding this fate and containing the consequences may force China to directly or indirectly support Evergrande.
How big is the risk for international investors? UBS chief executive Ralph Hammers said that Evergrande’s troubles “did not keep me awake at night”. (UBS is a holder of Evergrande bonds, but the bank’s direct risk is “not relevant,” Hammers said.) HSBC CEO Noel Quinn, who is also a holder of Evergrande bonds, said, The situation is "worrying", but the bank has not changed its approach to China's commercial real estate. On Wednesday, Fed Chairman Jay Powell described Evergrande’s troubles as "specific to China."
— Christopher Schuetze of The Times on how Armin Laschet and Olaf Scholz, the two main candidates to become the next chancellor of Germany Show your views to voters before the Japanese election. Angela Merkel stepped down after 16 years, and the next leader of Europe's largest economy matters. Listen to "Daily" after Merkel to learn more about Germany, here are other information you need to know about voting.
According to data from Broadridge Financial Solutions, last year, approximately 2,000 listed companies in the United States held their annual general meetings in a virtual manner. This is an increase from about 300 people in 2019. Now, a group of shareholder activists is pushing the company to keep these meetings virtual or add remote options permanently. They are achieving some success.
This week, the US Securities and Exchange Commission ruled that Brinker International and Campbell Soup must allow shareholders to continue voting on the remote meeting option. The two companies have asked the SEC to allow them to exclude these proposals at the upcoming meeting. After the ruling, Brink decided to open the meeting to remote participants. Campbell will vote on the matter at the next meeting.
Shareholder meetings are traditionally a face-to-face business. Companies generally prefer this format because it limits the participants-and the problems that board members may face. Shareholder advocates have long stated that virtual meetings provide a level playing field for small investors who may not have the resources to attend the meeting.
What is Evergrande? Evergrande Group is a large-scale Chinese real estate giant and a debt-laden developer in the world. It was founded in 1996, riding on the real estate boom in China to urbanize large areas of the country, with millions of apartments in hundreds of cities.
How much does it owe? Evergrande has financial obligations of more than 300 billion U.S. dollars, hundreds of unfinished residential buildings and angry suppliers have closed construction sites. Things got so bad that the company used the unfinished property to pay overdue bills and asked employees to lend it.
How did the company get into financial trouble? For decades, the operation of China's real estate market has been unconstrained. But recently, Beijing has begun to take measures, including new restrictions on home sales, to tame the industry. Evergrande borrowed heavily in the process of growing and expanding its new business, and eventually became heavily indebted.
Why is Evergrande's destiny important? The company's collapse will cause repercussions worldwide, affecting the global market, millions of jobs and hundreds of thousands of employees created by the company. China's entire residential and commercial real estate market, which accounts for one-third of China's total economy, may collapse.
How did the Chinese government respond to the crisis? With Evergrande approaching financial collapse, Beijing has been on the sidelines for months. It wasn't until December last year that the company said that officials from state support agencies had joined a risk committee to help restructure the business.
How is Evergrande now? For months, the real estate giant avoided default by making an 11th hour payment on bonds. But on December 9, a large credit rating company announced that Evergrande had failed to make payments on schedule. What will happen next to the company, bankruptcy, fire sale or business as usual, is yet to be determined.
Virtual meetings “fundamentally change the scope of shareholder participation and accessibility,” Matthew Prescott, shareholder advocate and senior director of the Humane Society, told DealBook. His team sponsored proposals for virtual meetings between Brink and Campbell.
For a long time, shareholders have been able to vote remotely before the meeting. A study this year found that compared to face-to-face meetings, virtual meetings tend not to generate more shareholder participation. "These shareholder proposals will not receive any meaningful support," said Douglas Chia, a corporate governance expert and author of the study.
The pandemic has not changed everything in our lives and work, but it has changed a lot. Former FDA Commissioner Dr. Scott Gottlieb pointed out in his new book "Uncontrolled Transmission" that there will be more changes in the future. DealBook and Pfizer board member Dr. Gottlieb talked about doing business in the new world created by Covid. The interview has been edited and condensed.
DealBook: Does the previous pandemic tell us about the future after this pandemic?
Dr. Gottlieb: The influenza pandemic of 1918 was a turning point in history. Obviously, this epidemic has changed the course of history. In terms of culture and society, it is too early to say what impact it will have. But the new crown virus has exposed the vulnerabilities in many aspects of society-basic workers, low-income people, the elderly and ethnic minorities. We will be forced to change.
The workplace needs to be immune to the threat of viruses. There is no clear dividing line, but at some point, Covid will become a constant threat, just like the flu. We need to consider companies that reduce space density, improve airflow, change commuting methods, and voluntarily request vaccinations.
Activities must be moved outdoors and held in certain seasons. Meetings may become more customized, and there will be a mix of on-site and virtual methods.
From the overall perspective, how will our thinking change?
We must systematically examine our entire government and corporate systems, how we operate in the world, and how we assess global risks and create a new framework based on preparedness requirements. We will have to consider maximum flexibility and maximum efficiency, taking public health as a priority-economic and national security issues.
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