UBS CEO says working remotely is good for bank’s clients as well as staff work-life balance

Ralph Hamers, new CEO of Swiss Bank UBS, gestures during a press conference in Zurich, Switzerland, Thursday, Feb. 20, 2020. Dutchman Ralph Hamers will replace Sergio Ermotti, who is still UBS boss, on Nov. 1, 2020. (Walter Bieri/Keystone via AP)
Ralph Hamers, new CEO of Swiss Bank UBS, gestures during a press conference in Zurich, Switzerland, Thursday, Feb. 20, 2020.

  • UBS CEO Ralph Hamers told Bloomberg that hybrid working is good for clients and employees.
  • He confirmed two-thirds of UBS staff would work hybrid in the future, though traders may be excepted.
  • The bank is also ‘reviewing’ its office footprint, Hamers said.
  • See more stories on Insider’s business page.

UBS Group CEO Ralph Hamers has said that hybrid working is good for clients, as well as staff.

The Dutch-born banker was speaking to Bloomberg’s Manus Cranny in Zurich about the Swiss bank’s recent strong second quarter growth and its immediate strategy. He also outlined the bank’s plan for hybrid working.

Two-thirds of the bank’s 73,000 staff will work hybrid roles in some way in the future, confirmed Hamers, adding this would benefit both staff and clients.

“Our clients like it, [they] have also experienced that they don’t always want to come to the office in order to meet our people. They don’t mind online advice,” he said.

“It’s a new way of working. It is here to stay. And I think it is also better in the end for work-life balance.”

When pressed whether these hybrid roles will extend to the traders in its investment bank, Hamers admitted that traders make up part of “the 25% to one-third of the roles for which it is really difficult to work from home.”

Hamers also hinted that the bank was planning to “review” office footprint, but did not provide specifics. He said the bank was experimenting, but ultimately teams would need time to find out what is the best mix between being in the office and working from home.

He won’t however be following HSBC’s Noel Quinn in ditching his personal office.

“For CEOs not to have their own room, I think we’ve done that in the past already so I don’t think that is about saving real estate square metres,” he said.

Speaking more generally about the bank’s performance since he took charge in November 2020, Hamers outlined that America and Asia would be a main focus of growth, and threw cold water on the craze around crypto currency, saying that he has “no FOMO” when he hears of other banks exploring the asset class.

But it’s tougher for traders to WFH

Hamers is the latest senior banker to talk publicly about his organization’s return to work plans, although his approach is more flexible than some of his counterparts.

Goldman Sachs CEO David Solomon, and JP Morgan’s Jamie Dimon have both been vocal about the importance of staff – particularly investment bankers – returning to the office.

Conversations about hybrid work are rarely straightforward, Nick Bloom, William D. Eberle professor of economics at Stanford University and co-director of the Productivity, Innovation and Entrepreneurship program at the National Bureau of Economic Research, told Insider.

The extent to which a person will be able to organize their time depends on their job role and the needs of the organization.

“It’s extremely expensive capital equipment that can’t be replicated at home,” said Bloom of the banking sector. “It’s also sensitive so it’s no surprise these folks have been told they’re going to come in.”

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Crackdowns by regulators could pop the crypto bubble and mean bitcoin is unsuitable for professional investors, says UBS

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China is increasingly cracking down on bitcoin.

  • Crackdowns by regulators make bitcoin unsuitable for pro investors and could pop the bubble, UBS said.
  • The bank pointed to China clamping down on mining, and the growing concern over crypto in the UK and US.
  • It also said the common practice of trading crypto with leverage is likely to draw regulators’ attention.
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Regulatory crackdowns could pop bubble-like crypto markets and mean bitcoin is unsuitable for professional investors, Swiss banking giant UBS has warned its clients.

In a note sent out last week, UBS’ global wealth management team said China’s latest crackdown had hurt crypto prices and operators. It also said there were signs that tougher rules could be in the pipeline in Western markets such as the US and UK.

“Regulators have demonstrated they can and will crack down on crypto,” the note read. “So we suggest investors stay clear, and build their portfolio around less risky assets.”

It added: “We’ve long warned that shifting investor sentiment or regulatory crackdowns could pop bubble-like crypto markets.”

Read more: The top US portfolio manager at $2 trillion Amundi explains why bitcoin and ether won’t play a bigger role in the financial system in 10 years than they do now – and says a regulatory storm is coming for crypto

UBS’ warning to clients said a number of recent regulatory developments were a concern for cryptocurrencies.

China renewed its restrictions on the computing process known as cryptocurrency “mining” in June, with authorities in Sichuan province closing down numerous sites.

In the US, Boston Federal Reserve’s president Eric Rosengren said stablecoin Tether was one of the “financial stability challenges” it is watching. And the UK’s Financial Conduct Authority banned crypto exchange Binance from operating in the country.

UBS’s note added: “Crypto trading practices, such as extending 50X or 100X leverage, appear fundamentally at odds with mainstream finance regulation.”

The Swiss bank’s concern about cryptocurrencies is shared by many other lenders. Goldman Sachs analysts in May said bitcoin is “not a suitable investment” and listed concerns about its volatility and lack of cash flow.

However, Wall Street is divided on cryptocurrencies – as are banks themselves. Goldman Sachs, for example, relaunched its crypto trading desk this year to take advantage of the crypto boom, in spite of its reservations.

UBS said in its note: “While we can’t rule out future price gains in cryptos, we see this as a speculative market that poses significant risks to professional investors.”

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The Instagram effect is pushing up the prices of ‘grammable activities like meals out and vacations – creating opportunities for investors

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Consumers are rushing out to spend as economies reopen.

Locked down during the pandemic, Americans and consumers around the world spent big on things like gadgets and gym equipment to make their time at home more bearable.

But as economies reopen, people are splurging their cash on vacations, new clothes, and meals out.

Paul Donovan, chief economist at UBS Wealth Management, calls it the Instagram effect.

He says people want to show off again after months of lockdown, leading them to splurge on things they can post on the ‘gram.

Donovan says the shift in spending patterns is pushing up inflation in some areas but helping bring it down in red-hot sectors like lumber. He expects the change to continue and argues it will be a good thing for markets and investors by lowering price pressures overall.

“In the next few months people will only spend money on things they can post about on Instagram afterwards,” Donovan told Insider. “So that’s going out and new clothes, essentially.”

Clothing and meals out have become dearer

In the US, inflation has hit a 13-year high, driven in large part by a sharp rebound in energy prices.

But prices in Instagrammable categories have also risen sharply, official data shows. The price of food bought away from home – i.e. at restaurants or hotels – rose 0.6% month-on-month in May, from 0.3% in April.

Clothing prices rose 1.2% compared to 0.3% in April. And airline fares jumped 7% after surging 10.2% a month earlier as vacations picked up again.

In the UK, the head of the Bank of England noted that the price of haircuts had jumped, suggesting people were trying to recreate “the early 1990s David Beckham look.”

Read more: The Fed has left rates steady while signaling 2 potential hikes by the end of 2023. Here is what to do with your stocks, bonds, and digital assets, according to top Wall Street and crypto investors.

The shift to Instagrammable spending could cool inflation

Markets have been worried about inflation in 2021, as strong price rises eat away at the earnings on stocks and bonds.

But Donovan thinks the Instagram effect is one reason that strong inflation will prove transitory, as the Federal Reserve has argued.

He said service businesses like restaurants are better placed than goods providers to adapt to strong demand, making the sort of supply bottlenecks that have driven up the prices of products like lumber and microchips less likely.

Bank of England governor Andrew Bailey made a similar point on Thursday, saying inflation should ease “as spending is redirected towards sectors with more spare capacity.”

Donovan said the outlook is good for stocks: “I think markets will be content to almost ignore the inflation story.”

Hugh Gimber, global market strategist at JPMorgan Asset Management, said spending on things like luxury goods and meals out could well boost the shares of companies in those sectors.

But risks remain and could rattle markets

Yet he also warned that inflation could yet stick around longer than a lot of people expect. He said rising wages, as sectors reopen and look for workers, could create price pressures across economies.

Stronger-than-expected inflation could yet rattle markets, Gimber told Insider. Fears over price rises did exactly that in early May, when the S&P 500 lost 2% in a day after inflation data came in hotter than expected.

Donovan also said there were risks to his view that inflation would fall back as the Instagram effect picked up speed. “If we don’t start to see the deceleration of inflation in the States that I expect to see, that would worry markets about the timing of rate moves,” he said.

But for now, investors are feeling much less worried about inflation, helping stocks rebound to record highs. Coincidentally, Instagram-owner Facebook is up more than 7% over the last month.

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Inflation fears are stoking volatility in stocks but they’re unlikely to derail the market rally, says UBS

NYSE traders
  • A jump in US inflation will stoke bouts of volatility in the stock market but it’s not likely to stop the overall rally, says UBS.
  • Consumer price inflation for April soared by more than expected, to a rate of 4.2%.
  • “We think that the reflation trade has further to run, UBS said Thursday.
  • See more stories on Insider’s business page.

US inflation rates are flying up and worries about an acceleration in prices ranging from airline tickets to energy have knocked stocks off their record highs, but those fears are unlikely to derail the overall rally in equities, wealth manager UBS said Thursday.

The “latest volatility does not come as a surprise. But we also don’t see it as signaling an end to the bull market,” Mark Haefele, chief investment officer of global wealth management at UBS, wrote to clients.

The arrival of April’s Consumer Price Index confirmed months of caution from economists who said stronger inflation was on the way, a reflection of ongoing economic recovery from the COVID-19 pandemic. The higher-than-expected headline and core inflation readings drove stocks sharply lower Wednesday.

Market pricing of the inflation outlook also stepped higher, said UBS, noting the US 10-year breakeven rate moved to imply an average inflation rate of 2.56%, close to the highest level since 2013 and up from 2% when 2021 got underway.

The CPI data triggered Wednesday’s selloff in stocks that left the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average each down by at least 2%, with the Dow industrials tumbling 682 points.

“The latest rise in inflation, in our view, reflects year-over-year comparisons, which will fade,” he said. “While raw material prices may climb further, we believe the bulk of the rise in commodity prices is now over. In addition, labor supply headwinds should ease in the next few months once schools fully reopen, vaccinations continue to rise, and supplemental unemployment benefits expire.”

The CPI jumped to 4.2% from a year earlier, the largest increase since 2008, and core inflation, which strips out volatile energy and food prices, surged 0.9%, the largest one-month climb since 1982.

The UBS wealth management chief said it was important to note that major central banks have indicated they will not tighten policy in response to a temporary increase in prices. He outpointed that Federal Reserve Governor Lael Brainard said Tuesday the Fed will be “patient” as an inflation surge looks transitory.

“As inflation uncertainty persists, and as economic reopening remains on track, we think that the reflation trade has further to run. Our preferences include small-caps, financials, energy stocks, commodities, and emerging markets,” said Haefele.

Investors on Thursday appeared to set aside inflation worries, with Wall Street’s key stock indexes riding up roughly 1% each after weekly jobless claims hit another pandemic-era low.

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UBS chairman apologizes for Archegos loss and promises to enforce more transparency

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Swiss bank UBS Chairman Axel Weber speaks during the company’s general shareholders meeting in Zurich on May 2, 2013.

  • UBS chairman apologized for the loss the Swiss bank suffered amid the Archegos meltdown, in an interview with Bloomberg.
  • Chairman Axel Weber blamed the lack of oversight particularly in family offices, which don’t have to disclose information about investments.
  • Weber said UBS is conducting an internal investigation into the fiasco.
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UBS Group Chairman Axel Weber apologized for the loss the bank suffered amid the Archegos Capital Management meltdown in March.

The Swiss bank announced a surprise $861 million loss in relation to the liquidation of fund manager Bill Hwang’s Archegos family office, which had highly leveraged positions in a handful of stocks.

Weber in an exclusive interview on Bloomberg TV blamed the lack of oversight particularly in family offices – entities typically established by wealthy families – which don’t have to disclose information about the firm to regulators, unlike hedge funds.

Weber urged regulators like the US Securities and Exchange Commission to enforce more transparency, adding that without action from official agencies, UBS itself would force more transparency at the bank.

“If it’s not enforced by regulators, we will enforce it because we need that information,” Weber told Bloomberg Wednesday. “If we finance activity, we want these disclosures and if clients are unwilling to give that, well there may be other banks that give them that same exposure, but it won’t be us.”

Given the “unusual” situation, Weber revealed that UBS is conducting an internal investigation to get to the root of the issue. The chairman did clarify that they are not subject to regulatory action.

“We’re not very happy with this event,” he said. “I’m hyper-focused on this …We’ve not changed our risk appetite. This was not within what should have happened. So we need to get to the bottom.”

Weber also clarified that no one will be stepping down at the bank as a result of the episode, adding that it was the process that needed improvement.

“I don’t see a single failure of a single part of the organization,” he said. “But what I do see is that the number of combinations that interacted wasn’t very good and so we need to improve each and every element of that so that those interactions don’t happen again.”

UBS, the world’s biggest wealth manager, joins Credit Suisse, Nomura Holdings, and Morgan Stanley which all lost billions of dollars in the wake of the Archegos blow-up.

The implosion of Archegos caused widespread chaos on Wall Street and exposed the fragility of the financial system, especially in lesser-known areas of the market such as total return swaps.

The founder grew his family office’s $200 million investment to $10 billion but did not need to register as an investment advisor since he was only managing his own wealth.

Hwang, a former Tiger cub, reportedly lost a staggering $8 billion dollars in 10 days.

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A majority of investors and business owners have faith in Biden’s economic boom, new UBS survey finds

small business owner bakery
Jorge Sactic is the owner of Chapina Bakery in Langley Park, Maryland.

  • About 64% of investors and business owners see Biden’s policies aiding the global recovery.
  • A majority also said Biden’s measures will support global markets, according to a UBS survey.
  • The optimism comes as Biden preps another $4.1 trillion in spending to boost the economic recovery.
  • See more stories on Insider’s business page.

The Biden boom is in full swing and people like what they see.

Investors and business owners around the world are largely optimistic that the Biden administration’s economic policies will fuel a robust recovery and leave them on better footing, according to a recent UBS survey. Some 64% of respondents view the administration as having a positive impact on the global economy. Six in 10 believe the White House’s policies will support global markets.

Roughly 57% of investors and business owners said the Biden administration has benefitted their personal finances, and 54% of business owners said the policies benefitted their companies.

In just the first 100 days of his time in office, President Joe Biden has embarked on one of the most ambitious policy strategies in modern history. The president passed a $1.9 trillion stimulus measure – the second-largest in history – on March 11 and has since unveiled follow-up packages that include roughly $4.1 trillion in additional spending. Economists have largely linked soaring retail sales and stronger economic growth to the stimulus measure.

To be sure, President Joe Biden’s policies aren’t the only cause for optimism. New COVID-19 cases in the US sit at their lowest seven-day average since October, and state and local governments have been slowly rolling back lockdown measures for weeks. And while the vaccination rate has slowed, it still sits at an average 2.5 million doses per day. At the current rate, the US will reach herd immunity over the next three months, according to Bloomberg data.

In the US specifically, seven in 10 investors expressed hope about the path of the economy. That compares to just 52% three months ago and makes US investors the most positive globally, UBS said.

The share of US investors growing positive toward stocks rose to 71% from 59%. The shift underscores a broader move toward riskier assets as investors ditch the safe havens they held at the start of the pandemic and position for a swift recovery.

The responses join other sentiment gauges that have turned stronger in recent months. The University of Michigan’s consumer sentiment index rose to a fresh pandemic-era high in April, according to a Friday release. That level is the highest since March 2020. Separately, the Conference Board’s consumer confidence measure rose to its highest level since February 2020 as the healing labor market and latest round of stimulus checks boosted outlooks.

UBS interviewed 2,850 investors and 1,150 business owners around the world from March 30 to April 18. Responses were sourced from 14 markets including the US, the UK, Mexico, mainland China, Japan, Italy, Brazil, and Mexico.

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Major banks are increasingly keen on the Ethereum network – and it’s helping ether hit record highs

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Major banks from JPMorgan to UBS are increasingly keen on the Ethereum blockchain network, and it’s helping the system’s cryptocurrency, ether, soar to record highs.

Ether rose to an all-time high of $2,710 during Asian trading hours, before paring some gains to stand at around $2,672 on Wednesday.

The world’s second-most popular cryptocurrency had risen 15% over the week to Wednesday, according to data provider CoinGecko. It had gained around 260% in 2021 so far, compared to a 87% rise in bitcoin.

The interest from major banks and institutions around the world in the Ethereum network has boosted ether, which is the native cryptocurrency of the network and is used for transactions on it, analysts say.

On Tuesday, Bloomberg reported the European Investment Bank is planning to sell digital bonds using the network’s technology, offering $121 million of debt. The sale will be led by Goldman Sachs, Banco Santander, and Societe Generale, Bloomberg said.

It follows a rise in interest in the blockchain network, on which a range of applications can be built, including non-fungible tokens or NFTs and new technologies in the world of so-called decentralized finance.

JPMorgan, UBS and Mastercard were among the investors in Ethereum development company ConsenSys in a $65 million funding round earlier in April.

“Enterprise Ethereum is a key infrastructure on which we, and our partners, are building payment and non-payment applications to power the future of commerce,” Raj Dhamodharan, executive vice president of digital asset products at Mastercard, said.

ConsenSys has also worked with central banks in France, Australia and Thailand on central bank digital currency projects.

Analysts also say planned upgrades to the Ethereum network to make it more efficient, lower fees and start to destroy coins are helping the ether price.

Dallas Mavericks owner Mark Cuban told the Unchained podcast earlier in April that the move to a more efficient system will mean “the holdback of the impact on the environment will change immediately.”

He added: “That is going to give some people a reason to use Ethereum as a store of value over bitcoin, right there.”

Lex Sokolin, head economist at ConsenSys, said: “We think that Ethereum will become a global digital economy, settling the movement of all types of value across the world, including a meaningful portion of traditional financial services.”

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UBS takes a $744 million hit from Archegos in the first quarter, as the fund’s implosion continues to hurt banks

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UBS took a sizeable hit from Archegos but still posted a 14% rise in profit in Q1.

UBS took a $744 million hit from the collapse of Archegos in the first quarter, as the US investment fund’s implosion continued to make itself felt on bank balance sheets.

Nevertheless, the Swiss banking giant beat analysts’ expectations with a net first-quarter profit of $1.82 billion, up 14% from a year earlier, as surging markets boosted fees from clients.

UBS’s first-quarter results, released on Tuesday, showed it had taken a $744 million hit on a US-based client of its prime brokerage business.

The hit from the Archegos fund, which spectacularly imploded in March after making risky bets, helped push down revenue in the bank’s global markets arm by 27% or $554 million.

Excluding the Archegos loss, UBS’ global markets revenue would have climbed 11% on the back of strong financial markets in the first quarter.

Archegos was a family office investment firm that managed the wealth of Bill Hwang, a former hedge fund executive.

It imploded in March when some of its highly levered bets on US media and Chinese tech companies started to go bad.

Its prime brokers – the banks which facilitate lending and sales to hedge funds and family offices – demanded it put up more collateral to cover potential losses. When Archegos failed to do so, the banks began to forcibly dump its holdings, leading tens of billions of dollars of selling.

Credit Suisse was the most badly burned by these fire sales. It eventually took a hit of $4.7 billion from Archegos in the first quarter after being slow to ditch its exposure. It pushed the bank to a $275 million loss in the first quarter.

Morgan Stanley took a $911 million loss from Archegos in its prime brokerage unit. But its profit nonetheless jumped 150% to $4 billion on the back of buoyant markets.

UBS chief executive Ralph Hamers said: “Our first quarter results also factored in a loss related to the default by a single US-based prime brokerage client. We are all clearly disappointed and are taking this very seriously.

“A detailed review of our relevant risk management processes is underway and appropriate measures are being put in place to avoid such situations in the future.”

UBS shares fell 2.73% in early trading to 13.74 Swiss francs ($15).

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Apple’s stock price doesn’t reflect the 12% upside offered by its growing autonomous-vehicle ambitions, UBS says

Apple CEO Tim Cook
Apple CEO Tim Cook.

Apple’s current stock price doesn’t reflect the tech giant’s budding autonomous-vehicle ambitions, according to a team of UBS equity analysts led by David Vogt.

The analysts have a price target of $142 for Apple, a roughly 12% gain from current levels. In a recent note, the analysts said their price target reflects Apple’s autonomous vehicle opportunity.

Apple has been developing autonomous vehicle technology for years but has never confirmed it’s working on a car. In a recent interview, CEO Tim Cook hinted that Apple was working on an electric-vehicle project – but said many of Apple’s ideas “never see the light of day.”

But UBS noted that there are increasing signs that Apple is working on autonomous vehicle technology. For example, Apple was recently granted a patent for VoxelNet, a technology that could be used for AVs, the analysts said.

“Although Apple has not made a formal announcement yet, we believe the series of patents granted around AV further demonstrates Apple is allocating significant resources to projects that have ‘optionality’ but not reflected in the shares,” they said.

UBS also noted that Apple’s Voxel patent file makes a brief mention that the technology involves processors that simulate a vehicle making a turn, a further hint that the company is diving into self-driving cars.

“Although the application could have a myriad of uses, we find the use of the word ‘vehicle’ in the patent claim along with prior research published by Apple as important clues around the company’s commercial intentions,” said UBS.

Apple rose as much as 1.6% on Thursday, though the stock is down roughly 2.5% year-to-date as investors have taken profits from mega-cap technology names that dominated in 2020.

“Apple currently trades at 28x NTM P/E, in-line with its trailing one year average,” said UBS. “However, we believe a sum-of-the-parts (SOTP) framework is more appropriate going forward given auto optionality. As such, our price target of $142 reflects not only a value for Apple’s “Core” of ~$128 but also an evenly-weighted probability value of Apple’s auto opportunity ($14/share) in our SOTP analysis.”

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Central banks must start issuing digital currencies in the coming years because cash will become irrelevant, UBS chief economist says

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  • Central banks need to issue digital currencies as cash will become outdated, a UBS chief economist said.
  • These digital currencies won’t operate like cryptocurrencies and will have no wild swings in value, Paul Donovan said.
  • The supply of an officially backed coin depends on a central bank’s authority to regulate the currency’s spending power.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Central banks will soon need to issue digital currencies as the use of cash slowly becomes irrelevant, according to UBS chief economist Paul Donovan.

“Central bank digital currencies are likely to start becoming part of individual economies’ payment systems in the coming years,” he said in a note published this week.

People are using physical forms of money, like notes and cash, much less than before. Moreover, about half of Sweden’s banks no longer accept cash and its economy is expected to go cashless by 2023.

“We wave debit cards and mobile devices around with the reckless abandon of a first year student at Hogwarts trying out a wand, magically paying for things without ever having to touch cash,” Donovan said, referring to the boarding school in the “Harry Potter” series of children’s books.

Donovan laid out specific differences between how CBDCs would operate compared with cryptocurrencies. CBDCs would be interchangeable with notes and coins in circulation, accepted for tax payments, and wouldn’t have wild fluctuations in value – unlike typical crypto, such as bitcoin. Officially backed digital currency supply could change depending on the central bank’s ability to regulate the spending power of the currency, he said. Meanwhile, cryptocurrencies are decentralized and cannot be controlled by any one party.

He also said digital cash is a direct claim on the private bank to which its account is tied, and not on the government. This means government-produced money is becoming less significant, while digital money produced by the private sector is increasing in importance.

“If central banks want to stay relevant as cash becomes less relevant, they might have to consider entering the world of digital money,” he said.

China is among the leading economies looking closely at CBDCs. The People’s Bank of China aims to become the world’s first to issue a digital currency as part of a push to reduce its reliance on the dollar-denominated financial system, according to Reuters.

Federal Reserve Chairman Jerome Powell said last month a potential digital dollar is a “high priority” project for the US. But he thinks CBDCs should exist alongside cash and other forms of money, rather than replace them entirely.

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