GRAB (or GrabTaxi as it was known then) is a mobile app that utilizes smartphone cloud-based technology to provide ride-hailing and logistics services. The concept was envisioned by Anthony Tan, a great grandson of an average taxi driver in Malaysia. Together with cofounder Tan Hooi Ling, Tan created MyTeksi, which became popular in Malaysia and eventually expanded into other countries in Southeast Asia under a brand new name GrabTaxi. GrabTaxi became the Philippines’ first “e-hailing” mobile app when it was launched in the country in 2013.
Available in iOs and Android formats, the app lets the user send their booking request to the drivers — handpicked from partner taxi fleets within a three-kilometer radius. The app will then calculate which taxis are nearest to the passenger in which case the information will be sent to that taxi. Upon booking, passengers can access the driver’s name, plate number, photo, and phone number. In addition, the app also displays a map that shows the driver’s real-time location as well as the estimated distance and projected time of arrival. The estimated fare is also shown once the passenger inputs their current location and desired destination.
After the ride, the passenger can rate their driver based on a five-star system (five being the highest) as well as giving them feedback. The grade will then be averaged and then shown to other passengers as reference to the driver’s performance. Any complaint against the driver will be investigated and can be grounds for suspension. When suspended, the company will confiscate the driver’s company-provided smartphone to disable him from connecting with passengers. To ensure safety, the passenger can share their bookings through social media platforms such as Facebook and Twitter.
In 2016, the company dropped the word “Taxi” from its brand to reflect its expansion in other transport segment. Grab (which will henceforth be called as such in subsequent mentions) as a brand will cover all its services: taxis (GrabTaxi), private car services (GrabCar), carpooling (GrabShare), and package delivery (GrabExpress).
Unlike other taxi operators, Grab does not need to own and operate its own taxi fleet. Instead, their strategy revolves around bringing taxi drivers (and other private owners of cars) onto using the platform. Under this strategy, they could simply sign up with the platform without the cooperation of taxi companies or other external parties.
The fare also depends on the dynamics between the existing supply of cars and demand of passengers. To start with, the fare is based on the LTFRB’s (Land Transportation Franchising and Regulatory Board) approved meter plus a booking fee of P70, in which the meter is only switched on once the taxi picks up the passenger.
To entice people in using their product, Grab offered regular promotion codes for fare discounts as well as free rides for the passenger’s first trip. In this case, part of the strategy was for Grab to subsidize these fees. For the drivers (called “partners”), incentives are provided by way of bonuses once a passenger quota is reached for a given period. According to Grab, 80% of the fare goes directly to the driver while 20% goes to the company for the use of their platform. Part of the 20% is spent on driver incentives and passenger promos.
Electronic payments are also encouraged on the Grab platform. GrabPay, its digital wallet, allows cashless transactions between drivers and passengers. By using GrabPay, driver-partners can easily transfer payments to their Grab-linked bank accounts and withdraw cash from nearby ATMs. Conversely, they can also reload their GrabPay accounts so that they can continue using Grab, which collects a fee for each passenger pick-up.
Meanwhile, passengers using GrabPay can earn rewards points for every ride, allowing them to enjoy discounts with Grab partners such as Agoda.com and Kentucky Fried Chicken, among others, in the Philippines. Passengers can also redeem those points by availing of P50 and P100 worth of discounts for their ride. Another way of enticing them to use GrabPay is by awarding them twice the rewards points that they receive from paying in cash.
Transport network companies (TNCs) such as Grab and Uber have also expanded their services by introducing GrabShare and Uberpool wherein they offer lower fares in exchange of sharing a ride with another passenger heading near one’s destination.
And this seemed to have worked as around 19% of commuters in Metro Manila have become reliant on ride-hailing apps, which is nearly double the 10% average in other capitals in Southeast Asia according to a study by Boston Consulting Group.
Similarly, results on Uber’s internal survey conducted last 2016 points to around nearly eight out of ten Metro Manila residents leaving their cars at home due to the so-called “carmageddon” that brought the speeds on EDSA, the Philippines’ busiest highway, to slow down to 10 kilometers per hour according to estimates.
When Grab was officially launched in the Philippines, Tan told the press that they chose the Philippines because of three things: the Philippine population, the fast-growing smartphone industry, and our culture. “I personally fell in love with the country, the culture, and the people,” he said.
The Philippines is home to approximately 105 million people and as such, its demographic profile remains a fundamental strength. With 31.95% of the population composed of those aged 0-14 years old as of 2015, the Philippines has a higher proportion of young people compared to those of Indonesia (27.69%), Malaysia (25.02%), Vietnam (23.09%), and Thailand (17.71%). Meanwhile, its working population (aged 15-64) is also increasing while those of its more developed neighbors are declining.
The country’s growth story is also intact. At around 73.3% of its gross domestic product in 2017, the Philippines ranked 3^rd out of 63 economies in IMD’s World Competitiveness Yearbook 2018.
Like all businesses, Grab, along with other TNCs such as Uber, has faced stiff competition not only against each other, but also the traditional players in the taxi industry. In 2015, the government released the world’s first-ever rules on ride-sharing services, thereby creating a new transport category, the Transport Network Vehicle Services (TNVS).
Consequently, the taxi companies took a hit on their earnings. The 52-member Philippine National Taxicab Operators Association (PNTOA), which has a combined fleet of around 40,000 taxicabs, saw utilization rates go down by double-digits. According to lawyer and former Quezon City councilor Jesus Manuel “Bong” C. Suntay, around 85 out of every 100 taxicabs in the industry were up and running. With the entry of these TNCs, it went down to 70%.
The new regulation also provided a shortcut to securing a taxicab franchise — something the authorities stopped issuing years ago. For instance, the ease of ride-sharing registration on Uber benefited operators of “colorum” taxis that have been running without any franchise for years.
In a span of only two years since their entry in the Philippine market, the two TNVS app providers, Uber and Grab, have grown faster than traditional taxis. Based on their financial performance in 2011-2015, the most popular taxi operators clocked in a median growth in the low single-digits. In contrast, Uber grew by at least five-fold on its second year in the Philippines, while Grab expanded at least six-fold, with either company’s gross revenue surpassing any of the traditional operators by a factor of between two to thirty depending on the taxi company.
Aside from market competition, TNCs also face regulatory hurdles. In July 2016, the LTFRB released a memorandum suspending the acceptance and processing of applications for TNCs. Grab and Uber, however, were shown to have still accepted new drivers despite the order, leading the LTFRB to impose a P5-million fine each on Grab and Uber. In February 2018, the LTFRB lifted its moratorium on acceptance of franchise applications for ride-sharing vehicles, but placed a cap on the number of cars that were allowed to drive.
On August 2017, the LTFRB issued a show-cause order for Uber, saying that they violated the July 26 Order directing TNCs to stop accreditation and/or activation of TNVS. Two weeks later, Uber was given a month-long suspension when it was shown that it violated the said order, paying a P190-million fine for the suspension to be lifted.
Come March 26 this year, Uber and Grab announced that the former has agreed to sell its Southeast Asian business to the latter. Uber will then take a 27.5% stake in Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. At that time, Grab was valued at an estimated $6 billion.
This effectively puts Grab with a 93% market share in ride-hailing according to a statement by the Philippine Competition Commission (PCC), adding that only 7% of the market share will be captured by new TNCs entering the market.
The resulting transaction has also led to the notion of Grab exhibiting monopolistic practices. Based on findings from the monitoring of 27,648 booking requests and mystery shopper surveys involving 1,104 rides, the PCC’s Mergers and Acquisitions Office has noted that before the transaction, Grab prices were “flat to declining,” but weeks after the sale saw “higher fares and increased frequency of surge-pricing applied.”
The PCC also noted that the quality of services of Grab has decreased following the buyout through increased driver cancellations; forced cancellation of rides; and increased waiting times, which they said, were compounded by the loss of Uber where trips were less likely to be canceled due to features which mask a prospective rider’s destination until pickup.
“While the Office notes that there are new entrants to the relevant market, historical data show that it would take a significant amount of time and cost for these new players to grow a driver and rider base sufficient to contest the incumbent. During such period, Grab will not be constrained by any competitor, allowing it to exercise its market power in the relevant market,” it explained.
As a response, Grab had begun the masking of trip destinations in April for around 25% of drivers, mostly those with high cancellation rates. It also said it had sanctioned around 500 drivers from high rate of cancellation.
The PCC also added the new entrants in the market are “not likely to exert sufficient competitive pressure on Grab.” Nevertheless, attempts were made to encourage new players in the ride-hailing industry. So far, the LTFRB has accredited five new locally owned TNCs: iPara Technologies and Solutions, Inc. (OWTO), Hype Transport Systems, Inc, Micab Systems Corp., Golag, Inc. (Go Lag), and Hirna Mobility Solutions, Inc.
Grab has defended its pricing and said that all fares are legally approved.
Also Grab Philippines’ Brian Cu has noted that Grab’s pool of 35,000 drivers falls short of meeting the 600,000 passenger demand it receives every day. After the acquisition of Uber, only 11,000 of 19,000 Uber drivers were able to move to Grab as some of the names were not in the master list of drivers of the LTFRB. Grab has been requesting the regulator to have the 6,000 drivers on-board to closer meet the demands of the riding public.
Cu had noted that the increase in the number of TNCs does not necessarily correspond to an increase in the number of cars on the road since the LTFRB has a cap of 65,000 TNVS allowed to drive.
“Even when the 600,000 [demand] gets spread out across five different TNCs, the supply wouldn’t change,” he said.
The LTFRB has a TNVS cap of 65,000 cars allowed to drive in Metro Manila, which is supposed to meet 75% of the demand for vehicles. All existing TNCs that follow a TNVS framework would have to get from the same pool of 65,000 cars.
Another concern for the country’s TNVS industry is the entry of another big player in the market. Antonio E. Inton, Jr., founder of Lawyers for Commuters Safety and Protection and former board member of LTFRB, had noted in a BusinessWorld podcast that their group will oppose the entry of Indonesian-based Go-Jek as it would gobble up the other existing players due to the cap placed on the TNVS cars.
This sentiment was echoed by Grab’s Cu in a separate podcast with BusinessWorld: “What will Go-Jek do? Go-Jek will come in, throw promos, increase incentives. Grab, kaya makipagsabayan niyan eh, kasi we have the capital (Grab can compete because we have the capital). But can the small players say the same? Kawawa sila (They’re pitiful),” he said. -text by Leo Jaymar Uy, BusinessWorld Research

END-OF-CASE QUESTIONS

1. Based on the current developments in the TNVS market in the Philippines, what are Grab’s current (and future) opportunities and threats? How should Grab respond to them?
2. If you had control in any of the business decisions made by Grab, what are other things that you would like to improve upon its business model?
3. How should Grab maintain its dominant position as an incumbent player in the market?

LONDON — The rise of robots in manufacturing in Southeast Asia is likely to fuel modern slavery as workers who end up unemployed due to automation and face abuses competing for a shrinking pool of low-paid jobs in a “race to the bottom,” analysts said on Thursday.
Drastic job losses due to the growth of automation in the region — a hub for many manufacturing sectors from garments to vehicles — could produce a spike in labor abuses and slavery in global supply chains, said risk consultancy Verisk Maplecroft.
More than half of workers in Cambodia, Indonesia, Thailand, Vietnam and the Philippines — at least 137 million people — risk losing their jobs to automation in the next two decades, the United Nations’ International Labour Organization (ILO) says.
The risk of slavery tainting supply chains will spiral as workers who lose their jobs due to increased robot manufacturing will be more vulnerable to workplace abuses as they jostle for fewer jobs at lower wages, said Alexandra Channer of Maplecroft.
“Displaced workers without the skills to adapt or the cushion of social security will have to compete for a diminishing supply of low-paid, low-skilled work in what will likely be an increasingly exploitative environment,” she said.
“Without concrete measures from governments to adapt and educate future generations to function alongside machines, it could be a race to the bottom for many workers,” the head of human rights at Britain-based Maplecroft said in a statement.
Farming, forestry and fishing, manufacturing, construction, retail and hospitality are the sectors in Southeast Asia where workers are most likely to be replaced by robots, Maplecroft said in an annual report, with Vietnam the country at most risk.
Workers in the garment, textile and footwear industry — mostly women in countries such as Cambodia and Vietnam — face the biggest threat from automation in the region, Maplecroft said.
The five countries the report lists are already considered high-risk for modern slavery as labor abuses are rife, wages low and the work force dependent on low-skilled jobs, the firm said, with automation set to make things worse.
“Automation has always posed a risk to low-skilled jobs, but governments and business can determine how it impacts on workers,” said Cindy Berman of the Ethical Trading Initiative, a group of unions, firms and charities promoting workers’ rights.
“Technology can be disrupting, but it can also be part of the solution by creating opportunities for better jobs,” its head of slavery strategy told the Thomson Reuters Foundation. — Reuters

AMONG THE WORLD’S top innovating economies, quite a few aren’t getting enough bang for their buck.
That’s the lesson from the latest annual Global Innovation Index release, which measures the most innovative economies and then, separately, calculates an “Innovation Efficiency Ratio.”
Among the top-10 innovators, Switzerland, Germany, Sweden and the Netherlands were the only countries that also ranked in the top-10 for innovation efficiency. The contrast is especially stark for Singapore, which came in at 5 for innovation but 63 for efficiency. On the other hand, Luxembourg is enjoying far more output relative to its input, at No. 2 for efficiency, but No. 15 innovation.
Published annually by Cornell University, INSEAD business school and the World Intellectual Property Organization, the report tallies scores among 126 economies. The efficiency measure is calculated by dividing an economy’s “outputs,” such as patent applications and increases in labor productivity, by “inputs” that include research and development spending and financial market openness. The broader gauge averages input and output scores.
While most economies have a linear relationship between input and output, China “strongly over-performs,” according to the report. China also stood out as the only economy in the top-30 innovators, at No. 17, that isn’t classified as high-income by the World Bank.
Other economies can celebrate rankings that at least show they’re punching above their weight. South Africa, Tunisia and Colombia were “innovation achievers” for the first time this year, having performed at least 10% above peers in their income group. Vietnam, India, Rwanda, Thailand and Bulgaria were among those that repeated in the report’s group of 20 “achievers.”
These out-performing countries have more structured institutional frameworks and “foster a higher integration with international markets,” according to the report. — Bloomberg

IN A FINANCIAL capability survey implemented by the World Bank in 2014 as part of a broader engagement on enhancing financial consumer protection and financial education in the Philippines, a sample of 3,000 adults were asked to answer seven questions dealing with basic calculus and financial concepts (simple interest rates, inflation, compound interest, risk diversification and the main purpose of insurance products) to gauge their financial knowledge and basic numeracy skills.
The results were dismaying. On average, the respondents were able to answer only 3.2 out of the seven financial literacy questions correctly. And 10% of them got six questions right, and only 2% managed to get a perfect score.
“A more worrisome finding is that around a fifth of the surveyed population did not answer more than one question correctly, while still a significant proportion of respondents, one out of 10 adult Filipinos, did not appear to have a sound grasp of any of the basic concepts being tested,” The World Bank said in “Enhancing Financial Capability and Inclusion in the Philippines — A Demand-side Assessment,” which was released in 2015.
Filipino adults also performed poorly in the 2014 Global Financial Literacy Survey by Standard & Poor’s Ratings Services, in which several questions measuring four fundamental concepts for financial decision making — basic numeracy, interest compounding, inflation and risk diversification — were posed to more than 150,000 respondents in 140 countries.
To be deemed financially literate, the respondents needed to correctly answer “at least three out of the four financial concepts.” The survey found that only 25% of adult respondents in the Philippines were financially literate, a figure lower than the global average of 33%.
It’s evident from these surveys that the financial literacy of the Filipinos is lacking, and it should be a cause for great concern. “Financial literacy is a necessary life skill. The simplest human activity requires financing and life brings with it various risks. At the individual level, financial literacy, and its eventual translation into financial capability, enables us to save, prepare for the future, and manage economic/financial shocks,” Pia Bernadette Roman-Tayag, managing director of the Inclusive Finance Advocacy Office and the Financial Consumer Protection Department at Bangko Sentral ng Pilipinas (BSP), told BusinessWorld in an e-mail.
Mario A. Deriquito, President of Banco de Oro Unibank, Inc. Foundation (BDO Foundation), the corporate social responsibility arm of one of the biggest banks in the country, shares the sentiment. “Financial literacy enables people to manage their resources efficiently and responsibly, thereby ensuring a more stable future. Financially literate people have knowledge of financial products and services which enables them to make well-informed decisions,” he said in an e-mail.
Financially learned citizens with the ability to understand, select and use financial services that fit their needs can also be more effective partners of BSP in maintaining stable prices and ensuring a stronger, safer banking and payment systems and can productively contribute to the economy, Ms. Roman-Tayag noted.
Everyone needs financial education, regardless of their social status and age. But there are several groups that require a financial education tailored to their needs, and one of those groups comprises overseas Filipinos (OFs) and their beneficiaries. “OF remittances continue to provide support to the country’s economy as a major driver of domestic demand. The 2017 level of OF personal remittances accounted for 10% of GDP. Yet anecdotal evidence and general public knowledge indicate that many OF families struggle to meet their needs, when the OFs return home,” Ms. Roman-Tayag said.
The unbanked, low-income households, farmers, fisherfolk and micro, small and medium-sized enterprises are also an important financial education target. Ms. Roman-Tayag said they lack not only adequate awareness, but also appreciation and knowledge of formal financial transactions, particularly their benefits and risks. “To effectively on-board them in the formal financial system, and enable them to make prudent financial choices, they would need enhanced financial literacy and improved financial capability,” she added.
There’s one more group that needs a financial education that suits them — the youth. In the 2014 book Financial Education for Youth: The Role of Schools, the Organization for Economic Cooperation and Development notes that incorporating financial education into the formal school curriculum is one of the most efficient and fairest ways to reach a whole generation on a broad scale. “In addition, since the curriculum spans several years and can start as early as kindergarten, it is unique means to inculcate and nurture a sound financial culture and behaviors amongst future adults,” the organization adds.
To enhance the financial literacy of the Filipinos, BSP started an initiative called the Economic and Financial Learning Program (EFLP), which consists of 10 learning programs designed for specific audiences: children, college students, the working sector, investors, overseas Filipinos, and select unbanked sectors.
“We have developed about 46 learning materials, videos and brochures. We continue to share them with participants, with our partners, and on social media platforms,” Ms. Roman-Tayag said. “As of end-2017, we have conducted more than 30,000 learning programs in 79 out of 81 provinces, reaching 2.2 million participants. EFLP participants have rated the programs with an average of 4.7, with 5 as highest possible score. Based on the annual organizational scorecard of the BSP, we have always met targets in terms of program completion and participation rates.”
More recently, the central bank, the Department of Education (DepEd) and BDO Foundation joined forces to develop financial literacy materials for an estimated 24 million students and around 700,000 teaching and non-teaching personnel in more than 47,000 public schools nationwide.
“These materials, consisting of short videos, lesson plans, and discussion guides, are expected to make teaching and learning financial literacy more fun, interesting and engaging. They cover topics such as saving, investing, responsible use of credit, personal budgeting and financial management, and sharing,” Mr. Deriquito said.
“Although it is too early to talk about the project’s impact, BDO Foundation is excited about the project because of DepEd’s commitment to use the materials in regular classroom instruction and in regular teacher training programs, making its rollout rapid and wide-reaching,” he added.
The partnership forged by the three institutions can be a model for the kind of collaboration that the government and the private sector should have to better tackle the financial literacy issue. “BSP provides overall direction through its National Strategy for Financial Inclusion. BSP also contributes to the content and materials development. DepEd, on the other hand, handles the pedagogical aspect by incorporating financial literacy into the curriculum, contributing ideas into the development of the videos, developing the lesson plans and discussion guides, and actually rolling them out within the entire public school system. BDO Foundation, for its part, lends its expertise and financial resources to the project and handles overall project management,” Mr. Deriquito explained.
The National Strategy for Financial Inclusion he mentioned was launched in 2015 to optimize collective efforts toward financial inclusion in the Philippines. It provides a platform for the private sector to support the government in improving the financial literacy of the Filipinos through financial education. A tenet of the initiative is that a well-informed and adequately protected public is critical to realizing financial inclusion.
“We think that financial education, financial inclusion as well as consumer protection should be a collective responsibility. This is an issue which requires all hands on deck,” Ms. Roman-Tayag said. A hand from the media is certainly welcome.
“By simply proliferating financial education messages (e.g. prudent personal finance management), informing the public about their rights as financial consumers, and warning them against financial fraud and scam — the media can already impact the lives of Filipinos. The media may likewise take proactive roles by developing specific programs on financial literacy, for example soap operas, ads or other innovative programs that promote fin-ed messages,” Ms. Roman-Tayag said. — FATV

LAST YEAR, Bitcoin led a motley pack of so-called cryptocurrencies in one of the great booms in market history, soaring over 2,000% to its peak. Since then, it’s led an epic bust that rivals the dot-com era stock market collapse. But there are still plenty of true believers. And as the dust settles, investors and regulators find themselves still grappling with questions first raised when Bitcoin broke into public consciousness five years ago: What exactly is it? How do imitators like Ethereum, Ripple’s XRP and Bitcoin Cash work? Should I buy it? Where do cryptocurrencies fit into the future of money? Here’s a guide for those feeling at sea in these turbulent digital waters.
1. WHAT’S BEEN HAPPENING?
The total market value of all traded cryptocurrencies exploded late last year to peak at about $800 billion in January by one count. Four months later, though, the value of crypto-assets had plunged by about two-thirds, as regulators began to crack down and fear of big losses began to replace fear of missing out. By late June, Bitcoin had fallen by 70% — close to the 78% fall of the Nasdaq Composite Index’s drop when the dot-com bubble burst — while the worth of hundreds of other virtual coins fell close to zero. Even so, the total market value of traded cryptocurrencies still rested above $250 billion, many multiples of what it was a few years ago.
2. IS BITCOIN MONEY?
In a way, yes, though it’s not necessarily a useful form of it. It’s possible to buy or sell some things with Bitcoin but very few people do. Extreme volatility is perhaps the biggest argument against treating cryptocurrencies as you would the dollar or the euro. The hallmark of a reliable currency is that it provides a stable store of value. You wouldn’t want to spend Bitcoin on groceries today if you thought its value might soar tomorrow, or take your salary in Bitcoin if you thought it might plunge.
3. SO WHAT IS IT?
Born out of the bitterness that followed the 2008 financial crisis, Bitcoin and its imitators aren’t bills or coins printed or policed by a government or bank. They’re electronic assets created and monitored by a community of users acting in a decentralized way, following protocols set down by the person or persons who dreamed them up. The “crypto” in the name refers to the encryption techniques used by so-called Bitcoin miners. And all the new currencies revolve around what’s seen as Bitcoin’s real innovation — blockchain, a publicly visible, largely anonymous online ledger that records the calculations miners perform to verify transactions without the need for a central authority.
4. WHY ARE SO MANY PEOPLE DOWN ON BITCOIN?
You mean, why did legendary investor Warren Buffett call it “rat poison squared”? There’s a long list of reasons. Besides the massive price swings, Bitcoin and other cryptocurrencies have been connected with scams, money laundering, tax evasion, cyberthefts, exchange outages, excessive speculation and more. Risks like these may have been easier for regulators to overlook when Bitcoin and its peers sat on the far fringes of finance, but they are moving ever closer to the mainstream. The stakes are much higher now that mom-and-pop investors and Wall Street banks alike are piling in.
5. IS ANYONE OVERSEEING THIS AREA OF FINANCE?
A wide range of regulators are trying to get a handle on cryptocurrencies. Turns out there’s little agreement about what they fundamentally are: currencies, commodities, securities or something entirely new. Thus you’ll see them called crypto-assets, digital tokens, coins or just “crypto.”
6. HOW ARE CRYPTO-ASSETS LIKE COMMODITIES?
The vision behind Bitcoin laid out in a 2008 pseudonymous manifesto promised that no more than 21 million will ever be created. That means it’s sometimes compared with scarce commodities such as gold, whose value is determined solely by what people are willing to pay for it. Crypto-assets have become popular in places where hyperinflation erodes the buying power of the local currency (think Zimbabwe), or where sanctions block purchases (think Venezuela and North Korea).
7. HOW ARE THEY LIKE SECURITIES?
There’s an argument that some crypto-assets have the same characteristics as stocks, such as a share of ownership in a common endeavor and the expectation of making a profit from work done by a company. Much of the focus is on new coins or tokens offered by start-ups through so-called initial coin offerings, or ICOs. While they take different forms, ICOs let companies bypass the venture capital process by selling coins instead of shares. In some cases, the founders say coin buyers are prepaying to use a service that the company will build. In the US, the Securities and Exchange Commission has opened a broad probe into whether entities running ICOs are violating its rules by offering what are really securities, although a top SEC official said that neither Bitcoin nor Etherereum fell into that category. China has banned ICOs entirely. That didn’t stop them from raising more than $10.5 billion worldwide through the first half of 2018.
8. HOW ARE REGULATORS CLAMPING DOWN?
Their approaches have run the gamut, from an exchange-licensing regime in Japan that was recently tightened to a largely hands-off system in Switzerland, though the anonymous and borderless nature of many digital coins makes them tough to control. China, once the world’s most active Bitcoin market, banned crypto-asset exchanges in 2017 and blocked access to overseas trading platforms. The crackdown came during government campaigns to stop money from leaving the country and to reduce financial risk. Most countries, notably the US, have not yet formulated a comprehensive regulatory strategy. But US prosecutors are investigating whether traders have been manipulating the price of digital currencies.
9. HOW CAN I BUY BITCOIN?
There are a bunch of ways, all with different risks. Individuals can buy crypto-assets directly from online exchanges that will trade them for regular currencies like the dollar, the euro or the yen. Most of the exchanges will offer to hold the asset for you in a digital “wallet,” although an alarming number of exchanges have been hacked. You can also hold the asset for yourself, in a digital wallet or in so-called cold storage: for instance, a thumb drive disconnected from the internet. Since December 2017, investors can place a wager on Bitcoin — betting it will either rise or fall — without having to own it directly, via futures contracts traded on two big US exchanges.
10. WHAT’S WALL STREET’S APPROACH?
Until recently, it mostly kept its distance. Now there’s lots of interest if not yet much action. Lenders including JPMorgan, Bank of America and Citigroup have barred customers from using their credit cards to buy cryptocurrencies to avoid the risk associated with these transactions. But Goldman Sachs Group, Inc. planned to begin trading Bitcoin futures on behalf of customers. And everybody in finance is at least dabbling in blockchain, which is seen as an innovative way to handle transactions that could potentially upend a wide range of industries.
11. WHY ARE THERE SO MANY DIGITAL COINS?
There are thousands of Bitcoin rivals, and it’s not clear how many of them are going to prove either legal or useful. Some were developed to overcome what their creators saw as flaws in Bitcoin, such as slow transaction times or high fees. Some of them were outright scams. Die-hard fans of newer currencies think they’ll eventually overtake their bigger cousin. The largest rival is Ethereum, which has a total market value half the size of Bitcoin. These so-called alt-coins are certainly getting more attention: By mid 2018 they accounted for more than half of all the money in crypto-assets, compared with less than a fifth at the start of 2017.
12. WHO ARE THE CRYPTO TRUE BELIEVERS?
Here’s a short list of enthusiasts: Teenagers and hackers drawn by a disdain for authority and the libertarian aspirations behind Bitcoin’s creation. Technology geeks who believe they’re disrupting the marketplace and getting in early on the next chapter in the history of money. Financial firms and central banks that think something important will come out of all this even if Bitcoin withers. And there are also plenty of investors who aren’t true believers but who hope to find one to sell their holdings to if crypto prices soar again. — Bloomberg