Tag Archives: Breaking News: Davos

Business

Credit Suisse CEO says outflows have reduced ‘very significantly’ as overhaul progresses

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Switzerland’s second largest bank Credit Suisse is seen here next to a Swiss flag in downtown Geneva.

Fabrice Coffrini | AFP | Getty Images

Credit Suisse is seeing a sharp reduction in client outflows, as the embattled Swiss lender progresses with its major strategic overhaul, new CEO Ulrich Koerner told CNBC on Wednesday.

The bank in November projected a $1.6 billion fourth-quarter loss after announcing a raft of measures to address persistent underperformance in its investment bank and a series of risk and compliance failures. It also revealed at the time that it had continued to experience substantial net asset outflows.

“The outflows, as we said, have reduced very significantly, and we are seeing now money coming back in different parts of the firm,” Koerner said on the sidelines of the World Economic Forum in Davos, Switzerland.

As part of the overhaul, Credit Suisse shareholders in November greenlit a $4.2 billion capital raise, including a new private share offering that will see the Saudi National Bank become the largest interest holder, with a 9.9% stake.

Koerner said the transformation towards a “new Credit Suisse” was going well.

“We laid out a very clear plan, and we talked to all different stakeholder groups in the last three months, as you would expect,” he said.

“I think the plan, the strategy resonates very much. We are in full execution swing, so I think we are making really good progress.”

Credit Suisse has also reached out to tens of thousands of clients in Switzerland and around the world for feedback, Koerner said.

“That has generated very positive momentum, and I think this is momentum that travels with us through 2023,” he added.

‘Zero concerns’ over Klein business acquisition

Koerner confirmed that the reported departure of 10% of Credit Suisse’s investment bankers in Europe was part of its previously announced plans to cut 2,700 jobs by 2023 and reduce headcount by a total 9,000 by 2025.

As part of the overhaul, Credit Suisse will spin off and rebrand its U.S. investment banking division as CS First Boston. The new unit will be headed by former Credit Suisse board member Michael Klein. Credit Suisse is reportedly on the verge of buying Klein’s boutique investment advisory firm.

Koerner insisted that he had “zero concerns” about conflicts of interest, stressing that the bank could deal with the situation “in the utmost professional way.”

“I am really looking forward for Michael to join, because Michael is an excellent banker, he is an excellent dealmaker, and he is very entrepreneurial, and that is why I want to go together with him on a journey.”

U.S. investor Harris Associates has more than halved its stake in Credit Suisse since June 2022. Koerner said he could not judge the firm for its timing, but “we will certainly have discussions.”

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Business

$1.4 trillion wipeout hits crypto industry at WEF

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Along the Davos Promenade in 2023 there were fewer crypto companies than in previous years after the market crash. Circle, the company behind the stablecoin USDC, was one the few present.

Arjun Kharpal | CNBC

DAVOS, Switzerland — Over the past few years at the World Economic Forum in Davos, Switzerland, the number of cryptocurrency industry attendees has boomed.

But after a near $1.4 trillion wipeout in 2022, the crypto industry is being a bit more reserved with how it splashes the cash and several companies spotted last year are not in attendance. 2022 was marked by failed crypto projects, liquidity issues and bankruptcies, topped off by the collapse of major exchange FTX.

When the World Economic Forum was held last May, bitcoin was hovering around $30,000, after having already fallen more than 50% from its all-time high hit in November 2021. More pain followed with bitcoin dipping as low as $15,480.

The Promenade is the main street in Davos where companies and governments take over shops and cafes for the week. Last year, crypto firms from all walks of life took over the place. But since the market slide, there are far fewer crypto firms with flashy store fronts at Davos.

One shop selling non-fungible tokens, or NFTs, has disappeared. Prices of NFTs, which are digital collectibles, also plunged last year. What’s left are companies that survived the bear market and that are looking to expand their businesses.

“It’s very clear that the speculation period is drawing to a close and every company that you see featured … is really focused on real-world use cases,” said Teana Baker-Taylor, vice-president of policy and regulatory strategy at Circle, the company behind the USDC stablecoin.

A stablecoin is a type of digital currency that is supposed to be pegged one-to-one with a fiat currency. USDC is pegged to the U.S. dollar. Circle says it is backed with real-world assets such as U.S. Treasurys so that one USDC can be redeemed for $1.

Casper Labs, a company that has built a blockchain designed to be used by businesses, is running a space on the Promenade called the Blockchain Lab. Casper Labs was also present last year in Davos.

Cliff Sarkin, chief of strategic relations at Casper Labs, said he’s “cautiously optimistic” that the crypto market has bottomed.

“So we’re over a year into the bear market, so I think the shock of that is settled in and for those of us that have been in the space for years … we feel like this is the time to build,” Sarkin told CNBC.

He added that the crypto firms that have remained at Davos are “substantiative projects” and “the real deals” versus things like NFTs.

There were also those in traditional finance who welcomed fewer crypto firms.

Mark Haefele, chief investment officer at UBS Global Wealth Management, was asked during an event hosted by the Swiss bank what he would like to see in Davos this year. He said he had seen it already: “It’s less crypto on the main street.”

The mysterious case of the orange bitcoin car

On Monday, a flashy bright orange Mercedes-Benz car was parked outside of the Blockchain Hub on the Promenade.

The orange Mercedes was parked along the Promenade in Davos. Nobody in the vicinity saw who parked it there. The license plate says “Kuna” on it, which is the name of a Ukrainian cryptocurrency exchange.

Arjun Kharpal | CNBC

A coin that represented a bitcoin was placed where the Mercedes-Benz logo would usually be. On the tires and the licenses plate, the words “in crypto we trust” were printed. The license plate had the Ukrainian flag on it and the name Kuna, which is the company behind a cryptocurrency exchange of the same name.

Kuna also set up the “reserve fund of Ukraine” after the war with Russia began where people could donate crypto to Ukraine.

People in the vicinity that CNBC spoke to could not verify who parked the car there.

However, two crypto executives who spoke to CNBC did not welcome the orange car, particularly after the market crash and the excesses of the industry were exposed. One remarked that the presence of such a car was not helpful for the industry’s reputation which took a hit last year.

CNBC reached out to Semen Kaploushenko, CEO of the Kuna exchange, via LinkedIn, but is yet to receive a response.

CNBC also reached out to the Blockchain Association of Ukraine which Kuna founder Michael Chobanian is the president of, but is yet to receive a response.

The license plate and tyres had the words “in crypto we trust” printed on them.

CNBC | Arjun Kharpal

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Business

Crypto firms say thousands of digital currencies will collapse

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With more than 19,000 virtual currencies in existence, the cryptocurrency industry has likened the current state of the market to the early years of the internet. Industry players said however that most of these coins will collapse.

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Several cryptocurrency industry players have told CNBC that thousands of digital tokens are likely to collapse while the number of blockchains in existence will also fall over the coming years.

There are more than 19,000 cryptocurrencies in existence and dozens of blockchain platforms that exist. A blockchain platform, such as Ethereum, is the underlying technology that many of these different cryptocurrencies are built upon.

The recent collapse of so-called algorithmic stabelcoin terraUSD and its associated digital token luna, which sent shockwaves through the market, has thrust a spotlight on the thousands of cryptocurrencies in existence and whether they will all survive.

“One of the effects of what we’ve seen last week with the Terra issue is we’re at the stage where basically there are far too many blockchains out there, too many tokens. And that’s confusing users. And that’s also bringing some risks for the users,” Bertrand Perez, CEO of the Web3 Foundation, told CNBC at the World Economic Forum in Davos, Switzerland, last week.

“Like at the beginning of the internet, you were having lots of dotcom companies and lots of them were scams, and were not bringing any value and all that got cleared. And now we have very useful and legit companies.”

Brad Garlinghouse, CEO of cross-border blockchain payments company Ripple, said there is likely to be “scores” of cryptocurrencies that remain in the future.

“I think there’s a question about whether or not we need 19,000 new currencies today. In the fiat world, there’s maybe 180 currencies,” Garlinghouse said.

Guggenheim Chief Investment Officer Scott Minerd added further pessimism last week when he said that most crypto is “junk” but that bitcoin and ethereum would survive.

The comments from the industry come as the cryptocurrency market continues to feel pressure. Bitcoin is off more than 50% from its record high it hit in November, with many other digital tokens sharply lower from their all-time highs.

Many different blockchain platforms from Ethereum to Solana are vying for a leadership position in the industry. But Brett Harrison, CEO of cryptocurrency exchange FTX U.S., said the hundreds currently in existence will not all survive.

“When you think about the blockchains … there probably won’t be hundreds of different blockchains in 10 years, I think there’ll be a couple of clear winners for different kinds of applications,” Harrison said.

“And we’ll see the market … sort that out over time,” he added.

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Business

UST debacle will ‘probably be the end’ of algorithmic stablecoins

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Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, dropped to $0. The collapse of the algorithmic stablecoin TerraUSD has raised question about the future survival of similar crypto assets.

Dan Kitwood | Getty Images News | Getty Images

Algorithmic stablecoins like terraUSD, which collapsed and sent shockwaves through the cryptocurrency market, are unlikely to survive, the co-founder of digital currency tether told CNBC.

Stablecoins are a type of cryptocurrency that is usually pegged to a real-world asset. TerraUSD or UST, is an algorithmic stablecoin which was supposed to be pegged to the U.S. dollar.

Whereas stablecoins like tether and USD Coin are backed by real-world assets such as fiat currencies and government bonds in order to maintain their dollar peg, UST was governed by an algorithm.

UST lost its dollar peg and that also led to a sell-off for its sister token luna, which crashed to $0.

The debacle has led to warnings that algorithmic stablecoins might not have a future.

“It’s unfortunate that the money … was lost, however, it’s not a surprise. It’s an algorithmic-backed, stablecoin. So it’s just a bunch of smart people trying to figure out how to peg something to the dollar,” Reeve Collins, the co-founder of digital token company BLOCKv, told CNBC at the World Economic Forum in Davos, Switzerland, last week.

“And a lot of people pulled out their money in the last few months, because they realized that it wasn’t sustainable. So that crash kind of had a cascade effect. And it will probably be the end of most algo stablecoins.”

Collins is also the co-founder of tether, which is not an algorithmic stablecoin. But tether’s issuer claims it is backed by cash, U.S. Treasurys and corporate bonds. In the crypto market turmoil last month, tether also briefly lost its dollar peg before regaining it.

Jeremy Allaire, CEO of Circle, one of the companies behind the issuance of the USDC stablecoin, said he thinks people will continue to work on algorithmic stablecoins.

“I’ve compared algorithmic stable coins to the Fountain of Youth or the Holy Grail. Others have referred to it as financial alchemy. And so there will continue to be financial alchemists who, who work on the magic potion to to create these things, and to find … the Holy Grail of a stable value, algorithmic digital currency. So I fully expect continued pursuit of that,” Allaire told CNBC last week.

“Now, what happens with regulation around it is a different question. Are there going to be, you know, clear lines drawn about what can interact with the market. What can interact with … the financial system, given the risks that are embedded,” he added.

Regulation ahead

The crytpo industry is expecting tougher regulation on stablecoins, especially after terraUSD’s collapse. Bertrand Perez, CEO of the Web3 Foundation and a former director of the Facebook-backed Diem stablecoin project, expects regulators to demand that such cryptocurrencies are backed by real assets.

“So I expect that once we have a clear regulation of stablecoins, the basic rules of the regulation would be that you have a clear reserve with a set of assets that are strong, that you’re subject to regular audits of those reserves,” Perez told CNBC last week.

“So you can have an auditing company that comes regularly to make sure that you have the proper reserves, that you have also the proper processes and measures in order to face bank runs and other, let’s say, negative market conditions, to make sure that your reserve is really secure, not only when everything goes well.”

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Business

Ripple, FTX on the hunt for acquisition targets as market crashes

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Two top cryptocurrency companies, Ripple and FTX, told CNBC that they’re on the lookout for acquisitions as the industry hopes to drive growth through buying other firms.

It is a sign that some crypto firms feel that they’re large enough and well capitalized to splash the cash on acquisitions.

Brett Harrison, president of cryptocurrency exchange FTX U.S., said in an interview last week that the company is in “a very good spot in terms of our capital and cash” and will “look around the market for potential merger and acquisition opportunities.”

Harrison said that FTX U.S. will look for companies which will help them acquire more users or regulatory licenses. In 2020, FTX acquired trading platform Blockfolio which helped it get more users. Earlier this month, CNBC reported that FTX is looking for brokerage start-ups to acquire to push further into stock trading.

Last year, FTX U.S. bought LedgerX, a futures exchange that had several licenses from regulators in the U.S.

“We’re doing that globally, in places like in Japan, Australia, in Dubai, different places where we’ve been able to either partner with local companies or sometimes do acquisitions to be able to get licenses that we need,” Harrison said.

Meanwhile, Brad Garlinghouse, CEO of cross-border payments company Ripple, said the company has “a very strong balance sheet,” predicting a rise in mergers and acquisitions in the crypto industry.

“I think there’ll be an uptick in M&A in the blockchain and crypto space. We haven’t seen that yet. But I think that’s likely in the future. And I certainly think as that unfolds, we would consider things like that,” Garlinghouse told CNBC in an interview last week at the World Economic Forum in Davos, Switzerland.

“We’re now at a stage of growth where I think we’re more likely to be the buyer versus the … seller,” he added.

Mergers and acquisition activity in crypto boomed in 2021 with the global value of such transactions totaling more than $55 billion, versus $1.1 billion in 2020, according to PWC. That coincided with a boom in cryptocurrency prices that took bitcoin to an all-time high in November last year.

But since then, prices have come crashing down. Bitcoin is about 55% off of its record high of $68,990.90, according to CoinDesk data.

A drop in cryptocurrency prices, and potentially valuations of companies in the industry, could make certain acquisitions attractive to larger players.

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World

Europe lambasted for failing to deter Putin’s war

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DAVOS, Switzerland — The European Union failed to counter Russian President Vladimir Putin and needs to now strike flexible alliances across the world and search for new friends, current and former leaders told CNBC on a panel at the World Economic Forum.

“We are too Euro-centric on this crisis, in the sense we think this is Russia versus the West — it is much broader than that,” Alexander Stubb, the former prime minister of Finland, said in Davos.

Earlier this month, the EU’s top diplomat, Josep Borrell, explained how the West now needed to pay more attention to the rest of the world, excluding China, to try to persuade these nations to condemn Moscow and its onslaught of Ukraine.

Speaking to CNBC on the sidelines of a G-7 foreign affairs ministers meeting, Borrell suggested that Europe had basically given up on trying to align China with its own views on the invasion. “To persuade China, [it] is a difficult task,” he told CNBC’s Steve Sedgwick on May 12.

The Chinese authorities have refused to denounce Russia’s unprovoked invasion of its neighbor — having abstained during a vote for a U.N. Security Council resolution condemning Moscow.

While they may not have the same stance as Beijing, India, Brazil and the United Arab Emirates have all been coy when it comes to Russia’s invasion.

Stubb, who also served as finance and foreign affairs minister of Finland, said that the war in Ukraine has ignited a bigger debate about the new global world order.

“It is an uncomfortable debate for us Europeans and the North Americans to have, because we fully realize we have more to lose than to gain in this one,” he told CNBC.

In order to achieve its foreign policy aims, the EU may have to look beyond the United States, with Borrell saying the bloc needed to work out how “we engage with everybody in the world in order to explain what’s going on in Ukraine.”

Flexible alliances

This is where the EU will have to “be a bit more flexible” in its thinking, Stubb said, suggesting that flexible alliances are the answer going forward.

“This is going to mean in some cases we are going to cooperate with countries that we don’t feel so comfortable with,” he said, pointing to a certain level of hypocrisy from European leaders.

Speaking on the same panel, Austria’s foreign affairs minister, Alexander Schallenberg, said the EU had been “naive” in the runup to Putin’s invasion of Ukraine and the war had become “like a shock therapy” for the bloc.

For many years, several European countries looked to do business with the Kremlin in an attempt to increase economic ties with Russia and at least try to keep Putin as close to western values as possible. This was certainly the case of Germany, for example, which rapidly increased its energy supplies from Russia, even after Moscow’s illegal annexation of Crimea in 2014.

Hungary, another EU country, has also deepened its ties to the Kremlin in recent years.

These deals came in spite of warnings from the Baltic nations — Latvia, Lithuania and Estonia — which, given their history with their larger neighbor, have tried to push closer to the West since the fall of the Soviet Union.

“You have said hypocrisy, you have said naivety and I will say some of it is just greed,” Natalie Jaresko, former finance minister of Ukraine, said at the same Davos panel this week.

“Because we had plenty of warning since the [2007] Munich Security Conference where Putin announced his war against the liberal order, to the war in Chechnya … he invaded Georgia, he invaded Ukraine … what more did we need to know about his stated published intentions?,” she said.

For European Parliament President, Roberta Metsola, it’s no longer the time for the EU to blame itself, but rather to say that it will never suffer from inaction again.

“We have taken what could have been many years of comfort, looking away from problems that were at our doorstep, looking away from crises and big tragedies such as in Afghanistan that are happening because of our inaction. So I think that rather than look and say we were selfish, say mea culpa, now it’s time for us not to do that ever again,” Metsola told CNBC in Davos.

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