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August 2024 | Emerging developments reshaping the financial markets
Breaking New Ground
As with any industry where advancement and innovation are outpacing regulation, the complex landscape can be difficult for businesses to navigate their operations. From adapting to new realities in emerging industries such as Web3, evolving regulations, compliance and commitment to environmental, social, and governance (ESG), it is of great importance for businesses to keep updated on key trends and developments in order to remain internationally competitive.
Here are several key highlights:
- ESG - Climate change remains a major driver of ESG considerations, with significant investment opportunities in companies transitioning to clean energy sources while the global push for standardisation and harmonisation of ESG reporting standards intensifies.
- Metaverse - AI might have stolen the thunder in recent months. However, an opportunity arises as metaverse creaters can make use of AI to augment and enhance their creations.
- Digital assets - The rout on cryptocurrencies during Q2 2024 when the price of bitcoin plummeted did not dampen any sentiments. Higher institutional adoption continues to drive the digital assets industry forward.
Feel free to explore the topics below and we welcome any opportunity to discuss more with our respective PwC representatives.
Main drivers
Environmental, Social and Governance (ESG)
ISSB is working to create a global baseline for sustainability disclosures, and countries like China and Australia are developing their own mandatory reporting requirements. In other news, PwC has recently published the PwC Global CSRD survey which offer insights into market sentiments, as well as the progress and challenges associated with adopting the EU’s Corporate Sustainability Reporting Directive.
Regulations and standards
China Releases ESG Reporting Standards for Businesses
China released a new set of ESG Reporting Standards, aiming to establish a mandatory, ISSB-aligned reporting system by 2030, with key standards to standardise ESG reporting.
Australia Plan for Mandatory Climate Reporting, Taxonomy, Sustainable Investment Labels
The AASB is expected to finalise its climate reporting standards in August 2024, while the AUASB is developing assurance standards for climate disclosures in late 2024.
Transition Plan Taskforce to become part of IFRS
UK’s TPT will hand its guidance over to the IFRS Foundation, which will likely form the basis of future global standards.
ISSB Delivers Further Harmonisation of the Sustainability Disclosure Landscape
The harmonisation aims to reduce fragmentation in information provided in the market, and ISSB plans to streamline frameworks and standards for disclosures about transition plans
Industry update
Asset management
Keppel Reit Establishes Green Funding Framework
Keppel Reits established a green financing framework that will serve as a reference for all green finance transactions it issues.
GIC Sees Opportunities in Greener Environment Despite Climate Change Risk
GIC sees long-term opportunities in sustainable assets and helping the world reduce carbon dioxide emissions by investing in companies with strong sustainability practices.
Australia cracks down on ESG investing industry with new rules
The Australian government will establish labels and disclosures for investment products marketed as “sustainable”, including funds run by the superannuation industry.
Banking and capital markets
Keppel Infrastructure Trust Unit Obtains S$612.5 Million Green Loan
The loan’s interest cost is designed to incentivise it’s subsidiary, Keppel Merlimau Cogen, to produce energy efficiently and continue its long-term commitment to sustainability.
UOB, EnterpriseSG launch sustainability-linked financing programme for SMEs
The programme aims to help SMEs reduce the time, cost and resources required to set sustainability performance targets and secure financing.
ICMA releases new resources on Sustainability-Linked and related Bonds and Notes
The resources support the Green, Social, Sustainability and Sustainability-Linked Bond Principles, and the "Guidelines for Sustainability-Linked Loans Financing Bonds".
Insurance
NTUC Income strengthen Singapore’s social compact with S$100 million investment
Income Insurance highlighted a clear focus on delivering positive social impact through its refreshed sustainability strategy, reflecting its ambition to foster resilience.
Climate challenge will place unprecedented pressure on insurance sector
Broker Howden warned of a 50% increase in insurance premiums for climate resilience and natural catastrophe protection by 2030 due to annual losses from climate-related events.
ESG platforms, solutions and tools
IFS, PwC UK to launch sustainability management and reporting solution
Under the new collaboration, Enterprise software company, IFS will develop a Sustainability Management module within IFS Cloud, while PwC will assist in the design and build.
Building decarbonisation platform Vizcab raises US$10 million
Vizcab offers a AI-driven software platform that calculates the Life Cycle Assessment of buildings to reduce the carbon impact of construction projects, expediting ESG reporting.
Interesting reads
Number of Companies with 1.5°C-Aligned Climate Transition Plans Jumps 44%
The number of companies reporting through research provider CDP disclosing that they have a 1.5°C-aligned climate transition plan in place jumped by more than 40% over the year.
IIGCC launches Net Zero Investment Framework 2.0
Developed following consultation with over 200 investors, IIGCC has updated the Net Zero Investment Framework (“NZIF”) to NZIF 2.0 to emphasise on ‘financing reduced emissions’.
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Metaverse
The metaverse is poised to make a resurgence with the help of AI. The high costs and time to market can be brought down by AI. AI will act as a force multiplier for the metaverse developers, allowing smaller developers to compete with larger ones and driving innovation.
General market
Can AI Save the Metaverse?
AI has stolen the thunder from Metaverse, but there is a collaboration opportunity present. Previously, creating a metaverse content required a lot of skill, time and effort, which puts developers off due to the high barriers. GenAI has the opportunity to allow "speaking the metaverse into existence" - to create 3D worlds from simple prompts. Barriers to entry is lowered where worlds can be created by anyone with an active imagination.
The Metaverse Revolution: A Market Poised for Exponential Growth
The metaverse market is on the cusp of a revolutionary expansion, driven by technological advancements, sector-wide adoption, and substantial investments from leading tech companies. With projections indicating massive growth in user base and market value across multiple sectors, the metaverse is set to become a dominant force in the global economy by 2030.
Industry update
Strategic alliances
xSPECTAR announces metaverse expansion, strategic partnerships, and massive community giveaway
xSPECTAR has partnered with Alpine F1 Team for a greater digital fan experience and is integrating multiple EVM chains, including Binance Smart Chain, Polygon, and Avalanche.
Futureverse and Animoca Brands Forge Strategic Partnership to Enhance Metaverse and AI Ecosystems
This strategic alliance aims to integrate Futureverse's advanced AI and metaverse tools within Animoca Brands' ecosystem, which includes over 400 Web3 projects. The collaboration will also focus on accelerating the growth of the Futureverse token ecosystem, which includes The Root Network's ROOT token, the ASTO token for AI protocols, and the SYLO token for communication and social graph protocols.
Industry use cases
McDonald’s metaverse debuts in Singapore
McDonald’s Singapore launches the ‘My Happy Place’ metaverse, letting locals build virtual burgers, play multiplayer games, and earn rewards. The US fastfood chain has partnered up with Bandwagon Labs. The platform makes use of Web3 technologies to boost security, functionality and use cases for holding digital collectibles. It intigrates wallet hosting services such as Metamask, which enables secure identity authentication.
Metaverse platforms
Walmart’s 3D e-commerce platform Realm is the retailer’s latest metaverse bet
Walmart has launched its latest metaverse experience called Walmart Realm, a new e-commerce platform where customers can purchase goods in different virtual worlds such as an underwater universe, a wild west and a chromatic environment. Walmart Realm can both be accessed via desktop or mobile phone. The launch of Walmart Realm is part of the testing and learning process, as the company believes that immersive commerce will the the future of commerce.
Qatar steps into metaverse with ‘Msheireb World’ Roblox experience
Roblox users can now explore “Msheireb World”, a virtual world in the metaverse featuring authentic Qatari cultural activities. These include pearl diving and mini-games will delve into Arabic typography and the legacy of Bedouin lifestyles, spotlighting Qatar’s dedication to sustainability and design excellence.
Key regulatory developments
South Korea labels mass-produced NFTs as virtual assets
The Financial Services Commission (FSC), issued guidelines clarifying when nonfungible tokens (NFTs) can be treated as virtual assets. According to the regulator, NFTs that are mass-produced, divisible and can be used as payment will be considered virtual assets. NFTs with little to no value at all will be treated differently. This applies to NFTs being used in ticketing or digital certificate NFTs. In these cases, they are classified as general NFTs. Such NFTs and Central Bank Digital Currency are not included.
Swiss Metaverse Association seeks to bring certainty to metaverse through regulation: London Blockchain Conference 2024
The paper itself, titled ‘Creating certainty for the Metaverse,’ breaks the space down into four “independent ecosystems” that come together to create the metaverse. Namely: NFTs, blockchain, and digital assets; gaming and e-sports; brands, influencers, and creators; and cloud and big tech. The Swiss Metaverse Association also created working groups to cover various aspects of the space, including arts and culture, insurance and payments, tech and infrastructure, consumer and fashion, and regulation, tax, legal, and policy.
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Yung Han Oei
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Digital assets
Institutional players, mainly large financial institutions, governments and regulators continue to develop the digital assets industry. More financial institutions are looking at tokenization of RWAs and stablecoins. Governments look increasingly likely to launch and implement CBDCs, while regulations start coming into force.
Industry update
General market
What To Watch Out For In Bitcoin and Crypto Markets in the Second Half Of 2024
Crypto bulls say bitcoin may have room to run as demand for spot bitcoin ETFs and the effects of the halving may not have played out yet. Some industry watchers say that while there is bound to be demand for a spot ether ETF at launch, it's unlikely to see the same level of success as the bitcoin versions. Regulatory clarity remains a key hurdle, with investors watching the presidential candidates' statements and recent developments for clues.
Crypto Markets Report: Majority of Digital Assets Investors Believe Bull Run Is Not Over Yet
In a CoinGecko survey, a majority 81.6% believed that the crypto bull run was not yet over. At least 1 in 2 participants, or 52.3%, “estimated that the current bull run was still at its starting or early stages”, another 29.3% estimated the market “to be midway through the bull run.”
Central Bank Digital Currency (CBDC)
China, Kazakhstan central banks forge CBDC research partnership
Under this agreement, the two central banks will share their expertise and knowledge in CBDC development and implementation, conduct joint research projects, and enhance the skills and competencies of employees involved in CBDC research and development. This could lead to lead to increased economic efficiency, reduced transaction costs, and improved financial inclusion.
Cross-Border CBDC Focused Project MBridge Moves Forward
For more than three years, the Bank of International Settlements (BIS) and the central banks of China, Hong Kong, Thailand and the United Arab Emirates have been working on a cross-border central bank digital currency (CBDC) project known as mBridge. The project aims to improve efficiency, speed and transparency in cross-border payments. MBridge recently took an important step forward with the completion of its minimal viable product (MVP) stage, with the four founding participant central banks and monetary authorities have each deployed a validating node, while commercial banks have conducted more real-value transactions in preparation for the MVP release.
Financial sector
Goldman Sachs to launch 3 new tokenization products this year: Report
Bulge Bracket Goldman Sachs plans to create marketplaces for tokenized real-world assets (RWAs) and would focus on the fund complex in the United States and European debt markets following a major uptick in interest from clients in crypto. It plans to target financial institutions, rather than retail investors, with its new products and will rely exclusively on permissioned blockchains.
DBS boosts digital asset push with first stablecoin tie-up
DBS has partnered stablecoin issuer Paxos to custody stablecoin reserves and offer related cash management services.
Funding
Haruko secures $6m to bolster digital asset management in Southeast Asia
Haruko, a pioneering digital asset investment management platform, announced today a significant $6m series A funding round co-led by White Star Capital’s Digital Asset Fund and MMC Ventures. This move aims to further consolidate Haruko’s global presence, building on its industry-leading portfolio and risk management solutions tailored for digital asset investment professionals.
Bitcoin Miner Genesis Digital Reportedly Eyes U.S. IPO
Genesis Digital Assets a major Bitcoin mining company, is reportedly planning an initial public offering (IPO) in the United States. The company is now seeking advice from consultants and intends to launch a pre-IPO funding round in the next few weeks. The company has recently sought to expand its operations, announcing a new facility in Texas with a 36-megawatt power capacity in April. The company said the facility added 1 exahash per second (EH/s) to its total hashrate capacity.
Stablecoins
USDC gains ground: Tether’s market share drops to 74% in 2024
Tether USDT market share drops from 82% to 74%. Regulated stablecoins such as USDC gains market share depicting changing market preferences. Major investors, especially institutional ones, are slowly shifting to legally accepted stablecoins to ensure they comply with operational requirements, especially in the European Union.
Tron develops gas-free stablecoin for Ethereum and Tron chains
Tron founder Justin Sun has revealed that his team is building a gasless stablecoin solution to make peer-to-peer transfers free for all. Sun hopes to integrate the stablecoin solution on the Tron blockchain in the fourth quarter, followed by Ethereum and other Ethereum Virtual Machine-compatible public chains soon after, with the fees being entirely covered by the stablecoins themselves.
Key regulatory developments
Bank of Russia Discusses Conditions of Upcoming Stablecoin Regulation
The Bank of Russia has highlighted the conditions it will need to consider when regulating the use of stablecoins for Russian individuals and companies. The bank stated that before a regulation is enacted, a thorough study of these assets and a discussion with the relevant actors of the market and the community around them should be conducted.
Europe’s stablecoin laws are going live — here are six key concerns as MiCA rolls out
The European Union's MiCA stablecoin rules went live on July 1 2024. Token issuers and crypto platforms will need to adjust to onerous payments licences, reserve requirements, and losing tokens that don’t comply.
Interesting reads
Crypto Exchange BitMEX Pleads Guilty to Violating the Bank Secrecy Act From 2015 to 2020
The Seychelles-based crypto exchange willfully failed to set up an adequate know-your-customer (KYC) and anti-money laundering (AML) program at the exchange between September 2015 and September 2020, where it allowed customers to register and trade cryptocurrency basically anonymously, without providing any identifying information or documentation.
Drop in Bitcoin Mining Difficulty 'Comparable to FTX Collapse,' CryptoQuant Says
Bitcoin mining difficulty dropped significantly by 7.8% on June 5, 2024, reaching levels not seen since before the halving event in April. This marks the largest difficulty drop since the collapse of crypto exchange FTX in 2022. This downward adjustment in mining difficulty can benefit smaller miners and potentially lead to profits for mining farms.
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Wong Wanyi
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