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Mastercard to launch crypto trading program with Paxos – Industry roundup: 18 October

New UK Finance Minister reverses recent controversial financial policies

The economic plan proposed by the UK government just weeks ago, which was met with harsh criticism and worsening in the market, has been thoroughly overturned. This past Friday, just weeks after taking office and appointing Kwasi Kwarteng as the nation’s Finance Minister, Prime Minister Liz Truss fired him, and Jeremy Hunt took his place. On Monday, the new Finance Minister promptly announced a hard about-face on the planned financial policy.

While plans to raise corporate taxes and cut taxes on high earners had already been abandoned earlier in the month, the new changes include a reversal of many more elements of the original package, including intended cuts to basic income tax and dividend taxes. Finance Minister Hunt says that the tax cut reversal amounts to £32 billion (US $36 billion) annually.

The proposed energy package has also been adjusted in a move Hunt says is intended to “cost the taxpayer significantly less than planned.” Under the new plan, the government will still subsidize individual and company energy bills, but now only through April of 2023.

The only portions of Kwarteng’s policy that survived the reversal are the cancellation of a previously planned jump in National Insurance and a property purchase tax cut.

“No government can control markets, but every government can give certainty about the sustainability of public finances,” said Hunt. “The United Kingdom will always pay its way.”

Markets have rallied in response to Hunt’s announcement, with the pound climbing by 1.2% and UK government bonds rising, while 30-year bonds dropped. Analysts, however, warn that the market relief is likely temporary.

Goldman Sachs plans major division reshuffle

According to anonymous sources, Goldman Sachs is planning to rearrange its major divisions. The reshuffle would divide and merge various units into three new divisions: 1) investment banking and trading, 2) wealth and asset management (this division would include consumer banking), and 3) “Platform Solutions”, would include transaction banking and various fintech portfolio ventures.

This year, Goldman Sachs was valued second-lowest in the rankings of large banks’ “price to tangible book value ratio”. Speculation attributes the reorganization to the pressure and criticism CEO David Solomon has faced for the bank’s recent performance. This would be the third major reorganization Goldman Sachs will have undertaken since Solomon took office four years ago, and news sites are saying it would be one of the more significant reshuffles in Wall Street history.

The sources, who preferred to remain anonymous until Goldman officially announces the plan, say that announcement could come within days. While details are scant in the meantime, the sources stated that some executives could come out of the reshuffle with different roles.

Mastercard to launch crypto trading program with Paxos

Mastercard announced yesterday that it is building on its partnership with Paxos, a regulated blockchain infrastructure platform, to support a new program called Crypto Source. The program is designed to support financial institutions in providing secure crypto trading to customers. Mastercard cited its 2022 New Payments Index findings in the program’s press release, with 65% of respondents stating that they would prefer that their crypto services come from their “current trusted financial institution.”

Crypto Source will help to round out the crypto offerings Mastercard already offers, including their Crypto Secure security and regulatory compliance offering. Mastercard says that its suite will now support buying, holding and selling crypto assets.

Crypto Source is currently in development and readying for pilot programs. 

Bank of America’s Q3 earnings show high digital transactions and consumer spending

Bank of America’s third-quarter earnings suggest continued growth in adoption of digital transactions, with Zelle transactions 44% higher than check transactions (167 million vs. 116 million). The bank also announced 17.7 million Zelle users, compared to 15.9 million in 2021.

Digital sales were up by a notable 36% year-over-year, and nearly half of consumer sales were made via digital channels. According to CEO Brian Moynihan, the growth in digital does not stand in contrast to any overall fall in spending, as some might have expected with inflation; instead, Bank of America has seen a 12% growth in spending (January through September) compared to last year.

Canada’s Real-Time Rail payments system delays launch

Payments Canada, the leader of Canada’s Real-Time Rail (RTR) development, has announced that the launch of the new payment system is being delayed. The previous launch date of mid-2023 has been pushed back to allow for more extensive testing, validation and integration.

The RTR is designed to enable payments that can be initiated and received seconds apart at any time of any day. With ISO 20022 compatibility, the system will also support rich and flexible payments data. Payments Canada CEO Tracey Black stated, “We recognise that there will be impacts for the payment ecosystem in Canada”, and added that a new launch date will be announced once discussed and confirmed with stakeholders.

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