<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430.jpeg" alt="" class="wp-image-408856" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/105900013-1557315786407gettyimages-903631430-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Changpeng Zhao, CEO of Binance, speaks during a TV interview in Tokyo, Japan, on Thursday, Jan. 11, 2018. Akio Kon | Bloomberg | Getty Images</figcaption></figure>



The boss of Binance on Wednesday said the cryptocurrency exchange hasn’t gotten everything right and has plenty of room to grow, following a crackdown from regulators around the world.



“Compliance is a journey – especially in new sectors like crypto,” Changpeng Zhao, CEO of Binance, said in a&nbsp;<a href="https://www.binance.com/en/blog/421499824684902301/A-letter-from-our-CEO-Reflecting-on-Progress-and-the-Road-Ahead" target="_blank" rel="noreferrer noopener">blog post</a>.



“The industry still has a lot of uncertainty,” he added. “We also recognize that with the growth comes more complexity and more responsibility.”



Last month, the U.K.’s Financial Conduct Authority&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">restricted Binance</a>&nbsp;from carrying out regulated activities in the country. Binance’s U.K. unit withdrew its application to register with the regulator in May due to not meeting anti-money laundering requirements.



Binance, the world’s largest crypto exchange by trading volumes, was ordered to add a notice in a prominent place on its website and app showing U.K. users that it is not permitted to carry out any regulated activity in the U.K.



Meanwhile, regulators in Canada, Japan and Thailand have also issued warnings to the company.



Japan’s Financial Services Agency said the crypto exchange was operating in the country without its permission, while Canada’s Ontario Securities Commission accused it of failing to comply with local regulations.



Last week, Thailand’s Securities and Exchange Commission filed a criminal complaint against Binance, alleging the firm was operating in the country without authorization.



“As a four-year-old startup, Binance still has a lot of room to grow,” Zhao said. “Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day.”



“We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users,” he added.



Zhao said Binance was taking a number of steps to improve its regulatory compliance. Those include ramping up hiring, partnering with anti-crime organizations and localizing operations in markets like the U.S.



Increased regulatory scrutiny has weighed on the nascent crypto market in recent months. China has cracked down on digital currency mining amid concerns over its environmental impact, for example.



Cryptocurrencies had a solid start to the year, with&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=">bitcoin</a>&nbsp;rallying to an all-time high of almost $65,000 in April. But they’ve since fallen sharply, with the overall crypto market capitalization losing more than $1 trillion in the last two months.

105900013-1557315786407gettyimages-903631430

Binance CEO says ‘compliance is a journey’ as world’s largest crypto exchange faces growing crackdown

Who Makes Money From America’s Pool Obsession

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289.jpg" alt="" class="wp-image-408812" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289.jpg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289-140x80.jpg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Budrul Chukrut | LightRocket | Getty Images</figcaption></figure>



China’s central bank said Tuesday it had called for the shutdown of a company that “was suspected of providing software services for virtual currency transactions.”&nbsp;<a href="https://mp.weixin.qq.com/s/jJbuBjDYMxvbZdR71jBKlQ" target="_blank" rel="noreferrer noopener">The statement</a>, issued by the Beijing office of the People’s Bank of China, also warned institutions not to provide other services related to virtual currency, including providing business premises or marketing.



Lashing out against digital currencies is nothing new for the authoritarian state.



In&nbsp;<a href="https://www.cnbc.com/2013/12/18/bitcoin-price-halves-as-china-clampdown-escalates.html">2013</a>, the country ordered third-party payment providers to stop using bitcoin. Chinese authorities put a stop to token sales in&nbsp;<a href="https://www.cnbc.com/2017/09/19/chinas-bitcoin-clampdown-is-likely-here-to-stay-analysts-say.html">2017</a>&nbsp;and pledged to continue to&nbsp;<a href="http://shanghai.pbc.gov.cn/fzhshanghai/113571/3926566/index.html" target="_blank" rel="noreferrer noopener">target crypto exchanges</a>&nbsp;in 2019.



But typically, each time Beijing has lashed out at the crypto industry, the sting has worn off and the rules eventually softened.



This time, however, appears to be different.



<a href="https://www.cnbc.com/2021/05/18/china-bans-financial-payment-institutions-from-cryptocurrency-business.html">In May</a>, China banned financial institutions and payment companies from providing crypto-related services. <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4273265/index.html" target="_blank" rel="noreferrer noopener">In June</a>, there were <a href="https://www.cnbc.com/2021/06/10/china-arrests-over-1100-suspects-for-crypto-related-money-laundering.html">mass arrests in China</a> of people suspected of using cryptocurrencies in nefarious ways. That same month, <a href="https://www.cnbc.com/2021/06/21/china-central-bank-urges-alipay-banks-to-crack-down-on-crypto.html">regulators dialed up the pressure</a> on banks and payment businesses to stop providing cryptocurrency services, and Weibo, the Twitter of China, <a href="https://www.cnbctv18.com/cryptocurrency/china-blocks-several-cryptocurrency-related-social-media-accounts-amid-crackdown-9565901.htm" target="_blank" rel="noreferrer noopener">suspended crypto-related accounts</a>.



As of July, half the world’s bitcoin miners&nbsp;<a href="https://www.blockchain.com/charts/hash-rate" target="_blank" rel="noreferrer noopener">have now gone dark</a>&nbsp;following Beijing’s<a href="https://www.cnbc.com/2021/06/15/chinas-bitcoin-miner-exodus-.html">&nbsp;call for a severe crackdown</a>&nbsp;on bitcoin mining and trading.



“China’s government is doing everything they can to ensure that bitcoin and other cryptocurrencies disappear from the Chinese financial systems and economy,” said Fred Thiel, Marathon Digital Holdings CEO and Bitcoin Mining Council member.



<h2 class="wp-block-heading" id="h-why-now">Why now?</h2>



So why China has essentially declared war on cryptocurrencies in 2021?



“We’re all wondering,” said Nic Carter, founding partner at Castle Island Ventures.



One theory is that it’s part of a broader law-and-order push ahead of the hundredth anniversary of the Chinese Communist Party this year.



“They’re cracking down on all sorts of undesirable behavior,” Carter said.



Crypto has long been synonymous with crime in the mainland.



“The largest-ever Ponzi in crypto was likely Plus Token, which was a Chinese project,” he said.



In that scheme, scammers swindled $5.7 billion from investors and dozens were arrested. “That will be lingering in their memory,.”



Another theory is that China is clearing the runway for its very own digital yuan, a central bank digital currency that’s been <a href="https://www.cnbc.com/2021/06/02/china-digital-currency-beijing-to-hand-out-6point2-million-in-trial.html">in development since 2014</a>.



“Part of this is to ensure the adoption of China’s central bank digital currency, and part of this is most probably to ensure financial surveillance activities are able to see all economic activity,” explained Thiel. The digital yuan could, theoretically, enable the government greater power to track spending in real-time.



But Carter argues that bitcoin and the digital yuan are different to the point that they can’t really be considered direct competitors.



“That’s certainly the most commonly cited reason,” Carter said. “I just don’t know if I believe it. They’re such distinct systems from each other.”



The most likely motivator, according to Carter, is that Beijing is looking to stem capital outflows via stablecoins and cryptocurrencies. “China choking off the flow of yuan to crypto is a big deal,” he said.



<h2 class="wp-block-heading">The price of bitcoin</h2>



When it comes to the price of bitcoin, stemming all Chinese retail into crypto “totally moves the needle,” according to Carter.



“I think that actually explains a lot of the market weakness and the sell-off,” he said. “The good news is that as the crackdown has accelerated, bitcoin has stayed pretty flat, which suggests the market has digested this information.”



Thiel believes that prohibiting bitcoin and crypto will actually help bitcoin in the long-term.



“If China’s goal was to kill bitcoin by shutting down 50% of the mining capacity and prohibiting trading – thus crashing its value to punish Chinese holders (a la Didi post IPO and Ant Financial),” it didn’t work. “Instead, bitcoin proved its resiliency and the trades just moved offshore and miners elsewhere will take up the slack.”



Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark, points out that this whole conversation may be a moot point, as a government’s capacity to effect a bitcoin ban will only continue to erode over time.



“I’d expect this type of news to have less of an impact on bitcoin’s exchange rate than it has historically,” she said. “It’s also true that there has been some level of industry inoculation to this news – bitcoin has been banned many times in many geographies, and yet today adoption is outpacing internet adoption at a similar lifecycle stage.”

106886635-1621609982766-106886635-1621609529179-gettyimages-1231989966-BC_ChineseFlag2021_4289

China’s war on bitcoin just hit a new level with its latest crypto crackdown

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET.jpeg" alt="" class="wp-image-408808" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905363-1625143405663-gettyimages-1233100876-CRYPTO_MARKET-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The Tether price displayed on cryptocurrency exchange Kraken’s website. Tiffany Hagler | Bloomberg via Getty Images</figcaption></figure>



Tether is the third-biggest cryptocurrency in the world by market value. And it’s got some economists — including an official at the U.S. Federal Reserve — worried.



Last month, Boston Fed President Eric Rosengren&nbsp;<a href="https://www.coindesk.com/us-fed-official-calls-tether-a-challenge-to-financial-stability" target="_blank" rel="noreferrer noopener">raised the alarm</a>&nbsp;about tether, calling it a potential financial stability risk. Meanwhile, some investors believe a loss of confidence in tether could be crypto’s “<a href="https://muellerberndt.medium.com/is-tether-a-black-swan-51095720b01c" target="_blank" rel="noreferrer noopener">black swan</a>,” an unpredictable event that would severely impact the market.



The issues surrounding tether hold significant implications for the nascent cryptocurrency world. And economists increasingly fear that it could also impact markets beyond digital currencies. Here’s what you need to know:



<h2 class="wp-block-heading" id="h-what-is-tether">What is tether?</h2>



Chances are you’ve heard a thing or two about bitcoin. But what about tether?



Like bitcoin, tether is a cryptocurrency. In fact, it’s the world’s third-biggest digital coin by market value. But it’s very different from&nbsp;<a href="https://www.cnbc.com/bitcoin/">bitcoin</a>&nbsp;and other virtual currencies.



Tether is what’s known as a stablecoin. These are digital currencies that are tied to real-world assets — the U.S. dollar, for example — to maintain a stable value, unlike most cryptocurrencies which are known to be volatile. <a href="https://www.cnbc.com/quotes/BTC.CM=">Bitcoin</a>, for example, rose to an all-time high of nearly $65,000 in April and has since almost halved in value.



Tether was designed to be pegged to the dollar. While other cryptocurrencies often fluctuate in value, tether’s price is usually equivalent to $1. This&nbsp;<a href="https://www.cnbc.com/2018/10/15/bitcoin-other-cryptocurrencies-jump-as-dollar-pegged-tether-falls.html">isn’t always the case</a>&nbsp;though, and wobbles in the value of tether have spooked investors in the past.



Crypto traders often use tether to buy cryptocurrencies, as an alternative to the greenback. This essentially provides them with a way to seek safety in a more stable asset during times of sharp volatility in the crypto market.



However, crypto isn’t regulated, and many banks avoid doing business with digital currency exchanges due to the level of risk involved. That’s where stablecoins tend to come in.



<h2 class="wp-block-heading">Why is it controversial?</h2>



Some investors and economists are worried tether’s issuer doesn’t have enough dollar reserves to justify its dollar peg.



In May, Tether broke down the reserves for its stablecoin. The firm revealed that only a fraction of its holdings — 2.9%, to be exact — were in cash, while the vast majority was in commercial paper, a form of unsecured, short-term debt.



That would place Tether in the top 10 biggest holders of commercial paper in the world, according to&nbsp;<a href="https://www.cnbc.com/quotes/JPM" target="_blank" rel="noreferrer noopener">JPMorgan</a>. Tether has been compared to traditional money-market funds — but without any regulation.



With more than $60 billion worth of tokens in circulation, Tether has more deposits than that of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-05-01/crypto-s-shadow-currency-surges-past-deposits-of-most-u-s-banks" target="_blank" rel="noreferrer noopener">many U.S. banks</a>.



There have&nbsp;<a href="https://www.cnbc.com/2018/02/02/tether-what-you-need-to-know-about-the-cryptocurrency-worrying-markets.html">long been concerns</a>&nbsp;about whether tether is being used to&nbsp;<a href="https://www.cnbc.com/2018/11/20/regulators-investigate-whether-bitcoin-price-was-propped-up-illegally.html">manipulate bitcoin prices</a>, with&nbsp;<a href="https://www.cnbc.com/2018/06/13/much-of-bitcoins-2017-boom-was-market-manipulation-researcher-says.html">one study</a>&nbsp;claiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.



Earlier this year, the New York attorney general’s office <a href="https://www.cnbc.com/2021/02/23/tether-bitfinex-reach-settlement-with-new-york-attorney-general.html">reached a settlement with Tether and Bitfinex</a>, an affiliated digital currency exchange.



The state’s top law enforcement official had accused the firms of moving hundreds of millions of dollars to&nbsp;<a href="https://www.cnbc.com/2019/04/26/cryptocurrency-bitcoin-price-falls-on-ny-ag-bitfinex-probe.html">cover up $850 million of losses</a>.



Tether and Bitfinex agreed to pay $18.5 million in the settlement and were barred from operating in New York state, however the companies didn’t admit to any wrongdoing.



<h2 class="wp-block-heading">Market contagion</h2>



Analysts at JPMorgan have previously warned that a sudden loss of confidence in tether could result in a “severe liquidity shock to the broader cryptocurrency market.”



But there are also concerns that a sudden increase of tether withdrawals could lead to a potential market contagion, affecting assets beyond crypto.



In June, Rosengren mentioned tether and other stablecoins as one of several potential risks to financial stability.



“These stablecoins are becoming more popular,” he said during a presentation.



“A future crisis could easily be triggered as these become a more important sector of the financial market, unless we start regulating them and making sure that there’s actually a lot more stable stability to what’s being marketed to the general public as a stablecoin,” Rosengren added.



Last week, Fitch Ratings warned a sudden mass redemption of tether tokens could destabilize short-term credit markets.



“Fewer risks are posed by coins that are fully backed by safe, highly liquid assets, although authorities may still be concerned if the footprint is potentially global or systemic,” the U.S. credit rating agency said.



“Whereas stablecoins that use fractional reserves or adopt higher-risk asset allocation may face a greater run risk.”



Tether isn’t the only stablecoin out there, but it’s by far the biggest and most popular one. Others include USD Coin and Binance USD.

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Why tether, the world’s third-biggest cryptocurrency, has got economists worried

Host Hotels CEO on new acquisition and forecast on tourism industry

Oil jumped to its highest level in six years after talks between OPEC and its oil-producing allies were&nbsp;<a href="https://www.cnbc.com/2021/07/05/opec-meeting-saudi-arabia-uae-in-focus-over-oil-output-policy.html">postponed indefinitely</a>, with the group failing to reach an agreement on production policy for August and beyond.



On Tuesday, U.S. oil benchmark&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1">West Texas Intermediate crude futures</a>&nbsp;traded as high as $76.98, a price not seen since November 2014. But by 9 a.m. on Wall Street those gains were erased, and the contract for August delivery stood 3 cents lower at $75.13 per barrel.&nbsp;<a href="https://www.cnbc.com/quotes/@LCO.1">Brent crude</a>&nbsp;hit its highest level since late 2018 before also reversing gains, and last traded 1.2% lower at $76.23 per barrel.



Discussions began <a href="https://www.cnbc.com/2021/07/02/opec-meeting-oil-output-policy-decision-in-focus-as-prices-rise.html">last week</a> between OPEC and its allies, known as OPEC+, as the energy alliance sought to establish output policy for the remainder of the year. The group on Friday voted on a proposal that would have returned 400,000 barrels per day to the market each month from August through December, resulting in an additional 2 million barrels per day by the end of the year. Members also proposed extending the output cuts through the end of 2022.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106485738-15867767812020-04-09T124529Z_1895158720_RC201G9KUNLZ_RTRMADP_0_GLOBAL-OIL.jpeg" alt="" class="wp-image-408749" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106485738-15867767812020-04-09T124529Z_1895158720_RC201G9KUNLZ_RTRMADP_0_GLOBAL-OIL.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106485738-15867767812020-04-09T124529Z_1895158720_RC201G9KUNLZ_RTRMADP_0_GLOBAL-OIL-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106485738-15867767812020-04-09T124529Z_1895158720_RC201G9KUNLZ_RTRMADP_0_GLOBAL-OIL-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>A person passes the logo of the Organization of the Petroleoum Exporting Countries (OPEC) in front of OPEC’s headquarters in Vienna, Austria April 9, 2020. Leonhard Foeger | Reuters</figcaption></figure>



The United Arab Emirates rejected these proposals, however, and talks stretched from Thursday to Friday as the group tried to reach a consensus. Initially, discussions were set to resume on Monday but were ultimately called off.



“The date of the next meeting will be decided in due course,” OPEC Secretary General Mohammad Barkindo said in a statement.



OPEC+ took historic measures in April 2020 and removed nearly 10 million barrels per day of production in an effort to support prices as demand for petroleum-products plummeted. Since then, the group has been slowly returning barrels to the market, while meeting on a near monthly basis to discuss output policy.



“For us, it wasn’t a good deal,” UAE Minister of Energy and Infrastructure Suhail Al Mazrouei&nbsp;<a href="https://www.cnbc.com/2021/07/04/uae-unconditionally-supports-opec-supply-increase-minister-says.html">told CNBC on Sunday</a>. He added that the country would support a short-term increase in supply, but wants better terms if the policy is to be extended through 2022.



Oil’s blistering rally this year — WTI has gained 57% during 2021 — meant that ahead of last week’s meeting many Wall Street analysts expected the group to boost production in an effort to curb the spike in prices.



“With no increase in production, the forthcoming growth in demand should see global energy markets tighten up at an even faster pace than anticipated,” analysts at TD Securities wrote in a note to clients.



“This impasse will lead to a temporary and significantly larger-than-anticipated deficit, which should fuel even higher prices for the time being. The summer breakout in oil prices is set to gather steam at a fast clip,” the firm added.



— CNBC’s&nbsp;<a href="https://www.cnbc.com/sam-meredith/">Sam Meredith</a>&nbsp;contributed reporting.

106485738-15867767812020-04-09T124529Z_1895158720_RC201G9KUNLZ_RTRMADP_0_GLOBAL-OIL

Oil touches six-year high after OPEC fails to get deal, then turns negative

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106426381-1583413121225gettyimages-1167486657.jpeg" alt="" class="wp-image-408718" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106426381-1583413121225gettyimages-1167486657.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106426381-1583413121225gettyimages-1167486657-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106426381-1583413121225gettyimages-1167486657-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>OPEC Secretary General Mohammed Sanusi Barkindo (L), Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman (C) and Russian Energy Minister Alexander Novak (R) attend an Opec-JMMC meeting in the UAE capital Abu Dhabi on September 12, 2019. KARIM SAHIB | AFP via Getty Images</figcaption></figure>



LONDON — Oil producer group OPEC has been plunged into crisis, with bitter infighting between Saudi Arabia and the United Arab Emirates raising questions about the future of the energy alliance.



OPEC and non-OPEC partners, a group of some of the world’s most powerful oil producers,&nbsp;<a href="https://www.cnbc.com/2021/07/05/opec-meeting-saudi-arabia-uae-in-focus-over-oil-output-policy.html">abruptly abandoned plans to reconvene on Monday</a>&nbsp;after last week’s meetings&nbsp;<a href="https://www.cnbc.com/2021/07/02/opec-meeting-oil-output-policy-decision-in-focus-as-prices-rise.html">unexpectedly failed</a>&nbsp;to broker a deal on oil production policy. The group did not set a new date to resume talks.



It means no agreement has been reached on a possible increase in crude production beyond the end of July, leaving oil markets in a state of limbo just as global fuel demand recovers from the ongoing coronavirus pandemic.



“OPEC+ has been thrown its most serious crisis since last year’s ill-fated price war between Saudi Arabia and Russia,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a research note.



“Back-channel talks reportedly are continuing, but questions about UAE’s commitment to remaining in OPEC will likely grow in the coming days.”



The UAE-Saudi dispute appeared to be about more than oil policy, Croft said, with Abu Dhabi “seemingly intent on stepping outside Saudi Arabia’s shadow and charting its own course in global affairs.”



OPEC+, which is dominated by Middle East crude producers, agreed to implement massive crude production cuts in 2020 in an effort to support oil prices when the coronavirus pandemic coincided with a historic fuel demand shock.



Led by Saudi Arabia, a close ally of the UAE, OPEC+ has met monthly to decide on production policy.



<h2 class="wp-block-heading" id="h-opec-solidarity-dissolved">OPEC solidarity ‘dissolved’</h2>



The disarray comes after OPEC+ on Friday voted on a proposal to increase oil production by roughly 2 million barrels per day between August and the end of the year in 400,000 barrels per day monthly installments. It also proposed to extend the remaining output cuts to the end of 2022.



<a href="https://www.cnbc.com/2021/07/04/uae-unconditionally-supports-opec-supply-increase-minister-says.html">The plans were rejected by the UAE</a>, however, which wants a higher baseline to its quota to allow for more domestic production.



“No agreement was reached and as we stand now the OPEC+ alliance, if it is still the right word to describe the group, will produce at the July level for the rest of the year,” Tamas Varga, oil analyst at PVM Oil Associates, said in a research note.



“The [non-] outcome of the meeting re-writes the supply-demand landscape for the near and potentially for the distant future,” he added.



The rare public stand-off between the UAE and Saudi Arabia saw energy ministers from both countries engaging in a media blitz over the weekend to outline their respective positions.



“For us, it wasn’t a good deal,” UAE Minister of Energy and Infrastructure Suhail Al Mazrouei told CNBC’s Hadley Gamble on Sunday. He added that while the country was willing to support a short-term increase in oil supply, it wants better terms through 2022.



Speaking to the Saudi-owned Al Arabiya television channel on Sunday, Saudi Arabia’s Energy Minister Abdulaziz bin Salman called for “<a href="https://www.cnbc.com/2021/07/05/oil-markets-opec-and-allies.html">compromise and rationality</a>” in order to reach a deal on Monday, Reuters reported.



Separately, a White House spokesperson reportedly said on Monday that President Joe Biden’s administration was pushing for a “compromise solution.” The U.S. is not a member of OPEC (which stands for the Organization of Petroleum Exporting Countries) but it has been closely monitoring the latest round of talks given their <a href="https://www.cnbc.com/2021/07/05/oil-explainer-energy-prices-rise-after-opec-fails-to-reach-deal.html?utm_term=Autofeed&amp;amp;utm_medium=Social&amp;amp;utm_content=Main&amp;amp;utm_source=Twitter#Echobox=1625462303">potential impact on crude markets into next year</a>.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106857956-16165075182021-03-23t131615z_918196034_rc21hm9oxsi6_rtrmadp_0_opec-usa-oil.jpeg" alt="" class="wp-image-408719" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106857956-16165075182021-03-23t131615z_918196034_rc21hm9oxsi6_rtrmadp_0_opec-usa-oil.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106857956-16165075182021-03-23t131615z_918196034_rc21hm9oxsi6_rtrmadp_0_opec-usa-oil-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106857956-16165075182021-03-23t131615z_918196034_rc21hm9oxsi6_rtrmadp_0_opec-usa-oil-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>The OPEC logo pictured ahead of an informal meeting between members of the Organization of the Petroleum Exporting Countries (OPEC) in Algiers, Algeria. Ramzi Boudina | Reuters</figcaption></figure>



Responding to the news that the OPEC+ meeting had been adjourned without a deal on Monday, John Kilduff, a founding partner at Again Capital, said: “The Opec solidarity dissolved today.”



“The pandemic held them together and now the post pandemic is breaking them apart. The UAE is sticking to their guns on wanting their baseline raised. They want to be able to produce more,” he told CNBC via email.



“Now the fun starts as to who breaks away,” Kilduff said, noting the UAE could be the “first domino” to fall.



OPEC was not immediately available to respond to a request for comment when contacted by CNBC on Tuesday.



<h2 class="wp-block-heading">Oil prices climb to multi-year highs</h2>



The news pushed oil prices to their highest level&nbsp;<a href="https://www.cnbc.com/2021/07/05/oil-prices-jump-to-multiyear-highs-after-opec-talks-yield-no-production-deal-.html">in nearly three years</a>. International benchmark&nbsp;<a href="https://www.cnbc.com/quotes/@LCO.1">Brent</a>&nbsp;crude futures traded at $77.65 a barrel on Tuesday morning, up 0.6% for the session, while&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1">U.S. West Texas Intermediate</a>&nbsp;futures stood at $76.62, around 2% higher.



Oil prices rallied more than 45% in the first half of the year, supported by the rollout of Covid-19 vaccines, a gradual easing of lockdown measures and massive production cuts from OPEC+.



Samuel Burman, assistant commodities economist at Capital Economics, said OPEC producers were likely to increase oil production above quota next month as member states “seek to take advantage” of higher oil prices.



In addition to a rift between the UAE and Saudi Arabia, he said Abu Dhabi was probably “somewhat irritated” that Russia hadn’t been complying with OPEC’s production quotas.



Burman said non-OPEC leader Russia hadn’t introduced any compensatory cuts at all and was currently overproducing by around 100,000 barrels per day. “We think that this spat involving the UAE increases the chances that the entire agreement falls apart which would clearly pose a downside risk to our near-term price forecasts.”



— CNBC’s&nbsp;<a href="https://www.cnbc.com/patti-domm/">Patti Domm</a>&nbsp;contributed to this report.

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Is this the end of OPEC? How Saudi Arabia and UAE infighting threatens the future of the oil alliance

WazirX: How this 36-year-old coder built India’s biggest crypto trading platform | CNBC Make It

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="549" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/2770193028_68edc662a9_b-820x549.jpg" alt="" class="wp-image-403037" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/05/2770193028_68edc662a9_b-820x549.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/2770193028_68edc662a9_b-300x201.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/2770193028_68edc662a9_b-768x514.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/05/2770193028_68edc662a9_b.jpg 1023w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Photo: via Flickr</figcaption></figure>



Oil prices could “very easily” hit $100 a barrel in the aftermath of the failed OPEC+ talks, former U.S. Energy Secretary Dan Brouillette told CNBC on Tuesday.



“You could very easily see oil hitting $100 a barrel — potentially even higher,” he told CNBC’s Hadley Gamble.&nbsp;



On the flip side, it’s “equally possible” that prices could collapse too.



“If there isn’t any agreement on production, and countries tend to go off and do their own thing, or do their own production, you could have a collapse of oil prices,” said Brouillette, who was U.S. energy secretary from 2019 to 2021.



OPEC and its allies, referred to collectively as OPEC+, twice failed to reach a deal on oil output last week. On Monday, another attempt to resume talks broke down,&nbsp;<a href="https://www.cnbc.com/2021/07/05/opec-meeting-saudi-arabia-uae-in-focus-over-oil-output-policy.html">and discussions were put off indefinitely.</a>



The energy alliance, which includes Russia, had sought to increase supply by 400,000 barrels per day from August to December 2021 and proposed extending the duration of cuts until the end of 2022. Last year, to cope with lower demand due to the pandemic, OPEC+ agreed to curb output by almost 10 million barrels per day from May 2020 to the end of April 2022. 



The United Arab Emirates had indicated that,&nbsp;<a href="https://www.cnbc.com/2021/07/04/uae-unconditionally-supports-opec-supply-increase-minister-says.html">while it was supportive of the proposal to increase supply, it objected to the terms of the extension</a>.



<a href="https://www.cnbc.com/2021/07/05/oil-prices-jump-to-multiyear-highs-after-opec-talks-yield-no-production-deal-.html">Prices soared to three-year highs</a>&nbsp;following the collapse of those talks on Monday.&nbsp;On Tuesday during Asia trading, they surged even higher.&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1">U.S. crude</a>&nbsp;pushed past $76 per barrel and international benchmark&nbsp;<a href="https://www.cnbc.com/quotes/@LCO.1">Brent&nbsp;</a>was higher than $77 per barrel.



Oil prices topping $100 would destroy demand, warned oil expert Dan Yergin, who said that it would not be in the interest of countries.



“I think countries recognize that $100 barrel oil would not be in (their) interest,” Yergin, the vice chairman of IHS Markit, told CNBC’s Street Signs Asia on Tuesday. “You would see governments pour more incentives into electric cars, and see the impact on demand.”



<h2 class="wp-block-heading" id="h-striking-that-uae-and-saudi-are-on-divergent-paths">‘Striking’ that UAE and Saudi are on divergent paths</h2>



OPEC+ is led by Saudi Arabia, a close ally of the UAE. But the breakdown of those talks, and UAE’s objection to the terms, reflect a rare public disagreement between the allies.



The discord between Saudi Arabia and the UAE has been “striking,” Brouillette and Yergin both said.



“I find it striking that the UAE has stepped away from Saudi Arabia, a longtime ally within OPEC and OPEC+,” Brouillette said.&nbsp;



Yergin, too, said the contention between both countries was striking, given that both countries until recently had “pretty much marched in lockstep.”



“I think that one side or the other is gonna have to give in &#8230; there’s going to have to be &#8230; a lot of, as they say, horse trading, to get to a deal and keep it together,” he told CNBC on Tuesday.



While they are on divergent paths in this matter, both actually have similar goals and require revenue from oil production for new investments, Brouillette pointed out.

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Oil prices could ‘very easily’ top $100 a barrel, says former U.S. energy secretary

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo-820x461.jpg" alt="" class="wp-image-408638" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo-140x80.jpg 140w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/loo.jpg 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption>Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman Al-Saud speaks via video link during a virtual emergency meeting of OPEC and non-OPEC countries, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia April 9, 2020. Saudi Press Agency | Reuters</figcaption></figure>



Oil producer group OPEC will resume talks on Monday with non-OPEC partners, seeking to broker a deal on crude output after the group&nbsp;<a href="https://www.cnbc.com/2021/07/02/opec-meeting-oil-output-policy-decision-in-focus-as-prices-rise.html">unexpectedly failed to reach an agreement last week</a>.



The energy alliance, often referred to as OPEC+, on Friday voted on a proposal to increase oil production by roughly 2 million barrels per day between August and the end of the year in 400,000 barrels per day monthly installments. It also proposed to extend the remaining output cuts to the end of 2022.



The United Arab Emirates&nbsp;<a href="https://www.cnbc.com/2021/07/04/uae-unconditionally-supports-opec-supply-increase-minister-says.html">rejected these plans</a>, however, blocking an agreement for the second consecutive day to leave oil markets in limbo over the weekend.



“For us, it wasn’t a good deal,” UAE Minister of Energy and Infrastructure Suhail Al Mazrouei&nbsp;<a href="https://www.cnbc.com/2021/07/04/uae-unconditionally-supports-opec-supply-increase-minister-says.html">told</a>&nbsp;CNBC’s Hadley Gamble on Sunday. He added that while the UAE was willing to support a short-term increase in oil supply, it wants better terms through 2022.



Speaking to the Saudi-owned Al Arabiya television channel on Sunday, Saudi Arabia’s Energy Minister Abdulaziz bin Salman called for “<a href="https://www.cnbc.com/2021/07/05/oil-markets-opec-and-allies.html">compromise and rationality</a>” in order to reach a deal on Monday, Reuters reported.WATCH NOWVIDEO01:38UAE supports increasing oil production unconditionally: Minister



OPEC+, which is dominated by Middle East crude producers, agreed to implement massive crude production cuts in 2020 in an effort to support oil prices when the coronavirus pandemic coincided with a historic fuel demand shock.



Led by Saudi Arabia, a close ally of the UAE, OPEC+ has since initiated monthly meetings in a bid to navigate production policy.



It has resulted in a rare public stand-off between the UAE and its long-time regional ally Saudi Arabia, OPEC’s de facto leader. The dispute comes as energy market participants anxiously await policy direction that is&nbsp;<a href="https://www.cnbc.com/2021/07/05/oil-explainer-energy-prices-rise-after-opec-fails-to-reach-deal.html?utm_term=Autofeed&amp;amp;utm_medium=Social&amp;amp;utm_content=Main&amp;amp;utm_source=Twitter#Echobox=1625462303">likely to shape crude markets into next year</a>.



OPEC+ will reconvene once again via videoconference from 2 p.m. London time Monday.



“UAE remains steadfast in its refusal to give ground, insisting that using the October 2018 production benchmark is fundamentally unfair. Hence, the prospect of a no-deal outcome — as well as a UAE OPEC exit — has risen materially even if it has not yet fully entered into firm base-case territory,” Helima Croft, head of global commodity strategy at RBC Capital Markets, said in a research note.



“Of course, in practice, the monthly meeting structure means that decisions can be reversed quickly and that no condition is permanent. On the flip side, if the talks end in utter discord, there is a risk of a return to an every-man-for-himself production scenario that could cause a reversal of this year’s oil price rally.”



Croft said Monday’s meeting was unlikely to end in disarray for a third day, but conceded this prospect could not be dismissed. “Certainly, it is not a black swan scenario,” she added.



<h2 class="wp-block-heading" id="h-beginning-of-the-end-for-the-broader-deal">Beginning of the end for the broader deal?</h2>



Ahead of the talks, international benchmark&nbsp;<a href="https://www.cnbc.com/quotes/@LCO.1">Brent</a>&nbsp;crude futures traded at $76.44 a barrel, up around 0.3% for the session, while&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1">U.S. West Texas Intermediate</a>&nbsp;futures stood at $75.35, roughly 0.25% higher.



Oil prices rallied more than 45% in the first half of the year, supported by the rollout of Covid-19 vaccines, a gradual easing of lockdown measures and massive production cuts from OPEC+.



Analysts had expected the energy alliance to raise supply by around 500,000 barrels per day from next month.



As such, energy strategists at ING said on Monday that an OPEC+ proposed increase of around 400,000 barrels per day would likely be supportive for prices.



“Failing to come to a deal may provide some brief upside to the market, with reports that output would remain unchanged if OPEC+ does not come to an agreement,” they added.



“However, realistically it could also signal the beginning of the end for the broader deal, and so the risk that members start to increase output.”

prince

OPEC+ to resume crisis talks as Saudi Arabia and the UAE remain at loggerheads over oil output

Can PG&E Stop Causing So Many Fires In California?

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905368-1625143982751-gettyimages-1255546781-vcg111291051603.jpeg" alt="" class="wp-image-408532" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905368-1625143982751-gettyimages-1255546781-vcg111291051603.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905368-1625143982751-gettyimages-1255546781-vcg111291051603-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106905368-1625143982751-gettyimages-1255546781-vcg111291051603-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>An employee wearing a face mask refuels a vehicle at a gas station of Sinopec (China Petroleum and Chemical Corporation) on July 10, 2020 in Xinle, Hebei Province of China. Jia Minjie | Visual China Group | Getty Images</figcaption></figure>



Oil prices surged more than 45% in the first six months of 2021, rallying toward $80 a barrel for the first time in more than two and a half years.



Analysts on Wall Street believe there is potential for crude markets&nbsp;<a href="https://www.cnbc.com/2021/06/30/wall-street-banks-name-their-top-stock-picks-as-oil-prices-rally.html">to climb even higher in the coming months</a>, although not everyone is convinced that’s the case.



International benchmark <a href="https://www.cnbc.com/quotes/@LCO.1" target="_blank" rel="noreferrer noopener">Brent </a>crude futures traded at $75.76 a barrel on Friday, down around 0.11%. The oil contract recorded gains of more than 45% through to the end of June, having stood at $51.80 on Jan. 1.



<a href="https://www.cnbc.com/quotes/@CL.1">U.S. West Texas Intermediate</a>&nbsp;futures traded at $74.28 during early deals in London, almost 0.1% lower. WTI posted gains of more than 51.4% during the first six months of the year.



Brent futures rose more than 8% in June while WTI climbed over 10%, reaching their highest levels since Oct. 2018.



Analysts attribute the oil price rally to a combination of factors, including the rollout of Covid-19 vaccines, a gradual easing of lockdown measures and massive production cuts from OPEC and non-OPEC members — an energy alliance known as OPEC+.



<h2 class="wp-block-heading" id="h-what-next-for-oil-prices">What next for oil prices?</h2>



Looking ahead,&nbsp;<a href="https://www.cnbc.com/quotes/GS" target="_blank" rel="noreferrer noopener">Goldman Sachs</a>&nbsp;sees Brent prices averaging above $80 in the third quarter, with potential spikes “well above” that level as demand comes roaring back.&nbsp;<a href="https://www.cnbc.com/quotes/JPM" target="_blank" rel="noreferrer noopener">JPMorgan</a>, meanwhile, expects crude oil prices to “decisively” break into the $80s during the final three months of the year.



Analysts at&nbsp;<a href="https://www.cnbc.com/quotes/BAC" target="_blank" rel="noreferrer noopener">Bank of America</a>&nbsp;are even more bullish. They argue Brent prices could see $100 in the summer of next year. That would mark a return to triple digits for the first time since 2014.



It comes as all three of the world’s main forecasting agencies — OPEC, the International Energy Agency and the U.S. Energy Information Administration — expect a demand-led recovery to pick up speed in the second half of 2021.



Tamas Varga, oil analyst at PVM Oil Associates, said global and regional oil inventories have been falling so far this year, supporting oil prices. “This trend is set to continue for the rest of the year,” he added.



It “would only come to an abrupt end if central banks start increasing interest rates unexpectedly because of fear of inflation or in case OPEC raises production above demand — or they fail to accommodate extra Iranian barrels if the Persian Gulf OPEC member comes back to the market.”



The prospect of OPEC+ failing to accommodate additional Iranian oil exports “looks unlikely at the moment,” Varga said.



<h2 class="wp-block-heading">Morgan Stanley on what happens at $80</h2>



A number of uncertainties continue to cloud the outlook, however. The spread of the delta Covid-19 variant worldwide has exacerbated concerns of a setback to oil demand and the potential of Iranian exports returning to the market remains unclear.



Renewed lockdown measures and rising costs have already resulted in slower factory growth in China, for example.



Martijn Rats, chief oil analyst at&nbsp;<a href="https://www.cnbc.com/quotes/MS" target="_blank" rel="noreferrer noopener">Morgan Stanley</a>, said crude markets were effectively searching for the price of oil that would start to destroy demand growth.



“It is a difficult thing to analyze, we put it at around about $80 a barrel or so,” Rats told CNBC’s “Street Signs Europe” on Thursday.



“Above that, we would expect quite a bit of demand destruction to kick in,” he continued. “That then would have implications for economic growth because if oil demand doesn’t grow quite as fast anymore then an awful lot of other industrial economic processes depend on that.”



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106809158-16076028382020-12-09t215538z_78903513_rc2xjk9x6vuf_rtrmadp_0_usa-drilling-california.jpeg" alt="" class="wp-image-408533" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106809158-16076028382020-12-09t215538z_78903513_rc2xjk9x6vuf_rtrmadp_0_usa-drilling-california.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106809158-16076028382020-12-09t215538z_78903513_rc2xjk9x6vuf_rtrmadp_0_usa-drilling-california-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106809158-16076028382020-12-09t215538z_78903513_rc2xjk9x6vuf_rtrmadp_0_usa-drilling-california-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Pump jacks are seen in the Midway Sunset oilfield, California. Lucy Nicholson | Reuters</figcaption></figure>



To be sure, Morgan Stanley believes Brent will trade between $75 to $80 through to the middle of 2022.



On Thursday, OPEC and its non-OPEC partners, an energy alliance often referred to as OPEC+,&nbsp;opted to delay a decision on whether to ramp up oil supply. Sources told Reuters that the UAE had blocked a plan for an immediate easing of supply cuts.



The Middle East-dominated producer group will meet again Friday when talks will continue.



Chris Midgley, global head of analytics at S&amp;P Global Platts, said the OPEC+ meeting would have a “strong bearing” on oil prices since the outcome will impact supply from next month.



“Platts Analytics believes prices could briefly test the high 70′s before prompt European buying starts to wane at the end of July and potential return of Iranian barrels enable Brent to retrace down to low 70s,” Midgley told CNBC via email.



“OPEC may look to hold prices above $70/bbl but ultimately the forward curve suggests fair value slightly below,” he added.

106905368-1625143982751-gettyimages-1255546781-vcg111291051603

$100 oil? Analysts share their price forecasts after a strong rally in the first half of 2021

What’s Causing The Container Ship Traffic Jam Clogging Up Global Trade

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/jane.jpeg" alt="" class="wp-image-408492" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/jane.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/jane-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/jane-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>U.S. Treasury Secretary Janet Yellen speaks during a news conference, after attending the G7 finance ministers meeting, at Winfield House in London, Britain June 5, 2021. Justin Tallis | Reuters</figcaption></figure>



Treasury Secretary Janet Yellen announced Thursday that a group of 130 nations has agreed to a global minimum tax on corporations, part of a broader agreement to overhaul international tax rules.



If widely enacted, the GMT would effectively end the practice of global corporations seeking out low-tax jurisdictions like Ireland and the British Virgin Islands to move their headquarters to, even though their customers, operations and executives are located elsewhere.



“For decades, the United States has participated in a self-defeating international tax competition, lowering our corporate tax rates only to watch other nations lower theirs in response. The result was a global race to the bottom: Who could lower their corporate rate further and faster? No nation has won this race,” said Yellen in a statement on the accord.&nbsp;&nbsp;



“Today’s agreement by 130 countries representing more than 90 percent of global GDP is a clear sign: the race to the bottom is one step closer to coming to an end,” Yellen said.



The deal also&nbsp;<a href="https://www.wsj.com/articles/u-s-wins-international-backing-for-global-minimum-tax-11625153698?mod=e2tw" target="_blank" rel="noreferrer noopener">reportedly</a>&nbsp;includes a framework to eliminate digital services taxes, which targeted the biggest American tech companies.



In their place, officials agreed to a new tax plan that would be linked to the places where multinationals are actually doing business, rather than where they are headquartered.WATCH NOWVIDEO10:29Is it time for big business to pay up?



Much of the groundwork for adopting a GMT has already been laid by the Organization for Economic Cooperation and Development, which&nbsp;<a href="https://www.zdnet.com/article/oecd-work-on-multinational-tax-avoidance-pushed-to-mid-2021/" target="_blank" rel="noreferrer noopener">released a blueprint last fall</a>&nbsp;outlining a two-pillar approach to international taxation.



The&nbsp;<a href="https://oecdecoscope.blog/2020/10/20/tax-challenges-from-digitalisation-a-global-two-pillar-solution-could-increase-tax-revenues-and-support-economic-activity/" target="_blank" rel="noreferrer noopener">OECD Inclusive Framework on Base Erosion and Profit Shifting,</a>&nbsp;known as BEPS, is the product of negotiations with 137 member countries and jurisdictions.



Yellen’s announcement did not include the actual rate at which the GMT would be set, but the Biden administration has pushed for at least 15%.



G-20 finance ministers and central bank governors are scheduled to meet in Venice, Italy, later this month, and the international tax plan is expected to be high on the agenda.&nbsp;



The GMT agreement represents a key part of what President&nbsp;<a href="https://www.cnbc.com/joe-biden/">Joe Biden</a>&nbsp;has called “a foreign policy for the middle class.”



The strategy, devised in part by Biden’s national security adviser Jake Sullivan, emphasizes how foreign policy and domestic policy can be integrated into a new middle ground between the traditional conservative and liberal approaches to global affairs.



“Foreign policy for the middle class” aims to ensure that globalization, trade, human rights and military might are all harnessed for the benefit of working Americans, not solely for billionaires and multinational corporations, but not for abstract ideological reasons either.

jane

130 nations agree to support U.S. proposal for global minimum tax on corporations

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="740" height="416" src="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1.jpeg" alt="" class="wp-image-408430" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1.jpeg 740w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2021/07/106887563-1621887067804-gettyimages-843200050-UK_BITCOINS-1-140x80.jpeg 140w" sizes="auto, (max-width: 740px) 100vw, 740px" /><figcaption>Chris Ratcliffe/Bloomberg via Getty Images</figcaption></figure>



<a href="https://www.cnbc.com/bitcoin/">Bitcoin</a> had a solid start to 2021, hitting an all-time high of nearly $65,000 in April. But the digital coin closed out the first half of the year down about 47% from its record — and a number of looming risks could result in further pain ahead.



While proponents appear to be holding onto&nbsp;<a href="https://www.cnbc.com/quotes/BTC.CM=">bitcoin</a>&nbsp;for now, other investors are wary about wild volatility in the market and what it means for their portfolios. With that in mind, here are five of the biggest risks facing the cryptocurrency as we enter the second half of the year.



<h2 class="wp-block-heading" id="h-regulation">Regulation</h2>



One of the biggest risks for bitcoin right now is regulation.



In recent weeks, China has&nbsp;<a href="https://www.cnbc.com/2021/06/22/china-crypto-crackdown-wipes-nearly-300-billion-off-market-btc-slides.html">clamped down on its cryptocurrency industry</a>, shuttering energy-intensive crypto mining operations and ordering major banks and payment firms like Alipay not to do business with crypto companies.



Last week, the global crypto crackdown&nbsp;<a href="https://www.cnbc.com/2021/06/28/cryptocurrency-exchange-binance-banned-by-uk-regulator.html">spread to the U.K.</a>, where regulators banned leading digital currency exchange Binance from undertaking regulated activities.



Simon Yu, co-founder and CEO of crypto cashback start-up StormX, told CNBC that China’s moves should be viewed as a “positive” thing for bitcoin and other cryptocurrencies like <a href="https://www.cnbc.com/quotes/ETH.CM=">ether</a> as it will lead to more decentralization. However, he added that “over-regulation” of crypto in the United States could be a problem.



“As a country, the U.S. has too many departments regulating it from different angles — is crypto a security? A commodity? A property?” Yu said. “As of now, the U.S. hasn’t figured out how to properly regulate the industry, which oftentimes leads to decisions that are difficult for crypto to operate.”



U.S. Treasury Secretary Janet Yellen and other officials have recently warned about the use of cryptocurrencies for illicit transactions.



Last year, former President Donald Trump’s administration proposed an anti-money laundering rule that would require people who hold their crypto in a private digital wallet to undergo identity checks if they make transactions of $3,000 or more.



“We’ve long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets,”&nbsp;<a href="https://www.cnbc.com/quotes/UBSG-CH" target="_blank" rel="noreferrer noopener">UBS</a>&nbsp;<a href="https://www.cnbc.com/2021/06/29/ubs-forget-crypto-this-is-the-next-big-thing-for-investors.html">wrote in a note</a>&nbsp;this week.



<h2 class="wp-block-heading">Volatility</h2>



Another big risk is persistent, extreme swings in the price of bitcoin and other digital currencies.



Bitcoin rallied to an all-time record of around $64,829 in April this year, on the day of crypto exchange&nbsp;<a href="https://www.cnbc.com/quotes/COIN" target="_blank" rel="noreferrer noopener">Coinbase’s</a>&nbsp;blockbuster debut. It then&nbsp;<a href="https://www.cnbc.com/2021/06/22/bitcoin-falls-again-breaking-below-key-30000-level-that-traders-say-could-lead-to-more-losses.html">tumbled as low as $28,911</a>&nbsp;in June, briefly sliding below $30,000 and turning negative for the year. It’s since risen back above $34,000.



Bitcoin bulls see it as a kind of “digital gold” — an asset uncorrelated to the wider marker that could provide sizable returns in times of economic turbulence. But while volatility can be good when the price of an asset is going up, it goes both ways.



While you would have doubled your money if you bought bitcoin in January and cashed out in April, today those year-to-date returns would be 18%. Still, that’s above the performance of the <a href="https://www.cnbc.com/quotes/.SPX">S&amp;P 500</a> index, which is up 16% since the start of the year. And over the last 12 months, bitcoin has more than tripled in price.



“Limited, highly inelastic supply on single cryptos can exacerbate volatility,” says UBS. “Limited real world use and extraordinary price volatility also indicate many buyers are seeking speculative gains.”



Meanwhile, the trend of traders who have made highly-leveraged bets on bitcoin getting flushed out of the market has led to&nbsp;<a href="https://www.cnbc.com/2021/05/25/bitcoin-crashes-driven-by-big-margin-bets-new-crypto-banking.html">intense price fluctuations</a>&nbsp;this year.



While continuous volatility could put off some investors, Ross Middleton, chief financial officer of decentralized finance platform DeversiFi, said that volatility in itself isn’t a barrier to institutional adoption.



Volatility “can actually be a significant draw as the potential for large price movements means that funds can make significant profits with a relatively small allocation compared to the size of their overall portfolio,” he told CNBC.



“The longer that Bitcoin moves sidewards in the $30-$40k range,” Middleton added, “the greater the perceived ‘base-building’ and the sooner that new capital will flow into both the asset and the wider crypto market.”



<h2 class="wp-block-heading">Environmental concerns</h2>



Questions surrounding bitcoin’s impact on the environment could be another big headwind for the cryptocurrency.



Bitcoin mining equipment&nbsp;<a href="https://www.cnbc.com/2021/02/05/bitcoin-btc-surge-renews-worries-about-its-massive-carbon-footprint.html">requires lots of electricity to run</a>, and bitcoin’s energy consumption has risen considerably over the years in tandem with its price.



While bitcoin’s critics have long warned of its <a href="https://www.cnbc.com/2021/02/05/bitcoin-btc-surge-renews-worries-about-its-massive-carbon-footprint.html">huge carbon footprint</a>, Tesla CEO Elon Musk <a href="https://www.cnbc.com/2021/05/13/why-elon-musk-is-worried-about-bitcoin-environmental-impact.html">brought the issue back to the fore</a> this year.



Musk’s electric car firm stunned both fans and skeptics of bitcoin this year when it&nbsp;<a href="https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html">bought $1.5 billion worth</a>&nbsp;of the digital currency and began&nbsp;<a href="https://www.cnbc.com/2021/03/24/elon-musk-says-people-can-now-buy-a-tesla-with-bitcoin.html">accepting it as a method of payment</a>. But he subsequently roiled crypto markets after deciding&nbsp;<a href="https://www.cnbc.com/2021/05/12/elon-musk-says-tesla-will-stop-accepting-bitcoin-for-car-purchases.html">to halt bitcoin payments</a>&nbsp;due to the currency’s “insane” energy usage and a reliance on fossil fuels.



It raises some questions for asset managers who are under heightened pressure to limit their investments to ethically-conscious assets.



“At the very least it may deter some investors from holding Bitcoin,” analysts at&nbsp;<a href="https://www.cnbc.com/quotes/C" target="_blank" rel="noreferrer noopener">Citi</a>&nbsp;wrote in a research note earlier this year, adding it could also “spur government intervention to ban mining, as seen in parts of China.”



<h2 class="wp-block-heading">Stablecoin scrutiny</h2>



So-called stablecoins, whose prices are meant to be pegged to real-world assets like the U.S. dollar, are also facing&nbsp;<a href="https://protos.com/tether-commercial-paper-jim-cramer-mad-money-crypto-financial-times/" target="_blank" rel="noreferrer noopener">growing scrutiny</a>.



Last week, Federal Reserve Bank of Boston President Eric Rosengren&nbsp;<a href="https://www.bostonfed.org/news-and-events/speeches/2021/official-monetary-and-financial-institutions-forum-fed-week-financial-stability-session.aspx" target="_blank" rel="noreferrer noopener">said&nbsp;</a>tether, a stablecoin that ranks among the world’s largest digital currencies, was a risk to the stability of the financial system.



Tether maintains that each of its tokens are backed 1:1 by U.S. dollars held in a reserve, the idea being that this keeps the price stable. Crypto investors often use tether to buy cryptocurrencies, as an alternative to the greenback But some investors worry tether’s issuer <a href="https://www.ft.com/content/529eb4e6-796a-4e81-8064-5967bbe3b4d9" target="_blank" rel="noreferrer noopener">doesn’t have enough dollar reserves</a> to justify its dollar peg.



In May, the company behind tether&nbsp;<a href="https://tether.to/wp-content/uploads/2021/05/tether-march-31-2021-reserves-breakdown.pdf" target="_blank" rel="noreferrer noopener">broke down the reserves for the stablecoin</a>, revealing that around 76% was backed by cash and cash equivalents — but just under 4% of that was actual cash, while about 65% was commercial paper, a form of short-term debt.



Tether has been compared to traditional money-market funds — but&nbsp;<a href="https://www.bloomberg.com/opinion/articles/2021-05-31/stablecoins-like-tether-should-face-regulators-scrutiny" target="_blank" rel="noreferrer noopener">without the regulation</a>&nbsp;— and, with almost $60 billion worth of the tokens in circulation, has more deposits than that of&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-05-01/crypto-s-shadow-currency-surges-past-deposits-of-most-u-s-banks" target="_blank" rel="noreferrer noopener">many U.S. banks</a>.



There have&nbsp;<a href="https://www.cnbc.com/2018/02/02/tether-what-you-need-to-know-about-the-cryptocurrency-worrying-markets.html">long been concerns</a>&nbsp;about whether tether is being used to&nbsp;<a href="https://www.cnbc.com/2018/11/20/regulators-investigate-whether-bitcoin-price-was-propped-up-illegally.html">manipulate bitcoin prices</a>, with&nbsp;<a href="https://www.cnbc.com/2018/06/13/much-of-bitcoins-2017-boom-was-market-manipulation-researcher-says.html">one study</a>&nbsp;claiming the token was used to prop up bitcoin during key price declines in its monster 2017 rally.



“Tether is a massive problem,” Carol Alexander, professor of finance at the University of Sussex, told CNBC.&nbsp;″Regulators seem unable to stop them so far.”



“Traders need tether to open accounts and trade. Or other crypto. But since most large traders are U.S.-based, tether is the obvious choice.”



<h2 class="wp-block-heading">‘Meme coins’ and scams</h2>



Rising speculation in crypto markets could prove another risk for bitcoin.&nbsp;



<a href="https://www.cnbc.com/quotes/DOGE.CM=">Dogecoin</a>, a cryptocurrency that started out as a joke, surged wildly earlier this year to record highs as growing numbers of retail investors piled into digital assets in search of outsized gains.



At one point, dogecoin was&nbsp;<a href="https://www.bloomberg.com/news/articles/2021-04-20/dogecoin-at-50-billion-makes-it-bigger-than-ford-and-kraft" target="_blank" rel="noreferrer noopener">worth more than Ford</a>&nbsp;and other major U.S. firms, thanks in no small part to&nbsp;<a href="https://www.cnbc.com/2021/05/20/dogecoin-jumps-on-elon-musk-tweet-as-wild-cryptocurrency-trading-continues.html">support from celebrities like Musk</a>. Its value has depreciated significantly since then.



Elsewhere in the crypto market, a decentralized finance, or DeFi, token called titan&nbsp;<a href="https://www.cnbc.com/2021/06/24/why-titan-crypto-crash-that-burned-mark-cuban-may-not-signal-similar-bitcoin-plunge.html">crashed to zero</a>. Self-made billionaire investor Mark Cuban was a holder.



“Another concern is the number of scams that have appeared throughout the year,” StormX’s Yu said. “With certain meme coins, we’ve seen many pump and dump activities and have seen retail investors getting burned.”



“Whenever retail gets burned, the government steps in. And if things are over-regulated to a point, as we have seen with&nbsp;<a href="https://www.cnbc.com/2018/07/13/initial-coin-offering-ico-what-are-they-how-do-they-work.html">2018 and ICOs</a>&nbsp;(initial coin offerings), the industry as a whole could be negatively affected.”

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