Aurelia Butler

Russia’s central bank has proposed outlawing all cryptocurrency operations in the country, one of the world’s biggest centres for mining digital tokens.Under the draft proposals, Russia would ban all cryptocurrency issuance and operations, stop banks from investing in cryptocurrencies, block exchanging crypto for traditional currency, and introduce legal liability for using crypto in purchases.In a 36-page report published on Thursday, the central bank said: “The breakneck growth and market value of cryptocurrency is defined primarily by speculative demand for future growth, which creates bubbles.”“Cryptocurrencies also have aspects of financial pyramids, because their price growth is largely supported by demand from new entrants to the market,” it added.The proposal comes after a senior EU financial regulator told the Financial Times that the bloc should ban the mining method used to produce most new bitcoin, an energy intensive practice referred to as “proof-of-work”. Elizaveta Danilova, head of the central bank’s financial stability department, said that Russians would still be allowed to own cryptocurrencies abroad but warned that regulators would track their holdings.“We consider it very important to ban using Russian financial infrastructure to obtain cryptocurrency. We think this will help remove a significant part of the risks and ensure that cryptocurrency won’t be so popular,” she said, according to Interfax.The announcement did not appear to knock the price of bitcoin, which was up 1.8 per cent against the dollar on Thursday. After China declared all cryptocurrency activities illegal last September, the currency plunged but recovered a few days later.Elvira Nabiullina, Russia’s central bank governor, is a longstanding cryptocurrency skeptic. “There are big risks of cryptocurrencies being used for money laundering and illegal operations, and we’ve spent a lot of effort on clearing the financial system of illegal and dubious operations,” she said in an interview with the FT last year. “A significant number of the bank licenses we revoked were because they were doing dubious things like this.” “We already defeated this problem and we don’t want to let it in through the back door.”In its report, Russia’s central bank said crypto would increase already hot inflation by “limiting the sovereignty of monetary policy” and warned that it could be used “to service illegal activity”.Russians made about $5bn in cryptocurrency transactions last year, according to the central bank. Russia also developed a thriving mining industry after China last year outlawed the practice. Cheap electricity prices and cold temperatures in eastern Siberia have been a boon to mining companies, which rely on vast data centres filled with fast computers. Russia’s share of bitcoin mining rose to 11 per cent last year from 6.8 per cent in 2020.Russia is the third largest cryptocurrency mining country, according to data from the Cambridge Centre for alternative finance, after the US and Kazakhstan. Huobi, one of the largest trading venues by volumes, said in September that Russian users account for 10 per cent of the company’s cash trading. But the Russian central bank said mining could potentially damage Moscow’s attempts to decarbonize its natural resource-intensive economy and pose risks to the country’s energy supply.In October last year, Russia’s energy ministry said was considering the introduction of tariffs on cryptocurrency miners, following a large uptick in the energy usage in regions such as Irkutsk in the months after China’s ban. Irkutsk’s governor warned the cabinet of an “avalanche-like spike in energy consumption” from the influx of miners, but later said mining should be classified as “entrepreneurial activity.”By January, mining activity was linked to electricity outages in digital asset specialist media.

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By Simon Jessop and Brenna Hughes NeghaiwiLONDON (Reuters) -Summa Equity said it has raised 2.3 billion euros ($2.6 billion) for Europe’s biggest-ever ‘impact’ fund, which is focused on helping meet the U.N.’s 17 Sustainable Development Goals.The Swedish private equity firm said the fund aims to improve health and working conditions and boost access to clean energy and infrastructure through its investments.Impact investing, requiring a fund manager to track how the money meets targets tied to various environmental, social and governance-related metrics, is a growing area for investors.Summa Equity Fund III was raised in “record” time over four months among investors such as pension funds, insurance companies, foundations and endowments from across the world, including the United States, Japan and Britain, Summa said in a statement on Thursday.Founded in 2016, Summa launched its first fund in 2017, raising the equivalent of 470 million euros, and its second in 2019, raising 680 million euros. In addition, it raised 540 million euros in co-investments.”The growth of Summa Equity and the strong interest for our Fund III within our five-year history is further evidence that impact investing has become mainstream,” Reynir Indahl, Managing Partner and Founder of Summa Equity, said.($1 = 0.8819 euros) More

Christine Lagarde has rejected calls for the European Central Bank to tighten monetary policy more quickly than planned in response to record inflation, saying it had “every reason not to act as quickly or as ruthlessly” as the US Federal Reserve.Soaring energy and food prices lifted inflation in the eurozone to a record high of 5 per cent in December, well above the ECB’s 2 per cent target. The ECB president, however, predicted that inflation in the bloc would stabilise and “gradually fall” this year.The Fed and the Bank of England are expected to raise interest rates several times after stopping their asset purchases this year. But the ECB in December said it was “very unlikely” to raise rates this year and outlined plans to continue bond purchases for most of 2022.“The cycle of economic recovery in the US is ahead of that in Europe,” the ECB president told France Inter radio on Thursday. “So we have every reason not to act as quickly and ruthlessly as one might imagine with the Fed.”Despite Lagarde’s confidence that inflationary pressures will fade soon, investors are betting that prices will continue to overshoot the ECB’s forecasts and force it to change its policy stance more aggressively than planned this year.

Markets are now pricing in two 0.1 percentage point interest rate rises from the ECB by the end of the year, despite the central bank’s insistence that higher borrowing costs in 2022 are not consistent with its guidance.After Germany’s 10-year bond yield — which acts as a benchmark for borrowing costs in the euro area — turned positive on Wednesday for the first time since 2019, Lagarde said rising yields meant “the fundamentals of the economy are recovering”.Critics argue the ECB is being too slow to remove its monetary stimulus because of fears this will push up borrowing costs for governments that have borrowed significantly during the coronavirus pandemic.Three German economists — Jürgen Stark, Thomas Mayer and Gunther Schnabl — wrote in a Project Syndicate article this week: “It is becoming increasingly clear that inflation will gain momentum without monetary policy countermeasures”. But they added: “Such tightening would create serious problems for highly indebted eurozone members.” More

The writer is author of ‘The Future of Money’The Chinese economy has held up remarkably well through the pandemic but now faces a combination of waning growth and financial market volatility. This reflects a number of dilemmas that Beijing is grappling with, some of which are of its own making. China’s government seems willing to tolerate lower short-term growth in the interest of securing long-term prosperity. This approach is well-intentioned, but the specific policies adopted risk creating more uncertainty and volatility, in turn eroding public support for the reforms needed to bolster long-term productivity and growth. Yet there is a way to improve this trade-off: adopting forceful measures that better define the government’s role in the economy and financial markets. The real estate sector encapsulates the challenges Beijing faces. Some property developers such as Evergrande recklessly undertook debt-financed development while many households have borrowed to finance purchases of multiple properties for speculative purposes. The property sector symbolises many of the excesses in the Chinese economy and the government clearly saw no choice but to rein it in to forestall growing economic and financial imbalances. The attempt simultaneously to reduce the build-up of debt in the economy and tamp down on property speculation has set the housing market on a downward spiral. The government is now discovering the huge costs of rectifying imbalances in a sector that it had long relied upon for propping up growth, boosting local government revenues and contributing to household wealth. The property sector’s influence over practically every aspect of the economy, financial markets and society makes it a thorny issue to fix. Beijing has set out two frameworks to guide its policymaking. The first, “dual circulation”, implies continued engagement with global trade and finance but seeks a greater reliance on domestic demand as well as technological self-sufficiency and homegrown innovation. The “common prosperity” agenda aims at a more equitable distribution of the fruits of growth. These are laudable frameworks but come up against some difficult realities. The government wants to persist with its deleveraging campaign and has rightly limited the use of debt-financed investment, fuelled by lax monetary policy, to support growth. Similarly, it wants to reduce energy-intensive production and the economy’s reliance on heavy industry and low-wage manufacturing. But the banking system, which continues to direct finance toward large state-owned industrial enterprises, has made it harder for smaller and nimbler private enterprises — including service sector firms — to secure credit. Beijing’s willingness to let Evergrande default shows it is ready to encourage market discipline by eliminating implicit state guarantees backing up financial firms and major corporations. However, the concomitant desire to increase state control of the economy and financial system, including the central bank’s measures to direct credit by fiat rather than through market mechanisms, adds more confusion than clarity.

Video: Is China’s economic model broken?

Xi Jinping’s government is clearly conflicted about the role of the private sector. Relying on it for innovation rubs up against Beijing’s steps to curb companies, particularly in the technology sector, that are seen as having accrued excessive economic and political influence. It is also not easy to square the objective of restraining wealth inequality with the reliance on the private sector to generate more wealth. Balancing these conflicting objectives is not impossible, but it will take a different approach. First, the government must commit to reducing its influence in financial markets. Second, it must tackle legacy problems, such as the large pile of implicit bad debts in the banking system, that have thwarted a restructuring. Third, a broader set of reforms is needed to reorient the economy in the direction that Beijing wants. This includes more decisive reforms to state-owned enterprises and measures to strengthen the social safety net. These steps must be complemented by institutional reforms that improve legal frameworks, including for the better protection of intellectual property rights, as well as corporate governance and transparency. These measures will help improve the trade-off between short-term pain and better economic outcomes over the longer term. Beijing might still have to accept lower growth as a price for trying to have it all, but it would be more palatable, both for China and the world economy, if that growth were more stable and balanced. More