South Korean customers of cryptocurrency exchanges will have a new ally in the Digital Asset User Protection Foundation, which is being set up to ease the return of funds stuck in defunct exchanges.

South Korea’s Financial Services Commission (FSC) approved an initiative by the self-regulatory Digital Asset Exchange Joint Consultative Group (DAXA) to create the foundation. The foundation may begin activities in October.

Where did all the crypto exchanges go?

The FSC stated that 10 of the 22 cryptocurrency exchanges in South Korea have closed and another three have suspended operations, leading to concerns about the return of users’ funds held by the nonfunctioning exchanges.

The safety of customers’ funds in the hands of the exchanges is also a concern as the “private keys to users’ virtual asset wallets are stored at these exchange service providers.” Therefore:

“To make sure that users’ assets are safely protected and properly returned to their owners, it is necessary to have a more systematic management mechanism along with voluntary efforts from those closed down exchange service providers.”

The Digital Asset User Protection Foundation will consult with the exchanges, after which users’ funds and virtual assets will be transferred to the foundation. From there, a bank will be chosen to hold users’ cash, and a “KRW-based [South Korean won-based] exchange service provider” — presumably one of the still functional crypto exchanges — will store and manage their virtual assets.

The foundation will then contact the users to inform them of the return process.

Government backs up the foundation

The Digital Asset User Protection Foundation will have an operating committee made up of representatives of the bank and exchange that will handle the cash and virtual assets, several government agencies and private sector experts. The government will back the foundation:

“Financial authorities plan to provide relevant support to facilitate consultation […] regarding the matter of transfer of users’ assets.”

For exchanges that cease operations in the future, “authorities will guide them accordingly to transfer their customers’ assets to the foundation.”

South Korea enacted the Virtual Asset User Protection Act on July 19. Among the requirements of the act are that exchanges keep customer deposits in banks and keep customer virtual assets separate from their own.

Source: COINTELEGRAPH

“Investing needs a Netflix docuseries.”-Imani Noel

 “Social media creates a cat and mouse game.”-Adin Farmer

“Generational wealth is not only wealth but the knowledge of how to build it.”-Anthony Armstrong

“The Kids are Alright”-The Who

 Global debt hit a record high of US$312 trillion (RM1.3 quadrillion) at the end of the second quarter, driven by borrowing in the United States and China, while a key debt ratio in emerging markets also scaled a fresh peak, data from a banking trade group showed.

The Institute of International Finance (IIF), a financial services trade group, said  that global debt rose by US$2.1 trillion in the first half to US$312 trillion — a new high point after previous data was revised lower.

The IIF flashed warning signs on the trend of ever-increasing government borrowing in its latest Global Debt Monitor report, forecasting global government borrowing would rise from its current level of US$92 trillion to US$145 trillion by 2030 and top US$440 trillion by 2050.

"With the Fed’s new easing cycle expected to accelerate the pace of global debt buildup, a significant concern is the apparent lack of political will to address rising sovereign debt levels in both mature and emerging market economies," the IIF report said.

A big chunk of the borrowing was driven by energy transition in the face of climate change which was expected to account for over a third of the projected rise by 2050.

"This poses significant challenges, as many governments are already allocating a growing share of their revenue to interest expenses," the report said.

Big country, big borrower

The US$2.1 trillion increase this year through June compares to US$8.4 trillion in the first half of 2023, IIF data showed.

Apart from China and the US, India, Russia and Sweden also increased their debt, while other European countries and Japan saw a notable decline, the report said.

The global debt-to-GDP ratio — an indicator on the ability to repay debt by comparing to what is being produced — has stabilised around 327%-328%, with output numbers partly buoyed by above-target inflation in major economies.

In developed markets, that ratio reached its lowest level since 2018 driven by declines in household and non-financial corporate sectors borrowing.

In contrast, emerging markets saw their debt ratio reach a new high of over 245% of output, more than 25 percentage points higher than before the Covid-related lockdowns.

Source: Theedgemarkets

POSSIBLE PATHS FOR ADDRESSING JUDICIAL OVERREACH CONCERNS IN THE WTO DISPUTE SETTLEMENT SYSTEM

Politicians do not pay much attention to demography. Given their electoral horizons, this is hardly surprising. The so-called demographic crisis and its consequences unfold over decades, while in most countries elections of some sort take place at least every two years. Little heed is paid to whether, in the near future, the electorate might get a few months older and possibly a little more worried about how they will make ends meet in their retirement.

However, politicians do worry about the state budget, and an aging population is a source of greater and greater concern in economies where it is the government, not individual savings, that funds most people’s pensions schemes. The problem is especially acute if these state programs operate on a pay-as-you-go principle, where pensions are funded by a share of the tax revenues from current workers. Of course, all other things being equal, the larger the number of retirees and the smaller the number of taxpayers, the larger the share of tax revenue state pension funds need. Not surprisingly, in some countries – such as Italy and France – the system is cracking.

Painful but effective: Restrict pensions

Policymakers have engaged in some makeshift fixing, which is rational for typical, myopic governments. State-(mis)managed pension schemes can be fixed – painfully, but relatively simply. The retirement age is being gradually increased and early retirement more heavily penalized, to contain the ballooning ratio between retirees and taxpayers. Payments are being cut by changing the parameters that define the annual amount to which each retiree is entitled. Typical examples are the move from the wage-linked criterion to capitalization; being less than transparent about the implicit returns on the taxpayers’ forced savings; and failing to fully index current pensions to price inflation.

These mechanisms are already in place. They are effective, and they will eventually transform the current state pension systems into some sort of basic-income scheme where small amounts are handed out to the elderly who failed to save enough for their old age. By contrast, efforts to rely on indiscriminate immigration of potential taxpayers are rife with problems: Many argue that their cost (reliance on the welfare state of the hosting countries and the burden of failed integration) outweighs the benefit for the treasury.

Longer lives and fewer births

Demography is largely the outcome of two variables: birth and mortality rates. Birth depends on the natural drive to reproduce one’s genes and on the costs and benefits of having children. Mortality depends on accidents, diet, lifestyle, environmental conditions and healthcare. The good news is that over recent decades, all the variables affecting mortality have changed for the better. In short, people’s living standards have increased dramatically and medical treatments have improved enormously.

The problematic aspect is fertility. In 2022, the fertility rate was 2.3 children per woman for the entire world (it was 4.9 in 1950 and 2.7 in 2000). It is currently about 2.0 in India, 1.7 in the United States, 1.5 in the European Union, 1.4 in Russia, 1.2 in China and 0.8 in South Korea. World population declines with a fertility rate below 2.2. The explanation of low (and declining) fertility is relatively simple: Many couples now believe that the opportunity cost of having even one child is too high, let alone two or three. It appears that many households are unwilling to cut their material living standards to have children, especially if those children are unlikely to support their parents if the need arises.

Can we pay people to procreate?

Handing out subsidies to encourage birth is unlikely to produce significant results. On the one hand, subsidies must be financed somehow, whether that be raising taxation, increasing public debt or printing money. This could reduce disposable incomes and further discourage couples from having children. Of course, one could tax childless couples and use the proceeds to finance those with children. Although this was actually overtly done in the past (for example, in fascist Italy), today such measures are impractical and morally murky, to say the least.

On the other hand, it is unlikely that a few hundred euros a year for a limited number of years would really make a difference. Rather, a large share of the subsidies would probably end up as a gift to those who would have had children anyway, or who decide to have children just to pocket the subsidy.

Living standards also play a role in the declining birth rates. If one considers the official national statistics, it is clear that over recent decades, most people in the world (including in the West) are better off. Today’s households may find it hard to obtain a satisfactory living standard, either because the notion of “satisfactory” has changed significantly, or the official figures are misleading, or both – the third option is probably closer to the truth. The race for electoral consensus has encouraged politicians to promise the moon to their voters.

Not surprisingly, the moon is kindly provided by governments through taxation and regulation, and the suppliers themselves (governments) proclaim that reaching out to the moon is a basic right. People adjust their expectations accordingly, and give up on having children if the moon is at risk. Nowadays all households are de facto forced to buy state services that allegedly guarantee “basic rights” at a price that exceeds their value for the buyer (for example, education and health). Households spend more, consumption figures rise, but individuals do not get their value for money. There is some truth in the common feeling that one works harder than in the past, but ends up worse off.

Last, but not least, today’s incomes do not really correspond to purchasing power at market prices (a share of what we buy is overpriced) and people find it difficult to lower their living standards. As a result, households actually stop saving and, in many cases, eat into their capital. This phenomenon has been observed in the U.S., but is more and more frequent in Europe, too. One of the consequences is that adult children know they will rely on a smaller amount of family wealth to meet emergencies and will be discouraged from having children in turn.

Source: GIS