THE news this week about Canadian digital asset exchange Quadriga CX highlights the pitfalls of investing in cryptocurrencies.
The exchange’s CEO passed away, taking to the grave the private keys and passwords needed to access the company’s funds. His death locked up about C$180mil (RM553mil) worth of cryptocurrencies, much to its investors’ chagrin.
Trading of cryptocurrencies requires a string of random numbers to be memorised by its users, a rather non-high-tech method ironically still associated with this so-called new asset class.
Making matters worse is online chatter that the CEO’s death could be faked, in order for him or his accomplices to get away with the bounty.
Attacks on exchanges have been known to happen in the cryptocurrency space, with investors losing millions of dollars worth of tokens, with hardly any recourse. The cryptocurrency world prides itself on operating outwith the regulation that is imposed on the traditional financial sector. That is increasingly looking like a double-edged sword, as investors in the space do not have any protection from regulators when incidences like this happen.
Another related event indicates how cryptocurrencies can be used for the wrong purposes. This week, Reuters reported that Portugal-based Novo Banco halted a transfer of US$1.2bil by the government of Venezuelan President Nicolas Maduro to banks in Uruguay, a day after the opposition denounced what they called the theft of public funds. Maduro’s adversaries warn that officials are seeking to drain state coffers ahead of a potential change of government. Do note that Maduro’s government has already launched its own cryptocurrency called the Petro, but indications are that it is not very widely used. However, with knowledge of how the technology works, what is stopping the regime from using cryptocurrencies to move monies about without detection?
If bitcoin’s anonimity isn’t good enough – some reckon that bitcoin transactions can be traced due to the record-keeping nature of blockchain technology – there are always the privacy coins in the crypto world to avail to.
An uncertain broadband job
FOR a telecommunications contract worth RM1.9bil, there is very little information available for investors to make a rationale investment decision.
Mesiniaga Bhd ’s first announcement that it had won a RM1.9bil contract related to broadband services was brief. It did not go into the details of the financial strength of the client – Xiddig Cellular Communications Sdn Bhd.
The only risk factors pointed out by the company were that Mesiniaga has to meet deadlines imposed by customers and keep up the service levels that it has committed to.
What about the assurance of getting paid for the job done?
This is important, as Xiddig is a private company and undertaking a job worth RM1.9bil is a lot for an unlisted entity. There is not much information on Xiddig in the public space except for its chairman, Datuk Seri Abdul Rashid Abdul Rahim.
Exacerbating the situation is the fact that the government is distancing itself from the broadband project that Xiddig is part of.
Initially, it was reported that the project – the Enhanced Malaysia Internet Gateway (EM-IIG) broadband worth a total of RM5.45bil – had the support of the government.
The government’s support was supposedly in the speech at the launch of the project that was read out by Parliament deputy speaker Datuk Mohd Rashid Hasnon on behalf of Deputy Prime Minister Datuk Seri Dr Wan Azizah Wan Ismail.
However, the Deputy Prime Minister’s office denied approving such a speech later.
Communications and Multimedia Minister Gobind Singh Deo added to the government’s stance by stating that the government had never promised its support for the EM-IIG project.
Following these developments, shareholders of Mesiniaga cannot be faulted if they are left wondering if the RM1.9bil job the company has bagged from Xiddig is real.
Securing a job is important for listed companies. More important is securing payments from their clients.
New council, old problems
WHEN it was announced that a new economic council would be established, it brought back memories of the past but with a current twist to the problems at hand.
The old National Economic Action Council (NEAC) was formed in the wake of the last and worst economic crisis to hit Malaysia. Gross domestic product collapsed along with the stock market that brought a crunch to the value of assets in the country.
The NEAC then was to coordinate the recovery measures that have since put Malaysia on a stronger economic footing. The current iteration of that is different. There is no “crisis” at hand, but it is clear to all that the economy is slowing.
The question many have asked is how is it going to be different? For one, circumstances were not the same in 1998/99 and right now it is about coordination. The government is new and the initial message many have got is that prudence is priority, given the debt problems.
With housing and construction in a slump – and those two sectors have the biggest linkages to the economy – there is a need for the plan to soothe things over until growth, at least internationally, returns.
With ministries being helmed by novice ministers after the change in government, it is understandable why there is a need for coordination. Planning is essential in giving growth a fillip and measures to assist in that would help.
But the new council has to be different than the last. Currently, debt is a bigger issue than before and there is a need to check how much the government and taxpayer money can be used to drive growth.
What the new economic council has to do is to see just how much innovation and the new economy can drive growth. That will take time and there will be a desire to resort to what had worked in the past, but whatever tried and tested measures has to be temporary. The world has changed from 20 years ago and any new economic stimulus measures have to reflect that.