Your Financial News Roundup
April 26, 2023
TL;DR
1. Economy: Coinbase sued the SEC over its treatment of the crypto space; while President Biden revised credit rules to provide more favorable mortgage rates for consumers with lower credit scores.
2. Tech: Tech lobbying group BSA is working with Congress to regulate AI; while Apple won its antitrust court battle with Epic Games.
3. World: Fox News parted ways with host Tucker Carlson after reaching a $787.5M settlement with Dominion Voting Systems; while India will soon become the most populous country in the world.
Guest Post: Cloud and FinServ by Harry | FinTech Fusion
Economy
🪧 Opening the Record: Crypto exchange Coinbase has gone on offense, suing the SEC to make it publicly answer whether or not the crypto industry could be regulated by existing SEC rules. In July 2022, Coinbase asked the SEC to propose and adopt rules for the crypto space. However, the SEC only doubled down on its enforcement actions against major crypto players. The exchange is using this lawsuit as an opportunity to seek regulatory clarity and reduce risk for the crypto industry. (CNBC)
Our Take: Coinbase is the most compliant crypto company in the U.S., as it has often collaborated with regulators on its product roadmap. With crypto firms wanting to move offshore and Binance.US backing out of an acquisition, Coinbase is attempting to save its home market by taking the fight to the SEC.
💳 Changing the Game: To promote homeownership among low-income and minority groups, the Federal Housing Administration (FHA) established a new rule that imposes higher monthly mortgage fees on home buyers with good credit scores to support home buyers with worse credit. Currently, only 25% of FHA loans go to minorities. For reference, white communities have an average score of 727, while the figures for Black and Hispanic ones are 627 and 667, respectively. Critics argue this change will hurt middle-class homeownership rates by distorting incentives. (Newsweek)
Our Take: With this rule slated to take effect on May 1st, we won’t be able to see its full impacts anytime soon. However, at face value, it feels like a band-aid for more pressing barriers to homeownership, namely limited affordable housing, high inflation, and discrimination.
Tech
🏛 Have No Fear, Congress Is Here?!: Tech lobbying group BSA, backed by Microsoft, IBM, and other tech firms, is calling for AI regulation. BSA recommends that these rules piggyback on the American Data Privacy and Protection Act (ADPPA), a bipartisan privacy rights bill. The group wants rules for the design and impact of AI that perform “consequential decisions” and a federal agency to enforce the law. Even with support from Congress members like Senate leader Chuck Schumer, revising the bill will be an uphill battle. (CNBC)
Our Take: Though the BSA has good recommendations, Congress should take a wider view of AI’s impact and create a broader bill that tackles issues like copyright of AI-generated content to exceed the current state of the AI space. The law will better shape the future if policymakers act proactively, not reactively.
📱Apple v. Free Market Capitalism: Apple won its appeals court case against Fortnite game creator, Epic Games. The dispute began when Apple removed Fortnite from its App Store for violating its terms on in-app purchases. Epic sued Apple in 2020, accusing the tech giant of being a monopoly because it only allows apps on iOS devices to come from its App Store — taking ≤ 30% of an app’s revenue. The 9th Circuit Court of Appeals affirmed that Apple wasn’t a monopoly, but must allow app developers to use alternative payment methods. (TechCrunch)
Our Take: Apple’s notorious iOS walled-garden ecosystem has been a point of contention among app developers for years. With the European Union’s (EU) Digital Markets Act that was signed into law in late 2022, it’s only a matter of time before the company gets forced to allow third-party app stores for the iPhone.
World
🔥 Cleaning House: Last week, Fox News reached a $787.5M settlement with Dominion Voting Systems over false accusations of election interference against Donald Trump. On Monday, Fox said that it agreed to part ways with its prime-time host Tucker Carlson. Watched by 3M+ people nightly, Carlson’s show was a leading program and often set the agenda and tone for the Republican Party. Dominion included Carlson’s show and personal texts as evidence that Fox News defamed them. Additionally, Carlson’s texts revealed he is anti-Trump in real life. (BBC)
Our Take: Fox’s settlement with Dominion amounted to 15-20% of its cash holdings, greatly affecting its financial stability and shareholders’ perception of the media giant. The evidence presented prominently featured clips from Carlson’s show and texts from its producers. Carlson’s show is also known to promote dubious information and conspiracy theories. Hence, Fox likely removed its most controversial host to mitigate business risks.
The case also revealed an alarming level of coordination between the network’s hosts, producers, and executives, who were focused on boosting its ratings and bottom line by promoting fake news that aligned with former President Trump’s storyline and appealed to conservative viewers. Tucker and his team also made sexist and derogatory remarks towards coworkers and guests, especially women.
This libel case is a cautionary tale for mainstream news media, as news outlets are now aware of the limits and consequences to pushing their coverage/commentary into the territory of fake news and conspiracy theories. Partisan cable news media like Fox and MSNBC will likely become less outlandish and polarizing in their coverage — benefitting the country’s political climate and dialog.
Fox is facing a slew of other lawsuits, including a bigger defamation suit by another voting machine company, Smartmatic, for $2.7B. Smartmatic claims Fox tarnished its business by making false accusations of interference in the 2020 election and spreading misinformation.
📈 The Biggest Country Is…: India’s population will surpass China’s very soon, estimated to reach 1.42M+ people by April 30th. Over the last 70 years, China and India have accounted for 30%+ of the global population. However, China’s birth rate fell last year for the first time, and its population is expected to shrink to below 1B by 2100. In contrast, India’s population is expected to grow for several more decades. But its fertility rate has also declined from 5.7 births per woman in 1950 to 2.2 today — indicating increasing prosperity. The world reached 8 billion humans in November but the global growth rate is at its lowest in decades. (BBC)
Our Take: India’s demographic pattern will eventually resemble that of developed countries as its fertility rate slows. Like China, India is projected to experience huge gains in its economy, quality of life, and influence on the world stage, possibly achieving superpower status with the likes of the U.S. and soon China.
Finance Concept of the Week
Guest Post By Harry From FinTech Fusion
Harry from the FinTech Fusion newsletter explores the strong relationship between cloud computing and the finance space. He illustrates how cloud computing has modernized the finance industry, making it more innovative, accessible, and streamlined.
Today, major players in the cloud space, include Amazon Web Services (AWS) and Microsoft Azure, power ≥ 50% of all websites! Cloud computing allows a company to quickly and securely scale its resources while keeping costs low — key for online financial platforms that serve millions of users.
Key Takeaways
- Financial institutions use cloud computing to process and analyze large amounts of data quickly. It’s also used to personalize financial products based on customers’ needs and gather customer feedback about products, improving business relationships.
- Launched in the 2010s, online banks leverage the cloud to provide customers with superior products like high-yield online savings accounts (HYSAs) that offer higher interest rates than big banks as online banks do not have physical locations.
- New apps like chatbots and website widgets make it easier for customers to get help with questions about finance concepts, their accounts, and a bank’s product offerings.
- New AI products will transform all areas, but perhaps none more than finance. AI development relies on cloud computing to train and power the models behind the AI — like ChatGPT or Midjourney.
- Data privacy and security are huge concerns for finance companies that use the cloud. These companies have large teams to manage security and privacy risks and comply with regulations.
- Blockchain technology could see more adoption as cloud computing allows decentralized networks to scale and process exponentially larger transaction volumes.
Read the full article here.
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Tip of the Week
💵 If you are looking for a place to park your money, check out U.S. I Bonds, which currently has an attractive 6.89% interest rate. But, don’t wait to buy them as the rates will likely drop to 3.2% after April 27th.
#Oof
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