Singapore Startup Launches Cryptocurrency Debit Card

A Singapore startup called TenX has designed a Visa card capable of debiting users’ cryptocurrency wallets, allowing them to pay for goods at brick-and-motor merchants with bitcoin, Ethereum and a handful of other digital currencies, according to Bloomberg.

The question now is: Will anybody use it?

TenX’s business model is straightforward: It allows its users to pay for goods in a given fiat currency, then “instantly converts” cryptocurrency from their wallet into the amount needed to cover the transaction.

To be sure, this isn’t the first digital-currency debt card: Two other startups, CryptoPay and Xapo, are selling similar products that focus exclusively on bitcoin. Being limited to bitcoin is obviously problematic for traders who don’t want to miss out on a single tick of the broad-based crypto rally, which Goldman believes will carry BTC to the moon (or at least to $3,600) by year’s end. But TenX’s promise of “instantaneous conversion” is already tempting users. The company says it’s processing 100,000 transactions a month, which is significant, considering bitcoin and Ethereum combined have a market capitalization of about $60 billion. The owners of most of this wealth treat it like an investment, not a system for payments – and it’s that attitude that TenX will likely find to be the biggest obstacle in its quest to 100x its current volume to $100 million a month.

Another flaw: Transactions are capped at $2,000 a year though users can apply for a higher limit if they undergo identify verification, something that crypto enthusiasts might balk at. And with bitcoin’s future far from assured, picking the right mix of cryptocurrencies presents another business risk.

“TenX’s bid to make digital currencies easier to spend comes amid massive volatility and infighting within the cryptocurrency community. Bitcoin, the most popular, slumped after reaching a record in June amid concerns about a split in two, only to recover as fears faded. The company has built an app that serves as a digital wallet connected to the Visa card so that when it’s swiped at a cafe or restaurant, the merchant is paid in local currency and the users’ crypto account is debited.”

Despite its purported ease of use, even company officials admit that the network undergirding its system is complex – perhaps unnecessarily so. But on top of the 2% transaction fee it collects from merchants, customers only pay a 15 to 20 basis point conversion fee levied by the exchange.  

“’You’re mixing two worlds that are night and day,” co-founder Julian Hosp said in an interview. ‘When the user spends the cryptocurrency, we have to instantly switch these currencies to fiat and pay to Visa straight away. It’s a lot of pathways.’


Hosp said transactions are processed immediately and it doesn’t impose any charges on top of the conversion fee that is set by cryptocurrency exchanges, which typically is 0.15 to 0.2 percent. The card now supports eight digital currencies, including the lesser-known dash and augur, and aims to offer about 11 of them by the end of the year.”

TenX, like all companies working on payments solutions involving cryptocurrency, also risks being pushed out of the market by a larger rival with deeper pockets and more entrenched connections in the payments space.

“’TenX has an advantage in moving early, but the startup can expect competition in the future from major financial institutions and venture capitalists with deeper pockets and direct access to clients and databases,‘ said Mati Greenspan, a Tel Aviv, Israel-based analyst at social trading platform eToro.


‘It’s an incredible concept,’ said Greenspan. ‘At the end of the day, it’s going to depend a lot on customer relations. Are they meeting the customers’ expectations? Can somebody else do it better?’”

Last month, the firm raised $80 million worth of Ethereum through an initial coin offering. It plans to spend half of that money to expand, and the other half to launch its own digital-currency exchange. Before that, it raised $120,000 from angel investors and $1 million Fenbushi Capital, which lists Ethereum creator Vitalik Buterin as a general partner.

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Bill Gross: A Recession Would “Probably Do The Economy Some Good”

Janus Portfolio Manager and purported “bond king” Bill Gross appeared on “Bloomberg Markets” to discuss his latest investor letter, in which he criticized loose-money policies of the world’s central banks, comparing them to gluttons who’ve feasted on bonds.

The unprecedented stimulus measures adopted by the Federal Reserve, the European Central Bank, the Bank of Japan and others have created distortions in markets, rendering widely followed historical models like the Philips Curve and Taylor rule useless, Gross said.

Because of the central banks’ bond-buying binge, which created $5 trillion of negative yielding sovereign debt, Gross said the yield curve my not need to flatten as much – i.e. short-term rates may not need to rise as aggressively – to trigger a slowdown in growth or even a recession.

“I still think interest rates should be raised to a more normal level in order to favor business models that are currently being hurt like pension funds and insurance companies and so on,” Gross said.

Counterintuitively, a slowdown might have more long-term benefits for the US economy than maintaining the status quo, according to Gross, who cited Joseph Schumpeter’s theory about “creative destruction.”

“I simply warned that based upon our historical knowledge of yield curve flattening between 3-month Treasuries and 10 year Treasuries we may not have to flatten as much as historically in order to produce a growth slowdown or a recession. I actually think that a slowdown or a recession would probably do the economy some good. You clear out some of the dead wood and you prevent forest fires. It’s the same with concepts such as Schumpeter’s creative destruction, or Minsky’s conclusions from five or ten years ago,”

Hyman Minsky, an economist who spent his entire life in obscurity, but whose research found renewed relevance after the financial crisis, has been dead since 1996. But his “Minsky moment” theory – a study of how excessive debt levels can trigger an abrupt crash in asset valuations – has found renewed relevance.

As Gross explained in his letter, in an economy with record levels of corporate and consumer debt, the cost of short term financing shouldn’t need to rise to the level of a 10-year Treasury note to trigger a recession. Indeed, “proportionality” would suggest that short-term interest rates only need to increase modestly to trigger a marked slowdown in growth.

“Most destructive leverage – as witnessed with the pre-Lehman subprime mortgages – occurs at the short end of the yield curve as the cost of monthly interest payments increase significantly to debt holders. While governments and the U.S. Treasury can afford the additional expense, levered corporations and individuals in many cases cannot…But since the Great Recession, more highly levered corporations, and in many cases, indebted individuals with floating rate student loans now exceeding $1 trillion, cannot cover the increased expense, resulting in reduced investment, consumption and ultimate default. Commonsensically, a more highly levered economy is more growth sensitive to using short term interest rates and a flat yield curve, which historically has coincided with the onset of a recession.”

In his letter, Gross argued that the Fed should proceed with caution. This fall, not only will investors be grappling with rising rates and the beginning of the Fed’s balance-sheet unwind, but a looming battle over raising the debt ceiling is already promising to inject more volatility into markets.

In a sign of investor dread surrounding the looming debt-ceiling battle, Treasuries expected to mature in mid-October have risen markedly in recent weeks, causing the 3mo-6mo curve to invert. The CBO has said the Treasury will run out of cash around then. Another sign that investors are worried about the short-term outlook for credit was Monday’s 3-month bill auction, which surprised the market with the highest yield since 2008.

Investors will hear more from the Fed tomorrow after the close of its two-day July policy meeting. Since there’s no press conference scheduled, investors will be on the lookout for clues surrounding the balance sheet.

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Wall Street Agrees On When The Bull Market Will Finally End

US stock indexes remain at record highs, and volatility near its lows, despite signs that their recordsetting run is losing steam as it becomes increasingly dependent on a narrow band of stocks. Indeed, signs that the rally is running on fumes have convinced portfolio managers and Wall Street strategists that the second-longest bull market of all time will be over in less than 18 months, while a similarly longstanding rally in bonds is also nearly ready to roll over, according to a Bloomberg survey of fund managers and strategists.

“The poll of 30 finance professionals on four continents showed a lack of consensus on the asset judged as most vulnerable now, with answers ranging from European high yield to local-currency emerging-market debt – though they were mostly in the bond world. Among 25 responding to a question on the next U.S. recession, the median answer was the first half of 2019.”

Of the 21 participants who responded to Bloomberg’s question of when they see a slide of more than 20 percent for the S&P 500 Index, the median response was the fourth quarter of 2018. Two forecast that the bear market would begin during the final three months of this year. Of the 21 respondents who forecast a bear market for credit, defined as a 1 percentage point jump in the premiums of US investment-grade corporate bond yields over comparable government-debt yields, the median pick was the third quarter of 2018.

According to Bloomberg, many of these strategists and portfolio managers see central bank policy as the lynchpin of their thesis, believing that years of easy-money policies have artificially inflated stock and bond valuations. By the beginning of 2019, US interest rates will have risen another 1.5 to 2 percentage points, and the central bank will have unwound at least part of the $4.5 trillion in Treasuries and MBS that the Fed purchased during the recession. Of course, this is hardly a coincidence, as Remi Olu-Pitan, who manages a multi-asset fund at Schroder Investment Management Ltd. in London, explains.

Furthermore, it’s widely expected that the Bank of England, European Central Bank and the Bank of Japan will all have begun tapering asset purchases, raising interest rates – or possibly both. The Bank of Canada has already shocked market strategists by raising its benchmark rate for the first time in seve years, which it did earlier this month.

“Consequences could be very painful,” Olu-Pitan said. “We have had a liquidity-fueled bull market. If that is taken away, there is a pressure point,” she said.

Indeed, in a version of a chart that we’ve presented many times, there’s a tight correlation between equity gains and global central-bank stimulus.

None of the poll’s respondents expect a 2007-2009 style meltdown. But as is depicted by Bloomberg in the chart below, the 2002 bear market in US stocks wiped out more than $7 trillion of value.

To be sure, some Wall Street strategists believe a downturn in stock and bond markets could begin as soon as the third or fourth quarter of 2017.

According to Bank of America strategist Michael Hartnett, risks for equities are set to multiply in the third and fourth quarters. Hartnett said in a note published earlier this month that “the most dangerous moment for markets will be when rising rates combine in three or four months’ time with an inflection point in corporate profits. In anticipation of this, we would use the next couple of months to buy volatility, and within fixed income slowly reduce exposure to IG, HY, and EM bonds.”

Atul Lele, chief investment officer at Nassau, Bahamas-based Deltec International Group, was the only respondent to the poll who ranked an economic collapse in China as his primary concern, followed by excessive Fed tightening.

All eyes are on the Fed this week as it prepares to deliver its July policy update on Wednesday. Investors will be looking for clues about when the great balance-sheet unwind will begin, after New York Fed Governor William Dudley, along with a few other officials, said that process would begin later this year.

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Business Customers Are Tired Of Being Bilked Of Billions; Demand Rate Increases On Their Bank Deposits

As we’re all well aware by now, once Trump was elected on November 8th the Fed suddenly decided it was no longer necessary to prop up asset prices in the United States with artificially low interest rates.  As such, they’ve embarked on their first rate-hiking spree since the last one ended just over a decade ago. 


Meanwhile, in light of the fact that the Fed has raised rates by 75bps over the past 6 months, we recently wondered aloud just how long the big banks could continue to stiff Americans out of interest payments on their deposits.  As the Wall Street Journal points out today, despite three Fed rate hikes over the past several months, the average rate paid on deposits at the 16 largest banks in the U.S. has risen a paltry 10 bps.

Meanwhile, with nearly $12 trillion held in deposit accounts at U.S. commercial banks, each 25bps of foregone interest is costing depositors about $30 billion a year, all of which is flowing straight to the bottom line of the large banks.


In the end, we concluded that the banks would continue to suppress deposit rates for as long as their customers continued to ignore the fact that they were getting shafted but that, over the long haul, math and greed would prevail and depositors would demand higher rates.

Alas, it seems as though the “long haul” that we predicted has arrived well ahead of schedule…at least for business customers anyway.  As the Wall Street Journal points out today, corporate customers are starting to demand higher rates on deposits and, for the most part, the large banks are acquiescing.

Consumers are giving banks a pass when it comes to shopping for higher interest rates on deposit accounts. Businesses, on the other hand, are becoming more demanding.


With short-term interest rates on the rise, corporate depositors are seeking bigger payouts for their deposits, and big banks have started capitulating.


The reason: Small rate increases are often worth just pennies to many consumers, but they can translate into meaningful dollars on large corporate deposits of millions or even billions of dollars.


And companies have greater leverage with banks since in many cases they also bring in lucrative investment banking and trading business.


“The jig is up,” said James Gilligan, assistant treasurer at Kansas City, Mo.-based power company Great Plains Energy Inc. He said many companies, including his, have negotiated better deposit pricing with banks where they also borrow. Treasurers who have the flexibility to move their money are also seeking out higher rates.

Of course, the reality is that banking institutions offer fairly commoditized products with minimal differentiation and barriers to switching, aside from the pure hassle, are not that extensive.  So while banking executives may tout their position of power in negotiating to keep deposit rates lower for longer, in the end they’ll be forced to take whatever rate the market demands…

“The way we approach pricing these days is, we defend our turf,” says Tayfun Tuzun, chief financial officer at Fifth Third Bancorp , the Cincinnati-based bank. Mr. Tuzun said U.S. banks are also being pressured by competition from overseas banks that want to build their deposits. Some are willing to pay 1.25% or 1.3%, he said, while a typical corporate deposit rate for a large account in the U.S. currently is about 0.9% to 1%.


More corporate customers say that day is now passing. “A year ago, it was not worth the time it takes to make a phone call” and push for a higher rate, said Jeff Glenzer, vice president at the Association for Financial Professionals, an industry group for corporate treasurers. “The higher the rate becomes, the more attractive it is to worry about where the money sits.”


Most banks are already awash in more deposits than they need, causing some analysts to predict they’ll be stingy on corporate deposit rates, especially with loan growth softening in recent months.


“We’ll use pricing to start relationships,” said Darren King, CFO of M&T Bank Corp. , based in Buffalo, N.Y. “But over time, relationships need to work for both us and the customer.”

And, then again, maybe Yellen will completely cave on rate hikes if equity markets ever decide to decline for more than 30 minutes at a time and this whole discussion will be moot.

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