Fed holds U.S. rates at 5.5%, indicates three cuts coming in 2024
The Federal Reserve on Wednesday 13th December 2023 held its key interest rate steady for the third time in a row and set the scene for multiple rate cuts in 2024 and 2025.
With inflation easing and the economy holding up policymakers Federal Open Market Committee policymakers voted unanimously to keep the rate in a range between 5.25%-5.5%.
Possible three Fed rate cuts pencilled in for 2024
Along with the decision to stay on hold, the FOMC pencilled in at least three rate cuts in 2024, assuming quarter percentage point increments. That’s less than market pricing of four, but more aggressive than what officials had previously indicated.
Markets had widely anticipated the status quo decision which could end a cycle that has seen 11 hikes, pushing the interest rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing.
The FOMC’s so called ‘dot plot’ of individual members’ expectations indicate another four cuts in 2025, or a full 1%. Three more reductions in 2026 would take the Fed rate down to between 2%-2.25%, close to the longer-term outlook, though there were considerable difference in the estimates for the final two years.
Dow at new all-time high!
Following the Fed update the Dow Jones Industrial Average jumped more than 400 points, surpassing 37,000 for the first time creating a new Dow all-time high.
In a significant development that has raised concerns among investors and policymakers worldwide, China’s debt outlook has been downgraded as the country grapples with a slowing economy. This move reflects growing apprehensions about the sustainability of China’s economic growth and its ability to manage its burgeoning debt.
Moody’s issued the warning as it cut its outlook on the government’s debt to negative, from stable. China said it was disappointed by the move, calling the economy resilient. China also reported to have said it is unnecessary for Moody’s to worry about China’s economic growth prospects and fiscal sustainability.
Rapid Expansion
For years, China’s rapid economic expansion has been the engine of global growth, but recent trends indicate a deceleration. The once double-digit growth rates have now tapered, with projections suggesting a further slowdown in the coming years.
China exports
This deceleration is attributed to various factors, including trade tensions, demographic shifts, and a maturing economy.
Downgrade
The downgrade, announced by a prominent credit rating agency recently, underscores the risks associated with China’s increasing debt levels. The country’s total debt, which includes government, household, and corporate debt, has climbed to around 85%* of its GDP. This debt accumulation is partly due to the government’s efforts to stimulate the economy through infrastructure spending and lending to state-owned enterprises.
Property Sector
The property sector, a significant pillar of China’s economy, has also shown signs of strain. High-profile defaults and a cooling housing market have added to the concerns, prompting fears of a ripple effect across the economy. The government’s crackdown on excessive borrowing and speculative investments has further tightened liquidity, impacting developers and homeowners alike.
The burden of debt sits heavy in China’s property sector.
Response
In response to the downgrade, China’s finance ministry has expressed confidence in the country’s economic resilience. Officials argue that the fundamentals of the Chinese economy remain strong, with continued efforts towards high-quality development and structural reforms. They assert that the concerns raised by the credit agencies are overstated and that China’s fiscal position remains robust.
Warning signal
Nevertheless, the downgrade should serve as a warning signal. It highlights the need for careful fiscal management and policy adjustments to navigate the challenges ahead. As the global economy faces uncertainty, the world will be closely watching how China addresses its debt dilemma and maintains its trajectory of growth.
This situation presents a complex puzzle for China’s leadership, balancing the goals of economic stability and sustainable development. The outcome will have far-reaching implications, not just for China but for the entire global economy.
The world awaits to see how China will write the next chapter in its remarkable economic story. If this goes wrong – it will go wrong in a big way.
Update Friday 8th December 2023
China’s top decision-making body of the ruling Communist Party on Friday said that the country’s fiscal policy ‘must be moderately strengthened’ to stimulate economic recovery, according to state-run news outlet.
85%* debt to GDP ratio
China’s debt-to-GDP ratio was recorded at around 77% of the country’s Gross Domestic Product in 2022. This ratio is an important indicator of a country’s economic health, reflecting its ability to pay back its debts. This ratio has been on the rise in recent years, indicating an increase in national debt relative to the GDP. For instance, the ratio was around 23% in 2000 and grew to 34% in 2012, with a significant jump to the current level.
China’s projected debt to GDP ration
Forecasts suggest that China’s debt-to-GDP ratio could reach 104% by 2028
It’s important to note that such figures can vary and should be interpreted within the context of each country’s economic structure and policies.
European Union officials have reached a provisional deal on the world’s first comprehensive laws to regulate the use of artificial intelligence (AI).
The EU agreed guidelines around AI in systems like ChatGPT and facial recognition.
The European Parliament will vote on the AI Act proposals early next year, but any legislation will not take effect until 2025 at the earliest. The U.S., UK and China are all rushing to publish their own guidelines.
Safeguards
The proposals include safeguards on the use of AI within the EU as well as limitations on its adoption into law.
European Commission President Ursula von der Leyen said the AI Act would help the development of technology that does not threaten people’s safety and rights. Consumers would have the right to launch complaints and fines could be imposed for violations.
Unique framework
In a social media post, she said it was a ‘unique legal framework for the development of AI you can trust’.
The European Parliament defines AI as software that can ‘for a given set of human-defined objectives, generate outputs such as content, predictions, recommendations or decisions influencing the environments they interact with.’
This is a significant step towards ensuring that AI development and deployment are aligned with ethical standards and respect for human rights.
Will the EU, UK, U.S., China and other countries AI rules conflict?
The world’s richest 1% of people are responsible for around the same percentage of global carbon emissions as the 5 billion people who represent the 66% poorest, according to a report published by Oxfam.
In the report he wealthiest 10% were responsible for 50% of global emissions, it found, while the bottom 50% were responsible for just 8%.
The top 1% represents 77 million people and is defined in the report as having an estimated income threshold of $140,000 per year, and an average income of $310,000.
The report states that personal consumption varies depending on factors such as location, use of renewable energy and transport where the very wealthiest contribute significantly more due to the use of private jets and yachts.
It also includes between 50% and 70% of emissions by the 1% coming through investments in companies, measured by taking firms’ reported emissions and distributing that proportionate to shareholder ownership of those firms by the 1%.
Pertaining to someone’s ability to attract another person through style, charm, or attractiveness, this term is from the middle part of the word ‘charisma’, which is an unusual word formation pattern.
Water is a precious Earth resource. It is becoming increasingly scarce due to climate change, population growth, pollution and waste. Without water we are nothing.
According to some sources, Big Tech and AI are contributing to the water crisis by using large amounts of water to cool their data systems and AI computations.
Researchers estimate that Microsoft used 1.7 billion gallons of water for AI alone in 2022, a 34% increase from 2021. Google also reported a 20% increase in water usage, mostly due to its AI work. One of the most water-intensive AI models is ChatGPT, which is estimated to use half a litre of water for every series of prompts.
These numbers are alarming, considering that water is a finite and vital resource for humans and ecosystems.
ChatGPT is estimated to use the equivalent of one 16-ounce bottle of water (approx’ half a litre) for every 20-50 queries according to a study by Shaolei Ren, an associate professor of electrical and computer engineering at the University of California.
BIG Tech aware of environmental impact
Some tech companies are aware of the environmental impact of their AI activities and are trying to find ways to reduce their water consumption and carbon footprint. For example, Microsoft has pledged to become water positive, carbon negative, and waste-free by 2030.
Is there a water crisis looming and could BIG Tech make things worse?
Google has also set a goal to operate on 24/7 carbon-free energy by 2030. OpenAI, the creator of ChatGPT, has stated that it is working on improving the efficiency of its AI models. Some possible solutions include using renewable energy sources, developing better algorithms and hardware, and locating data centres in colder climates.
Too much
Some argue that Big Tech and AI are using too much water, and that they should be regulated. They should be held accountable for their environmental impact.
Others may contend that Big Tech and AI are providing valuable services and innovations and they are taking steps to mitigate their water usage and become more sustainable.
Iceberg A23-A is the world’s biggest iceberg that has been stuck to the ocean floor for more than 30 years.
Scientists believe the A23-A’s breakaway from Antarctica was a natural occurrence, but say it provides a stark reminder of the potentially disastrous implications as global sea levels rise.
It split away from the Antarctic coastline in 1986 and became an ice island in the Weddell Sea. It is about 4,000 sq km (1,500 sq miles) in area, which is more than twice the size of Greater London, and 400m (1,312 ft) thick, which is taller than the London Shard.
On the move
Recently, it has started to move at a faster pace and is now about to leave the Antarctic waters. Scientists believe it has lost its grip on the sea floor and is being pushed by winds and currents. It is likely to follow the path of other icebergs from the Weddell Sea and head towards the South Atlantic, where it will eventually melt and break apart.
Map of Antartica showing Weddell Sea
A23-A Iceberg moving through the Weddell Sea
Ecosystem
Icebergs are important for the ocean ecosystem, as they carry fresh water and nutrients that support marine life. They also affect the climate, as they reflect sunlight and cool the air. Iceberg A23-A is a remarkable natural phenomenon that has been observed for decades by researchers and satellites.
This is not happening because of climate change – it is a natural process of nature.
Britcoin is a potential British digital currency that would be issued by the Bank of England and backed by the Government.
It would be tied to the pound and have a stable value, unlike cryptocurrencies such as Bitcoin. It would be accessible through digital wallets and interchangeable with cash and bank deposits. The Treasury and the Bank of England are consulting on its launch, which could take place by 2030.
Britcoin could be used for everyday transactions, both in-store and online, and could make payments more efficient and enable innovation. However, some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks.
Some MPs have warned that Britcoin could cause severe financial damage and undermine the role of banks for several reasons.
Concerns about introducing a digital pound
Britcoin could increase the chance of bank runs, if customers were able to quickly and easily switch their bank deposits into digital pounds, especially during times of financial stress or panic. This could reduce the liquidity and solvency of banks and make them more vulnerable to failure.
Britcoin could also raise the cost of borrowing for banks and consumers, as banks would need to replace the funding that they would lose from deposits with more expensive sources. The Bank of England estimated that if 20% of bank deposits turned digital, it could result in a rise in interest rates on commercial loans.
Britcoin could pose risks to data privacy and security, as the government or third parties could potentially access, track, or control how users spend their digital funds. This could raise ethical and legal issues and require robust regulation and protection.
Britcoin could also have unintended consequences on the wider economy and society, such as affecting monetary policy, financial inclusion, innovation, and competition. The MPs said that the benefits and costs of Britcoin should be clearly evidenced before any decision is taken to introduce it.
Art illustration: Digital £ pound proposal – Britcoin
The development of a state-backed ‘digital pound’ should proceed with caution, MPs have warned.
The benefits of the currency are still unclear and there must be systems in place to protect cash access and privacy, the Treasury Committee said in a report.
The Bank of England (BoE) and the Treasury have been consulting on the idea since February 2023. They are currently designing what such a system could look like. The CBDC would be directly issued by the Bank of England (BoE), just like banknotes.
This means people would have all the same safety and security that they have with their cash currently, which is different to cryptocurrencies that fluctuate in value and are generally run by private companies.
A report published Tuesday by the Kick Big Polluters Out coalition found that at least 2,456 fossil fuel lobbyists registered to attend the two-week long summit. That’s more than almost every other country delegation, except for Brazil (3,081) and COP28 host the United Arab Emirates (4,409), the report said.
Supporters say the number of fossil fuel lobbyists attending the talks is ‘beyond justification’ and demonstrates that polluting industries are seeking to advance a fossil fuel agenda.
Others however say that Big Oil’s participation at COP28 should be welcomed.
Unabated
There’s also a debate about whether an agreement should centre on abated fossil fuels, which are trapped and stocked with carbon capture and storage technologies. Unabatedfossil fuels are largely understood to be produced and used without substantial reductions in the amount of emitted greenhouse gases.
Delegates at the beginning of COP28 sealed a landmark deal to help the world’s most vulnerable countries pay for the impacts of climate disasters. To me, that suggests it is okay to carry on with business as usual because the industry can throw money at the poorer people suffering at the brunt end of climate effects.
Announcements at COP28 have sought to help decarbonize the energy sector, with nearly 120 governments pledging to triple renewable energy capacity by 2030, recent news reports show.
Whichever way we care to spin this, we are nowhere near ready to switch to renewables.
United Nations’ biggest and most important annual climate conference to-date, gets underway as the United Arab Emirates on Wednesday 29th November 2023 defended what it described as ‘fake news’ designed to undermine its work as the host of the COP28 climate conference.
The UAE organizers slammed a number of ‘fake press‘ releases in the name of COP28. Among them, a letter claiming COP28 president-designate Sultan Al-Jaber was due to step down from his position as chief executive of state oil giant the Abu Dhabi National Oil Co. (ADNOC).
Al-Jaber’s appointment as COP28 president-designate had provoked a furious backlash from climate activists when it was first announced. He reportedly pushed back over reports earlier in the week that said the UAE planned to use its role as the host of the climate summit as a platform to lobby foreign government officials for oil and gas deals.
Even so, the COP28 summit, which starts on Thursday 30th November 2023 and is scheduled to run through to 12th December 2023. I will provide a critical forum for government officials, business leaders and campaign groups to accelerate action to tackle the climate crisis. Let’s hope there is no further rolling back on previous pledges such as the UK’s government announcement to increase the number of North Sea oil and gas exploration and recovery licences.
OPEC
Meanwhile, also on Thursday 30th, the influential Organization of Petroleum Exporting Countries (OPEC) and its allies will convene to decide the next production policy steps in a delayed meeting caused by the conflict in the Middle East.
Art illustration of renewable and fossil fuel energy – Heat is on at COP28
UAE, one of the world’s major oil producers and a key OPEC+ component, is keen to burnish its reputation as a champion of the transition to green energy.
Tangible climate action though is the best way to push back all scepticism and cynicism. Now is as good as any time to start.
Production cuts will come – some analysts predict $100 a barrel.
The world is not ready to relinquish its thirst for oil and gas… just yet. It is still hungry for traditional power – and renewables is not ready to take over.
China’s factory activity contracted for a second month in a row in November 2023.
Non-manufacturing activity hit yet another new low this year, signalling that the world’s second-largest economy was still not out of the woods and may require more policy support.
The official manufacturing purchasing managers’ index unexpectedly dropped slightly lower to 49.4 in November 2023 from 49.5 in October 2023, according to data from the National Bureau of Statistics released Thursday 30th November 2023.
It has been a turbulent time at Twitter since Musk’s acquisition and the subsequent renaming of the company to X.
X is a subsidiary of X Holdings Corp., which is owned by Elon Musk. X has faced several issues and controversies since its inception, such as advertiser boycott, declining user base, staff layoffs, and more recently accusations of antisemitism and even more recently of a profane outburst levelled against X advertisers.
What a mess
Elon Musk launches attack on X advertisers in a profanity-laced outburst.
Musk has slammed advertisers that have left X, warning they will kill the social media platform. At an event in New York, he accused companies that have joined an advertising boycott of the site formerly known as Twitter of trying to blackmail him.
Musk tells X (Twitter) advertisers to go ‘f**k yourselves,’ but admits it will die without them: Despite this, Musk refused to accept responsibility for the impact of his statements on X’s ability to do business.
Instead, the billionaire insisted that if X (Twitter) went under, the blame would be entirely on the advertisers who fled as opposed to his decisions as its owner which more likely pushed them away.
His message to advertisers leaving X of: ‘Go f**k yourself’ – didn’t help matters as he admits responding to anti-Semitic post on X was one of the most foolish things he’s done on the platform.
Elon Musk is reported to have said on Wednesday 29th November 2023 that he regretted his November 15th tweet allegedly endorsing an anti-Semitic conspiracy theory.
Is the death knell of X and of a $44 billion investment?
Musk should be a force for good in the world – could that still happen?
A recent cyber-attack on CTS, a company that provides IT services to law firms and other organisations in the UK legal sector.
It was reported the cyberattack occurred on Wednesday, 22nd November 2023, and caused a widespread outage that affected dozens of law firms and homebuyers.
The cyberattack was reportedly caused by a CitrixBleed bug that has targeted other firms in recent weeks.
The governor of the Bank of England, Andrew Bailey has raised concerns over economic growth as he warned again that interest rates will not be cut in the ‘foreseeable future’.
The bank boss said he was concerned over the UK economy’s potential to grow. It comes after the government’s forecaster cut its growth outlook for the UK, due to high inflation, interest rates, energy and food price increases which were exacerbated by the Covid pandemic and Russia’s invasion of Ukraine.
Inflation, which is the rate consumer prices rise at, has dropped sharply in recent months, falling to 4.6% in the year to October largely as a result of lower energy prices.
However, it is still more than double the Bank of England’s 2% target and Mr Bailey warned lowering inflation further would be ‘hard work’.
Interest rates are currently at 5.25%, a 15-year high, which has pushed up borrowing and mortgage costs.
The first transatlantic flight using 100% sustainable aviation fuel (SAF) is scheduled to take off on Tuesday, 28th November 2023.
UK Government funded project
The flight is operated by Virgin Atlantic and will fly from London’s Heathrow to New York’s JFK airport. The flight is part of a UK government-funded project to demonstrate the feasibility and benefits of using SAF as an alternative to conventional jet fuel. SAF can reduce carbon emissions by over 70% compared to fossil jet fuel.
The flight will also use biochar credits to offset any remaining emissions and achieve net zero.
Biochar is the lightweight black residue, made of carbon and ashes, remaining after the pyrolysis of biomass, and is a form of charcoal.
Support
The flight is supported by a consortium of companies, including Boeing, Rolls-Royce, BP, Imperial College London, University of Sheffield, Rocky Mountain Institute, and ICF. The transatlantic flight has received a permit to fly from the UK Civil Aviation Authority, after undergoing technical assessments and ground testing.
The flight will use a Boeing 787 Dreamliner powered by Rolls-Royce Trent 1000 engines. The SAF used will be made primarily from waste oils and fats, such as used cooking oil.
The flight is not the first transatlantic flight to use SAF, but it is the first to use 100% SAF. In 2019, Gulfstream flew a G600 aircraft from Georgia to the UK using a 30/70 blend of SAF and jet fuel.
The Virgin Atlantic flight will be the first to use pure SAF on a commercial airliner.
Update 29th November 2023 – History made
The first transatlantic flight by a large passenger aeroplane, fueled by ‘greener fuel’ was a success.Operated by Virgin Atlantic, it flew from London’s Heathrow to New York’s JFK airport.
Gold prices on Monday 27th November 2023 climbed to a more than six-month high as the U.S. dollar weakened.
Investors, it is reported, have placed their bets, suggesting the Federal Reserve is finished with interest rate hikes.
Gold was up around 0.52% at $2,012 per ounce in early afternoon trading (London time). It reached a high of $2,017.82 earlier in the day. Gold futures for December 2023 hit $2,018.90 according to analysts’ data.
The dollar index, a measure of the greenback against major currencies, was 0.13% lower as markets price in a more than 90% chance the Fed will hold rates at its next two meetings.
Analysts at Goldman Sachs reportedly said that the outlook for 2024 is that gold’s ‘shine is returning’.
The potential upside in gold prices will be closely tied to U.S. real rates and dollar moves.
Lilium is a German start-up that is developed a five-seater electric jet that can take off and land vertically. It is a flying taxi.
The company aims to offer sustainable, high-speed air mobility through its aircraft, vertiports and digital service. Lilium successfully tested its prototype in 2019 and 2021 and plans to launch its services in multiple cities by 2025.
eVTOL market
Lilium is one of the leading companies in the emerging eVTOL market, which faces challenges such as regulation, infrastructure, safety and public opinion. Lilium claims that its jet is faster, quieter and more efficient than its competitors, and that it can travel up to 300 km in just 60 minutes.
Lilium has been granted EU approval to design and operate its electric vertical takeoff and landing vehicles globally.
Lilium is a German start-up that is developed a five-seater electric jet that can take off and land vertically.
It’s a key milestone for the industry. Lilium has been working for several years to get such vehicles ready for commercial market.
It is widely reported that HSBC‘s online banking system is experiencing some problems today, 24th November 2023.
According to the news reports, many customers are unable to access the app or the website or make payments.
The bank has acknowledged the issue and said it is working hard to fix it as soon as possible. Some users have also reported missing money from their accounts.
Downdetector, which tracks websites, showed more than 4000 people reported they could not access HSBC services.
‘It is impacting HSBC UK customers only – there is no impact to First Direct or M&S Bank customers’, a spokesperson for the bank said.
Tech execs have expressed concern that the development of artificial intelligence (AI) is concentrated in the hands of too few companies, potentially giving them too much power. OpenAI’s ChatGPT marked the start of what many in the industry have called an AI arms race, as tech giants including Microsoft and Google have sought to develop and launch AI models.
A number of tech execs have said that they feel users have lost control of their data online and that it is being harnessed by technology giants to feed their profits.
The development of artificial intelligence (AI) is concentrated in the hands of too few companies, potentially giving them excessive control over the rapidly evolving technology.
OpenAI’s ChatGPT
An explosion of interest in AI was sparked by OpenAI’s ChatGPT late last year thanks to the novel way in which the chatbot can answer user prompts. Its popularity contributed to the start of what many in the tech industry have called an AI arms race, as tech giants including Microsoft and Google seek to develop and launch their own artificial intelligence models. These require huge amounts of computing power as they are trained on massive amounts of data.
Meredith Whittaker reportedly said of large tech companies and the current deployment of AI…
‘Right now, there are only a handful of companies with the resources needed to create these large-scale AI models and deploy them at scale. And we need to recognize that this is giving them inordinate power over our lives and institutions’,Meredith Whittaker, president of encrypted messaging app Signal, is reported to have said. ‘We should really be concerned about, again, a handful of corporations driven by profit and shareholder returns making such socially consequential decisions’.
Whittaker previously spent 13 years at Google but became disillusioned in 2017 when she found out the search giant was working on a controversial contract with the Department of Defence known as Project Maven. Whittaker grew concerned Google’s AI could potentially be used for drone warfare and helped organize a walkout at the company that involved thousands of employees.
‘AI, as we understand it today, is fundamentally a technology that is derivative of centralized corporate power and control’, Whittaker reportedly said. ‘It is built on the concentrated resources that accrued to a handful of large tech corporations, largely based in the U.S. and China via the surveillance advertising business model, which gave them powerful computational infrastructure and huge amounts of data; large markets from which to pull that data; and the ability to process and structure that data in ways useful for creating new technologies.’
In essence, BIG TECH has far too much power in AI technology.
Tim Berners-Lee
The inventor of the web, Tim Berners-Lee, has also raised concerns about the concentration of power among the tech giants. Jimmy Wales, the founder of Wikipedia, says it is the state of social media that is of particular concern right now. On AI, however, he feels that while the technology giants now are leading the way, there is space for disruption.
Big tech and social media giants are inflicting profound damage on our society, and he believes AI could make this worse.
Binance is still open for business and is now being run by, Richard Teng. But who is the new boss of Binance?
Mr Teng, from Singapore joined Binance just over two years ago as the chief executive of the Singapore business. That was the year when Binance came under a Justice Department investigation, and as regulatory scrutiny of the company and Zhao intensified. Richard Teng was rapidly climbing the ranks in the background.
He only stayed in his original position as the Singapore CEO for five months, according to his LinkedIn page, before he was promoted to regional head of Europe, Asia and the Middle East and North Africa in April 2023.
Mr Teng later moved to become head of regional markets in May 2023 before he was appointed to the top job on Tuesday 21st November 2023.
In announcing his successor, Mr Zhao called Mr Teng a ‘highly qualified leader‘, adding that ‘with over three decades of financial services and regulatory experience, he will navigate the company through its next period of growth’.
Traditional financial background
Prior to joining Binance, Mr Teng worked in the more traditional financial sectors as a director of corporate finance at the Monetary Authority of Singapore (MAS) and a chief regulatory officer of the Singapore Exchange (SGX). He then moved on to the become chief executive of the Abu Dhabi Global Market (ADGM), an international financial centre in the United Arab Emirates, where he stayed for six years. The ADGM regulates the trading of digital assets.
In a statement on Wednesday 22nd November 2023, Mr Teng said he was honoured to take this position, adding that he would focus on reassuring Binance’s 150 million users about ‘the financial strength, security and safety of the company’.
Despite this, Mr Teng has reiterated that Binance is ‘here to stay‘, adding that company’s foundation stands ‘stronger than ever’.
Binance chief Changpeng Zhao pleaded guilty Tuesday to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents.
The plea arrangement with the U.S. government resolves an investigation into the world’s largest cryptocurrency exchange.
Zhao said Tuesday in a post on X, that he had ‘made mistakes’ and ‘must take responsibility’. He said Richard Teng, the company’s former global head of regional markets, is the new CEO of Binance.
Action taken against Binance
The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission (SEC) was absent.
Treasury Secretary Janet Yellen reportedly said in a release Tuesday 21st November 2023 that the cryptocurrency exchange permitted ‘illicit actors’ to make transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.
Plea deal
Zhao personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.
Zhao has been released on a $175 million bond secured by $15 million in cash and has a sentencing hearing scheduled for 23rd February 2024.
Continue to operate
Binance will continue to operate but with new strict rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money-laundering standards. The company is required to appoint an independent compliance monitor.
The case against Binance shows that three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy. Binance has agreed to forfeit $2.5 billion to the U.S. government, as well as to pay a fine of $1.8 billion.
SEC takes aim too
The SEC targeted the company with a lawsuit in June 2023, alleging that Binance was running an illegal securities exchange and mishandling customer funds.
The SEC also challenged rival crypto exchange Coinbase with a similar lawsuit, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.
And on Monday 20th November 2023 the SEC sued Kraken, alleging that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.
Binance battered as CEO Changpeng Zhao (CZ) pleads guilty to federal charges, steps down.
In the charges brought against Binance by the SEC, the agency accused Binance of ‘commingling’ billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now bankrupt and disgraced crypto exchange FTX. The founder of FTX, Sam Bankman-Fried was convicted of fraud and now awaits sentencing.
EC Chair, Gary Gensler reportedly said, ‘Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law’.
Binance origin
Started by the Chinese-born entrepreneur in 2017, Binance went from being a relatively obscure name to being a major force in crypto in a matter of weeks. Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trades every year.
While its holding company is based in the Cayman Islands, Binance doesn’t have a global headquarters and Zhao frequently resisted calls to create one, saying he wanted the platform to run on a ‘decentralized’ operating model.
UK ban
In 2021, the U.K.’s Financial Conduct Authority (FCA) barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its ‘know-your-customer and anti-money-laundering’ controls didn’t meet its requirements.
Binance and Zhao filed a motion in July 2023 to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s ‘fishing expedition’.
Crypto industry concern
Of particular concern for the crypto industry are the implications of the crypto crackdown for a myriad of altcoins or tokens and blockchains, not just the exchanges.
The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms such as: Solana’s SOL, Cardano’s ADA , and Polygon’s MATIC are all securities that should have been registered.
At the speed of AI, the story at OpenAI moves at lightning speed.
Hundreds of OpenAI employees signed a letter demanding the OpenAI board resign or face an employee exodus to Sam Altman’s new venture at Microsoft ‘imminently‘.
The board then attempted to negotiate Altman’s return, but those talks were unsuccessful.
At the touch of a button – resignation letter sent to the OpenAI board of directors
To the Board of Directors at OpenAI
OpenAI is the world’s leading AI company. We, the employees of OpenAI, have developed the best models and pushed the field to new frontiers. Our work on AI safety and governance shapes global norms. The products we built are used by millions of people around the world. Until now, the company we work for and cherish has never been in a stronger position.
The process through which you terminated Sam Altman and removed Greg Brockman from the board has jeopardized all of this work and undermined our mission and company. Your conduct has made it clear you did not have the competence to oversee OpenAI.
When we all unexpectedly learned of your decision, the leadership team of OpenAI acted swiftly to stabilize the company. They carefully listened to your concerns and tried to cooperate with you on all grounds. Despite many requests for specific facts for your allegations, you have never provided any written evidence. They also increasingly realized you were not capable of carrying out your duties, and were negotiating in bad faith.
The leadership team suggested that the most stabilizing path forward – the one that would best serve our mission, company, stakeholders, employees and the public – would be for you to resign and put in place a qualified board that could lead the company forward in stability. Leadership worked with you around the clock to find a mutually agreeable outcome. Yet within two days of your initial decision, you again replaced interim CEO Mira Murati against the best interests of the company. You also informed the leadership team that allowing the company to be destroyed “would be consistent with the mission.”
Your actions have made it obvious that you are incapable of overseeing OpenAI. We are unable to work for or with people that lack competence, judgement and care for our mission and employees. We, the undersigned, may choose to resign from OpenAI and join the newly announced Microsoft subsidiary run by Sam Altman and Greg Brockman. Microsoft has assured us that there are positions for all OpenAI employees at this new subsidiary should we choose to join. We will take this step imminently, unless all current board members resign, and the board appoints two new lead independent directors, such as Bret Taylor and Will Hurd, and reinstates Sam Altman and Greg Brockman.”
In just 5 days
Sam Altman sacked from OpenAI.
Altman appears to move to Microsoft.
OpenAI staff revolt.
No confidence in OpenAI board.
Space for staff to move to Microsoft and create new AI company under Altman’s leadership.
OpenAI mass employee resignation letter emerges.
Microsoft CEO Nadella says OpenAI governance needs to change no matter where Altman ends up.
Altman back at OpenAI after board changes.
Now, Altman is back after getting the sack.
So, is all OK at OpenAI? I asked CHATGPT the question, here is the answer…
Sam Altman, the former CEO of OpenAI, who was fired last week in a controversial board decision.
According to the latest reports, Altman is joining Microsoft to lead a new AI research team that will focus on advanced and ethical AI development.
Altman is a well-known entrepreneur and investor who has been involved in several AI-related projects.
He was one of the co-founders of OpenAI, a research organization that aims to create artificial general intelligence (AGI) that can ‘benefit humanity without causing harm’ or being controlled by a few elite players.
Leadership and ideology clash
However, Altman’s vision and style clashed with some of the board members and researchers at OpenAI, who reportedly accused him of being too ambitious, secretive, and authoritarian. They also reportedly claimed that he was pursuing a dangerous goal of creating artificial superintelligence (ASI).
The disagreements escalated when Altman announced a partnership with Microsoft in 2023, which gave Microsoft exclusive access to OpenAI’s GPT-4 Turbo model, a powerful natural language processing system that can generate realistic text on any given topic.
Some of the OpenAI staff and community members reportedly felt let-down by this deal, which they saw as a violation of OpenAI’s original mission of creating and sharing ‘AI for the common good’.
On Friday 17th November 2023, the board of OpenAI voted to remove Altman as CEO, citing irreconcilable differences and lack of trust. He was replaced by Emmett Shear, the former CEO of Twitch, who promised to restore transparency and collaboration at OpenAI.
Altman to join Microsoft
Altman did not comment on his dismissal. However, on Monday 20th November 2023, he rocked the AI world by announcing he was joining Microsoft as the head of a new AI research team.
He reportedly said that he was excited to work with Microsoft’s talented people and that he would continue to pursue his vision of creating beneficial and ethical AI for humanity.
Altman’s move to Microsoft has sparked mixed opinions from the AI community. Some have praised him for his innovation and courage, others have criticized him for his arrogance and recklessness.
There were reports over weekend suggesting employees and investors including Microsoft were pushing for Mr Altman to be reinstated. Some employees resigned in support of Altman.
Some have expressed concern about the potential impact of his new role on the future of AI development and regulation.
Where do OpenAI, Microsoft and the AI go from here?
It was reported Friday 17th November 2023 by the city-state’s central bank that Singapore will be piloting the live issuance and use of wholesale central bank digital currencies in 2024.
During the pilot, the Monetary Authority of Singapore, (MAS) will partner with local banks to pilot the use of wholesale CBDCs to facilitate domestic payments.
What is a CBDC?
A CBDC is a digital form of a country’s fiat currency, issued and regulated by the central bank or monetary authority of that country. CBDCs are different from cryptocurrencies, which are decentralized and not backed by any government.
Singapore is one of the countries that has been actively exploring the potential of CBDCs, both for wholesale and retail purposes. Wholesale CBDCs are meant for interbank transactions and cross-border payments, while retail CBDCs are meant for general public use and everyday payments.
CBDC MAS timeline
In November 2021, the Monetary Authority of Singapore (MAS) launched Project Orchid, a retail CBDC project that aims to build the infrastructure and test the use cases for a digital Singapore dollar. The project will explore the concept of purpose-bound digital Singapore dollars, which allow senders to specify how and where the money will be used.
In August 2021, MAS announced Project Dunbar, a wholesale CBDC project that involves the collaboration of the Reserve Bank of Australia, Bank Negara Malaysia, and South African Reserve Bank. The project will develop prototypes of shared platforms for cross-border transactions using multiple CBDC’s.
In June 2021, MAS published a monograph on the economic considerations of a retail CBDC in the Singapore context. The monograph concluded that there is no urgent case for a retail CBDC in Singapore, but MAS wants to be prepared in case the situation changes in the future.
In April 2021, MAS extended the regulatory sandbox for Project Ubin, a wholesale CBDC project that started in 2016. Project Ubin has successfully demonstrated the feasibility of using blockchain technology for clearing and settlement of payments and securities.
Singapore to pilot use of wholesale central bank digital currencies in 2024
In March 2021, MAS joined the Multiple CBDC (m-CBDC) Bridge initiative, a wholesale CBDC project that involves the Bank of Thailand, the Hong Kong Monetary Authority, and the Bank for International Settlements. The project will explore the use of distributed ledger technology to enable real-time cross-border transactions using multiple CBDC’s.
Process
Banks will issue tokenized bank liabilities in the form of claims in balance sheets. Retail customers can then use the tokenized bank liabilities in transactions with merchants, who will then credit these bank liabilities with their respective banks. Tokenization refers to the process of issuing a digital form of an asset on a blockchain.
The CBDC will then be automatically transferred to the merchant as a form of payment during the transaction.
Many central banks are testing and exploring their own digital currencies, includung the UK and U.S.
Microsoft is working on its own artificial intelligence chip, code-named Athena, that could compete with Nvidia’s products.
The company introduced two new microchips.
The first, its Maia 100 artificial intelligence chip, could compete with Nvidia’s highly sought-after AI graphics processing units.
The second, a Cobalt 100 Arm chip, is aimed at general computing tasks and could compete with Intel processors.
The chip is designed for training large language models (LLM’s) like ChatGPT and powering AI applications. Microsoft has been developing the chip since 2019 using Taiwan Semiconductor’s 5-nanometer process. The chip is currently being tested by a small select group of Microsoft and OpenAI employees.
Long-term objective
Microsoft’s objective is to reduce its dependency on third-party hardware providers and to customize its AI infrastructure for its own projects.
Microsoft has invested billions in OpenAI, which makes ChatGPT, to enhance its position in the AI field. The Athena chip could also enable Microsoft to add AI capabilities to its Office products and GitHub, but it has already achieved this using the OpenAI system.
Microsoft has not announced when the chip will be available to the public or to its Azure cloud customers.
IMF’s Kristalina Georgieva reportedly said that the public sector should keep preparing to deploy central bank digital currencies (CBDC’s) and related payment platforms in the future.
But according to data from the Atlantic Council, only 11 countries have adopted CDBC’s thus far.
Alternative to cash
Central bank digital currencies (CBDC’s) have the potential to replace cash. But adoption could take time, said Kristalina Georgieva, managing director of the International Monetary Fund on Wednesday 15th November 2023.
‘CBDC’s can replace cash which is costly to distribute”, she is reported to have said at the Singapore FinTech event. ‘They can offer resilience in more advanced economies. And they can improve financial inclusion where few hold bank accounts’.
‘CBDC’s would offer a safe and low-cost alternative to cash. They would also offer a bridge between private monies and a yardstick to measure their value, just like cash today which we can withdraw from our banks’, the IMF chief reportedly said.
Fiat currency
CBDC’s are the digital form of a country’s fiat currency, which are regulated by the country’s central bank. They are powered by blockchain technology, allowing central banks to channelgovernment payments directly to households.
Central Bank digital money to replace cash. IMF’s Kristalina Georgieva reportedly said that the public sector should keep preparing to deploy central bank digital currencies (CBDC’s) and related payment platforms in the future.
‘The level of global interest in CBDCs is unprecedented. Several central banks have already launched pilots or even issued a CBDC’, the IMF said in a September 2023 report.
According to a 2022 survey conducted by the Bank for International Settlements, of the 86 central banks surveyed, 93% said they were exploring CBDCs, while 58% said they were likely to or may possibly issue a retail CBDC in either the short or medium term.
But as of June 2023, only 11 countries had adopted CBDC’s, with an additional 53 in advanced planning stages and 46 researching, according to data from the Atlantic Council.
