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SEC Fines and Libra Woes

This past week, two companies within the token ecosystem announced settlements with the SEC. The SEC has been pursuing enforcement action for the past couple of years in wake of the ICO boom and bust of 2017. Neither of the Read more…

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This past week, two companies within the token ecosystem announced settlements with the SEC. The SEC has been pursuing enforcement action for the past couple of years in wake of the ICO boom and bust of 2017. Neither of the companies who settled admitted fault, but both have paid fines. Block.one (EOS creator) paid $24M on its unregistered $4B offering while Nebulous (SIA creator) paid $225K on its unregistered $120K offering. Nebulous also has a utility token offering; interestingly, the SEC agreed not to take action on that token, which seems to allow for a dual token structure going forward. Block.one’s relatively small fine given its massive raise, in my view, is not too dissimilar from the small fines that tech giants Facebook, Google and others have paid due to privacy violations. While regulation is certainly here for crypto, the SEC appears to be making good on its claim that it wants to support innovation while holding companies to current laws.

Meanwhile, Libra, the cryptocurrency announced by Facebook back in June, is facing a tumultuous start. Regulators from France and Germany have vowed to block Libra’s use in Europe due to concerns relating to financial stability, money laundering and consumer risk. Both governments asserted that no private entity should claim monetary power.

In the face of this setback, the Libra Association contends that they will be “firmly maintaining (their) launch schedule” for the second half of 2020. They emphasized that the stablecoin will be backed by fiat reserves from a basket of currencies (notably USD, EUR, GBP), which should stave off comments about its intrinsic volatility.

In response to Libra, the European Central Bank has highlighted its efforts to build a real-time payments system in the euro zone, known as TIPS and originally announced in November 2018. The ECB also reiterated its interest in building a long term digital currency for the Euro, but little information has been disclosed so far. In addition, Libra has forced the EU to think harder about what a clear regulatory framework would look like for cryptocurrencies.

As more countries and trade regions aim to develop public digital currencies, the distinction between a digital currency and cryptocurrency remains important—mainly that true cryptocurrencies (such as bitcoin) aren’t tied to fiat reserves and do not have a controlling entity. A sovereign digital currency, on the other hand, is simply a digital manifestation of cash issued by a central bank. Countries’ proclivity towards digital currencies is fueled by two factors. First, they provide central banks with more control and the ability to closely track the currency. Second, they can sever reliance on reserve currencies like the US dollar, a practice that now engulfs global trade. I have written and spoke extensively on the topic over the past few weeks (links are below) as it is important to educate on the distinction -and all of these may have potential significant impact on the global financial system over time. China has announced the acceleration of its digital yuan in light of the Libra announcement and I expect India to do the same with the rupee.

Complete Newsletter linked here: The FPV Blockchain Weekly #40, November 1, 2019

Source: http://thebarefootvc.com/2019/10/03/sec-fines-and-libra-woes/

Private Equity

Demand for central London office space sinks as thousands of staff work from home

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Demand for office space in central London sank in the third quarter as staff at major occupiers such as banks, insurers and asset managers continued to work from home as a result of the coronavirus pandemic.

A survey from the Royal Institution of Chartered Surveyors showed that 77% of surveyors reported a drop in demand for London office space.

The survey comes as banks such as HSBC confirm they are looking at a hybrid model of remote working and office working that could lead to a steep drop in the amount of prime office space needed by financial-services firms.

Availability for London’s office space grew for the eighteenth successive quarter, the survey showed, with availability growing at the strongest pace since 2009.

Over the next year, prime office rents in the capital are expected to fall by 6.8% as demand shrinks.

Tarrant Parsons, RICS economist, said: “Occupier demand across the office sector remains in decline and may continue to come under pressure going forward as businesses reassess their office-space requirements following the increased prevalence of remote working.”

Deutsche Bank and HSBC are among lenders that have announced that they will embrace the model of workers who opt to spend some days in the office and some days out.

The announcements come as a Morgan Stanley survey found that some 63% of office workers said they believe their employers will allow one or two days working from home in the future.

About one in five, or 18%, in the bank’s survey said they think their bosses will allow even more days than that. More than 90% of London office workers have been working from home during the pandemic — the most of any major European city.

Surveyors who commented on the RICS survey predicted that the coronavirus pandemic could lead to long-lasting changes in the way that companies use offices.

David Apperly of Apperly Estates said: “The biggest impact of coronavirus will probably be long term for office demand; rental growth is likely to be subdued for 10+ years.”

Gregory McGonigal of Ashdown Phillips said: “We are highly unlikely to return to anything like we were all experiencing in 2019 for at least five years and certain sectors will be changed permanently. The pandemic has caused, and will continue to create, a seismic shift in the UK property sector.”

Simon Wood of Downing Intervention simply said: “Winter is coming.”

To contact the author of this story with feedback or news, email James Booth

Source: https://www.penews.com/articles/demand-for-central-london-office-space-sinks-as-thousands-of-staff-work-from-home-20201029

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BlackRock wants global standards for sustainability reporting

Previous demand for firms to follow with existing standards led to a 400% increase in compliance

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BlackRock, the world’s largest asset manager, has called for the creation of a single global sustainability standard, claiming existing frameworks are making it difficult to compare companies and leading to confusion for investors.

“BlackRock is calling for convergence of the different private-sector reporting frameworks and standards to establish a globally recognised and adopted approach to sustainability reporting,” the $7.8tn New York-headquartered group said on 29 October.

BlackRock claimed the proliferation of existing disclosure initiatives, many of which are overlapping, has meant companies are reporting the same information more than once and that there is a lack of consistent and comparable data.

“We believe that this could be resolved by aligning and converging to establish a globally recognised sustainability reporting framework and set of standards,” BlackRock said.

“Ideally, these would be developed by those with domain expertise in the private sector and supported by public policymakers as they move to require more comprehensive corporate reporting.”

The call from BlackRock comes after it asked companies in January to publish their climate-related disclosures in line with the Sustainability Accounting Standards Board standards and the Task Force on Climate-related Financial Disclosures framework — two of the world’s major reporting standards.

BlackRock said it would consider voting against company management where sufficient progress had not been made.

Companies appear to have heeded BlackRock’s warning. According to a report by the fund manager’s investment stewardship team, by the end of September, there had been a 400% increase in companies reporting under the SASB standards.

“The uptick is encouraging,” BlackRock said. “However, one of the top challenges to greater adoption we hear from the directors and leadership teams is the confusion caused by the various frameworks or standards.”

Efforts are already under way to develop a common approach for sustainability disclosure.

The IFRS Foundation published a consultation in September to assess demand for global sustainability standards. The IFRS said it would assess to what extent it could help develop such standards if demand proved strong.

Also in September, a group of five sustainability-reporting organisations — the SASB, the Global Reporting Initiative, the International Integrated Reporting Council, the CDP and the Carbon Disclosure Standards Board — said they planned to work together to develop “a comprehensive global corporate reporting system”.

BlackRock has singled out an approach proposed by the IFRS Foundation as the “most practicable and likely to succeed”.

“Progress may take some time,” it said. “BlackRock will continue to advocate for TCFD and SASB-aligned reporting until a global standard is established.”

To contact the author of this story with feedback or news, email David Ricketts

Source: https://www.penews.com/articles/blackrock-wants-global-standards-for-sustainability-reporting-20201029

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Comment: Don’t overestimate the coronavirus recovery

At this point in the Covid-19 crisis, governments have only one good option: further aggressive fiscal stimulus complemented by coherent virus-containment strategies

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The world economy has risen from the depths of the initial Covid-19 plunge. But the recovery has been tepid, uneven and fragile – and is likely to remain so for the foreseeable future.

Start with the good news. World merchandise trade has rebounded strongly, consistent with indications of a revival in household demand for goods in many economies, even as public-health restrictions and consumer concerns continue to hobble demand for services.

Moreover, financial markets have held up surprisingly well, with stock markets in many countries regaining or even exceeding pre-pandemic levels. Despite near-zero interest rates, banking and financial systems seem largely stable. And consumer and industrial demand has buoyed commodity prices, with even oil prices having recovered somewhat.

But as the latest Brookings-Financial Times Tracking Indexes for the Global Economic Recovery update shows, many economies are experiencing essentially no growth, or are even contracting. With private sector confidence depleted, and the struggle to contain the virus far from over, the risks of substantial and long-lasting economic scarring are on the rise.

This is true even in the economies that have returned to growth, such as the United States. In some ways, the US seems to have turned the corner. Industrial activity and the labour market have regained some lost ground. The unemployment rate is falling, and employment levels are up.

But unemployment remains significantly higher, and employment significantly lower, than before the pandemic. The increase in long-term unemployment, together with ongoing service sector disruptions, portends a difficult path to a more robust and sustained recovery.

It doesn’t help that fiscal stimulus measures have largely lapsed, and negotiations on a new relief package have repeatedly broken down. As household disposable income has declined, private consumption growth has weakened. Similarly, business investment continues to contract – a trend that does not augur well for sustained growth.

Even stock markets, which experienced a sharp rebound earlier in the year, seem to be taking a breather. This may reflect concerns about the virus-containment strategy (or lack of) being pursued by US president Donald Trump’s administration. In any case, as next month’s presidential election approaches, heightened political and policy uncertainty is likely to keep consumer and business confidence muted.

The eurozone is in even worse shape. Not only has the pandemic decimated short-term growth; deflation is now setting in, raising the risk of a deep and prolonged contraction. While manufacturing in Germany and elsewhere has rebounded, the positive effects are more than offset by the enduring services slump, reinforced by ongoing public health restrictions.

The United Kingdom’s services sector, by contrast, has experienced a revival. Yet the combination of erratic lockdown policies and far-reaching uncertainties surrounding Brexit are contributing to a continued economic contraction. Meanwhile, on the other side of the world, Japan is also in serious economic peril, though it has so far avoided sliding back into deflation.

Most emerging market economies have not fared well, either. India is experiencing a sharp slowdown in economic activity, which could be exacerbated by a devastating acceleration in Covid-19 cases, fuelled by the easing of lockdown measures. The government has pushed through some agricultural and labour market reforms, but a banking system hobbled by bad loans remains a powerful constraint on growth.

Brazil and Russia have fared little better. Both have experienced substantial economic contractions, and have few policy levers available to revive growth.

The one country experiencing a strong recovery is China, where, thanks largely to the country’s apparent success in bringing the virus under control, both industrial production and services have rebounded. Retail sales and manufacturing sector investment have also bounced back. By many indicators, the country’s economic performance is now even stronger than it was before the pandemic.

Yet, unlike in the wake of the 2008 global financial crisis, China’s strong performance is not likely to do much to buttress the rest of the world economy, not least because of the growing push towards deglobalisation. China’s recently unveiled “dual-circulation strategy” – whereby the country will increasingly depend on the domestic cycle of production, distribution, and consumption for its long-term development – will reinforce this trend.

Making matters worse, central banks now have far less firepower than they did after the 2008 crisis. To be sure, the major central banks have pulled out all the policy stops since the Covid-19 crisis began, pursuing unprecedented monetary expansion in order to support economic activity and, in some cases, to fend off deflation. Some – most notably, the US Federal Reserve – have even adjusted their policy frameworks to signal tolerance of higher inflation. The central banks of some smaller advanced economies, such as Australia and New Zealand, and emerging economies, such as India, have also resorted to unconventional measures.

But the limits of monetary policy for boosting growth are becoming increasingly apparent. Meanwhile, large-scale purchases of corporate and government bonds, together with the direct financing of firms, are generating serious risks – not least to central-bank independence.

Against this background, governments have only one good option: further aggressive fiscal stimulus, ideally in the form of well-targeted government expenditure that could spur private investment. Whatever risks the increase in public debt may generate, they do not compare – especially in today’s low-interest-rate environment – to the long-term economic pain that countries will face without such stimulus.

To be effective, however, fiscal measures must be complemented by coherent virus containment strategies, which credibly enable safe economic reopening. Without such strategies, demand and confidence will remain subdued, and global growth will continue to falter well into the future.

Eswar Prasad is a professor of trade policy at Cornell University’s Dyson School of Applied Economics and Management and a senior fellow at the Brookings Institution. Darren Chang and Ethan Wu, undergraduate students at Cornell, assisted in the writing of this commentary.

Copyright: Project Syndicate

Source: https://www.penews.com/articles/comment-dont-overestimate-the-coronavirus-recovery-20201029

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