Business

PARIS — The co-founder of one of the world's most popular cryptocurrencies called for tighter regulation of the sector to guard against the fraud and wild swings that have dogged it, in an interview with AFP.

Jeremy Allaire of Circle recounted the US firm's decision to offer a stabilised cryptocurrency — and insisted crypto operators owed it to society to submit to safeguards just as other emerging sectors such as AI must.

"We have social objectives that we have to match against the technology," Allaire said during a visit this week to Circle's European headquarters in Paris.

Circle offers a USDC "stablecoin", pegged to the dollar, as well as a euro-pegged variant, EURC.

Currently, $35.5 billion worth of USDC are in circulation.

As with other cryptocurrencies, transactions are recorded on a decentralised ledger, the blockchain, and not by a bank as is the case with traditional currencies.

However, whereas the dollar value of cryptocurrencies such as bitcoin tends to fluctuate, often wildly, the creators of stablecoins actively target a stable value.

In a world propelled by technological development, Allaire said, safeguards are vital for such activities.

"If I'm writing software to control a ballistic missile system, that should be regulated activity," said Allaire.

"If I'm writing a large language model and deploying that, and it has the potential to do very problematic things in society, there need to be rules that need to be assessed. Crypto is the same thing."

Crypto fraud, ransomware 

Cryptocurrencies have made headlines since their creation, from their extreme volatility to the collapse of several industry giants, foremost among them the FTX exchange platform.

The best-known cyptocurrency, bitcoin, remains the currency of choice for paying on the dark web without leaving any trace.

It is used for extorting funds via ransomware attacks, which block access to victims' computer systems and demand a ransom payment.

According to a recent report by Chainanalysis, the first half of 2024 was marked by a decrease in illicit activities. However, over that period, $460 million was paid out for ransomware, a rise of 2 per cent on a year earlier.

Crypto exhanges operate through open-source software, Allaire noted.

"That helps with transparency, visibility, security, other things."

But some have been "using the technology to do things outside of any kind of supervision", he conceded.

"You've seen fraud, abuse. You've seen people running off with money."

When cryptocurrency emerged, "unregulated intermediaries" sprang up in the sector, he said.

"Of course, the risks they take... in many cases, have led to significant losses," Allaire said.

"But that's not an argument against the technology. That's an argument against humans. And it's an argument for better supervision."

EU, US crypto regulations 

Regulators across the globe have taken note.

Last year the European Parliament adopted an EU-wide framework for crypto asset markets, "MiCA" — Markets in Crypto-Assets — requiring mandatory approval for digital-asset service providers.

In July, Circle announced it was the first "stablecoin" issuer to comply with this new regulation.

Stablecoins are used to facilitate intra-crypto exchanges by investors without having to go through a bank.

But they also give users access to a product pegged to the dollar without having a bank account in the United States, and allow cross-border payments or money transfers.

In the United States too, greater regulation is on the agenda.

US presidential candidate Kamala Harris was quoted as telling Bloomberg last week: "We will encourage innovative technologies like AI and digital assets, while protecting our consumers and investors."

In May the US House of Representatives passed a legal framework designed to regulate the crypto market — the Financial Innovation and Technology for the 21st Century Act.

Circle is meanwhile preparing to move its headquarters from Boston to New York City — "at the very top of the World Trade Centre... the very heart of the dollar international system", says Allaire.

"That's in part symbolic. It's also who we are, what we're doing. We're building, hopefully, the world's leading digital dollar and upgrading to this new internet financial system."

BEIJING — China unveiled some of its boldest measures in years on Tuesday aimed at boosting its struggling economy as leaders grapple with a prolonged property sector debt crisis, continued deflationary pressure and high youth unemployment.

The world's second-largest economy has yet to achieve a highly anticipated post-pandemic recovery and the government has set a goal of 5 per cent growth in 2024 — an objective analysts say is optimistic given the headwinds it is facing.

On Tuesday, Central Bank Chief Pan Gongsheng told a news conference in Beijing that it would cut a slew of rates in a bid to boost growth, pledging to "promote the expansion of consumption and investment".

The moves represent "the most significant... stimulus package since the early days of the pandemic", said Julian Evans-Pritchard, head of China economics at Capital Economics.

But "it may not be enough", he warned, adding a full economic recovery would "require more substantial fiscal support than the modest pick-up in government spending that's currently in the pipeline".

Among the moves unveiled Tuesday was a cut to the reserve requirement ratio, which dictates the amount of cash banks must hold in reserve.

The move will inject around a trillion yuan ($141.7 billion) in "long-term liquidity" into the financial market, Pan said.

Beijing would also "lower the interest rates of existing mortgage loans".

And it will "guide commercial banks to lower the interest rates of existing mortgage loans to the vicinity of the interest rates of newly issued loans".

The move would benefit 150 million people across the country, Pan said, and reduce "the average annual household interest bill by about 150 billion yuan".

Beijing will also create a "swap programme" allowing firms to acquire liquidity from the central bank, Pan said, a move he said would "significantly enhance" their ability to access funds to buy stocks.

"The initial scale of the swap programme will be set at 500 billion yuan, with possible expansions in the future," Pan said.

More cash please 

Shares in Hong Kong surged more than 3 per cent and in Shanghai more than two percent after China unveiled the measures.

But Heron Lim at Moody's Analytics said the move was expected given gloomy economic data in recent months suggesting Beijing could miss its 2024 growth target.

"But this is hardly a bazooka stimulus," he told AFP.

"Far more monetary easing and a stronger government stimulus is also desirable to finish bailing out the real estate market and inject more confidence into the economy," he said.

At a minimum, he added, "broader direct household support in helping them consume more goods will be useful, which is currently just too narrowly designed for industrial goods".

Another analyst said the "measures are a step in the right direction".

"We continue to believe that there is still room for further easing in the months ahead," said Lynn Song, chief economist for Greater China at ING.

Property and construction have long accounted for more than a quarter of China's gross domestic product, but the sector has been under unprecedented strain since 2020, when authorities tightened developers' access to credit in a bid to reduce mounting debt.

Since then, major companies including China Evergrande and Country Garden have teetered, while falling prices have dissuaded consumers from investing in property.

Beijing has unveiled a number of measures aimed at boosting the sector, including cutting the minimum down payment rate for first-time homebuyers and suggesting the government could buy up commercial real estate.

But those failed to boost confidence and housing prices have continued to slide.

Adding further strain, local authorities in China face a ballooning debt burden of $5.6 trillion, according to the central government, raising worries about wider economic stability.

Speaking alongside the central bank chief Tuesday, Li Yunze, director of the National Administration of Financial Regulation, said Beijing would "actively cooperate in resolving real estate and local government debt risks".

"China's financial industry, especially large financial institutions, is operating stably and risks are controllable," he insisted.

"We will firmly maintain the bottom line of preventing systemic financial risks," he added.

GENEVA — The World Trade Organisation (WTO) agreed Monday to establish an expert panel to examine US subsidies for electric vehicles after Beijing accused Washington of unfair competition.

The United States slammed China's complaint, insisting the country was seeking "to distract from its own non-market policies and practices that undermine a fair, competitive and mutually beneficial trading system".

The world's second-largest economy initially brought the case to the WTO in March, charging that the US Inflation Reduction Act (IRA) "formulates discriminatory subsidy policies for new energy vehicles", referencing a classification that includes electric cars and hybrids.

In 2022, the United States announced a massive aid programme to support companies in the energy transition sector and electric cars manufactured on American soil.

The United States has insisted that the act was a tool to address the climate crisis and "invest in US economic competitiveness".

It was also meant to counter Beijing's subsidies for electric vehicles and the wider green industry within China, which has poured vast state funds into domestic firms as well as research and development.

Washington blocked an initial request for a WTO panel in the case in July, but a second request was granted Monday during a meeting of the organisation's Dispute Settlement Board, according to a Geneva-based trade official.

Under WTO regulations, parties in a dispute can block a first request for an arbitration panel, but if the parties make a second request, it is all but guaranteed to go through.

"If China chooses to go forward with a panel proceeding, the United States will vigorously defend the Inflation Reduction Act clean energy tax credits as fully consistent with WTO rules and necessary to address our global climate crisis," the representative said, according to a transcript provided by the US mission.

"Existing WTO rules cannot be understood to prevent WTO Members from taking action to address the most urgent global issues of our time."

The WTO dispute comes at a time when Beijing and Washington are locking horns over a series of trade issues, including customs duties, cutting-edge technologies and a possible ban on social media site TikTok.

The United States had already announced in May that it was quadrupling customs duties on imported Chinese electric vehicles, with economic competition with Beijing at the heart of the US presidential campaign.

WASHINGTON — Central banks face a "difficult balancing act" as they start lowering interest rates around the world in the face of falling inflation, the head of the IMF said recently.

Central banks on both sides of the Atlantic have cut rates this year, with the US Federal Reserve reducing its key lending rate by half a percentage point earlier this week in a bid to boost demand, following in the footsteps of the European Central Bank (ECB).

But as they do so they must tread carefully, International Monetary Fund Managing Director Kristalina Georgieva said at an event with ECB President Christine Lagarde in Washington.

"Central banks face a difficult balancing act," Georgieva said. "They must ensure that inflation sustainably returns to target and remains there, while avoiding the risk of excessively tight policies."

"While clearly weaker than we would have wanted, economic activity has been remarkably resilient," she added. "While inflation is retreating, rates are going down. Recession appears to be unlikely."

The ECB has cut rates twice this year, while the Bank of England voted on Thursday to leave rates unchanged after just one cut, as UK inflation remained above-target.

Lagarde said Friday that the ECB's "determined policy actions have successfully kept inflation expectations anchored," adding that inflation remains on track to hit its two percent target in the middle of next year.

"But is the uncertainty gone? No, there is still plenty of that around," she said.

FRANKFURT, Germany — Germany wants to support Volkswagen and help it avoid factory closures but the ailing car giant will have to fix most of its problems itself, Economy Minister Robert Habeck said recently.

Volkswagen said earlier this month it needed significant restructuring to stay competitive, and was considering shutting sites in Germany for the first time in its 87-year history.

The announcement stunned employees and added to concerns about Germany's flagship car industry as it grapples with high costs, increased competition from China and weak demand for electric vehicles (EVs(.

"The majority of the tasks will have to be solved by Volkswagen itself," Habeck said during a visit to a VW plant in Emden in northwestern Germany.

He refused to comment on media reports that thousands of jobs could be threatened at Volkswagen, saying he "cannot interfere" in company policy.

But politicians could help the car sector by looking at ways to send the right "market signals", Habeck said, stopping short of mentioning any possible state aid for Volkswagen.

He pointed in particular to efforts to boost demand for EVs, insisting that electric driving "is the future".

Sales of battery cars have plummeted in Germany this year after the government phased out subsidies, dealing a blow to carmakers who have invested heavily in the transition away from fossil fuels.

Berlin recently laid out plans for new tax breaks for electric company cars to help turn the tide, Habeck noted.

The minister will on Monday host a high-level meeting with representatives from the car industry and unions to discuss the sector's woes.

Underlining the current challenges for carmakers, Mercedes-Benz on Thursday lowered its outlook for 2024 on the back of weak sales in the key Chinese market.

German rival BMW likewise trimmed its profit guidance earlier this month, also citing muted demand in China.

WASHINGTON — Sales of previously owned US homes fell in August, according to industry data released Thursday, but lower mortgage rates and growing supply are likely to boost the industry.

Existing home sales dropped 2.5 per cent last month from July to an annual rate of 3.86 million, seasonally adjusted, said the National Association of Realtors (NAR).

This was largely in line with the 3.90 million consensus that analysts expected.

"Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months," said NAR chief economist Lawrence Yun.

He added in a statement that more inventory means homebuyers will be in a better position to find properties at favorable prices.

Homebuyers in the United States have been grappling with a sharp rise in mortgage rates after the US central bank rapidly lifted the benchmark lending rate in 2022 to tackle inflation.

But with growing expectations that the Federal Reserve was going to pivot to rate cuts after holding rates at a decades-high level for months, mortgage rates have also shifted lower.

The popular 30-year fixed-rate mortgage averaged 6.2 per cent as of September 12 according to Freddie Mac — reaching the lowest level since February 2023.

A year ago, the rate was around 7.2 per cent.

On Wednesday, the Fed kicked off a process of easing monetary policy with a bold half-percentage-point rate reduction, adding to expectations that mortgages rates would fall further.

Compared with a year ago, NAR data showed that existing home sales were 4.2 per cent down in August.

The median price increased 3.1 per cent from August 2023 to $416,700, with all four US regions seeing price jumps.

Yun told a press call on Thursday that although home sales are struggling, home prices remained high.