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Handling cryptocurrencies is the riskiest of businesses, according to the world’s most powerful banking standards-setter.
As moves to regulate the market accelerate, the Basel Committee on Banking Supervision released a report on Thursday calling for cryptocurrencies to carry the toughest bank capital rules of any asset.
“The growth of crypto assets and related services has the potential to raise financial stability concerns and increase risks faced by banks,” it warned, citing market and credit risk, fraud, hacking, money laundering and terrorist financing risk.
It proposed a risk weight of 1,250 per cent, in line with the toughest standards for banks’ exposures on riskier assets. That would mean banks would in effect have to hold capital equal to the exposure they face, so a $100 exposure in bitcoin would result in a minimum capital requirement of $100. The standards would also apply to assets created for decentralised finance (DeFi) and non-fungible tokens (NFTs), but potential central bank digital currencies were outside the scope of its consultation, the committee said.
Some bankers have told us they feel the Basel proposals go too far. “We’ve all seen what happens when you drive activity out of a pretty well regulated system into the wild west . . . Do the regulators want the adults to do the business, or would they want the teenagers to do the business?” said one executive involved in crypto.
The industry is under pressure from its customers to get involved. The head of State Street’s new digital division told the FT the US custody bank was seeking to keep up with customers who had increased their crypto exposure by 300 per cent in the past two to three months.
Lex says custody banks occupy one of the stodgiest corners of Wall Street as providers of back-office services, giving their entry into the wild world of cryptocurrencies an incongruous look. While custodial fees earned for crypto may not be significant, the value in servicing digital assets may come from applying blockchain technology to streamline future financial transactions.
The Internet of (Five) Things
1. SoftBank helps Klarna to $46bn valuation
Klarna has boosted its valuation by 50 per cent to $45.6bn in just three months as the buy-now, pay-later company raised fresh capital from Japan’s SoftBank. The new valuation — up from $31bn in March and $11bn last September — cements the Swedish group’s status as Europe’s most valuable private fintech company.
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2. Altice builds big BT stake
Altice, the telecoms investor controlled by billionaire Patrick Drahi, has bought a 12.1 per cent stake in BT worth £2bn, making it the British company’s biggest shareholder. Helen Thomas comments the arrival of a hard-charging, acquisitive billionaire in the register would unsettle many CEOs. But BT boss Philip Jansen, who also counts German incumbent Deutsche Telekom as a 12 per cent shareholder, is likely to welcome the attention.
3. Amazon facing UK antitrust probe
The UK’s competition watchdog is planning a formal investigation into Amazon, mirroring a continuing investigation by the EU, according to three people familiar with the situation. The Competition and Markets Authority may focus on whether the company favours merchants that also use its logistics and delivery services. Meanwhile, Josh Chaffin has profiled Prologis, whose almost 1bn sq ft of warehouses in 19 countries are the essential nodes of electronic commerce and home to tenants including Amazon and Walmart.
4. JBS paid $11m ransom
The world’s largest meat processor JBS said it paid the equivalent of $11m in ransom “to prevent any potential risk for our customers” from last week’s hack of its IT systems. Check out our Big Read on the incident, while Hannah Murphy has an explanation of how the FBI’s Trojan Shield operation exposed a criminal underworld.
5. Down and out in Chinese tech
A new generation of workers is demanding an end to harsh conditions at China’s tech giants. Forced ranking is just one recent flashpoint that has generated scrutiny as allegations of overwork, abuse and injury have become the subject of a heated national debate, writes Yuan Yang for FT Magazine.
Forwarded from Sifted — the European start-up week
German fintech Wajve raised fresh funding from Sweden’s EQT Ventures this week, hoping to become the go-to banking app for teens. The amount raised was only €5m, but it speaks to a trend of venture capitalists looking for the next hot fintech for the Gen Z market.
Others include Quirk, a new financial adviser app for youngsters, as well as Kard, Go Henry and Mitto. One gearing up to launch in the summer is XPO, an app targeting content creators — many of whom are under 22 — with a speedy invoice-financing solution.
Elsewhere in European start-ups this week, SoftBank launched its Emerge accelerator with the aim of increasing the diversity of the founders that the firm funds; Europe’s largest digital wealth manager Scalable Capital announced that it has raised a $180m Series E funding round, making it the sixth German fintech unicorn; and Lithium-ion battery maker Northvolt has raised a mammoth $2.75bn in fresh equity.
Tech tools — OnePlus Nord CE 5G
OnePlus’s Nord CE 5G (Core Edition) is an update to its midrange phone, and at a lower price — £299 in the UK, less than half the cost of its flagship OnePlus 9. It includes a 64MP triple camera system, 16MP selfie snapper, 6.43in 90Hz screen and a 4,500mAh battery, nearly 10 per cent larger than the original Nord. The Verge also notes a new processor and the addition of a headphone jack. The phone can be pre-ordered now and becomes available over the next 10 days.