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Green bond resurgence in China - Industry Roundup: 9 August

ACI Worldwide and CARDNET join forces to optimize Japan's digital payments landscape

ACI Worldwide, a real-time payments software provider, has partnered with Japan's central domestic payment network, Japan Card Network, Inc., CARDNET, to modernize its digital payments infrastructure. The collaboration aims to provide customers with cutting-edge digital payments technology and next-generation solutions.

CARDNET reportedly processes over 30 billion domestic payment transactions per year and provides card payment switching services to 106 companies across the country, as well as over 889,000 point-of-sale terminals to Japan's top merchants.

The new infrastructure is expected to meet rising demands by offering its clients more sophisticated digital payment services and solutions that cover both the domestic and international markets in Japan. Leslie Choo, Managing Director, APAC, ACI Worldwide, commented that the right technology, collaboration and shared vision are important to maintaining a competitive advantage as well as providing unparalleled customer convenience as Asia's digital payments networks becomes more integrated.

The Bank of Thailand to initiate a retail CBDC pilot programme

The Bank of Thailand has begun its retail Central Bank Digital Currency (CBDC) pilot programme, which is expected to run from late 2022 to mid-2023. The study, according to Vachira Arromdee, Deputy Governor of the central bank, is expected to mainly concentrate on the progress and development of the retail CBDC and its potential impacts across the banking sector.

The Bank of Thailand is said to be one of the first central banks to investigate the potential of retail CBDC for their financial infrastructure's future. Reports indicate that the Thai economy can leverage this opportunity to diversify as well as enable businesses to gain access to more user-friendly and cost-effective financial services.

The two phases of the pilot will be Foundation and Innovation. The CBDC technology, to be developed by Giesecke+Devrient, is expected to test payment activities by 10,000 retail consumers chosen by the Bank of Thailand, Bank of Ayudhya Public Company Limited, and Siam Commercial Bank Public Company Limited during the Foundation phase. The Innovation stage will evaluate the programmability and development of CBDC for a variety of consumers, with the goal of observing real-world CBDC applications and adapting the design to Thai retail consumers.

The central bank has also launched a CBDC hackathon to promote industry involvement, fostering public discussion on the issue. The Bank of Thailand stressed that the pilot does not ensure the issuance of retail CBDC and that its purpose is to assess the viability of CBDC technology in Thai contexts.

Thailand’s Securities and Exchange Commission banned cryptocurrency as a form of payment earlier this year, and the Bank of Thailand warned against using cryptocurrency as a payment method.

Green bond resurgence in China

In the first half of 2022, reports illustrated that green bond issuance declined year over year by almost a third (27%) but grew quarter-over-quarter in the second quarter of 2022. Climate Bonds Initiative (CBI), a non-profit, international, investor-focused organization dedicated to mobilizing capital for climate action, released its earnings (H1) overview of the sustainable debt market. The overview highlighted that the overall decline was due to challenging bond market conditions brought on by the European energy crisis, post-pandemic inflation, and increasing interest rates. However, issuance increased by 25% in Q2 compared to Q1, totalling US $121.3 billion (€119.2 billion). According to the report, this recent surge indicates a rebound that CBI expects to last for the remainder of 2022.

Reports indicate that China issued the most green debt in the first half, accounting for 22% of the total so far in 2022 at $48.2 billion. Germany, in second place, issued almost $30 billion. China reportedly had the most issuances, with 190, nearly twice the number issued in the United States. Furthermore, Chinese issuers accounted for four of the top ten green issuers in the first part of the fiscal year, with the Bank of China issuing $8.13 billion. In comparison, the EU issued $11.8 billion, while the German government issued $7.83 billion.

China, along with Japan, was a major issuer of transition bonds during the first part of 2022, accounting for nearly all of the 23 transition bonds issued with emphasis on challenging sectors such as steel, chemicals, aviation and utilities.

Fintech Virtual Pay receives PSP license to operate in Kenya

The Central Bank of Kenya (CBK) has granted fintech Virtual Pay International Limited authorization to operate in Kenya as a Payment Service Provider (PSP). According to reports, this license enables Virtual Pay to provide payment processing services to both domestic and international merchants. The company plans to play an important role in the growth of the financial sector and intends to collaborate with all market sector players, including banks, non-bank financial institutions and major card schemes.

The fintech has also partnered with business managers and merchants globally to assist clients with a more streamlined and accelerated international payment process. Virtual Pay is said to have offices in Tanzania, Mauritius and the United Arab Emirates, where it provides services in a variety of industries. Additionally, Virtual Pay plans to provide Payment Gateway Services in accordance with the National Payment System (NPS) Act of 2011, as well as the NPS Regulations of 2014.

Mastercard supports Australian-based cryptocurrency exchange with crypto-linked payment cards

Ebang International Holdings Inc., a global blockchain technology company, announced that its Australian cryptocurrency exchange platform, Ebonex, has teamed up with Mastercard to introduce a new crypto-linked card. Customers can expect to buy, sell and trade crypto assets via Ebonex. This collaboration with Mastercard will give Ebonex customers the ability to spend their crypto holdings wherever Mastercard is accepted, converting them into fiat currency accepted by the merchant in a seamless manner.

Ebonex is reportedly the first Australian cryptocurrency exchange to be granted Mastercard's Principal Member status for the issuance of crypto-funded Mastercard payment cards. Dong Hu, Chairman and Chief Executive Officer, Ebang, commented that the collaboration with Mastercard’s global payment network will enable them to further promote innovation in the crypto and payment sector in Australia through Ebonex, encouraging customers, merchants and business towards digital assets.

US sanctions cryptocurrency mixer allegedly involved in US $7 billion in money laundering

The United States is reportedly stepping up its efforts to combat fraudulent cryptocurrency activities. According to reports, Tornado Cash, a mixer that allegedly helped launder more than US $7 billion in stolen crypto funds since its inception in 2019, has been sanctioned by the US Treasury Department. Tornado Cash is accused of systematically assisting criminals by concealing transaction details and failing to implement anti-laundering safeguards.

The Lazarus Group, a state-sponsored hacking group in North Korea, is thought to have channelled $455 million through the mixer. The sanctions prohibit transactions with or for the benefit of Tornado Cash-related individuals and entities, regardless of whether they are based in the US or are controlled by Americans. Officials emphasized that anyone who discovers prohibited activity must notify the Treasury's Offices of Foreign Assets Control (OFAC).

Tornado Cash is powered by the Ethereum blockchain. Officials said the mixer was involved in other large-scale thefts, including the Harmony Bridge heist in June 2022, where it laundered $96 million, and the Nomad attack this month involving nearly $7.8 million.

Reports indicated that the government has pursued legal action against cryptocurrency mixers for years. In 2020, federal authorities charged an Ohio man with operating a darknet mixer that assisted criminals in laundering $300 million. However, the Treasury only began sanctioning mixers this May 2022 when it blocked Blender, a previous target. The US hopes that initiatives like these will reduce terrorism and attempts to evade conventional sanctions since it now views criminal-friendly mixers as a threat to national security.

Russia's Moscow Exchange to lessen its reliance on dollars as collateral

The Moscow Exchange is expected to reduce the maximum amount of dollars it will accept as collateral to underwrite transactions. Additionally, Russia seeks to reduce its reliance on currencies from countries that have imposed sanctions on it.

Russian authorities have reportedly expressed concern about individual and corporate holdings of dollars and other non-allied currencies, urging their conversion into alternatives. Furthermore, the Moscow Exchange declared that it will reduce the amount of funds that users of its platform must submit as collateral for transactions from 50% to 25% beginning 15 August. De-dollarization in Russia has purportedly accelerated since Western countries imposed unprecedented sanctions in response to Russia's deployment of troops into Ukraine on 24 February. Moscow's access to international economic and trading systems has been hampered as a result of the sanctions.

The central bank intends to differentiate the cost of foreign currency loans for legal entities and debt securities investments based on whether they are denominated in currencies of allied or adversarial countries.

SoftBank to sell all or part of its stake in SoFi following US $23.4 billion loss

SoftBank Group Corp. is expected to sell a portion of its 9% stake in SoFi Technologies Inc., as part of a broad effort by the Japanese conglomerate to cut costs of its technology-focused Vision Fund investment portfolio following a record US $23.4 billion loss due to declining valuations and foreign currency losses.

According to a Monday filing with the US Securities and Exchange Commission, SoftBank sold approximately 5.4 million SoFi shares on 5 August at a weighted average price of $7.99. It then sold an additional 6.7 million shares at an average price of $8.17 on 8 August. According to the filing, a SoftBank subsidiary owned 83.2 million shares of SoFi as of 30 June. SoFi shares have fallen 50% this year and fell 3.5% in extending trading.

Following a record 3.16 trillion-yen ($23.4 billion) loss, SoftBank Chairman and CEO Masayoshi Son said that he intends to cut costs across his Tokyo-based company and the Vision Fund. This year's selloff in global technology stocks has reportedly hammered the Vision Fund, and SoftBank also reported a $6.1 billion foreign exchange loss due to the weaker yen.

SoftBank's Vision Fund, a global technology investment vehicle, has large stakes in hundreds of unlisted technology startups. However, SoftBank's ability to turn public listings of its portfolio companies into liquidity to boost further big bets has been hampered by low valuations. Coupang Inc., SenseTime Group Ltd., and DoorDash Inc. were among the Vision Fund holdings that saw their value fall. Drops in AutoStore Holdings and WeWork also impacted the fund. SoftBank also sold its stake in Uber Technologies Inc., the US ride-hailing behemoth that was supposedly a high performer in its portfolio.

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