The Pound Tumbles as Britain Announces New Tax Cuts to Fight Inflation

Business

Ian Krysztofiak, Staff

https://www.bloomberg.com/opinion/articles/2022-08-17/hsbc-citigroup-and-the-end-of-global-banking

The British pound hit a record low of $1.0349 when compared to the dollar during Asian trading hours on Monday, surpassing 1985’s previous record low. This comes after the British government unveiled tax cut programs on Friday. These plans include canceling the proposed plan of a 25% corporate tax hike, and a reduction on income and bonus taxes. These tax cuts come after a rise in energy prices from Russia’s cut in energy exports. The tax cuts will hopefully shield businesses and households from surging energy prices. It has been 50 years since Britain has seen tax cuts of this scale. 

Resulting in a low pound against the dollar, imports, oil and gas, and other commodities priced in dollars will now be more costly, which puts more economic stress on England. A low pound also affects yields on ten-year UK government bonds, which ultimately makes government borrowing more expensive. The ten-year UK government bond yield is currently at 4.12%. 

Recently, currency exchange markets have been hit hard; the Turkish Lira has also hit a record low against the dollar. And China has recently announced that it will make it harder to bet against the Yuan by introducing a 20% risk-reserve ratio for any financial institutions that sell foreign exchange forward contracts. This will make it costlier for banks and their clients to sell Yuan to buy Dollars in the derivatives market. The Euro has also fallen to a 20-year-low against the dollar. 

Critics see the falling pound as a potential debt problem for the U.K., as they recently borrowed 11.8 billion pounds in August, a 5.3 billion difference from what they borrowed in 2019. These tax cuts by the U.K. are a gamble, using the cuts to both fight inflation, and high energy prices are accelerating worries of a recession. With inflation at a 40-year high of 9.9 percent, this is a bold strategy from Kwasi Kwarteng, the Chancellor of the Exchequer. Unfortunately, these tax cuts will most likely only benefit the wealthy more than the middle class.

Interest Rates. On the Rise Again?

Business

Jorden McVeagh, Editor

rising interest rates

What do Rising Interest Rates Mean for Your Money? | Access Wealth 

This upcoming Wednesday Sept. 21, The Federal Reserve will meet to discuss the topic of raising interest rates once again. The past two meetings have resulted in two interest rate hikes which is significant since they haven’t raised rates since 2018. However, since March alone, the Fed’s benchmark policy rate has risen 2.25% and it stands to go up again after Wednesday’s meeting. After the meeting concludes interest rates once again will receive a bump of three quarters of a point which would bring rates to 3%. In addition, they also could raise rates by as much as an entire percentage point which would bring rates to 3.25%. All around Wall Street it is a back-and-forth discussion between whether or not people think the Fed will continue raising interest rates until November or if inflation will slow down so the central banks can relax for a little. 

Forecasts for the last quarter show that interest rates could rise to as high as 3.5-4% by November and jump up to 3.75-4.5% in December. When it comes to answering the question “do you think this will slow down anytime soon?” economists believe that there is still more to come in the future. Inflation is still rather high in comparison but has gone down over the past year. Before August, the national inflation rate sat at 8.52% with it now sitting at 8.26%. This is certainly moving in the right direction, but still up from last year’s closing rate of 5.25%.

Even though interest rates are still high, this still doesn’t mean the economy is struggling all around. The job market is sitting in an amazing position right now with an unemployment rate of 3.7% equaling 6 million people across the US without work. To put it into perspective, it is generally accepted that an unemployment rate between 4-5% is full employment. Full employment refers to the economic system where anyone who wants to and is able to work is employed. In addition, consumer spending is also still going strong. We are seeing consumer spending numbers at a higher level than it was during the COVID-19 pandemic period, it is still strong with consumers spending $1.392 trillion (USD) in the second quarter of 2022. This is up slightly from the $1.388 trillion that was spent in the first quarter of 2022. 

Finally, the housing market is still high even with the spike in interest rates in the past months. These rate hikes could prove to be costly in the long run though, as too many hikes could result in sending the US economy into a mild recession according to Chief Investment Officer at Girard Timothy Chubb. These hikes could also shift the stock market substantially in terms of market volatility. With interest rates still rather unpredictable, investors have no idea what forecasts for later in the year could look like. July 2023 forecasts have rates anywhere between 3.25-5% which would result in other central banks, such as the European Central Bank, to increase rates as well to keep the market in some sense of balance. If this were to happen it would make the markets that much more volatile making it harder to predict whether a stock price will go up or down based on other market occurrences.

While it is unknown what will happen this week and in the coming months, it will be interesting to see what happens and how it continues to impact the global economic environment. 

 

Goldman Sachs Prepares for Layoffs as Deal-Making slows

Business

Jason Ryan, Staff

Courtesy of Financial Times

Goldman Sachs is a leading American multinational investment bank and financial services company headquartered in New York City. The company provides a wide range of services to a substantial and diversified client base that includes corporations, financial institutions, governments, and individuals. 

Goldman Sachs is preparing for a round of layoffs that could come as soon as next week due to low deal-making. At the end of June, Goldman had about 47,000 employees across investment banking, trading, asset and wealth management, consumer banking and operational functions. The job cuts can greatly affect employees across the company. 

Deal-making in the United States so far this year has totaled about $1.2 billion, compared with $2 billion a year ago in 2021, according to the data firm Dealogic. Initial public offerings raised about 95 percent less through the first half of the year than the first half of last year, according to EY, an advisory firm. With this, the number of deals has fallen about 73 percent.

Goldman typically revisits its headcount every year, letting go of employees based on performance and to match the bank’s needs. It had paused that program during the pandemic, which also coincided with a record period for deal-making, when bankers complained of being overworked. The program typically lays off 1 to 5 percent of workers; this round of layoffs is likely to be at the mid of that range. 

Goldman’s Chief Financial Officer, Denis Coleman, told analysts in July that the bank was “probably reinstating our annual performance review of our employee base at the end of the year.”

The move comes as the Federal Reserve’s effort to tame inflation by raising rates has somewhat cooled deal-making and raised concerns that the U.S. economy will tip into recession. The war in Ukraine has added further uncertainty to the mix.

With this however, Goldman reported in July that its second-quarter profit had dropped nearly 50 percent from a year earlier, to just under $3 billion. Revenue from Goldman’s investment banking division fell 41 percent from the same period in 2021. At that time, the bank said hiring for the rest of the year would slow.

Still, for executives across Wall Street, assessing the requisite size for layoffs can be difficult. This is a milestone as something like this has not formally existed in the past two years. Although it may be just a modest decrease over the company, it will still cause anxiety among employees. It will be interesting to see what Goldman Sachs’ headcount is at the end of the year. These layoffs are crucial to see if other job cuts on Wall Street go ahead with this trend. 

  ryanj21@lasalle.edu

Financial Problems turn Personal Problems for Bed Bath and Beyond

Business

Jorden McVeagh, Editor

https://www.nbcphiladelphia.com/tag/bed-bath-beyond/

On Sunday Sept.4th, Bed Bath and Beyond Chief Financial Officer Gustavo Arnal was found dead by New York City Police Officials. The former 52-year-old CFO was identified as deceased after it was found he threw himself off the balcony of his 18th floor high-rise apartment. Arnal had joined the company at the peak of the COVID-19 pandemic in May 2020 after a successful career at companies such as Avon, Walgreens and Procter and Gamble. Arnal was instrumental in guiding triple B through the pandemic through his financial knowledge and his ability to create a strong collaborative culture around him. This news however comes at a terrible time for triple B as they creep closer to declaring bankruptcy. As of now, they are fighting this problem by downsizing.

 As of Wednesday Sept. 7, the company will be laying off 20% of their corporate employees, closing 150 stores, and reducing several in-house home good brands. In addition to this, $500 million has been saved up to help the company fight through the financial hardships they are facing at this time. Shifting the focus back on Gustavo Arnal, on Aug. 23, a lawsuit filed in the US District Court in DC naming Arnal as a defendant in a class action lawsuit. This case pinned him against Ryan Cohen, who accused the company and Arnal of pump and dump schemes to hyperinflate the company’s stock price. The contents of the lawsuit stated that Arnal and other company officials made misleading comments regarding the company’s current financial situation. Bed Bath and Beyond failed to communicate financial plans with investors, delayed stockholders from seeing their holdings and stock positions, and shared fake revenue numbers.

The company also introduced their “Buy Buy Baby” promotion for the purpose of increasing stock price. This promotion saw triple B acquire a privately held baby merchandising company for $67 million. This comes at a time of financial hardship for companies worldwide. It is worth noting that Ryan Cohen, the other side of the lawsuit against Arnal, sold his $178 million stake in the company. As a result of this sale, Bed Bath & Beyond stock (BBBY) dropped by a whopping 19.63%. On Aug. 18, the day Cohen sold his shares, Bed Bath and Beyond stock price dropped from $23.08 per share to $8.63 per share as of today. This was the beginning of the downfall for the company, and they have been fighting to stay afloat since. It will be interesting to see how Bed Bath and Beyond fights through this time and the financial standing of the company moving forward.

Crypto guide for someone who knows nothing about crypto

Business

Elizabeth McLaughlin, Editor
Header Image: QuoteInspector

This will be my last article in the business section of my beloved school newspaper. Reflecting on my time spent editing this section for the past year, I have one regret: I wish we had talked about crypto more.

That’s not because I’m a crypto fanatic; I don’t own any Bitcoin or Ethereum or tokens. But I am about to complete my B.S. in finance and launch my art and design business. Given my background in finance coupled with my perspective as an artist, crypto clearly intersects with my interests.

I’ll admit: for the past two years or so, I would have groaned at the mere mention of the blockchain. What do you mean it’s digital money? Isn’t my money digital when I send it through Venmo? And what do you mean crypto is “decentralized…” where exactly is it? And what the f*ck is an NFT?

First, a few disclaimers:

  1. Crypto isn’t going anywhere. Whether you like it or not, it is part of the future of finance.
  2. There are strong arguments in favor of crypto. There are also strong arguments in opposition to crypto.
  3. I have not found a single, comprehensive guide to understanding cryptocurrency, probably for a few reasons:
    1. The field is constantly evolving.
    2. Part of its appeal is that it remains ambiguous; cryptic, if you will. Pun intended.
  4. It’s actually not that difficult to understand.

With those disclaimers in mind, let’s get into it. This guide heavily quotes the information provided by Cryptopedia.

  1. Cryptocurrency is a blockchain-based digital asset. There are two main blockchain-based digital assets: crypto and tokens. We’ll get to the blockchain later.
  2. “A digital asset is anything that is stored digitally and is uniquely identifiable that organizations can use to realize value.”
  3. The difference between crypto and tokens is that cryptocurrencies have their OWN blockchains, whereas tokens are built on EXISTING blockchains.
  4. Where does the term “crypto” come from?
    1. Cryptography: an advanced encryption technique that assures the authenticity of crypto by eliminating the possibility of counterfeiting or double-spending.
    2. Encryption: computer-speak for converting data from one form into another; more specifically, plaintext into ciphertext.
  5. What is the blockchain?
    1. Imagine a bank. Way back when, banks kept written records of all their transactions. Then computers came along, and they could print out data and store it in filing cabinets. All of this transaction data existed in real time and space, not just online. The blockchain is the digital “place” where transaction data is stored.
    2. Essentially, the blockchain is “a distributed ledger that connects a decentralized network on which users can send transactions and build applications without the need for a central authority or server” (Gemini).
      1. I implore you to look further into this and discover just how murky the “decentralization” truly is — basically, it is very difficult for any technology to not be centralized by one person or organization. Back to the basics.
    3. Bitcoin is the native cryptocurrency of its own blockchain. Ethereum is the native cryptocurrency of the Ethereum blockchain.
  6. When and where do these networks operate?
    1. Everywhere, all the time. These networks are called peer-to-peer, or P2P, meaning you can communicate from Philadelphia to Seoul almost instantaneously, without first passing through a dedicated server.
  7. So we understand the blockchain, and that the two biggest digital asset classes are crypto and tokens. What can you do with crypto?
    1. Trade it, use it as a medium of exchange, use it as a store of value.
  8. What is a token? What can you do with it?
    1. It’s easier to tell you what it’s not. It’s not the native, or main or flagship currency that accompanies a blockchain.
      1. For example, Ethereum (the blockchain) has ETH (the crypto), but it also has DAI, LINK, COMP and CryptoKitties.
    2. Like crypto, tokens hold value and can be exchanged. They can also represent physical assets. They are also used by users of certain blockchains to vote on actions/policies taken by the blockchain. In other words, users can use them to guide the course of their network.
  9. Is any of this stuff regulated?
    1. What a big question. I can’t answer it all in one guide. I can say, however, that tokens do follow sets of standards, known as ERC-20 and ERC-721. I cannot give you much more information on these standards than that. I never said I was an expert.
    2. Speaking strictly from a United States perspective, crypto is really hard to regulate from a governmental perspective. The age of the average Congressperson is around 61 years old. For context, I am 21 — I’ve had a Facebook account since age 8 — and even I don’t know where to begin with regulation.
  10. How do cryptocurrencies/tokens gain or lose value?
    1. There are many ways. One thing that heavily contributes to the rate of Bitcoin, the first and biggest cryptocurrency, for example, is hype. People “in the know” buy low and sell high, as one does in any stock market situation.
    2. Their value can fluctuate greatly and quickly — it is a volatile market.

I hope this guide has clarified what cryptocurrency is. I invite any insight and/or corrections from those who are more well-versed in it than I. For further reading on the topic, I suggest:

Don’t let the finance bros gatekeep this knowledge from you. In fact, nobody should gatekeep financial knowledge of any sort — we all know the sayings, “knowledge is power” and “money is power,” so knowledge of money? Priceless.

I’m not saying crypto or finance in general are simple to understand; there are a lot of variables and context that you need to consider. In my research on crypto, I’m learning that there’s a lot more about coding that I’d like to know; information that would definitely enhance my understanding of digital finance.

But with this and with all new endeavors, remember to give yourself time. Nothing happens overnight, meaning you won’t wake up tomorrow with a full, clear understanding of the blockchain or how to invest. Just like investing, good things take time. 

You owe yourself the time it takes to understand how to function in our modern world. And you can do it. Perhaps I’m talking to myself here, or the handful of people who will read this article; either way, you can do it. In the words of Elle Woods, “What, like it’s hard?” Cryptocurrency in many ways needs to evolve before it is publicly accepted, especially due to its environmental impact, but it is the future of currency exchange and it’s here to stay.

Editor’s Note: There are many controversies surrounding cryptocurrency. For example, it is believed that one Bitcoin transaction, let alone mining, takes up the same amount of energy that a U.S. house uses in 42 days. 102.38 kilograms of CO2 is created from one Ethereum trade. 30,000 tons of electronic waste come from crypto a year. 35 percent of Bitcoin is mined in the U.S. and over 60 percent of the U.S. power grid runs on fossil fuels. NFTs can be used in pyramid schemes due to the public’s lack of understanding and pleasant nature of the images. The ethics of using NFTs to dodge copyright laws undermines the entertainment industry and art industry. Bitcoin is also used to fund criminal activity as it is difficult to track and regulate in many countries.

Credit Suisse prepares for senior management changes after a year of crisis

Business

Ian Krysztofiak, Staff

Header Image: CNBC
Credit Suisse building in Zurich Switzerland.

The Swiss investment bank Credit Suisse (NYSE: CS) reportedly has plans to replace some of its senior management positions in the coming months after the chief financial officer, general counsel and Asia-Pacific head are set to step down. Chairman of the board, Axel Lehmann, is hoping to put the bank back on stable ground after recent losses and scandals. Credit Suisse was founded in the 1800s to fund the Swiss railway system, but has since grown into a double digit billion dollar holding company with reaches into nearly every international market.

Credit Suisse is planning to replace Chief Financial Officer David Mathers, Chief Legal Officer Romeo Cerutti and the CEO of the Asia-Pacific region Helman Sitohang. Mathers has been in this role since 2010 and Cerutti has been the bank’s top lawyer since 2009. The board has yet to make any decisions. 

Credit Suisse is expected to take a loss in the first quarter of 2022 after recent litigation provisions and losses on loans through Russia’s invasion of Ukraine. Credit Suisse is looking to scale back its investment banking division and sharpen its focus on wealth management. They are also looking “to stabilize the bank through cultural and strategic changes,” said chairman Axel Lehmann.

Lehmann has only been at the helm of the board since January, as the former chairman Antonio Horta-Osorio resigned due to breaking COVID-19 quarantine requirements by attending football and tennis matches. Hort-Orsorio was at Credit Suisse for less than a year before he resigned from the board. 

Credit Suisse reported a net loss of 1.57 billion Swiss francs ($1.7 billion) for 2021. This comes after a 5.5 billion loss resulting from its risky exposure to the hedge fund Archegos Capital, which resulted in the firing of nine executives and disciplinary action against another 24 executives. They also suffered fines of $475 million for their role in the “tuna bond” scandal in the Republic of Mozambique. The firm helped arrange loans to Mozambique that were said to be used for a state owned tuna fishery and maritime commerce and security projects, but were aware that portions of he money would be used for military projects. Credit Suisse received $50 million worth of kickbacks for their bankers in exchange for better loan terms, while Mozambique officials used the funds to finance military expansion instead of the promised fishing fleet. 

Credit Suisse was unable to make a profit in 2021 during the most profitable years for financial institutions. Though with an increased focus on cultural changes, decreased investment banking activities and new management changes, only time will tell if they can rebound from their calamities.

Elon Musk buys Twitter for a whopping $44 billion

Business

Jason Ryan, Staff

A person in a suit and tie

Description automatically generated with low confidence

Shortly after becoming a majority shareholder with a 9.2 percent stake in the social media platform, Elon Musk has bought Twitter for $44 billion. Source: NPR

On Monday, Elon Musk, CEO of Tesla, Inc. and founder of SpaceX, purchased social media platform Twitter for $44 billion. Musk, the outspoken CEO, and the richest man on Earth, according to Forbes, plans to take the social media company private, and has said that he wishes for Twitter to adhere more closely to the principles of free speech, which, in a statement, Musk called, “the bedrock of a functioning democracy.” 

This deal caps off a hasty episode in which the billionaire became one of Twitter’s largest shareholders, buying a 9.2 percent stake of the company. Afterwards, Musk was offered and turned down a seat on its board and decided to bid to buy the entire company all in less than a month.

Under the terms of the deal, shareholders will receive $54.20 in cash for each share of Twitter stock they own, matching Musk’s original offer and marking a 38 percent premium over the stock price the day before Musk revealed his stake in the company.

The offer became more concrete once Musk announced in a Securities and Exchange Commission filing that he received commitments for $46.5 billion to help finance the potential deal. This included about $25.5 billion in debt financing from Morgan Stanley Senior Funding and other firms. He said he committed about $21 billion in equity financing.

Though Musk has indicated that his primary interest in Twitter has to do with what he views as the company’s censorship of free speech, Musk’s critics are concerned that the billionaire’s control over the platform could result in the silencing of their voices and others with whom he may disagree, given that he’s often blocked critics from his personal account.It is too premature to say what Musk is to do with Twitter, but it is obvious he clearly intends to make his presence felt and heard around the social media platform. Musk has repeatedly stressed in recent days that his goal is to bolster free speech on the platform and work to “unlock” Twitter’s “extraordinary potential.” We will be following this story in the coming week if there are any major updates.

Yen tumbles, as the Bank of Japan announces the purchase of 10-year bonds

Business

Ian Krysztofiak, Staff

The Yen has hit a seven-year record low of ¥124 when compared to the dollar on foreign exchange markets. Just 10 months ago, it was valued at ¥109. The Euro gained 1.17 percent to €135.79, a four-year high. The Yen is on track to be the worst performer in 2022 in the foreign exchange markets, next to the Swedish krona — while the U.S. dollar and the Australian dollar are currently the best performers of this year. The Yen has been commonly viewed as a “safe haven” currency when things are going wrong in markets.

On March 28, the dollar hit USD $125.09 against the Yen; it has since dropped two percent to around $122 on April 1. A weak Yen caused by low rates can make cost increases even worse for imports, but it should help Japan’s exporters. 

As the Bank of Japan (BOJ) moves to contain rising bond yields, they have announced the purchase of unlimited 10-year Japanese bonds for four straight days to curve bond yields. Inflation remains relatively quiet in Japan, as their estimate for 2022 is two percent, while they are currently at 0.9 percent. 

While Japan’s economy is already facing economic problems from surging energy costs and raw materials imports, confidence among Japan’s largest manufacturers declines as the Yen weakens. Japan has been primarily an export-driven economy, but in recent years production has been shifting overseas. Wage growth also remains relatively low and might not be able to keep up with overall inflation if the weak Yen pushes Yen-denominated energy prices up even higher.

Currently, the Yen is the third most heavily-traded currency, being used in trillions of dollars of highly leveraged trades. Hedge funds are fans of the Yen because they use it to invest in high yield bonds, and they use it to arbitrage differences in interest rates. These highly leveraged trades have the potential to fall apart quickly when the Yen makes upward or downward moves, forcing hedge funds to make margin calls and liquidate their safe bets.

While most central banks have been hiking interest rates to fight inflation, or at least discussing it, the BOJ has no plans to do either. Given Japan’s low inflation rates relative to the rest of the world, especially the United States, it makes sense that they wouldn’t need to hike interest rates to compensate. However, due to surging energy costs and raw materials imports, the Bank of Japan will likely have to exercise some type of monetary policy to strengthen the Yen back to its previous state.

Elon Musk is now Twitter’s largest shareholder

Business

Jason Ryan, Staff

Elon Musk’s newly disclosed 9.2 percent stake in Twitter Inc. has made him the largest shareholder of the social media-company, topping out numerous financial institutions. To put into perspective, Musk’s shareholding is four times greater than that of Jack Dorsey, who stepped down as chief executive in November.

Musk’s purchase comes after a bout of criticism aimed at the social media company. The outspoken Tesla CEO polled people on Twitter last month about whether it adheres to free speech principles. He later said he himself was considering building a new social media platform. It is evident that was not the case. 

The news that Musk would be joining Twitter’s board of directors after becoming the platform’s largest shareholder sparked immediate speculation over how much the billionaire tech entrepreneur might shake up the social media company. Moreover, people speculated about how receptive the current board might be to having him on the team.

That being said, hours after his holding in the company was set public, Musk sought to launch a poll asking whether people want an edit button, something that has been long called for and perhaps something he personally wanted. In a tweet on Tuesday, Twitter Chief Executive Parag Agrawal said, “through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board”, it seems Elon is already doing just that. 

Elon Musk

Elon Musk takes a 9.2 percent equity stake in the social-media company Twitter, exceeding large institutions and former CEO Jack Dorsey. Source: BBC News

On April 5, Twitter announced that it has been working on an edit button and that it will be rolled out soon to certain testers of the social media platform. In a later statement, Twitter executives announced that this feature and rollout are unrelated to Musk joining the board, although business critics and social media analysts are skeptical of this statement’s honesty.

Musk reported owning almost 73.5 million shares of Twitter as of March 14, according to a security filing Monday. Shares in the platform soared following Monday’s revelation that the Tesla founder had become the largest shareholder in the company. This means that stake has already grown in value and is now worth more than $3 billion.

According to a filing with the SEC, Musk’s term is set to expire in 2024. For his entire board term or 90 days after, Musk cannot be the beneficial owner of more than 14.9 percent of the company’s common stock outstanding.

It’s too soon to think about how much influence Musk will have as a director; however, social media expert Casey Newton points out that it is not the first time a big tech firm has gained a stance on Twitter. Microsoft chief executive Steve Ballmer once bought a four percent share of the company “and essentially did nothing with it”.

Yes, it is too premature to say what Musk is do with this stake, but he recently called out Twitter for allegedly falling short of “free speech principles” and very recently asked users if they want an edit button feature. It is obvious Musk clearly intends to make his presence felt and heard around the social-media platform. It will be interesting to see what comes in the coming weeks. Will Musk push for more features within the platform? Or will he push for free speech and try to allow certain people back on twitter? Only time will tell.

Powell calls for regulations on digital currencies

Business

Elizabeth McLaughlin, Editor

Header Image: The Washington Times

On Wednesday, March 23, Federal Reserve Chairman Jerome Powell discussed the need for consumer protection when it comes to digital currencies. The Bank for International Settlements, an organization that includes central bankers from around the world, organized the panel at which Powell spoke. There are two kinds of new technologies that Powell is concerned with: stablecoins and central bank digital currencies.

The former are a kind of cryptocurrency tied to a commodity or the dollar; the latter are government-issued digital forms of currencies, like the U.S. dollar. Back in Jan., the Fed released a study on stablecoins that identifies the form of currency as “a possible breakthrough innovation in the future of payments.” The Fed understands that stablecoins have the potential to significantly impact the banking system, both on traditional banking and credit provision. As for digital currencies, the Fed is researching the topic but has not decided whether to issue their own.

Although Powell did not provide much detail as to the content of these regulations, he did say that these digital transactions should be regulated the same as other transactions executed by banks. Powell is particularly concerned with the perceived lack of consumer awareness of the risk associated with cryptocurrency: many popular investments lack government protection of losses. The rate of adult Americans who invest in cryptocurrency is 16 percent and it seems that the hype is only growing, meaning that more Americans are going to be exposed to unregulated risk by investing in crypto in the coming years. That is, however, unless the government develops more robust laws and regulations concerning digital currencies.

Besides personal loss and privacy concerns, Powell discussed how cryptocurrency assets have been used for “illicit activity,” such as money laundering. On top of that, Sen. Elizabeth Warren has expressed concern regarding crypto use and evading sanctions on Russia.