Defying U.S. Sanctions Ban, Cryptocurrency Helps Iran Process $8 Billion in Cryptocurrency Transactions

Almost all of the money, about $7.8 billion, is moving between Coinan and Iran’s largest cryptocurrency exchange, Nobitex, which offers guidance on its website on how to circumvent sanctions, according to U.S. blockchain researcher Chainalysis.

Three-quarters of the Iranian money handled by Coin is traded in a relatively low-profile cryptocurrency called Wavefield Coin (Tron), where users can choose to hide their identity. In a blog post last year, Nobitex encouraged customers to use the intermediary token, Tron, to trade anonymously without “jeopardizing assets due to sanctions.

 

The size of the cryptocurrency flows in Iran, and the fact that they continue, has never been reported before.

The new findings come as the U.S. Justice Department is investigating possible money-laundering violations by Mr. Kervielan. Cryptocurrency dominates the $1 trillion cryptocurrency industry and has more than 120 million users. Lawyers and trade sanctions experts say the transactions put Kerkorian at risk of violating a U.S. ban on doing business with Iran.

In July, Reuters reported that Cryptocurrency was still serving customers in Iran and that Cryptocurrency was internally aware of its popularity in the Islamic republic. This is one of a series of Reuters investigations into the situation at Korn/Ferry regarding financial regulatory compliance.

The article came on the same day that Cryptocurrency said in a blog post that it complied with international sanctions against Iran and barred anyone based in Iran from accessing its platform. Changpeng Zhao, the billionaire founder of Cryptocurrency, tweeted, “Cryptocurrency banned Iranian users after sanctions and 7 people were left out/found a workaround and they were later banned anyway.”

Cryptocurrency did not respond to detailed questions about the new deal, which was reported by Reuters. In a statement, spokesman Patrick Hillmann said, “Binance.com is not a U.S. company, unlike other platforms that are associated with U.S. sanctioned entities. However, we have taken proactive steps to limit our exposure to the Iranian market by working with industry partners and using internal tools.”

Cryptocurrency declined to disclose details about the location of the Binance.com transaction or the entity behind it.

Nobitex did not respond to questions for this article. Tron Network, based in the British Virgin Islands, and its founder, Sun Yuchen, were also unavailable for comment.

American International Group achieves growth in net profit

AIG claimed that its property insurance business, which insures companies around the world and protects the property of wealthy homeowners, posted higher underwriting profits in the quarter, as well as in its other businesses. Separately, the company’s divested life and retirement insurance unit reported strong sales of annuities during the quarter.

The positive effects of these highlights were offset by a decline in net investment income, which fell 28 percent to $2.67 billion in the quarter, primarily due to the failure of the exciting alternative investment business to deliver another quarter of growth.

AIG’s adjusted income, which excludes items considered non-recurring, fell 39 percent to $509 million in the quarter. Net income jumped 63 percent to $2.7 billion in the quarter, boosted by net realized gains on derivatives related to an AIG subsidiary that AIG divested but continues to hold a partial stake in.

AIG said underwriting profit in the quarter included $600 million in estimated catastrophe costs from Hurricane Ian and other weather events that hit southwest Florida in late September. AIG is one of the largest commercial property insurers in Florida by premium volume, according to Moody’s Investors Service. The company, which also insures wealthy families’ properties and other possessions, did not crack the state’s top 10 for homeowners insurance.

AIG’s catastrophe costs for the quarter were down slightly from the $628 million in costs expected in the year-earlier period, primarily from Hurricane Ida. Ida made landfall in Louisiana during the same period the previous year, bringing tornadoes and flooding on its way to the Northeast United States.

Prudential Financial posts big fiscal third-quarter loss on higher interest rates

Prudential Financial Inc. (PRU) said the company was hit by rising interest rates and volatile stock market conditions in the third quarter, while American International Group Inc. (AIG) was negatively impacted by claims stemming from Hurricane Ian in Florida. AIG was negatively impacted by claims arising from Hurricane Ian in Florida.

These two large insurers faced different challenges in a difficult third quarter. Prudential Financial Group’s adjusted operating profit for the quarter fell to $803 million from $1.49 billion a year earlier, and a net loss of $284 million in the quarter compared with a net profit of $1.53 billion a year earlier.

Prudential Financial Group incurred a pre-tax realized net investment loss of $1.46 billion in the quarter, which the company said was primarily driven by higher interest rates and related expenses and adjustments; approximately $100 million of the pre-tax loss was from divested and outstanding liability insurance operations.

Assets under management at Prudential Financial Global Investment Management, or PGIM, fell 20 percent to $1.206 trillion in the fiscal third quarter, driven by higher interest rates, falling stocks and lower riskier bonds. Another reason cited by the company was a net outflow of third-party funds, which achieved a net inflow in the same period the previous year when it posted a record $1.514 trillion in assets.

Charles Lowrey, chief executive of Prudential Financial, said the quarterly results were hit by “market conditions, including changes in alternative investment returns and lower fee income. He said rising interest rates “will benefit our business economically in the long-term.

QIA plans to increase its stake in Credit Suisse: U.S.

Qatar Investment Authority plans to increase its stake in Credit Suisse Group, joining Saudi National Bank in a share sale of the Swiss bank.

The deal would result in Middle Eastern investors holding as much as a quarter of Credit Suisse’s shares, as the scandal-plagued bank seeks to raise 4 billion Swiss francs (about $4 billion) to fund a complete restructuring.

Credit Suisse revealed details of its 4 billion Swiss franc capital-raising plan on Monday local time. The company is trying to raise funds for a restructuring that includes cutting thousands of jobs and streamlining its investment banking operations.

The Swiss bank said new qualified investors have committed to buy about 462 million shares at 3.82 Swiss francs ($3.84) per share, a price equivalent to about 94 percent of the weighted average price of the stock on Oct. 27 and 28, which would raise 1.76 billion Swiss francs. This includes the issuance of 307m new shares to the National Bank of Saudi Arabia, which will receive a 9.9 per cent stake in Credit Suisse after this round of fundraising.

What does a strong U.S. dollar means?

Over the past 2 years, the value of the U.S. dollar has increased significantly against the currencies of other major economies. For example, counting from the beginning of 2021 to the end of October 2022, the dollar has gained about 19 percent cumulatively against the euro and about 40 percent cumulatively against the yen. It is very rare to achieve such an appreciation in just 20 months.

why u.s. dollar getting stronger in such a short period of time?

There could be a variety of reasons behind it. For example, the dollar has always been seen as a “safe-haven currency”, that is, when the asset market turmoil, or even panic, the first thing investors think of is to exchange their currency for dollars and buy U.S. Treasuries. This factor may explain why the dollar rose significantly against nearly every other currency at the start of the Russia-Ukraine conflict earlier this year.

Another possible reason is the Fed’s greater willingness to raise interest rates, and the faster pace at which it has done so compared with other central banks. The benchmark rate for the dollar, for example, is now 3 percent to 3.5 percent, compared with 2 percent for the euro and minus 0.1 percent for the yen. In the foreign exchange market, there are many investors who are willing to participate in the “carry trade”, that is, to borrow the currency with low interest rates to buy the currency with elevated interest rates to earn the spread. Higher interest rates on the dollar compared to other currencies encourage additional carry trades and push up the value of the greenback.

So after 2 years of consecutive gains, is the dollar currently overvalued or undervalued? Is the dollar overvalued, or undervalued?

There are plenty of indications that the dollar is more likely to be overvalued. For example, The Economist magazine has a famous “McDonald’s Index”. The index collects and compares the price of McDonald’s burgers worldwide and uses it to determine whether a country’s currency is overvalued or undervalued. “An essential logic under the McDonald’s Index is the assumption that the same McDonald’s burger should be sold at the same price around the world. For example, if McDonald’s sells for $5 in the U.S. and 30 RMB in China, then the “fair” exchange rate of the U.S. dollar to the RMB should be 1 to 6. By comparing this “fair” exchange rate with the real world factual exchange rate, one can speculate whether a country’s currency is overvalued or undervalued relative to the The Economist, in its July report, said that the “fair” exchange rate should be 1 to 6. Based on the “McDonald’s Index” calculated by The Economist in July, the currencies of most of the world’s major economies are undervalued compared to the U.S. dollar. For example, the euro is undervalued by 7.5 per cent, the pound by 13.8 per cent, the yuan by 30 per cent, the yen by 45 per cent and the Hong Kong dollar by 48 per cent.

Then we look at the Real Effective Exchange Rate (RER) of the US dollar. According to the calculations of the Bank for International Settlements (BIS), the real effective exchange rate index of the US dollar is currently in the third highest position since 1970, after 1971 and 1985, and only about 5% short of the high point in 1985. In particular, in 1985, the United States, Britain, France, Germany and Japan signed the famous Plaza Agreement at the Plaza Hotel in New York City to jointly devalue the dollar. Since then, the value of the U.S. dollar began to fall rapidly against the major currencies of different countries (the Japanese yen, the German mark, the British pound, the franc, etc.). In just two years since the Plaza Accord, the dollar has lost more than 50 percent of its value against the Japanese yen and the German mark, and nearly 50 percent against the British pound and the Swiss franc. There is, of course, no indication that any government is interested in meeting to negotiate a reduction in the value of the dollar, but it is clear enough that the dollar is near an all-time high.

Looking ahead from today, it is unlikely that the dollar’s strong position will be reversed in the short term, so what does this environment mean for national stock markets? Broadly speaking, the more undervalued a currency is today, the more likely its country’s stock market is to return better over the next 3 years.

There are two main reasons behind this. First, currency movements in major economies are rarely a straight line of devaluation or wild rises, but often fluctuate around an average value. A currency that depreciates continuously is more likely to bottom out next, while a currency that appreciates continuously is more likely to top out and retrace. So a currency that is currently undervalued, even if the country’s stock market does not shift in the next few days, is likely to become more marketable as its value “reverts to the mean”. Second, the low value of a country’s currency means that the products and services it offers are less expensive, which is a major benefit to the country’s export sector and tourism, and could spur its stock market to start rallying in the next few years.

While the above is a theoretical level analysis, is there any empirical support for such a prediction? Researchers (Inker, 2022) compiled historical data on financial markets over the past 50 years (1970-2022) and found that currencies that were initially overvalued (by more than 16%) declined in value by an average of about 5.4% over the next 3 years. In contrast, currencies that start out relatively undervalued (undervalued by more than 14%) see their value rise by an average of 8.7% over the next 3 years. Then, the first conjecture, that there is a pattern of “mean reversion” in currency values, is supported by empirical evidence.

Second, the researchers also found that currencies that started with higher valuations saw their stock market returns fall by an average of about 11 percent in dollar terms over the next three years. By contrast, currencies that started with lower valuations saw their domestic stock market returns rise by an average of about 9.3 percent in dollar terms over the next three years. This pattern exists, not only in developed markets, but also in developing markets.

These findings suggest that we investors should constantly remind ourselves when analysing financial markets not to be unduly influenced by the news and price changes that are currently taking place. What is also valuable to investors is not what has happened in the past, but what may happen in the future.

In the medium to long-term, numerous assets have a “reversion to the mean” characteristic, thus don’t be overly bullish or bearish on them because of their recent price increases or decreases. For example, if we look at the returns of Japanese and European equities over the last 2 years, it is likely to give a highly pessimistic feel. However, from a value investing perspective, European and Japanese stocks happen to be in a state of “double low” currency valuation and stock market valuation. Of course, this does not mean that European and Japanese stocks will necessarily start to rally in three months, six months or a year, but at least it shows that for long-term investors such assets are worth patiently holding on to.