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US venture capital’s digital coin quandary: cash-rich startups

NEW YORK ( Reuters):  US venture capital firms lining up for a slice of the burgeoning digital currency market are grappling with a novel challenge – some of the hottest tech startups that sell the coins just don’t need their money.

Only a few years ago, digital currency entrepreneurs, like other Silicon Valley peers, had to line up to pitch their ideas to venture capitalists, who controlled their destiny as virtually the only source of funding.

So-called initial coin offerings (ICOs), where new tech companies using blockchain technology can raise millions quickly by creating and selling digital “tokens,” with no regulatory oversight, have turned traditional relationships upside down.

Blockchain, a public online ledger of transactions, gained prominence as a technology that underpinned the first digital currency, bitcoin.

“The day when VCs were the elusive elite and primary source of capital for startups has ended,” said Jamie Burke, founder and chief executive officer of VC firm Outlier Ventures, which specializes in blockchain and other technology investments.

“When a startup can raise $35 million in 30 seconds without any dilution, the genie is out of the bottle and it isn’t going back in,” he said, referring to Brave, an open source web browser that blocks ads and trackers, which sold its Basic Attention Token in June.

By mid-July, tech firms raised about $1.1 billion in 89 coin sales this year, roughly 10 times more than that in the whole of 2016, according to data compiled for Reuters by crypto-currency research firm Smith + Crown.

Coin sales have already eclipsed funds blockchain firms received from venture capital, which invested over $300 million in equity in the sector in the first half of this year, Coindesk data showed.

Still, the tokens’ strong gains on dozens of online exchanges got venture capital firms’ attention and several sought to get a slice of the offers in exclusive pre-sale deals, public sales or both. Prominent venture capitalists Tim Draper and Blockchain Capital co-founder Brock Pierce told Reuters they have participated in coin offerings.

Many of these VC firms also take equity in the start-ups that issue the coins.

However, venture capital firms moving into the world of digital currencies face unprecedented pushback. Some issuers limit the size of pre-sale deals, making venture capital firms scramble like everybody else for sought-after public offers.

Pierce of Blockchain Capital said the old business model that gave venture capitalists and founders the lion’s share of a company no longer worked with blockchain firms.

“Whether VCs like it or not, venture capital will become a very small part of capital formation,” he said.

The reason is that firms issue tokens not only to raise money but also to attract a broad group of enthusiasts who can help develop their projects hoping to lift the value of their investments.

“Tokens can galvanise a community: lots of individuals and corporations are able to work together and improve a decentralized network,” said Ryan Shea, co-founder of tech start-up Blockstack in New York.

Blockstack recently launched a new browser that will give users access to new applications on their own devices without remote servers.

For Blockstack’s own token launch later this year, Shea said the firm plans a combination of a crowdsale and so-called “mining”, in which market participants solve complex mathematical problems to release a coin.

“I think if you have a few venture capitalists that come in and sweep up all the tokens, to me that’s a failed token sale,” Shea added.

Stelian Balta, developer, entrepreneur as well as founder and chief executive officer of Singapore-based hedge fund HyperChain Capital, is one such investor issuers target.

“We help in the security audit of the tokens, we help introduce developers for coding purposes, and we have introduced the start-ups to our own network of connections,” he said.

Robust Returns

Venture capital firms’ digital currency investments still account for only a sliver of the roughly $19.3 billion they have invested in tech-related sectors in the first half of 2017, according to data from consulting firm PwC and research firm CB Insights.

But the double-digit returns coins have delivered over the past few years is not something venture capital investors want to pass up.

According to tokendata.io, a new website that tracks initial coin offerings, these tokens trade on the exchanges at 20 times their initial sale price on average. That number is skewed by high-performing outliers and the median multiple is three.

Yet VCs sometimes have to make do with less than they bid for in token sales.

For example, US startup Civic, which is building an identity verification network, trimmed venture capital firms’ and other institutional orders in a pre-sale of its token, the company’s co-founder and chief executive Vinny Lingham told Reuters.

Venture capitalists recognise digital coin sales as a genuine disruptive force, but argue they still have a role to play – helping blockchain startups build teams and devise longer-term business strategies.

“The investors who bought your token, like public market investors, may be gone tomorrow, next month, or next year, having moved on to the next big thing,” said Fred Wilson co-founder of Union Square Ventures, which has participated in coin sales. “VCs, at least the best ones, are there for your company in good times and bad.”

Yet as long as coin sales provide quick, hassle-free access to funds, start-ups tend to focus on technical expertise and see less urgency to tap venture capital funds.

“People who provide value are those who have insight on how blockchain works,” said Jake Brukhman, a partner at U.S.-based CoinFund, which invests in tokens. “I think VCs are two years behind on blockchain.”

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Mobile phone import decline by 5.78%

ISLAMABAD (APP): The import of mobile phones during fiscal year 2016-17 fell by 5.78 per cent as compared to same period the previous year.

Mobile phone imports during the period under review were recorded at $709.69 million against the import of $753.224 million in July-June (2015-16).

According to latest data of Pakistan Bureau of Statistics(PBS), on month-on-month and year-on-year basis, mobile phone imports in June 2017 however, increased by 12.02 per cent in May 2017 and 9.97 per cent in June, 2016. Imports in June 2017 were recorded at $72.549 million as compared to imports of $64.762 million in May 2017 and 65.972 million in June 2016.

Similarly, overall telecom import also decreased by 0.38 per cent in July-June (2016-17) to $1.356 billion from $1.361 billion in the same period of the preceding year. Likewise on month-on-month and year-on-year basis telecom import also witnessed a downward trend as it fell to $102.796 million in June 2017 from $117.618 million in May, 2017 and $104.441 million in June, 2016 thus showing a decrease of 12.6 per cent and 1.58 per cent respectively.

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Pakistan’s economy expected to subside: IMF

DUBAI (AFP): After a better than expected performance with five percent growth in 2016, the economies of countries in the Middle East and North Africa as well as Pakistan and Afghanistan will subside to just 2.6 percent growth this year, the International Monetary Fund said on Monday.

Economic growth in the Middle East and North Africa is forecast to slow considerably over oil prices as the Saudi economy slides, it said. Last year’s healthy regional economic performance was mainly attributed to Iran’s strong growth estimated at above 6.5 percent because of higher crude production, the IMF said.

In its World Economic Outlook update, the IMF lowered economic growth of Saudi Arabia, the world’s top oil exporter, to just 0.1 percent in 2017, down 0.3 percent on its April projections.

This will be Saudi Arabia’s worst growth since 2009 when its economy contracted by 2.0 percent on the slump of oil revenues following the global financial crisis.

“The recent decline in oil prices, if sustained, could weigh further on the outlook for the region’s oil exporters,” the IMF said. After recovering to over $55 a barrel following a production reduction agreement by producers, oil prices receded on strong inventory levels and a pickup in supply.

The IMF projected that regional growth will rebound to 3.3 percent in 2018, however.

Saudi economic growth is also forecast to rebound to 1.1 percent next year, down 0.2 percentage points on April projections, it said. Saudi Arabia’s economy, the largest in the region, grew by 4.1 percent and 1.7 percent in 2015 and last year respectively.

MENA oil exporters have lost hundreds of billions of dollars since the mid-2014 crash in crude prices, transforming huge surpluses into shortfalls.

They have since implemented some economic reforms that have included raising fuel and power prices. Gulf states, which earn more than 70 percent of their revenue from energy, have been posting budget deficits since oil prices fell.

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State Bank of Pakistan maintains interest rate at 5.75%

KARACHI (Monitoring Desk): The interest rate remains unchanged, at 5.75% announced State Bank of Pakistan Governor Tariq Bajwa on Saturday.

While addressing a news conference, the central bank governor said the national economy was undergoing expansion given the rise in fiscal activity. He added the service sector has grown by 6%, while there has been a significant improvement on the construction front.

However, the rate of inflation is expected to rise to 5.5% from 4.5%.  The announcement has been made after a meeting of SBP’s Monetary Policy Committee members.

Earlier on May 20, the Monetary Policy Committee held a meeting during which decision was taken to keep the interest rate unchanged at 5.75%. According to the minutes of the meeting, the current account deficit, inflation, loans to the private sector and economic stability were the factors that made the committee reach the conclusion.

Also during the meeting, the committee had discussed there was no margin left to lower the interest rate.

The interest rate has been at 5.75% since 2016.

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PSX closes on bearish note following Panama case hearing

KARACHI (PPI): The KSE-100 index decreased by 217 to reach the 45,418-points level at close of trade on Wednesday.

During the first half of trading, the US Dollar’s value fell by 9 paisas in the interbank market.

The unexpected decline in the USD’s value from Rs105.39 to Rs105.30 during early trading hours was followed by a 126-points increase in the KSE-100 index, which crossed the 45,762 points level during the day.

A special implementation bench, headed by Justice Ejaz Afzal Khan and comprising Justice Sheikh Azmat Saeed and Justice Ijazul Ahsan, began hearing the Panama Papers case early Wednesday. The Pakistan Stock Exchange (PSX) is expected to react to the socio-political situation as the hearing proceeds.

Earlier on July 11, the PSX reacted negatively to Monday’s damning report against the prime minister and his family by the Panama case Joint Investigation Team to drop by over 2,153 points to reach 44,120 points on Tuesday.

Investors took a cumulative hit of Rs425 billion, informed sources, adding that share value of as many as 305 companies fell.

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Dollar remains hobbled by Trump

LONDON (AFP): The dollar s travails extended into Wednesday as Donald Trump faces a battle to push through his much-vaunted economic agenda, but equity traders took the news in their stride.

The euro eased slightly on Wednesday against the dollar, having surged the previous day to a near 15-month pinnacle at $1.1583 — last seen in May 2016.

However, after a blistering rally in the months following Trump s November election win — fuelled by bets his tax cuts and big spending plans would fan inflation — the greenback remains hobbled by a congressional logjam and a series of crises engulfing the White House.

A crucial blow was struck Monday when it was clear his Republican party would not be able to muster enough senators to pass controversial healthcare reforms, throwing into doubt his ability to pass big-ticket measures.

With inflation stuck below the Federal Reserve s two percent target and prospects fading of any economic reforms, traders are questioning whether the Fed will raise interest rates for a third time this year. Just months ago there had been bets on four increases.

“The market has been waiting for the Trump failure cascade to begin and yesterday s health care headlines once again bring into question the administration s ability to enact on their key legislative promises, leaving investors in limbo and the dollar sagging,” analyst Stephen Innes at trading firm Oanda.

The greenback was only marginally up against its major peers but remained stuck near multi-month lows, with the euro enjoying some support from expectations the European Central Bank will soon begin to reduce stimulus.

The bank will hold its next policy meeting Thursday and boss Mario Draghi s statement will be pored over for clues about its timetable as the eurozone economy continues to improve.

“As the ECB meeting gets closer… attention will increasingly focus on the likelihood of any further hawkish commentary from the central bank that could squeeze the euro even higher against the dollar,” noted IG analyst Chris Beauchamp.

Key figures around 1100 GMT

Euro/dollar: DOWN at $1.1528 from $1.1554 at 2100 GMT Monday

Pound/dollar: DOWN at $1.3027 from $1.3040

Dollar/yen: DOWN at 112.00 yen from 112.08

London – FTSE 100: UP 0.1 percent at 7,393.90 points

Frankfurt – DAX 30: FLAT at 12,434

Paris – CAC 40: UP 0.2 percent at 5,181

EURO STOXX 50: UP 0.4 percent at 3,141.80

Tokyo – Nikkei 225: UP 0.1 percent at 20,020.86 (close)

Hong Kong – Hang Seng: UP 0.6 percent at 26,672.16 (close)

Shanghai – Composite: UP 1.4 percent at 3,230.98 (close)

New York – DOW: DOWN 0.3 percent at 21,574.73 (close)

Oil – Brent North Sea: UP 20 cents at $49.04 per barrel

Oil – West Texas Intermediate: UP 14 cents at $46.54

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FBR alerts taxpayers to fake, harmful emails

ISLAMABAD (NNI): Federal Board of Revenue (FBR) on Wednesday alerted the taxpayers to fake, harmful emails-cum-notices being sent to them regarding anomalies in their tax returns.

A statement by FBR has denied any association with these emails being sent from a fake email address do-not-reply@fbrgovpk.com which has no connection with FBR’s email domain.

These fake emails inform the targeted taxpayers the tax returns filed by them do not match their sources of income and further advise them to contact the Commissioner Inland Revenue at the earliest. These emails also reportedly carry attachments infected by harmful viruses and malware.

This nefarious activity apparently by some hackers is a type of spamming used to send viruses and malware to the general public and taxpayers. The taxpayers and the general public are advised to ignore such fake emails and refrain from clicking any link provided in them. The receipt of such fake emails should be immediately reported to the authorities concerned.

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PSX gains 1,113 points after Panama case hearing, Qatari minister visit

KARACHI (NNI): Pakistan Stock Exchange (PSX) 100-index has gained 1,113 points on Tuesday as the market closed on a 35,636 figure.

Experts believe that today’s Panama case hearing followed by the Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani ?Pakistan visit has positively motivated the investors. The value of stocks has piled up to Rs. 192 billion.

The Pakistan Stock Exchange’s benchmark KSE 100-Index skyrocketed by 2.50 percent, or 1,113.15 points, to 45,636.36 points, the highest level in Financial Year 2018, on Tuesday when compared with 44,523.21 points reported on Monday.

During the three-day bullish streak, the main index has accumulated 1,852.81 points after losing 2,490.26 points in the earlier three trading sessions largely due to the political turmoil in the country.

The KSE All-Share Index surged by 2.11 percent or 656.75 points to 31,839.58 points, the KSE 30-Index jacked up by 2.70 percent, or 626.53 points, to 23,843.63 points, the KMI 30-Index jumped by 3.16 percent, or 2,385.89 points, to 77,903.34 points, whereas the Islamic All-Share Index increased by 2.38 percent, or 512.06 points, to 22,060.95 points.

During Tuesday’s trading session, the main index moved in a healthy range of 1,170.18 points as it touched an intraday peak of 45,668.88 points as against an intraday trough of 44,498.70 points.

Market volumes more than doubled with an augmentation of 110.29 percent or 83.03 million shares to 158.32 million shares on Tuesday when compared with a trading of 75.29 million shares posted on Monday.

Market capitalization improved by 2.11 percent or 192.38 billion rupees (1.80 billion U.S. dollars) to 9.33 trillion rupees whereas trade value was bolstered by 115.13 percent or 4.82 billion rupees to finish the trading day at 9.00 billion rupees.

Among 373 active scrips on Tuesday, the prices of 307 issues advanced, 56 depleted, whereas values of 10 other companies stayed unchanged.

TRG Pakistan Limited, Karachi Electric Limited, and Aisha Steel Mills Limited were the top traded companies with turnovers of 11.25 million shares, 8.91 million shares, and 7.10 million shares, respectively.

Philip Morris Pakistan was the top price gainer of the day with an increment of 125.85 rupees to close at 2,645.00 rupees while on the other hand, Bata Pakistan led the major price shedders with a decrement of 73.00 rupees to 3,100.00 rupees. (1 U.S. dollar = 106.85 rupees).

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Govt taking measures to improve customs procedures: Dar

F.P. Report

ISLAMABAD: Finance Minister, Senator Mohammad Ishaq Dar said Tuesday that comprehensive measures were being taken to improve and upgrade customs procedures in Pakistan in line with international standards.

The Minister was talking to Visiting Secretary General, World Customs Organization (WCO), Kunio Mikuriya who called on him here Tuesday. Dar said that the government has also taken steps for the facilitation of cross-border and regional trade.

Welcoming the visiting dignitary, Minister Dar stated that Pakistan had a long standing relationship with the WCO and we would continue to play an active role in further strengthening it.

He apprised the Secretary General about the measures being taken to improve and upgrade customs procedures in Pakistan in line with international standards. He also shared with him steps being taken for facilitation of border regional trade and said that regional integration was a priority of the government.

He said Pakistan fully supported all measures for enhancing regional connectivity and cooperation and, promotion of regional trade was a major area in this regard. Referring to CASA 1000, TAPI and the Integrated Transit and Trade Management System Projects, he said that these initiatives would further integrate the Pakistan economy with the region.

Minister Dar shared with the visiting diginitary an overview of Pakistan’s economy and said that having achieved macroeconomic stability, the government was now fully focused on higher, sustainable and inclusive economic growth. He also shared with the Secretary General government’s efforts for improving the ease of doing business through trade and investment facilitation.

Secretary General WCO, Kunio Mikuriya stated that Pakistan’s active participation in the WCO was highly appreciated. He suggested that Pakistan should post permanent representative at the WCO headquarter to further augment this participation.

The Secretary General said that the improvement in system of Customs in Pakistan in the recent years was very visible and impressive . He said his organization would like to enhance cooperation with Pakistan especially in the areas of capacity building and further improvement of the systems in line with WCO guidelines.

Both sides expressed agreement on having greater Pak-World Customs Organization cooperation and linkages in the future. Special Assistant to Prime Minister on Revenue, Haroon Akhtar Khan, Chairman FBR, Tariq Mahmood Pasha, senior officials of Ministry of Finance attended the meeting.

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Foreign investment in Pakistan slightly rises

KARACHI (PPI): Foreign investment in the country recorded a small rise of 9 percent during financial year ended June 30, 2017 after security situation improved and fresh inflows from China crossing one billion dollars level.

Foreign investment in Pakistan during July 2016-June 2017 amounted to 2.157 billion dollars as against 1.976 billion dollars of the preceding year.

Major chunk of foreign investment arrived from China amounting to 1.185 billion dollars during the preceding fiscal year. Second country which contributed most was Netherland which bought Engro Foods worth 463 million dollars during the previous year. Another stepping stone which boosted the investment was buying of Dwalance by Turkey group which helped improved flows amounting to 135 million dollars.

The performance from the foreign investors buying and selling stocks at local capital market was quite poor..
Foreign outflow during the preceding year was 531 million dollars as compared to 320 million dollars of the preceding year.

The root cause of foreign selling during the earlier part of the fiscal year was political situation joining to Panama issues and afterwards, the local bourse up gradation from frontier market to emerging market, which led to heavy foreign selling in the month of May.

All eyes on election 2018, outcome of Supreme Court hearing, rupee fluctuation and performance of the key economic indicator to decide the foreign investment in the stock market and other industrial areas. Investment from China has been pouring in but the amount is limited and burden on the economy has been larger than expected because of widening trade deficit.