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Cryptocurrencies – Separating fact from financial fiction

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Cryptocurrencies - Separating fact from financial fiction

Sam Reed from IT experts Air IT, takes a look at the truth behind the cryptocurrency trend…

Last year, the value of the Bitcoin hit an all time high that sparked all manner of predictions about how cryptocurrencies would revolutionise the financial world.

However, now the frenzy has abated, it is clear that the future of cryptocurrencies is uncertain.

Before we dive into the truth behind some of the areas of speculation, I’ll clarify what typifies a cryptocurrency. To begin with, the currencies are digital and at the moment they are generally unregulated. You don’t need a bank account to use them and they can be used anywhere in the world.

Are users anonymous?

Bitcoin was the original cryptocurrency and one of its biggest draws was that it afforded relative anonymity to those who used it. The whistleblowing site Wikileaks is among those that encourages payments to be made in Bitcoin, so their donors can’t be traced. Unfortunately, anonymity also makes Bitcoin particularly appealing to those involved in criminal activities, such as ransomware.

Bitcoin users are considered to be anonymous because they make transactions under a pseudonym that is not tied to their real name, or any personally identifiable details like their physical address. Most bitcoin software allows you to create a unique pseudonym for each transaction, which makes it even harder but not impossible to trace users.

A system called blockchain is widely used to keep the transactions secure. Because blockchain acts as a public ledger, anyone can readily see the records of all of the transactions ever associated with a particular bitcoin address. Blockchain analysis firms have already been set up to uncover people’s identity by looking for patterns in their transactions.

Does blockchain have other uses?

Blockchain is made of a chain of interconnected transaction blocks. If a change is made to one block in the chain the whole network will know about it. This makes it incredibly difficult to corrupt the data it holds and because it has no single point of failure it is inherently reliable too.

Even if crypto-currencies don’t survive into the future there are those who believe that blockchain could still be used in other scenarios.

Finance companies are already looking at how they can use blockchain for their transactions and some of the world’s biggest banks have funded a start up called Digital Asset Holdings to help with this.

Some believe blockchain could also evolve to be used for other applications where data security is important, such as medical records. Others believe it may be used to create a digital identity which could be used to securely log into sites, such as online banking websites, or even for digital voting.

But not everyone is convinced about the value of blockchain. Martin Walker, the director of the think tank for the Centre for Evidence Based Management recently told the Treasury Select Committee that blockchain is a fad in finance. He said: “In terms of demonstrable benefits [blockchain technology offers] little to nothing.”

 Will it replace credit cards and/or cash?

In 1999, Professor Milton Friedman, winner of the Nobel Memorial Prize in Economic Sciences said: “I think the internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing but that will soon be developed is a reliable e-cash.”

Some proponents of bitcoin believe that moment has come as some high profile companies like Virgin Galactica and Expedia are among those accepting payment in the cryptocurrency. Richard Branson said: “Sometime in the future, innovative payment models such as Square, Clinkle and Bitcoin will become serious challengers to traditional banks, which will spur more competition and give customers even more options.”

But a few hurdles need to be overcome before cryptocurrency payments can go mainstream. For starters, cryptocurrencies can only handle a few transactions at a time, compared to the tens of thousands handled by traditional payment systems. Although a solution to this is being worked on, it is still far off.

Transaction fees for making payments are also continually rising and have therefore lost the appeal of being free, like they originally were.

Are cryptocurrencies beyond the reach of the law?

At the moment, cryptocurrencies are unregulated in most parts of the world but this is unlikely to be the case for much longer.

Japan has already set up a regulatory body for its cryptocurrency exchanges and other countries are likely to follow suit.

China has also introduced a series of regulatory measures to control the use of cryptocurrencies, including a ban on internet and mobile access to all things related to cryptocurrency trading.

The UK and EU are also making plans to avoid cryptocurrencies being used for money laundering and tax evasion. Traders will be forced to reveal their identities while online platforms will have to report any suspicious transactions.

The bottom line

Cryptocurrencies may bring changes to the financial world and beyond but what they hold for the future is still being worked out. We are unlikely to see them overtake mainstream currencies any time soon.

Finance

SH Capital Ltd launches in Dubai to support SMEs with global banking services

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SH Capital Ltd launches in Dubai to support SMEs with global banking services 1

Fintech provider to reconnect businesses with international banking services, digital treasury management solutions, risk management and cash investment products

A new digital treasury services management provider SH Capital Ltd (SHC), launches in Dubai today with a plan to empower small and medium sized enterprises (SMEs & MMEs) by offering world class global banking services, asset management, FX hedging solutions, investment products and services.

SH Capital is a subsidiary of parent company Stanhope Financial Group, which launched with $3.5m funding in November last year.  In December, the group also announced the launch of its EU headquarters in Lithuania after obtaining its Electronic Money Institution licence.

The independent fintech firm, which has received its in-principle approval Cat 3A regulatory licensing from the DFSA, Dubai, is set to begin trading as of end of Q2’21, with a mission to help companies meet their financial goals during the Covid-19 recovery.

SHC will act as an intermediary for clients, helping them to access leading and global tier one cash investment products. The Stanhope team of leading industry experts will also advise on commercial paper, money market funds, futures, options, ETFs & FX hedging solutions.  Additionally, SHC has already partnered with a number of global counterparties, exchanges and e-trading venues to provide liquidity in the equity, FX, fixed income and commodity markets for all clients.

In spite of recent market volatility due to Covid-19, SHC are also committed to providing bespoke financial strategies for companies as matched principle, designed to meet their risk tolerance and position them ahead of the curve for both short and long-term financial goals.

To do this, SHC leverages the latest RegTech and blockchain technology, which helps to significantly reduce CBR risk and service friction, whilst maintaining a fast, secure and transparent service.  More specifically, AML, KYC, trade monitoring and a distributed ledger technology are just some of the technology utilised for an efficient and safe execution of service.

Speaking to Global Banking and Finance Review, Khalid Talukder, Managing Director, SH Capital Ltd, said: “For ambitious businesses within the GCC, getting multi-product access and global reach of investment instruments and solutions will be a critical priority for 2021 and beyond.

“Key to SH Capital’s offering is that we have the ability to aggregate high tier one investment solutions in a single venue, delivered digitally through our platform. This gives clients a greater choice and reach over the instruments that they can invest in, as well as our ability to help create a bespoke portfolio on a client-by-client basis through our holistic approach to client service. “

“Dubai is quickly being recognised as a global hub of fintech and innovation, being home to some of the fastest growing, most exciting firms on the planet.  With postponed Dubai Expo launching in the Autumn of 2021, we are perfectly placed to support these business to maximise this global showcasing opportunity.

Many of these businesses struggle to gain access to efficient and high quality digital asset management and investment products globally to support their treasury activities.  We aim to provide a fully digital service offering via our platform allowing easy access to various cash asset management products, services and investment products that they need in order to thrive in an increasingly competitive global world.

SH Capital Ltd will change all that, reconnecting these fast-growing firms mid-market corporates which are the backbone of GCC commerce with the products offered by Tier 1 financial institutions, as well as offering treasury consultancy to take them to the next level.

With over 70 years combined experience in our team of financial professionals, shared with quantitative-driven data insight, regulatory technology and blockchain, we are confident we can provide a consistent treasury management service, free from delays, security issues and unfair charging, to all firms in need of assistance during this difficult Covid period and beyond.”

Kevin von Neuschatz, Group CEO, Stanhope Financial Group added, “We’re excited to have received our operating licence and formally launch SH Capital Ltd in Dubai. Our on-the-ground team of experts will begin trading immediately, providing ambitious businesses across the region with tier one banking and payments services to enable rapid growth during an incredibly challenging time.

This is the first of many expansion plans for the Stanhope Financial Group, with similar launches in Europe and other key regions in the first part of 2021.”

 

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Finance

Daily Mail publisher posts 15% drop in quarterly revenue

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Daily Mail publisher posts 15% drop in quarterly revenue 2

LONDON (Reuters) – The publisher of Britain’s Daily Mail newspaper said that group revenue fell 15% in the three months to the end of December, dragged down by falls in print advertising revenues at its papers and by cancellations in its events business.

Daily Mail and General Trust said that group quarterly revenue came in at 304 million pounds ($416 million), down 15% on an underlying basis, but excluding the impact of cancelled events it was down 5%.

At its newspapers, print advertising revenues fell 38%, compared to an 8% rise in digital advertising. The group said that the impact of the pandemic meant it was difficult to provide short-term forecasts.

($1 = 0.7301 pounds)

(Reporting by Sarah Young; editing by Michael Holden)

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Dollar slides vs. most currencies on optimism about Biden administration

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Dollar slides vs. most currencies on optimism about Biden administration 3

By Gertrude Chavez-Dreyfuss and Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar fell against most currencies on Wednesday, as risk appetite held up on optimism about a massive stimulus package under the new Joe Biden administration that will likely bolster a U.S. economic recovery.

The greenback slid against the yen as well as currencies tied to commodity prices such as the Australian, Canadian, New Zealand dollars, and the Norwegian crown. The U.S. dollar dropped to a three-year low versus its Canadian counterpart and sterling, while hitting a two-week trough against the yen.

The S&P 500 climbed to a new all-time peak, while U.S. crude futures gained as the risk rally carried on.

Biden was sworn in as the 46th president of the United States on Wednesday, vowing to end the “uncivil war” in a deeply divided country reeling from a battered economy and a raging coronavirus pandemic that has killed more than 400,000 Americans.

The new government is expected to push through Congress a nearly $2 trillion U.S. fiscal stimulus plan.

“Once you are no longer uncertain about something and it materializes, the overall optimism grows and gives way to the global recovery narrative,” said Juan Perez, senior FX strategist and trader at Tempus Inc. in Washington.

“The election and the issues after — all of them played a dramatic role, but now it’s over. Joe Biden is president and stimulus hopes are, like some markets, at a record high,” he added.

In afternoon trading, the dollar fell 0.4% against the yen to 103.54, sliding to a two-week low earlier in the session to 103.45.

The U.S. dollar tumbled to a three-year low versus the Canadian currency at C$1.2607, after the Bank of Canada on Wednesday opted not to cut interest rates. The greenback was last down 0.7% at C$1.2642.

The Aussie dollar rallied 0.6% to US$0.7745, while the New Zealand currency also gained 0.6% to US$0.7167.

Sterling rose to a three-year high versus the dollar of $1.3720, but surrendered some of those gains to trade up just 0.1% at $1.3643.

A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday.

The dollar index, meanwhile, was up 0.1% at 90.483. Since the beginning of the year, the index has posted a modest 0.5% gain.

Futures positioning data still shows that investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.

The euro fell 0.2% against the dollar to $1.2106.

European countries are struggling to contain the contagion of the coronavirus amid worries that a new variant could lead to more stringent lockdowns and more economic pain.

Investors are also fretting about the slower pace of the rollout of vaccines relative to the United States and Britain, which may hobble economic recovery in the euro zone.

(Reporting by Saqib Iqbal Ahmed and Gertrude Chavez-Dreyfuss; Editing by Mark Heinrich and Sonya Hepinstall)

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