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Chain reaction as Bitcoin drops below $20k – Industry roundup: 20 June

Cryptocurrency sector fears a chain reaction as Bitcoin drops below $20k

As Bitcoin battled to hold above a crucial level on Monday, the cryptocurrency market was on edge. Investors worry that issues at prominent crypto players could trigger a wider market shakeout, according to reports.

Early London trading hours saw Bitcoin, the largest cryptocurrency in the world, trading just below the symbolic threshold of US $20,000, or “roughly the peak of its charge to its previous record in 2017.” On Saturday, Bitcoin fell as low as $17,592.78, falling below $20,000 for the first time since December 2020. Reports indicate that in the latest cryptocurrency collapse, it has lost nearly 60% of its value this year and 37% this month alone.

According to market participants, further declines could force other crypto investors to sell their holdings to meet margin calls and cover losses. Three Arrows Capital, a crypto hedge fund, is considering selling assets and seeking a bailout from another firm. Babel Finance, Asia-based crypto lender, and Celsius Network, a US-based lender, have both announced they will suspend withdrawals.

According to Adam Farthing, Chief Risk Officer for Japan at cryptocurrency liquidity provider B2C2, "there is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books, which means that the entire amount of credit available in the crypto ecosystem is much reduced."

Smaller tokens were also impacted, such as Ether, which was trading at $1,075, after falling below its own symbolic level of $1,000 over the weekend.

The decline in crypto markets has coincided with a decline in equities, with US stocks suffering their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession, stated reports. Bitcoin's movements have reportedly been similar to those of other risk assets such as tech stocks.

According to price site Coinmarketcap, the overall crypto market capitalisation is around $877 billion, down from a peak of $2.9 trillion in November 2021. Reports show that a drop in stablecoins, a type of cryptocurrency designed to maintain a constant value, suggests that investors are withdrawing funds from the sector as a whole.

China's central bank approves Ant's application for a financial holding company

Reports indicate that China's central bank has accepted Ant Group's application to establish a financial holding company. The People's Bank of China (PBOC) is expected to approve the plan, which is the latest indication that Ant, a tech powerhouse with financial activities spanning from wealth management to payments, is about to emerge from regulatory restrictions.

The PBOC accepted Ant's application this month amid investor hopes that Chinese regulators are easing restrictions on private enterprises. While Ant has reportedly been working with financial regulators for months on a major overhaul, the central bank's agreement to review the application indicates that the company may soon receive its long-awaited license.

China's central management has reportedly given Ant, an affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd, a tentative green light to restart its IPO in Shanghai and Hong Kong. Ant is reportedly awaiting final feedback from financial regulators, particularly from the PBOC, on the setup of the financial holding firm before filing a preliminary prospectus for the share offering as early as next month.

Reports indicated that Ant must obtain the critical financial holding license and complete its restructuring before resuming its “mega-listing.” The cancelled IPO in late 2020 served as the catalyst for the crackdown that quickly spread to other sectors, including property and private education, wiping billions off market values and causing layoffs at some firms, stated reports. Beijing, on the other hand, has reportedly softened its stance in recent months. Liu He, Vice-Premier, commented that the government supports the sector's development.

In addition to the financial holding company license, Ant's personal credit-scoring joint venture has applied for a permit as part of the fintech giant's business restructuring. Ant has agreed to form the joint venture with three state-owned companies as part of a plan that will allow state-backed investors to own a combined 48 percent of its key asset – “a data treasure trove of over 1 billion users.”

BNP Paribas interested in acquiring ABN Amro

According to recent reports, French International Banking Group, BNP Paribas, has expressed interest in acquiring ABN Amro Bank, the Dutch-based consumer lending firm with headquarters in Amsterdam that has been government-owned since the financial crisis. Reports indicate that BNP Paribas is interested in ABN Amro's retail and corporate franchise, as well as the opportunity to expand into Northern Europe. ABN Amro rose as much as 18.4 percent in Amsterdam, trading up more than 12 percent to 11.55 euros. This year, the stock has dropped about 10%, giving the bank a market value of US $11.45 billion.

The Dutch government reportedly asked NLFI, which holds the ABN Amro stake on behalf of the state, for advice on a potential further sale of shares in the bank earlier this year. The Dutch finance ministry did not comment on specific considerations about a sale.

BNP Paribas, the eurozone's largest bank, will reportedly have additional capital for a deal after agreeing to sell its Bank of the West unit to Bank of Montreal for $16 billion in cash. The sale of its retail business in the United States is expected to close this year. BNP Paribas executives have committed to a 4-billion-euro stock buyback for shareholders, with the excess funds going toward growth.

BNP Paribas’ ability to make a larger purchase was advanced in May 2022 when global regulators agreed that cross-border exposures within the EU can be treated as domestic exposures, which are deemed less risky. According to Bloomberg, this move could free up funds for BNP because its prospective capital requirement would be reduced.

MAS, BdF, and ACPR collaborate to improve cross-border cyber crisis response and preparedness

The Monetary Authority of Singapore (MAS), the Banque de France (BdF) and the Autorité de contrôle prudentiel et de résolution (ACPR) conducted a joint crisis management exercise recently that focused on cybersecurity threats. The exercise follows the signing of a Memorandum of Understanding on Cybersecurity Cooperation by MAS, BdF and ACPR.

Reports indicate that the joint collaboration tested the effectiveness of the three financial authorities' cyber crisis coordination and response when dealing with scenarios such as ransomware, zero-day vulnerabilities and IT supply chain attacks. Additionally, the cyber threats and the interconnectedness of the financial systems has reportedly led to the increased importance of cross-border cooperation in ensuring financial stability and the resilience of critical financial services.

"The joint exercise demonstrates the commitment of MAS, BdF, and ACPR to sharpen our collective response to major cyber-attacks targeted at cross-border financial institutions, through effective information sharing protocols," commented Vincent Loy, Assistant Managing Director (Technology), MAS.

According to Bertrand Peyret, Deputy Secretary General, ACPR, “collaboration with MAS enables them to share best practices on how to address the growing number of cyber threats confronting financial systems." In addition to the processes and protocols required of financial institutions, supervisory authorities and central banks are said to have processes and protocols to handle these threats, including cross-border transactions.

RBC and Plaid partner to improve client security and increase connectivity to financial services apps

Global financial institution Royal Bank of Canada (RBC) and Plaid, a US-based data network provider, announced a new data access agreement that will enable RBC clients to securely share their financial data via a direct application programming interface (API) with the thousands of apps and services of their choice on the Plaid data network. This new API connection reportedly improves the user experience and removes the need for credential sharing, resulting in increased security and better privacy protection of its users.

Peter Tilton, Chief Digital Officer, Personal & Commercial Banking, RBC, commented that “While our clients want their primary banking connection with RBC, they also want to be empowered with the ability to access, use and share their financial data with applications outside of the bank.”

RBC's collaboration with Plaid, an API-first company, will significantly reduce the need for credentials when sharing financial information in Canada, said reports. This additional layer of security is said to come at an opportune time, as privacy is a top priority right now, and fraud attempts are continuously on the rise. According to RBC's 2022 Fraud Prevention Month Poll, 48 percent of respondents believe fraudsters have targeted them since the pandemic began, up from 22 percent in 2021.

Plaid's data connectivity solutions are said to enable customers to connect to the company's network of over 6,000 fintech applications, including nine of the top ten most downloaded fintech apps from Android and the App Store, in an easy and secure manner. Consumers will be able to access various financial wellness applications using these Plaid-powered tools. In addition to the RBC Digital Banking Security Guarantee, RBC clients will benefit from a variety of digital security tools such as PIN on Mobile, ID Verification, 2-Step Verification, Card Lock, two-way fraud alerts, and fraud monitoring.

Reliance Industries of India contemplates acquiring US-based Revlon

Reliance Industries, an India-based conglomerate, is considering acquiring US-based Revlon Inc. The news comes after Revlon declared bankruptcy last week, attributed to the global supply chain disruptions for driving up raw material costs and forcing vendors to demand upfront payments. In recent months, Reliance has reportedly expanded into the fashion and personal care sectors as it diversifies away from its core oil business. It has already made inroads into the telecom and retail sectors. Following the report, Revlon shares jumped 20% to $2.36 in premarket trade. In the Mumbai market, Reliance was up 1.9 percent.

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