Cryptocurrencies – flying high or dead in the water?

Venezuela has launched its own cryptocurrency – the petro – but will it fly?Another week, another cryptocurrency. Venezuela’s president Nicolas Maduro is the newest convert to the crypto cause with the announcement of the country’s own digital coin, the petro. In a country that’s on its knees, few locals were able to join the celebrations – most are hard-pressed to buy food, let alone to consider the pros and cons of the latest investment opportunity.

With Venezuela’s national currency, the Bolivar, worth next-to-nothing, it’s easy to see what’s attracting its government to a new currency concept, especially one that’s linked to a state-controlled commodity like oil. The launch is a response to the social and economic problems that have left Venezuela with no chance of accessing international financing, although many will see it as a cynical move to scare up much-needed funds for the flagging administration. Maduro claims that the initial coin offering (ICO) will raise $6 billion based on the issue of 100 million oil-backed petro tokens.

It’s an idea that’s gaining traction in other struggling economies around the world. Iran’s Technology Minister Mohammed-Javad Azari Jahromi has already announced plans for its own state-backed cryptocurrency, while in neighbouring Turkey, rumours are afoot that the issue of a digital coin is being discussed by the ruling coalition parties. Brazil also appears to have its eyes on the crypto-prize, according to comments by Carlos Costa, planning chief of the country’s national development bank – BNDES – who has intimated it will press ahead with the use of blockchain technology in the near future.

Building the trust and transparency to support an ICO

There’s a gap a mile wide between announcing a coin issue and building the infrastructure to ensure it works, though. As well as blockchain, a massive investment is needed by private companies to buy the equipment and resources needed to mine the coins – money that Venezuela surely does not have.

In some ways, the idea of creating a reliable currency that isn’t dollar dependent and that would help smooth out the boom-and-bust pattern experienced by countries with unstable or inadequate banking options, is a sound one. But, it’s a process that requires trust and transparency – qualities the Venezuelan administration doesn’t appear to possess, based on its hyperinflation of the bolivar. What’s more, if Maduro lost the presidential election this spring, chances are the petro collapse, leaving investors holding the bag.

Opinion is split on the future of cryptocurrencies

Economists, investors and central banks remain split over the future of cryptocurrencies. Naysayers have variously described bitcoin as a ‘Ponzi scheme’, an ‘environmental disaster’ and ‘the mother of all bubbles’, a ‘noxious poison’. Speaking of cryptocurrencies in general, Berkshire Hathaway guru Warren Buffet has been unequivocal: ‘I can say almost with certainty that they will come to a bad end,’ he said.

Market regulators are concerned about the risk to investors, especially regarding the opportunities presented by cryptocurrencies to money launderers looking to rinse their funds, while central banks fear the threat to global financial stability – and to their own money supply monopoly, of course.

In China and Russia, the central banks have taken an unapologetically hawkish approach to cryptocurrencies. The People’s Bank of China has already closed bitcoin exchanges and supressed ICOs, while Elvira Nabiullina, the governor of Russia’s central bank has declared her opposition to the proliferation of non-fiat digital currencies, saying: ‘we don’t legalise pyramid schemes’. Not everyone is anti-crypto, though. Both the Bank of Canada and the Bank of England are investigating the opportunities afforded by a distributed-ledger system like blockchain and are downplaying the associated risks.

Crunch time for crypto?

So far, most of the discussions around the efficacy, or otherwise, of digital currencies have been hypothetical. Few products or services – excepting hackers’ ransoms – are priced in bitcoin and it’s not often used in transactions because of the prohibitive costs of doing so. As an investment, the extreme price volatility makes it super-risky for all but the most reckless of gamblers.

By every standard definition, cryptocurrencies are currencies in name only. Without the backing of a central bank, they simply don’t carry the weight they need to become a usable, tradeable asset in the same way as a fiat currency. And that’s without evaluating the environmental cost of a mining process that consumes vast amounts of energy. But, even if – as is expected – the petro fails, it’s doubtful that it will sound the death knell for cryptocurrencies, in the short term at least.

Will US tax reform tempt Apple back home?

Apple has announced plans to repatriate some of its cash holdingsAnother bite of the Apple

Could times be a-changing for tech giant Apple? After coming under fire for its tax evasion policies, it seems as if the company could be softening its stance towards corporate tax obligations, as CEO Tim Cook announced in January that Apple would be making a payment of $38 billion to repatriate part of its overseas cash holdings. Cook also committed to spending $30 billion in the US over a five-year period, creating 20,000 jobs and a new campus in the process.

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It’s not too early to start planning for proposed tax reform

ew your tax strategies now so you can make the most of planned tax reformWe’ve all heard a lot about tax reform over the last twelve months but with proposed changes still to make it through Congress, should you be planning new tax strategies now or is it best to wait till the dust settles?

This is actually a great time to review your current tax position. Our tips for getting your affairs in apple-pie order might also help to prepare the way for tax savings in the years to come.

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Will FCC plans to dismantle net neutrality signal the end of online equality?

How will FCC plans to dismantle net neutrality affect our access to the internet?What is Net Neutrality…

Everyone deserves a fair slice of the internet pie – don’t they? Well, it’s an argument that’s up for discussion in the closing months of the year as rules enacted by the Obama administration – designed to ensure equal access to the internet for all – are facing drastic reform.

Net Neutrality classes access to the internet as the digital equivalent of an essential public utility – like electricity – with equal rights for all. The regulations prevent internet service providers (ISPs) such as AT&T and Verizon from speeding up, slowing down or blocking content, applications or websites. Without these rules, ISPs could theoretically control how internet access is delivered, providing a preferential service to those who can afford to pay, while leaving others languishing in the slow lane.

…And why does the government want to repeal it?

The Federal Communications Commission (FCC) chairman, Ajit Pai, has proposed a plan to dismantle these so-called ‘net neutrality’ regulations, opening the door for ISPs to vary fees on a customer-by-customer basis.

Mr Pai said in a statement: ‘Under my proposal, the federal government will stop micromanaging the internet. Instead, the FCC would simply require internet service providers to be transparent about their practices so that consumers can buy the service plan that’s best for them.’

Pai, who was appointed by Trump, has overseen the repeal of several other regulations governing broadcasters and news agencies that were intended to protect public interests – including a rule limiting any organisation from controlling broadcasts that are capable of reaching more than 39 percent of US homes.

Will pay-to-play favour established companies?

The announcement has sparked a row over free speech, as opponents of the plan fear the dominant telecom companies will increase their power base at the expense of smaller innovation-based businesses, arguing that only big players will be able to afford to pay for preferential speeds. Consumers may also feel the pinch as the cost of streaming content from services like Netflix could sky-rocket.

Advocates of the repeal counter that the current rules limit consumer choice and prevent ISPs from experimenting with new business models. AT&T, among others, contends that this kind of heavy-handed regulation represents unnecessary government intervention that will restrict the scope of ongoing investment, resulting in a lower-quality service for all over the long-term.

What’s next?

Internet access companies believe it’s a lot of fuss over nothing, claiming that customers can trust them to act in good faith, continuing to provide good service and voluntarily sticking to the principles of Net Neutrality. They argue that, as in any free market, competition will hold providers to account.

It’s fair to say, though, that if carriers are charging more for high-speed services, it’s likely that bigger costs will hit consumers’ pockets at some point, though the FCC claims that companies will still be covered by laws governing anti-competitive behaviour.

This latest proposal will probably be played out in court as companies like Google and Facebook are expected to lead the resistance to Pai’s planned reform. It remains to be seen which argument will prevail.

Tech firms spark record highs in US stock markets

US stock markets hit new peaks as tech companies returned upbeat resultsTech stocks on the rise

US stock markets are surfing new highs as better-than-forecast results from technology giants are boosting gains across the sector. Although stronger economic growth in the US and globally has given rise to increased business confidence across the board, it’s estimated that a quarter of the S&P 500’s record-breaking return this year is down to a handful of over-performing tech stars.

The S&P 500’s gains put the index firmly on track to record its 104th month in a bull market. In fact, the price-to-earnings ratio of the US stock market hasn’t been this high since the dotcom bubble of the 1990s. And while there are no signs of an imminent crash, it’s a scenario that’s making some investors nervous.

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Huge rise in personal wealth as stock markets boom

A million people join ranks of super wealthy thanks to stock market boomRising wealth hits new highs

The number of high net worth individuals – those with free assets of more than $1m – has grown exponentially, as booming stock markets in the US and Europe propelled more than a million people into the ranks of the super wealthy, bringing the current global count to a record 16.5 million.

According to a recent report by business consultancy Capgemini, the world’s high net worth individuals (HNWI) have collectively amassed an eye-watering fortune of $63.5 trillion. Last year alone, 1.1 million people joined this exclusive club – a rise of 8.2% – far outstripping the 6.5% annualised growth across the previous five years. Researchers predict that HNWI wealth is on track to exceed $100 trillion by 2025.

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