Finance

LONDON — British fintech giant Wise got off to a solid start in its highly anticipated debut Wednesday, which gave the company a market value of £8 billion ($11 billion).Shares of Wise, which was formerly known as TransferWise, opened at £8 a share at 11 a.m. London time, climbing as high as £8.31 before later settling at £8.26 by early afternoon trading.The money transfer firm opted to list in London through a direct listing, a rare method of going public that was pioneered by Spotify in the U.S. back in 2018. Rather than raising money in an IPO, Wise’s private backers are selling their existing shares to the public.The listing is a victory for London, which is aiming to become a top global tech hub following the U.K.’s withdrawal from the European Union.Unconventional listingIn an unusual move, Wise also introduced a program called OwnWise that lets users own a stake in the company. Customers participating in the scheme would be entitled to receive bonus shares worth up to a maximum of £100 after 12 months.The Wise logo displayed on a smartphone screen.Pavlo Gonchar | SOPA Images | LightRocket via Getty Images”It feels very consistent with their brand, particularly the direct listing,” Russ Shaw, founder of Tech London Advocates, told CNBC.”They’re bypassing what can often be a very expensive process to get through an IPO, and going direct to the market, direct to their customers, trying to cut out as many intermediary costs as possible,” he added.Wise is one of Britain’s biggest and best-known fintech unicorns. Its listing is seen as a validation for the country’s burgeoning fintech sector, which has produced multibillion-dollar firms like Revolut and Checkout.com, and attracted $4.1 billion of investment in 2020.The company was founded in 2010 by Estonian friends Taavet Hinrikus and Kristo Käärmann. Frustrated with the steep fees they faced sending money between the U.K. and Estonia, the pair worked out a new way to make cross-border transfers at the real exchange rate.Wise, which makes money through cross-border transaction fees, has been profitable since 2017. In its 2021 fiscal year, the company doubled profits to £30.9 million ($42.7 million) while revenues climbed 39% to £421 million.A win for LondonAt $11 billion, Wise’s market cap is more than double the $5 billion private investors had valued the company in 2020. The float has made billionaires out of Wise’s founders. Käärmann’s stake is now worth approximately $2.1 billion, while Hinrikus’ is worth $1.2 billion.The debut is also good news for early Wise investors like Peter Thiel’s Valar Ventures and Andreessen Horowitz.Wise’s debut is also a big win for the U.K., which is vying to attract more tech companies to its stock market after Brexit with reforms to London’s listing rules. At the same time, as the first direct listing of a tech company in London, it was also a risky gamble. Nevertheless, it has turned out to be the biggest London tech listing by market cap in history.”Wise joining the Main Market through its Direct Listing demonstrates that global tech companies can build, scale-up and go public in London,” said Julia Hoggett, CEO of the London Stock Exchange.”London offers access to deep pools of international capital, alongside high standards of corporate governance and effective regulations.”However, Wise’s decision to list with a dual-class share structure — which gives founders and early investors enhanced voting rights — may prove controversial for some investors. Food delivery firm Deliveroo plunged as much as 30% on the first day of trading, in part due to governance concerns around its dual-class stock structure.Wise is a four-time CNBC Disruptor 50 company that most recently ranked No. 23 on the 2019 list. More

In this articleVCoinbase launched its own debit card in an effort to promote the use of cryptocurrencies in payments as well as investing.CoinbaseVisa said Wednesday that more than $1 billion worth of cryptocurrency was spent by consumers globally on goods and services through their crypto-linked cards in the first six months of the year.By comparison, Visa estimated crypto spending at only a fraction of that amount in the same periods last year and in 2019. The payments giant did not release exact numbers.”We are doing a lot to create an ecosystem that makes crypto currency more usable and more like any other currency,” Visa CFO Vasant Prabhu told CNBC. “People are exploring ways in which they can use cryptocurrencies for things they would use normal currencies for.” He added, “There are lots of issues in terms of volatility, etc. But that’s up to the owners of cryptocurrencies to manage and track.”According to recent research from Visa rival Mastercard, 93% of North American consumers plan to use cryptocurrency or other emerging payment technology, such as biometrics, contactless, or QR code systems, in the next year. The study also showed that 75% of millennials would use crypto currency if they understood it better.”We see a lot of volume on our [network] of people buying crypto currencies at these various regulated exchanges and as far as we can see that trend continues,” Prabhu said.This summer, Mastercard will launch a card with crypto exchange Gemini, co-founded by billionaires Cameron and Tyler Winklevoss. The card will allow consumers to earn cryptocurrency as a reward. However, cardholders will not be allowed to access their digital wallet on the site.Visa also announced Wednesday the FTX cryptocurrency platform, founded by billionaire Sam Bankman-Fried, would be added to its Fintech Fast Track Program, focused in part on making cryptocurrency more practical for consumer and business spending.Circle, BlockFi and Coinbase, which went public in April on the Nasdaq, are current Visa partners that allow cardholders to spend from their cryptocurrency wallet at more than 70 million merchants globally. Visa estimated crypto-linked cards and other emerging payments including biometrics and QR code have the potential to disrupt the $18 trillion spent every year with cash and checks globally.Bitcoin’s market cap topped $1 trillion for the fist time in February and hit an all-time high near $65,000 per unit in April due to retail investor enthusiasm during the coronavirus pandemic as a store of value and an inflation hedge. However, bitcoin has fallen roughly 45% since then — and last month, it plunged briefly below $29,000 where it started the year.Prahbu said Visa has no near-term plans to add any cryptocurrency to its balance sheet like Tesla, MicroStrategy and other companies have done recently.”We don’t hold crypto currencies on our balance sheet today. We hold currencies on our balance sheet that we need to run our business. We hold currencies that we get paid in or we pay people in. That tends to be the dollar, euro, pound. So we don’t have plans to hold crypto currency because it’s not typically the way we get paid or the way we pay people,” he said. More

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.Nick Oxford | ReutersTake a look at some of the biggest movers in the premarket.Devon Energy, Occidental Petroleum — Energy stocks were set to gain as oil prices rose. Devon Energy advanced 3% in premarket trading, while Occidental Petroleum climbed 1.7%. U.S. West Texas Intermediate gained $1.23, or 1.7%, to trade at $74.60 per barrel, having declined by more than 2% in the previous session amid uncertainty about OPEC+ supply policy.Didi — The slide in Chinese ride-hailing company continued with shares falling another 4% in premarket trading. Didi shares sunk nearly 20% after Chinese regulators announced a cybersecurity review of the company, less than a week after Didi’s public debut on the New York Stock Exchange.Sunnova Energy — Shares of the solar company climbed more than 3% after Raymond James upgraded the stock to strong buy from outperform, saying the stock’s recent underperformance was caused by misguided concerns. The stock is down about 13% this year.Whirlpool — The home appliance stock edged up about 1% after JPMorgan named the company a top pick, saying that the rest of Wall Street was too negative about the company. JPMorgan’s price target of $278 represents a 28% upside for Whirlpool stock.JPMorgan, Goldman Sachs — Bank stocks were set to extend their sell-off as long-term bond yields fell further. The 10-year Treasury yield dipped another 3 basis points below 1.35%, its lowest level since February. The 30-year Treasury yield fell a similar magnitude to 1.97% on Wednesday.  More

In this articleBTC.CM=The Tether price displayed on cryptocurrency exchange Kraken’s website.Tiffany Hagler | Bloomberg via Getty ImagesTether is the third-biggest cryptocurrency in the world by market value. And it’s got some economists — including an official at the U.S. Federal Reserve — worried.Last month, Boston Fed President Eric Rosengren raised the alarm about tether, calling it a potential financial stability risk. Meanwhile, some investors believe a loss of confidence in tether could be crypto’s “black swan,” an unpredictable event that would severely impact the market.The issues surrounding tether hold significant implications for the nascent cryptocurrency world. And economists increasingly fear that it could also impact markets beyond digital currencies. Here’s what you need to know:What is tether?Chances are you’ve heard a thing or two about bitcoin. But what about tether?Like bitcoin, tether is a cryptocurrency. In fact, it’s the world’s third-biggest digital coin by market value. But it’s very different from bitcoin and other virtual currencies.Tether is what’s known as a stablecoin. These are digital currencies that are tied to real-world assets — the U.S. dollar, for example — to maintain a stable value, unlike most cryptocurrencies which are known to be volatile. Bitcoin, for example, rose to an all-time high of nearly $65,000 in April and has since almost halved in value.Tether was designed to be pegged to the dollar. While other cryptocurrencies often fluctuate in value, tether’s price is usually equivalent to $1. This isn’t always the case though, and wobbles in the value of tether have spooked investors in the past.Crypto traders often use tether to buy cryptocurrencies, as an alternative to the greenback. This essentially provides them with a way to seek safety in a more stable asset during times of sharp volatility in the crypto market.However, crypto isn’t regulated, and many banks avoid doing business with digital currency exchanges due to the level of risk involved. That’s where stablecoins tend to come in.Why is it controversial?Some investors and economists are worried tether’s issuer doesn’t have enough dollar reserves to justify its dollar peg.In May, Tether broke down the reserves for its stablecoin. The firm revealed that only a fraction of its holdings — 2.9%, to be exact — were in cash, while the vast majority was in commercial paper, a form of unsecured, short-term debt.That would place Tether in the top 10 biggest holders of commercial paper in the world, according to JPMorgan. Tether has been compared to traditional money-market funds — but without any regulation.With more than $60 billion worth of tokens in circulation, Tether has more deposits than that of many U.S. banks.There have long been concerns about whether tether is being used to manipulate bitcoin prices, with one study claiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.Earlier this year, the New York attorney general’s office reached a settlement with Tether and Bitfinex, an affiliated digital currency exchange.The state’s top law enforcement official had accused the firms of moving hundreds of millions of dollars to cover up $850 million of losses.Tether and Bitfinex agreed to pay $18.5 million in the settlement and were barred from operating in New York state, however the companies didn’t admit to any wrongdoing.Market contagionAnalysts at JPMorgan have previously warned that a sudden loss of confidence in tether could result in a “severe liquidity shock to the broader cryptocurrency market.”But there are also concerns that a sudden increase of tether withdrawals could lead to a potential market contagion, affecting assets beyond crypto.In June, Rosengren mentioned tether and other stablecoins as one of several potential risks to financial stability.”These stablecoins are becoming more popular,” he said during a presentation.Read more about cryptocurrencies from CNBC ProInvesting in Ethereum? What you need to know about it and why it’s not just another bitcoinBitcoin’s ‘mining difficulty’ is about to fall. Here’s what that means for the cryptocurrencyMost investors see bitcoin ending the year below $30,000, CNBC survey shows”A future crisis could easily be triggered as these become a more important sector of the financial market, unless we start regulating them and making sure that there’s actually a lot more stable stability to what’s being marketed to the general public as a stablecoin,” Rosengren added.Last week, Fitch Ratings warned a sudden mass redemption of tether tokens could destabilize short-term credit markets.”Fewer risks are posed by coins that are fully backed by safe, highly liquid assets, although authorities may still be concerned if the footprint is potentially global or systemic,” the U.S. credit rating agency said.”Whereas stablecoins that use fractional reserves or adopt higher-risk asset allocation may face a greater run risk.”Tether isn’t the only stablecoin out there, but it’s by far the biggest and most popular one. Others include USD Coin and Binance USD. More

In this articleBTC.CM=Changpeng Zhao, CEO of Binance, speaks during a TV interview in Tokyo, Japan, on Thursday, Jan. 11, 2018.Akio Kon | Bloomberg | Getty ImagesThe boss of Binance on Wednesday said the cryptocurrency exchange hasn’t gotten everything right and has plenty of room to grow, following a crackdown from regulators around the world.”Compliance is a journey – especially in new sectors like crypto,” Changpeng Zhao, CEO of Binance, said in a blog post.”The industry still has a lot of uncertainty,” he added. “We also recognize that with the growth comes more complexity and more responsibility.”Last month, the U.K.’s Financial Conduct Authority restricted Binance from carrying out regulated activities in the country. Binance’s U.K. unit withdrew its application to register with the regulator in May due to not meeting anti-money laundering requirements.Binance, the world’s largest crypto exchange by trading volumes, was ordered to add a notice in a prominent place on its website and app showing U.K. users that it is not permitted to carry out any regulated activity in the U.K.Meanwhile, regulators in Canada, Japan and Thailand have also issued warnings to the company.Japan’s Financial Services Agency said the crypto exchange was operating in the country without its permission, while Canada’s Ontario Securities Commission accused it of failing to comply with local regulations.Last week, Thailand’s Securities and Exchange Commission filed a criminal complaint against Binance, alleging the firm was operating in the country without authorization.”As a four-year-old startup, Binance still has a lot of room to grow,” Zhao said. “Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day.”Read more about cryptocurrencies from CNBC ProInvesting in Ethereum? What you need to know about it and why it’s not just another bitcoinBitcoin’s ‘mining difficulty’ is about to fall. Here’s what that means for the cryptocurrencyMost investors see bitcoin ending the year below $30,000, CNBC survey shows”We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users,” he added.Zhao said Binance was taking a number of steps to improve its regulatory compliance. Those include ramping up hiring, partnering with anti-crime organizations and localizing operations in markets like the U.S.Increased regulatory scrutiny has weighed on the nascent crypto market in recent months. China has cracked down on digital currency mining amid concerns over its environmental impact, for example.Cryptocurrencies had a solid start to the year, with bitcoin rallying to an all-time high of almost $65,000 in April. But they’ve since fallen sharply, with the overall crypto market capitalization losing more than $1 trillion in the last two months. More

The U.S. and China flags stand behind a microphone awaiting the arrival of then-U.S. Senator John McCain for a press conference at the U.S. Embassy in Beijing on April 9, 2009.Frederic J. Brown | AFP | Getty ImagesBEIJING — The U.S. and China can co-exist peacefully, and that the relationship should not be viewed as a “new cold war,” said Kurt Campbell, White House coordinator for the Indo-Pacific.”There will be periods of uncertainty — perhaps even periods of occasional raised tensions,” he said Tuesday, according to a press release of his comments at an Asia Society event.”Do I believe that China and the United States can co-exist peacefully? Yes, I do,” Campbell said. “But I do think this challenge is going to be enormously difficult for this generation and the next.”Since U.S. President Joe Biden took office in January, his administration has maintained the tough stance of the preceding Trump administration. Biden has called China the “most serious competitor” to the U.S.On the contentious issue of Taiwan, Campbell reiterated the Biden administration does not recognize Taiwan as an independent country, in accordance with the “One China Policy.” Under Chinese President Xi Jinping, Beijing has more aggressively asserted its claims over Taiwan and pressured other countries and international organizations not to deal with the region independently.Campbell added Tuesday that the U.S. is “quietly exploring” trade initiatives in Asia.While domestic recovery in the U.S. from the coronavirus pandemic remained the administration’s priority, “for the first time in our history, the Indo-Pacific will be the center of our regional focus,” Campbell said. More

IT IS RARE for spats about oil supply to break out between Saudi Arabia and the United Arab Emirates (UAE). The countries’ views on output usually align. Traders and analysts regard them, along with Kuwait, as the core of the Organisation of the Petroleum Exporting Countries (OPEC). So eyebrows were raised in early July when Suhail Al Mazrouei, the UAE’s energy minister, told reporters that OPEC’s quotas were “totally unfair”. A further surprise came on July 5th when meetings between the cartel and its allies (notably Russia), together known as OPEC+, were abandoned because of the disagreement. The price of the benchmark Brent crude rose above $77 a barrel for the first time in more than two years, before dropping back below $75. (The price of American crude briefly hit a six-year high.)OPEC+ introduced swingeing production cuts last spring as covid-19 began to spread, the demand for fuel tanked and the oil price collapsed to below $30 per barrel. More recently the cartel has been carefully increasing supply as demand has revived and oil prices have recovered. The cancelled meeting had been convened with the goal of agreeing on further increases to output after July. At the same time the Saudis and others were also seeking to extend the current regime for assigning cuts to members’ production. But the UAE wants the quotas, which are based on countries’ oil-producing potential in October 2018, to be revised. Its supply capacity has grown by almost a fifth since then, thanks to heavy investment. A third of its production is now sitting idle—a greater share than in any other OPEC+ country (see chart).Other members, in particular Saudi Arabia, are reluctant to see production rise too much, however. That is partly because giving way on quotas could mean that countries such as Russia start to make similar demands. But it could also reflect the Saudis’ desire to avoid overproduction at a time when non-OPEC producers could also expand supply. The usual suspects would have been America’s shale producers, who in the past have often increased output when oil prices rise. This time may be different, though. The industry is trying to change its ways, promising to keep a tight rein on oil output, restrain investment and return cash to shareholders. Iran is a more likely source of new supply. The country’s negotiators are trying to strike a deal with America that would lift economic sanctions in return for limits on Iran’s nuclear ambitions. If they succeed, the country could add around 1m barrels per day to the market by the end of the year; it could also sell the 200m barrels it currently has in storage. Chris Midgley of S&P Global Platts, a data firm, points out that Saudi officials do not want a replay of 2018, when America’s decision not to reimpose oil sanctions on Iran took them by surprise and sent oil prices lurching downwards. What, then, to expect from the cartel and its allies? There are three scenarios. One is that countries start producing whatever they want, a price war ensues, and oil prices tumble. Analysts reckon that this is the least likely outcome. Energy ministers still bear the scars of the ill-timed price war of March 2020, when Russia and Saudi Arabia failed to agree on production cuts. The market was flooded with oil just before demand suffered its covid-induced collapse. Another possibility is that a new deal fails to be struck, and that countries stick to their current quotas. That would mean the extra post-July production increases that the market had been expecting do not materialise. Coupled with the uptick in demand from holidaymakers, that would push prices up, perhaps over $80 per barrel. The most likely outcome from the row, however, is a compromise. One possibility is that the UAE and some other countries are allowed a temporary increase in production and the thorny issue of quota revision is kicked down the road. Even if a deal is struck, however, the spat may portend further disagreements—and more price volatility. OPEC+ members are using divergent strategies when it comes to the energy transition and the oil markets, argues Francesco Martoccia of Citi­group, a bank. Faced with dwindling demand in the long term, some producers, such as the UAE, want to boost supply and monetise petroleum reserves earlier. Others, such as Saudi Arabia, want to restrict production to keep prices high. Such divisions will become even clearer as the shift towards a greener economy accelerates. OPEC’s latest tiff won’t be its last. More

Wise CEO and co-founder Kristo Kaarmann.WiseLONDON — Wise, one of Britain’s biggest fintech companies, is about to go public. And it will be a major test for post-Brexit London.The money transfer firm has opted to list its shares directly on the London Stock Exchange, using a rare listing method pioneered by Spotify in the U.S. three years ago.The first trades in Wise are expected to commence shortly after 11:22 a.m. London time, according to the company’s prospectus.What is Wise?Wise, formerly known as TransferWise, was founded in 2010 by Estonian friends Taavet Hinrikus and Kristo Käärmann. Frustrated with the high fees they faced sending money between the U.K. and Estonia, they worked out a new way to make cross-border transfers at the real exchange rate.The service proved popular with Brits and has been expanding fast overseas. Wise claims to have over 10 million customers who use its service to send £5 billion ($7 billion) across borders each month.Wise competes with wire transfer incumbents like Western Union and MoneyGram, as well as fintech upstarts such as Revolut and WorldRemit.Unlike many venture-backed tech companies, Wise has been profitable for years. The company broke even for the first time in 2017. In its 2021 fiscal year, Wise doubled profits to £30.9 million ($42.7 million) while revenue climbed 39% to £421 million.Wise’s biggest shareholders are founders Käärmann and Hinrikus, who own 18.8% and 10.9% of the company, respectively. The start-up’s top external investor is Peter Thiel’s Valar Ventures, which holds a 10.2% stake in the business.Käärmann and Wise’s early investors will receive enhanced voting rights for five years after Wednesday’s listing thanks to a planned dual-class share structure. Tech giants like Facebook and Alphabet were early pioneers of such ownership structures.What is a direct listing?It’s an alternative to an initial public offering, or IPO, where a private company offers shares to the public for the first time.Swedish music streaming service Spotify was an early adopter of the method, going public via a direct listing on the New York Stock Exchange in 2018. U.S. workplace messaging app Slack and cryptocurrency exchange Coinbase have also gone public through direct listings.Unlike in a traditional IPO, companies that list directly don’t issue any new shares or raise fresh capital. This process also forgoes the need for investment bankers to underwrite the offering. However, Wise is being advised by banks like Goldman Sachs and Morgan Stanley.Tech founders and venture capitalists say direct listings can be a more attractive route to the stock market than an IPO, as it avoids paying steep underwriting fees and a potential mispricing of shares.Wise was last privately valued at $5 billion in a secondary share sale. As it is listing directly, there is no pricing process like the one firms normally undergo with an IPO, and the share price will be determined by the market once it lists.Why does it matter?Wise’s listing is a big win for London, which is vying to attract more tech success stories following Britain’s departure from the European Union.U.K. regulators are currently consulting on proposals to relax London’s listings regime and make it more attractive for tech firms to list in the capital.It’s also a validation for the country’s burgeoning fintech sector, which has produced multibillion-dollar unicorns like Revolut and Checkout.com and attracted $4.1 billion in venture capital investment last year.However, Wise’s float will also be a significant test for the city. Wise says its market debut will be the first direct listing of a tech company in London.”It is risky,” Russ Shaw, founder of Tech London Advocates, told CNBC. “This really hasn’t been done that often, especially with a fintech business.”But, he added: “They’re a profitable business. They don’t have the baggage that Deliveroo brought to the table.”Food delivery firm Deliveroo’s IPO was shunned by large institutional investors due to concerns over its gig economy model and a dual-class share structure which gave founder Will Shu over 50% of the voting rights. Deliveroo plunged as much as 30% in its first day of trading.Despite worries over governance with such ownership structures, Wise said its dual-class shares are structured in such a way that no existing shareholder will hold more than half of the voting rights just by holding class B shares. More