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Financial News

Dec 13, 2021

The Weekly Scan December 13, 2021

By Stash Team

Find out what’s happening in the world of business this week

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Welcome to the Weekly Scan. Here’s what we’re following for the week of December 13, 2021.

Vis-à-vis crypto. Visa kicked off a global cryptocurrency advisory service for banking clients and merchants last week. Known as one of the largest payment processors, Visa will educate institutions about cryptocurrency, allow clients to use its platform for digital offerings, and manage backend operations. This year, Visa also intends to launch services that will  facilitate buying, selling, and custody of cryptocurrencies in partnership with banks. The payment processor will also permit clients to use a stablecoin called USD Coin, tied to the U.S. dollar, to make transactions. 

  • The takeaway: Visa’s expansion into cryptocurrency demonstrates the increasing acknowledgement of cryptocurrency’s legitimacy by big financial institutions. Banks are also exploring cryptocurrency offerings such as investments in currencies and non-fungible tokens (NFTs). Visa conducted a survey that found 40% of cryptocurrency owners were likely to switch to a primary bank that offers cryptocurrency products within the next year. Other financial companies, including BNY Mellon and Mastercard, have moved into cryptocurrency within the last year.

Reuters

Grande problem. Chinese real estate developer Evergrande failed to make two coupon payments due last Monday. As a result, credit rating agency Fitch Ratings downgraded Evergrande to a “restricted default.” Evergrande, which is the world’s most indebted developer, owes $19.2 billion, and its delinquency could trigger the default of its lenders. In response, Evergrande will be forced to restructure with oversight from the Chinese government. That supervision, along with added  protections that ensure that developers have access to funding, is expected to insulate other companies from taking a huge hit. 

  • The takeaway: Evergrande’s default happened days after another Chinese real estate developer—Kaisa Group—was downgraded to default following a missed $400 million bond payment. The defaults are thought to be a result of increased pressure from the Chinese government, led by President Xi Jingping. The government is reportedly attempting to curb over-leveraged property developers and an overheated property market. 

Bloomberg

Crypto goes to Congress. Several cryptocurrency executives, including representatives from FTX Trading, stablecoin issuer Circle Internet Financial, bitcoin miner Bitfury Group, and others, spoke before Congress last week regarding cryptocurrency regulation. The House Financial Services Committee questioned the executives on how cryptocurrency works and how it should be regulated, versus how other financial entities are managed. For the most part, the executives reportedly argued that Congress should refrain from ramping up regulation since cryptocurrency is still a relatively new concept, and lack of regulation has helped the industry grow. However, skeptics of cryptocurrency continue to point out the volatility and fraud that often accompany cryptocurrency transactions. 

  • The takeaway: Until recently Congress has taken a somewhat hands-off approach to regulating cryptocurrency. The Securities and Exchange Commission (SEC) announced in August that it would begin regulating cryptocurrency to the maximum extent allowed.Under the Commodity Exchange Act, cryptocurrencies are actually considered commodities that are regulated by the U.S. Commodity Futures Trading Commission (CFTC). In contrast, stocks, bonds, and ETFs are considered securities that are regulated by the SEC, which holds them to more stringent standards.

Wall Street Journal

Shake it up. Equity fund Enlightened Hospitality Investments, led by ShakeShack founder and restaurateur Danny Meyer, will spearhead a $27.5 million investment in the Mexican restaurant chain Tacombi. Two Mexico-based companies—Rodina and Capital Mazapil—plus Stonyfield Farm co-founder Gary Hirshberg will also join the investment round. Tacombi, which was reportedly founded on a beach in Yucatan, Mexico, sells tacos and margaritas at locations in New York City, Washington, D.C., and Miami. The company also owns chip and tortilla brand Vista Hermosa. 

  • The takeaway: The funding is expected to help expand the restaurant chain to 75 locations from its current 13. Additionally, the money will go towards upgrading Tacombi’s ordering technology, developing a frozen burrito line, and expanding Vista Hermosa. Meyer reportedly aims to turn Tacombi into a more upscale competitor to chains like Chipotle and Taco Bell.

Bloomberg, Eater

 Here’s what we covered in last week’s Scan

  • Congress reached a budget deal, called a stopgap spending bill, that will keep the government funded through mid-February, 2022. 
  • Payments company Square announced on December 1, 2021, that it will change its corporate name to Block to better align with its focus on cryptocurrency.
  • Clothing prices for all apparel are expected to increase 3% on average in 2022.

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Stash Team

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