crisis

Premarket stocks: How cryptocurrencies could trigger a financial crisis

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London
CNN Business
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Gone are the days when bitcoin, ether and other cryptocurrencies could be thought of as a niche corner of financial markets.

What’s happening: In a new report, the Financial Stability Board — an international body that brings together regulators from 24 countries and jurisdictions — said that the “fast evolving” crypto market could quickly reach a point where it becomes a “threat to global financial stability” due to its size, structural vulnerabilities and growing ties to the traditional financial system.

“Financial stability risks could rapidly escalate,” the group said this week, adding that policymakers needed to step up.

The assessment comes as banks and other big market players ramp up their exposure to crypto due to requests from clients, despite its volatility.

On Thursday, bitcoin plunged almost 8% as the broader market sold off. The same day, Sequoia Capital said it was ramping up its crypto business with a new $500 million to $600 million fund. The venture capital giant said it would be “focused primarily on liquid tokens and digital assets.”

“Systemically important banks and other financial institutions are increasingly willing to undertake activities in, and gain exposures to, crypto-assets,” the FSB said. “If the current trajectory of growth in scale and interconnectedness of crypto-assets to these institutions were to continue, this could have implications for global financial stability.”

The state of play: In 2021, the market for crypto-assets at one point more than tripled to $2.6 trillion. That’s still relatively small. Global stock markets, for comparison, were last valued at more than $120 trillion.

Why, then, is the FSB sounding the alarm? The group said that because big players are getting involved, significant swings in the crypto market could trigger a series of unexpected events. It even drew a comparison to trades tied to the housing market which helped unleash the 2008 financial crisis.

“As in the case of the US subprime mortgage crisis, a small amount of known exposure does not necessarily mean a small amount of risk, particularly if there [is] a lack of transparency and insufficient regulatory coverage,” the FSB wrote.

Watch this space: After a slow start, governments could begin to get more aggressive. Yahoo! News reported Thursday that US President Joe Biden could issue an executive order next week instructing agencies to study crypto and develop a government-wide strategy to regulate digital assets.

Earlier this month, Congress held a hearing on the regulation of stablecoins. These are digital assets whose value is pegged to other currencies or commodities.

But UBS doesn’t think investors should hold their breath for clearer guidance from lawmakers any time soon.

“Regulators could be waiting a long time for Congressional action and in the meantime will need to grapple with these issues using the

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In the middle of a crisis, Facebook Inc. renames itself Meta

OAKLAND, Calif. (AP) — Like many companies in trouble before it, Facebook is changing its name and logo.

Facebook Inc. is now called Meta Platforms Inc., or Meta for short, to reflect what CEO Mark Zuckerberg said Thursday is its commitment to developing the new surround-yourself technology known as the “ metaverse.” But the social network itself will still be called Facebook.

Also unchanged, at least for now, are its chief executive and senior leadership, its corporate structure and the crisis that has enveloped the company.

Skeptics immediately accused the company of trying to change the subject from the Facebook Papers, the trove of leaked documents that have plunged it into the biggest crisis since it was founded in Zuckerberg’s Harvard dorm room 17 years ago. The documents portray Facebook as putting profits ahead of ridding its platform of hate, political strife and misinformation around the world.

The move reminded marketing consultant Laura Ries of when energy company BP rebranded itself to “Beyond Petroleum” to escape criticism that the oil giant harmed the environment.

“Facebook is the world’s social media platform, and they are being accused of creating something that is harmful to people and society,” she said. “They can’t walk away from the social network with a new corporate name and talk of a future metaverse.”

Facebook the app is not changing its name. Nor are Instagram, WhatsApp and Messenger. The company’s corporate structure also won’t change. But on Dec. 1, its stock will start trading under a new ticker symbol, MVRS.

The metaverse is sort of the internet brought to life, or at least rendered in 3D. Zuckerberg has described it as a “virtual environment” you can go inside of, instead of just looking at on a screen. People can meet, work and play, using virtual reality headsets, augmented reality glasses, smartphone apps or other devices.

It also will incorporate other aspects of online life such as shopping and social media, according to Victoria Petrock, an analyst who follows emerging technologies.

Zuckerberg’s foray into virtual reality has drawn some comparisons to fellow tech billionaires’ outer space adventures and jokes that perhaps it’s understandable he would want to escape his current reality amid calls for his resignation and increasing scrutiny of the company.

On Monday, Zuckerberg announced a new segment for Facebook that will begin reporting its financial results separately from the company’s Family of Apps segment starting in the final quarter of this year. The entity, Reality Labs, will reduce Facebook’s overall operating profit by about $10 billion this year, the company said.

Other tech companies such as Microsoft, chipmaker Nvidia and Fortnite maker Epic Games have all been outlining their own visions of how the metaverse will work.

Zuckerberg said that he expects the metaverse to reach a billion people within the next decade and that he hopes the new technology will creates millions of jobs for creators.

The announcement comes amid heightened legislative and regulatory scrutiny of Facebook in many parts of the world because

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