A version of this story first appeared in CNN Business’ Before the Bell newsletter.Not a subscriber? You can sign up right here .London (CNN Business) El Salvador’s “Bitcoin Day” did not go especially well.
The impoverished country’s vaunted adoption of bitcoin as legal tender on Tuesday was marred by street protests, technical glitches and an extreme drop in the value of the controversial digital currency.What went wrong? “Chivo Wallet,” a storage app created by the government, wasn’t immediately available on major app stores.By the end of the day, it had appeared on Apple and Huawei platforms.Hundreds of people marched against bitcoin in various protests across the capital city, the Financial Times reported .
The price of bitcoin started the day around $53,000 before plunging by as much as 19%, according to data from Coinbase.The digital currency has since recovered some losses to trade near $46,270.
President Nayib Bukele, a right-wing populist who is the driving force behind the bitcoin initiative, took the dramatic price drop in his stride.”Buying the dip,” he quipped on Twitter.He also joined online crypto supporters in praising major companies such as McDonald’s ( MCD ) for accepting bitcoin as payment.Read More Supporters have argued that adopting bitcoin as legal tender will help Salvadorans avoid costly fees on remittances from abroad, which totaled nearly $6 billion last year — around a quarter of GDP.Bukele may succeed in ironing out the initial technical glitches, but the biggest risks from bitcoin will persist long into the future.President Nayib Bukele after a news conference in San Salvador, El Salvador, on June 6, 2021.
El Salvador does not have a currency of its own, instead relying on the US dollar.Adding another currency to the mix that’s prone to wild changes in value will further complicate the government’s budget and tax planning.
It’s also a nightmare for households and businesses, who now have to devote time and resources to deciding whether to hold their funds in dollars or bitcoin.With crypto prices prone to wild swings, the stakes are high.
Another risk: Adopting bitcoin as legal tender may also encourage crime to flourish, according to the International Monetary Fund, which agreed to provide $389 million in emergency funding to El Salvador in April 2020.”Without robust anti-money laundering and combating the financing of terrorism measures, cryptoassets can be used to launder ill-gotten money, fund terrorism, and evade taxes.This could pose risks to a country’s financial system, fiscal balance, and relationships with foreign countries and correspondent banks,” the IMF said in July.Big picture: Credit rating agencies are not impressed.In late July, Moody’s Investors Service pushed El Salvador’s debt deeper into junk territory, citing “a deterioration in the quality of policymaking” including the government’s decision to adopt bitcoin as legal tender.Moody’s said the country remains susceptible to financing shocks that could jeopardize the government’s ability to repay creditors starting in January 2023.
That means El Salvador is likely to need another bailout from the IMF.Other countries should follow El Salvador with extreme caution.The IMF urged governments to use new digital forms of money only when they can preserve financial stability, efficiency and equality.”Attempting to make cryptoassets a national currency is an inadvisable shortcut,” the IMF warned.
Chinese investors pour $1 billion into BlackRock’s new fund BlackRock’s new investment fund in China — the first owned entirely by a foreign firm — has attracted $1 billion from Chinese investors in its first week.The world’s largest asset manager said Wednesday that the fund — which has now raised 6.68 billion yuan — was officially established this week and has attracted more than 111,000 investors.It started offering investment products to individual Chinese investors late last month.”We are very proud of achieving this milestone for our China fund management business, and are grateful for investors’ overwhelming support,” said Rachel Lord, BlackRock’s chair and head of Asia Pacific.
Chinese investors pour $1 billion into BlackRock’s new fund Remember: BlackRock’s announcement comes days after the company was blasted by billionaire philanthropist George Soros for its efforts in China, which he called a “blunder.” BlackRock’s new product launch came just weeks after it recommended that investors pile into Chinese assets.”Pouring billions of dollars into China now is a tragic mistake,” Soros wrote in an op-edrote in an op-ed published Monday by the Wall Street Journal.”It is likely to lose money for BlackRock’s clients and, more important, will damage the national security interests of the [United States] and other democracies.” Soros highlighted Xi’s recent crackdown on private business, which he sees as proof that “the regime regards all Chinese companies as instruments of the one-party state.” He also referenced “an enormous crisis brewing in China’s real estate market,” and Xi’s efforts to redistribute wealth.These trends, he said, do “not augur well for foreign investors.” Who’s right? Time will tell.
The humble shipping container You probably don’t spend much time thinking about shipping containers .But these humble building blocks of global trade have become incredibly scarce and extremely expensive during the pandemic.Before the Bell’s lead author Julia Horowitz spent the past couple weeks reporting on shipping containers and how they’re contributing to a global shipping crisis.Backlogs are now looming over the holiday shopping season.
How the pandemic turned humble shipping containers into the hottest items on the planet Before the coronavirus hit, companies could rent a 20-foot or 40-foot box with relative ease, allowing them to move goods at a low cost.But empty boxes remain scattered across Europe and North America, while supply chain delays mean even more are needed to fulfill orders.
Here’s the result: One year ago, companies would pay roughly $1,920 to book a 40-foot steel container on a standard route between China and Europe, according to data from Drewry, a maritime research consultancy.Now, they’re spending more than $14,000, an increase of more than 600%.Meanwhile, the cost of buying a container has effectively doubled.”We are seeing record high rates, particularly on the spot market,” said John Fossey, head of container equipment and leasing research at Drewry, referring to the just-in-time reservation of trips on ocean carriers.Experts in the container industry aren’t sure when prices will ease.But they do agree on one thing: The situation isn’t going to be resolved any time soon.
Gene Seroka, executive director at the Port of Los Angeles, has said that supply chain issues could persist until 2023.Up next GameStop ( GME ) and Lululemon Athletica ( LULU ) report earnings after the closing bell.Also today: US job openings data at 10:00 a.m.ET.Coming tomorrow: ECB decision and US unemployment claims..