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Friday December 9th, 2022

Record highs, record heists: where is crypocurrency heading?

AFP – A hacking theft that netted $530 million, a ban on Facebook advertising, regulation even in Russia and more wild price swings: despite another stomach-churning week for cryptocurrencies, analysts say they are here to stay.

While headline-grabbing hacks like that suffered by Japan’s Coincheck are likely to attract the attention of regulators, experts say the "Teflon" crypto boom is now part of the economic landscape.

Cryptocurrencies have "been down numerous times, but always able to get off the canvas," Stephen Innes, head of Asia-Pacific trading at OANDA, told AFP.

Virtual currencies have certainly taken some hefty blows recently.

In the dead of night, hackers stole $530 million in Japanese virtual currency from Coincheck, sending prices plunging and underlining the vulnerability, and volatility, of cryptocurrencies.

The January 26 hack appears to be the largest cryptocurrency theft ever, exceeding even the $480 million stolen in 2014 from another Japanese virtual currency exchange, MtGox.

In the wake of the MtGox theft, Japan’s government introduced regulations requiring exchanges to obtain a government-issued licence.

And the news from Coincheck again piqued regulators’ interest, with Finance Minister Taro Aso admitting this week that the government "needs to strengthen our supervision."

Coincheck "did not store the important things separately. I think they lacked fundamental knowledge or common sense," he said.

Regulators have already clamped down in South Korea and China and even in Russia, where a draft law was drawn up last week aimed at controlling the production and creation of virtual money.

On Thursday India’s Finance Minister Arun Jaitley said the government did not consider cryptocurrencies legal tender and would "take all measures to eliminate" their use as part of a payment system and in funding illegitimate activities.

Innes said such regulatory oversight was long overdue, as the current framework was "far too lax given investors’ vulnerabilities from both market volatility and cybercriminals."

"In general, the regulatory framework in Asia was terrible, which offered criminals mouth-watering targets," he added.

– ‘Systemically important’ –

Crypto regulation was also on the minds of the global elite at this year’s World Economic Forum, with British finance minister Philip Hammond urging governments to be "cautious."

"Possibly we do need to look at the way we regulate this environment before the amount of outstanding bitcoin becomes large enough to be systemically important in the global economy," he told Bloomberg TV.

Tech giant Facebook then got in on the act, banning all ads related to cryptocurrencies in an effort to fight scams.

All this has taken its toll on the value of bitcoin — the best-known virtual currency — which soared to nearly $20,000 before dropping back to less than half that value with wild daily swings.

But despite the negative publicity and the growing attention of regulators, enthusiasm for cryptocurrencies does not appear to be waning.

BitFlyer, Japan’s main bitcoin exchange, told AFP it had actually seen increased interest after the Coincheck hack was revealed.

"Many people got interested in cryptocurrencies. On our platform, the number of new account applications increased," bitFlyer CFO Midori Kanemitsu said.

And Innes said virtual currency had "a sort of Teflon persona."

He said he expected to see dips down to around $6,000 "before the market irons out."

"Given recent trading patterns, I suspect $10,000-$15,000 will be the sweet spot, and as more traditional market makers enter the fray… volatility will decrease."

– ‘More selective’ –

Industry professionals say there is no stopping the technology behind virtual currencies and while some cryptocurrencies may disappear, others will likely pop up in their place.

"All kinds of new ideas are emerging," said lawyer Ken Kawai, an expert in financial regulation and the blockchain technology behind cryptocurrencies.

"Hacks occur. People who choose to use this technology must be aware of the danger associated with it," he told AFP. "I expect to see users becoming more selective when choosing exchanges."

To ensure client safety and improved use of the technology, virtual currency exchanges should face strict regulations like banks and brokerages, he suggested.

Banks and e-commerce firms could use the most stable cryptocurrencies among themselves, while others could be traded as alternative assets, Kawai said.

With investor interest apparently insatiable, regulators are likely to introduce a range of tighter checks, including requiring exchanges to verify the identity of their clients.

They could also impose outside cyber audits to protect against the kind of security loopholes that appear to have led to the Coincheck theft.

Cryptocurrency trading is also likely to come under the scrutiny of tax authorities, potentially cooling investor appetite if particularly steep new tariffs are rolled out, analysts say.

Kanemitsu said bitFlyer would welcome "good and reasonable regulation" as "an opportunity."

Hikaru Kusaka, co-founder of blockhive, an innovation incubator, said consumers will eventually weed out the weak virtual currencies and only the best will survive.

"To put it dramatically, maybe not all the cryptocurrencies will disappear, but new ones will emerge, and there will be a process of picking and choosing," said Kusaka.

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Sri Lanka president slams power regulator chief after conflicting with minister

ECONOMYNET – The powers to change the electricity tariff in Sri Lanka is vested with the Minister of Power and not the Public Utilities Commission (PUCSL), President Ranil Wickremesinghe told the Parliament.

The minister of Power and Energy, Kanchana Wijesekara has requested an upward price revision to be implemented in two phases both in January and July next year, saying the recent tariff hike was not enough for the state-run utility provider Ceylon Electricity Board (CEB) to continue uninterrupted power supply.

However, Jaynaka Ratnayake, the Chairman of the PUCSL had said  the recent tariff hike is enough for the CEB to cover the cost of production and it will not allow another price hike. However, he has said a twice a year price revision is necessary though it should be in April and October instead of January and July.

President Wickremesinghe said the PUCSL chief was opposing the tariff hike due to his personal reasons.

“The power is vested with the Minister and me. I am the one who made the PUCSL act and I know what is in it,” Wickremesinghe told the parliament on Thursday. quoting a letter from the Attorney General which mentioned provisions in the island nation’s Electricity Act.

Accordingly the Act, the PUCSL would be statutorily obliged to give effect to such policy. It is observed that neither the Act nor the PUCSL Act contains any provisions that empowers the PUCSL to change or act invariant of such policy guidelines.

“The Chairman of the PUCSL is misguiding the general public. I have to meet him and see,” Wickremesinghe said.

WIckremesinghe said the Chairman does not want the tariff hike because he owns one of the highest electricity consuming companies.

“He is the Chairman of the Trillium corporation. It is the firm that takes up the most energy”, he said.

The Trillium group is managed by Janaka Ratnayake and he also holds positions as the chairman and CEO of Trillium Property Management & Services Ltd., City Housing and Real Estate PLC, Trillium Residencies Ltd., Computer Care (Pvt) Ltd., and Rent a Comp Services (Pvt) Ltd., and JR Management Consultants (Pvt) Ltd.

“It means when the electricity bill increases, his expenses increase as well”

He said the CEB still has a loss of 300 billion rupees since 2013 and it needs to be covered.

The CEB issue can be solved only in three ways, either printing more money, increasing value added tax or increasing the tariffm, he said. (Colombo/Dec08/2022)

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Sri Lanka President bemoans over inconsistent LNG deals

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe bemoaned over successive governments’ liquefied natural gas (LNG) deal that has brought in all the world powers into the discussion.

Wickremesinghe’s center-right United National Party (UNP) had discussions with India and Japan between 2002-2004 for an LNG project.

“Following dialogues with India and Japan, the UNP government could come to agreements to get two LNG power plants. After we were defeated the successor government, without cancelling those agreements granted it to New Fortress company in USA,” Wickremesinghe told the parliament.

“Thereafter, as they did not like New Fortress, they gave it back to Pakistan and China. So within the same premises, there were China, Pakistan, India, USA, Japan and only Russia was not there.”

“It was wonderful that a world war did not ignited there as there were five main powers in the world.”

“Now there is no LNG or anything here and now they ask me to solve this issue.”

Wickremesighe’s outburst comes as his government is forced to raise tariffs on power prices after successive governments failed to implement cheap and renewable power generation projects.

He said a total loss for the state-run Ceylon Electricity Board since 2013 was 300 billion rupees and a possible drought next year could increase the 2023 electricity cost to 420 billion rupees.

“If it rained, we need Rs. 352 billion while Rs. 295 is required if rained so much to have floods. How are we going to find this money? We would have to print money, but Rupee would depreciate. We would have to increase VAT but it would increase the price of all commodities or to charge it direct.” (Colombo/Dec08/2022)

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Air quality drop forces Sri Lanka to close schools; public warned

ECONOMYNEXT – A rapid drop in air quality in Sri Lanka has forced the Colombo government to close all schools across the country after a deep depression over Southeast Bay of Bengal, officials said.

The Education Ministry, issuing a special notice on Thursday said, it has decided to close all government schools for Friday, after discussing with the officials in Meteorology Department and Disaster Management Center.

An official said the drop was due to the deep depression over Southeast Bay of Bengal carrying the air from India.

Due to the depression over South east Bay of Bengal (370 km east of Trincomalee) has concentrated into a cyclonic storm “Mandous” by Wednesday night.

“Cyclone in the Bay of Bengal that is the prime reason for the increase in the pollution load as we receive more wind from India,” H.D.S.Premasiri, Senior Scientist, Coordinator-Air Quality, noise and vibrations at National Building Research Organization (NBRO) told EconomyNext on Thursday.

Officials said there is a likelihood of the cyclone moving west-northwestwards and further intensify into a severe cyclonic storm tonight and cross North Tamil-Nadu, Puducherry and South Andhra Pradesh coast around midnight of 09 th December and the maximum wind speeds will be 70-90 km per hour and can increase up to 90 in sea areas.

“Hopefully, today we can expect normalization in the environment and the effects of the fog will disappear”.

According to the NBRO’s real time Air Quality Index Indicator, the quality of air in northwestern coastal district of Puttalam has dropped drastically and indicated a particular matter (PM) 132, while Kegalle (85) and Mannar (84) were the districts which had next worst air quality.

According to NBRO, Battaramulla, Polonnaruwa, Dambulla, Kegalle, Mannar and Puttalam indicate a poor quality of air due to higher PM.

“The fog will lead to lung and breathing issues,” Premasiri said.

“So the public is warned to wear a mask when they travel outside. The pollution highly prevails in city areas and has a less impact on the other parts of the areas.” (Colombo/ Dec08/2022)

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