The President of the United States loves Bitcoin. Donald Trump says that the cryptocurrency – invented by the mysterious Satoshi Nakamoto in 2008 – will be included in a strategic reserve of digital assets that his administration plans to create.
Bitcoin has been the most well-known and, at times highly controversial, digital asset, while the true identity of the person or persons behind Satoshi Nakamoto remains inconclusive.
Its origins are related to how, with the advent of the World Wide Web, it became easy to create digital information and, with the increasing volume of it, just as straightforward to replicate and copy all of it. The internet held the promise of easy and direct commerce between individuals. But to enable this, a problem to be solved was how to ensure rightful and legal ownership of something digital. Without a solution, a huge obstacle to the expansion of the digital economy would remain.
But just as the physical financial system went into meltdown following the failure of Lehman Brothers bank, a whitepaper Nakamoto authored was published online. It proposed Bitcoin as an incentive for ordinary people to run a system of digital payments that would not need a trusted third party – for instance, a bank – to process and handle the transactions.
Using their computer power, participants in the Bitcoin system race to solve a puzzle to verify each block in a chain of transactions. The first one to do so receives some Bitcoin as a reward for their efforts and also to compensate for any cost, including electricity. With millions of computers working to build the Bitcoin blockchain – each transaction visible to all – it would be too difficult to overpower the system and alter a transaction fraudulently. Working successfully, you would then no longer need an institution or government to guarantee anything.
It was a vision for a future financial system defined by radical transparency and equality. But since then, Bitcoin has developed supporters and detractors of matching ferocity. Its backers hold on to it for dear life through volatility and scandals, while those who oppose them fear its use by criminal networks and challenge its utility and value.
The order banned the use of any digital asset backed by other large economies trialling their use as they explore ways to reduce global dependence on the US dollar
During his election campaign last year, Mr Trump vowed to begin a new, benign era for crypto.
In January, he used his authority to issue an order “to promote United States leadership in digital assets and financial technology while protecting economic liberty”. The order highlighted how “the digital asset industry plays a crucial role in innovation and economic development in the United States, as well as our nation’s international leadership”. Most significantly, this was linked to “promoting and protecting the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide”.
It also pledged “measures to protect Americans from the risks of Central Bank Digital Currencies [CBDCs], which threaten the stability of the financial system, individual privacy, and the sovereignty of the United States, including by prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States”. Thus, the order banned the use of any digital asset backed by other large economies – such as China, India, Russia, Japan and the EU – that are trialling their use as they explore ways to reduce global dependence on the US dollar.
Over the past year, a consensus has formed that de-dollarisation is an unstoppable force. According to the Atlantic Council’s Dollar Dominance Monitor, “The US dollar has served as the world’s leading reserve currency since World War II. Today, the dollar represents 58 per cent of foreign reserve holdings worldwide. The euro, the second-most-used currency, accounts for only 20 per cent of foreign reserve holdings".
But the report also pointed out that in recent years – particularly since Russia’s full-scale invasion of Ukraine and the G7’s subsequent escalation in the use of financial sanctions – a number of countries have signalled their intention to accelerate efforts to diversify away from dollars.
Mr Trump has threatened these efforts, including with 100 per cent tariffs on goods from any country pursuing de-dollarisation. Simultaneously, he is closing the door on any chance of the growth of digital assets becoming a Trojan Horse to replace the dollar by championing cryptocurrencies that are unaffiliated to other nations.
“A US Crypto Reserve will elevate this critical industry after years of corrupt attacks by the [previous Joe] Biden administration, which is why my Executive Order on Digital Assets directed the Presidential Working Group to move forward on a Crypto Strategic Reserve that includes XRP, SOL and ADA,” Mr Trump added, referring to the cryptocurrencies being added to the reserve. “I will make sure the US is the Crypto Capital of the World. We are making America great again!”
Mr Trump posted on social media last weekend before following up with another one: “Obviously, BTC and ETH, as other valuable cryptocurrencies, will be the heart of the Reserve. I also love Bitcoin and Ethereum!”
Critics of the move point to conflicts of interest and also the danger of creating a bubble in these assets.
According to Yanis Varoufakis, an economist and the former finance minister of Greece, in order to accomplish his economic goals Mr Trump needs the seemingly contradictory outcomes of a weaker dollar to spur American exports, while maintaining its power as the dominant currency, which gives him political leverage over rival nations. In other words, he needs large economies to reduce their dollar holdings for the currency to be weakened, but also not seek to supplant it with another fiat currency.
By promoting Bitcoin, Ethereum and other cryptocurrencies, the US President ensures that his country’s rivals are even further constrained from challenging its financial dominance through this emerging technology.
Six things you need to know about UAE Women’s Special Olympics football team
Several girls started playing football at age four
They describe sport as their passion
The girls don’t dwell on their condition
They just say they may need to work a little harder than others
When not in training, they play football with their brothers and sisters
The girls want to inspire others to join the UAE Special Olympics teams
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Mohammed bin Zayed Majlis
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
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Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
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Pox that threatens the Middle East's native species
Camelpox
Caused by a virus related to the one that causes human smallpox, camelpox typically causes fever, swelling of lymph nodes and skin lesions in camels aged over three, but the animal usually recovers after a month or so. Younger animals may develop a more acute form that causes internal lesions and diarrhoea, and is often fatal, especially when secondary infections result. It is found across the Middle East as well as in parts of Asia, Africa, Russia and India.
Falconpox
Falconpox can cause a variety of types of lesions, which can affect, for example, the eyelids, feet and the areas above and below the beak. It is a problem among captive falcons and is one of many types of avian pox or avipox diseases that together affect dozens of bird species across the world. Among the other forms are pigeonpox, turkeypox, starlingpox and canarypox. Avipox viruses are spread by mosquitoes and direct bird-to-bird contact.
Houbarapox
Houbarapox is, like falconpox, one of the many forms of avipox diseases. It exists in various forms, with a type that causes skin lesions being least likely to result in death. Other forms cause more severe lesions, including internal lesions, and are more likely to kill the bird, often because secondary infections develop. This summer the CVRL reported an outbreak of pox in houbaras after rains in spring led to an increase in mosquito numbers.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
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The Bio
Hometown: Bogota, Colombia
Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves in Abu Dhabi
The one book everyone should read: 100 Years of Solitude by Gabriel Garcia Marquez. It will make your mind fly
Favourite documentary: Chasing Coral by Jeff Orlowski. It's a good reality check about one of the most valued ecosystems for humanity
