China Tightens Cryptocurrency Crackdown
Regulators have ordered Chinese cryptocurrency platforms to shut down trading between virtual and traditional currencies.
Editor’s Remarks: The People’s Bank of China and regulators declared cryptocurrency “initial coin offerings” illegal last week, and now they are further tightening controls by banning the exchange of virtual currencies into RMB and other legal tenders. The country’s three largest exchanges, OKCoin, BTC China and Huobi, which together account for 60% of Chinese Bitcoin trading, have all suspended trading on their exchanges. OKCoin said it would comply with any new regulations but would continue with P2P (exchanges between different virtual currencies) trading and become a P2P platform for digital assets. Chinese regulators are suspicious of the role that unregulated cryptocurrencies have in capital flight and money laundering, and especially wary of the danger of uncontrolled bubbles forming in an economy that is awash with cash.
EU to Target Tech Giants Revenue Tax
Finance ministers are calling for a new European revenues tax for global internet giants such as Google, Apple, Facebook and Amazon.
Editor’s Remarks: For years, large US tech companies have taken advantage of intricate tax planning to minimise the amount of tax they must pay on the billions of revenues they earn from EU countries. The EU commission forced Apple to pay €13bn of back-taxes to Ireland last year and finance ministers are now drafting an EU-wide regime that will tax these companies based on total turnover in respective EU countries, and not profits. The proposals have been dubbed an “equalisation tax”, and EU officials have been looking at setting a rate at between 2% and 5% of turnover. European governments have been looking at ways to crack down on multinational company tax avoidance, but the setting of a turnover tax would be highly contentious, not least in EU member states Ireland and Luxembourg who have used their low tax regimes to attract big US internet companies.
US dollar down to 33-Month Lows
The greenback is being hit by multiple worries, and the dollar index is now down over 12% from its January 2017 high.
Editor’s Remarks: Concerns over growth, government policy direction and the future makeup of the Federal Reserve have combined with geopolitical worries to depress the dollar for the sixth consecutive month. Already flagging growth expectations have been hit by the prospect of economic fallout from hurricanes Harvey and Irma, which has lowered the probability of a rate hike by year end to 20%, and confidence in the Trump administration’s ability to deliver tax reform and pro-growth policies is melting away. The announcement by Federal Reserve vice-chair Stanley Fischer that he will leave its board of governors has added to uncertainty over future monetary policy direction, especially as Fed Chair Janet Yellen’s current term is expiring in February. The focus last week was on a strong euro, but attention is now turning to the falling dollar.
Equifax Data Hack
The credit-reporting agency has said that the personal records of 143m US customers have been accessed by hackers.
Editor’s Remarks: Equifax is one of America’s big three credit-reporting agencies and gathers information on the credit-profiles of over 800 million consumers. The data-breach, which included names, addresses and social security numbers and could affect close to half the US adult population, started in Mid-May and was discovered at the end of July but was not announced until over a month later. Equifax is now facing a regulatory and legal storm. Its contract’s small-print waives the legal rights of consumers in the case of a cyber-breach, and the company has had to announce that the waivers will not apply in this case after severe criticism from US politicians. Equifax’s shares were down 14% after the breach announcement and, apart from legal and regulatory problems, the company will have a hard time regaining the trust of its customers.
FBI Probe Uber over Illegal Tracking
The ride hailing company is facing an investigation into whether it illegally tracked rival Lyft’s driver locations and pricing.
Editor’s Remarks: Uber has confirmed that it is cooperating with the FBI over investigations into its “Hell” software that was used to monitor drivers when they worked for the rival Lyft ride hailing platform, and use the information to incentivise them to work for Uber instead. The new investigation comes hot on the heels of a criminal investigation by the Department of Justice into the use of another programme called “Greyball” that was used to evade law enforcement in cities where Uber’s services were not allowed to operate. The “Hell” software is no longer in operation, but new CEO Dara Khosrowshahi has hardly got his feet under the desk and is already facing a host of legacy problems that will need to be cleaned up before he can take the company forward.