WSJ : In China, a Cat-and-Mouse Game to Rein In Crypto

In China, a Cat-and-Mouse Game to Rein In Crypto
Recent court cases reveal how middlemen are facilitating a booming trade, eluding a crackdown

Three years ago, China’s government imposed sweeping restrictions on trading cryptocurrencies. But that hasn’t stopped brokers, including Chen Xin, from helping people convert large amounts of Chinese yuan into crypto.

Working as a middleman in China’s underground financial system, Chen would routinely accept more than $100,000 in cash and then swap it for the cryptocurrency tether using overseas trading platforms. He knew not to ask too many questions about where the cash came from—but he assumed a lot of it wasn’t clean.

“The money is dirty,” he told his wife, according to testimony he delivered later as a witness in a Chinese court case that was part of the government’s efforts to clamp down.

The role of traders such as Chen in facilitating Chinese crypto transactions is largely invisible to the outside world. But a Wall Street Journal examination of court cases and Chinese government notices sheds new light on how they operate—and how they are fueling Chinese demand for crypto despite government efforts to rein it in.

In some cases, criminal groups are trading crypto to launder ill-gotten gains, boosting crime syndicates beyond China’s borders, including ones trafficking fentanyl, U.S. prosecutors say. In other cases, middle-class urbanites are using it to secretly move money out of the country, in violation of government rules designed to restrict the flow of money across China’s borders.

The activity is exceedingly difficult to stamp out and undercuts Beijing’s image of strict control over the economy and financial industry.

The total scale of crypto activity in China is unknown. After China sought to limit access to mainstream crypto exchanges in 2021, many users turned to over-the-counter trading and peer-to-peer networks that are tougher to track.

Blockchain data firm Chainalysis estimates $95 billion flowed to China-based over-the-counter brokers it analyzed from late 2023 through mid-2024, more than double the level of the same period two years earlier.

The rising interest has made China an important source of crypto activity globally, though it remains behind the U.S. in overall crypto adoption, according to Chainalysis. Even so, if demand keeps rising, it could support prices for crypto assets such as bitcoin, which has soared in value to more than $100,000 recently.

Finding workarounds
On the messaging app WeChat and other online forums, users teach one another how to surreptitiously sign up for accounts on popular trading platforms. Trading yuan for tether, whose value is pegged to the U.S. dollar, appears to be especially popular.

Once a person has traded yuan for tether, bitcoin or other virtual currencies, it can then be converted into foreign currencies and reinvested in overseas property or stocks, sidestepping capital controls that cap individual purchases of foreign exchange at $50,000 a year.

Crypto users and industry participants say that Chinese nationals are still able to open accounts and trade crypto on exchanges such as OKX and Binance despite the government’s restrictions. While the platforms’ websites are blocked in mainland China, users can access them via virtual private networks, or VPNs, which are commonly used by urbanites to get around government internet rules.

“Access to OKX services is restricted in the PRC,” an OKX spokesperson said in response to questions, referring to the People’s Republic of China. The spokesperson added that OKX ensures compliance in all jurisdictions and cooperates with regulators and law enforcement globally.

Binance didn’t respond to requests for comment. In the past, Binance has said its website is blocked in China and isn’t accessible to China-based users.

Workarounds also exist for users who run into problems such as failing to pass trading platforms’ “know your customer” checks. Such checks, which are standard practice in the financial industry, seek to determine customers’ identities and at times their sources of funds.

To pass the tests, China-based users can register shell companies in offshore jurisdictions, such as the Cayman Islands or British Virgin Islands, and set up institutional trading accounts on the platforms instead, said Jack Ding, a Beijing-based crypto-regulations specialist at Duan & Duan Law Firm. He has also been representing Chinese creditors against the failed crypto exchange FTX in its chapter 11 proceedings.

Many Chinese are also connecting through messaging apps such as Telegram to trade crypto via informal peer-to-peer networks that don’t involve the exchanges.

‘Avoid getting involved’
China has tried to curtail the activity by prosecuting big traders to scare off others. In one Chinese county, authorities have begun going door to door to warn local residents against trading crypto.

The message from officials, according to state media: “Stay rational, avoid getting involved.”

Chinese officials worry about the transactions because of their potential links to money laundering and other illicit activity. They also worry that outflows could put pressure on the value of the yuan and complicate Beijing’s efforts to reinvigorate a weakened economy just as President Trump is promising to take aim at China’s lucrative export sectors.

In the coastal province of Jiangsu, near Shanghai, one crypto-trading ring managed to change the equivalent of at least $150 million from Chinese yuan into Australian dollars over about 18 months before several of the people operating it were prosecuted in late 2023 for running illegal business operations.

First, the Chinese money handlers collected funds from customers looking to transfer currency offshore. Then they bought tether and transferred the virtual currency to brokers in Australia, who simultaneously paid the clients back overseas using Australian dollars.

More than 90% of clients were looking to move the equivalent of at least $400,000 offshore per transaction, prosecutors said recently, well in excess of China’s $50,000 annual cap. People involved in running the operation were sentenced to as much as seven years in prison.

In late 2023, state media said 74 people were arrested in connection with another trading ring, involving more than $2 billion in the underground banking system, with much of the money being turned into tether, according to state media.

A low-level employee at a textiles company was behind the crypto-trading ring, police said. Investigators identified cash flows of nearly $700 million via bank cards linked to him.

“This was obviously inconsistent with his status,” one police official said, according to the state media account.

In response to questions, China’s central bank said that the opacity of crypto trading, its low costs and the speed of cross-border transfers presented major challenges for fighting money laundering, but that the government was expanding efforts to combat the problem.

China will “maintain a high-pressure stance against the use of cryptocurrencies in money laundering and for the illegal transfer of funds,” the central bank said.

Widening appeal
For many young Chinese, crypto is appealing at a time when there are few good options to build wealth at home amid a weak economy. While some are tapping crypto to move money offshore, others buy it as an investment, hoping it will protect their wealth if the yuan falls in value.

“In China, cryptocurrencies represent a kind of fintech innovation that is widely perceived as new, trendy and innovative among the younger generation,” said Maggie Hu, an assistant professor at the City University of New York’s Baruch College.

Chen Xin’s case sheds light on how small-time brokers help make the trading possible.

The operation began in 2022, when Chen started accepting cash from clients and in exchange provided them with tether, he recalled in court testimony, as part of a case against several others involved in the network who were convicted of facilitating online criminal activities. He testified as a witness but wasn’t named as a defendant.

Chen said in the testimony that he teamed up with another broker, and that each of them ran accounts on OKX and Binance. He said one big customer, named Fang Rengan, routinely asked Chen to prepare more than $100,000 worth of tether on behalf of other clients.

In his own witness testimony, Fang said he was working on behalf of a casino in Cambodia. He said he didn’t know many details about the casino, which wasn’t named in the court documents, except that it had money it needed to convert into crypto. Like Chen, Fang wasn’t listed as a defendant in the case.

Casinos targeting Chinese gamblers have sprung up in Cambodia, the Philippines and Myanmar in recent years, in some cases operating in violation of local or Chinese laws. The illicit ones need to launder the money they earn, with crypto serving as one option.

Fang recruited others who received yuan transfers from the casino into their personal bank accounts. These people would then withdraw the cash—at times the equivalent of tens of thousands of dollars each—and give it to representatives of Fang, who would hand it over to Chen. Known as layering, the tactic helps obfuscate the source of the funds from police.

After receiving the cash, Chen would then transfer the equivalent amount of tether to the bosses of the casino, completing the deal. He earned a commission for his efforts.

Chen’s wife quizzed him about his activities, according to the court testimony. But the couple had little money of their own and Chen figured it was best to push on.

“To put it bluntly, it was money laundering,” Chen said in the court testimony.

The Journal was unable to determine the location of Chen or Fang, or whether they had lawyers. It couldn’t be learned whether they were punished for their roles in the crypto network.

Tether, the company behind the cryptocurrency, said it was committed to combating illicit activity and that it complies with requests from global regulators and law enforcement.

FT : Harland & Wolff takeover raises fears over payments to suppliers

Harland & Wolff takeover raises fears over payments to suppliers
Bankrupt shipbuilder is being bought by Spanish state-owned group Navantia

Harland & Wolf suppliers owed millions of pounds fear they will not be paid as the bankrupt shipbuilder is taken over by Spain’s Navantia, warning of a hit to UK supply chains if they are replaced by European contractors.

The 164-year-old company best known for building the Titanic fell into administration last September, hobbled by large losses and steep interest payments on its debt.

A deal was struck in December with state-owned Navantia which the UK government vowed would protect 1,000 jobs at H & W’s four yards in Northern Ireland, England and Scotland.

But suppliers say jobs are already being lost in the supply chain and they have little prospect of getting their invoices paid.

Russell Downs, the bankruptcy and restructuring expert brought in as interim executive chair in July, told the Financial Times in December the sale to Navantia “regrettably” would mean losses for creditors and suppliers.

On January 14, the four yards that had been continuing to operate followed the parent company into administration.

“It’s very stressful,” said the chief executive of one British-based supplier who, like others, asked not to be named. “They owe us £10mn plus, a reasonably big chunk of our business . . . We’re an SME. That kind of money does have an effect.”

He added: “Until just before Christmas, the assumption was that H & W would be sold as a going concern and Navantia were going to stand behind its debt . . . Looking ahead, I would imagine Navantia are going to use their own suppliers now — they’re not going to want to take liabilities.”

Tan Dhesi, chair of the defence select committee at Westminster, asked John Healey, UK defence secretary, in a letter last week for “comprehensive answers” by February 3 on how government is helping H & W’s supply chain.

“The immediate effects on the UK supply chain and employment landscape are huge,” said the head of one company supplying H & W’s Appledore yard in England and Belfast.

“There’s a lot of angry local people and not much support from anybody,” said a supplier of services in Belfast, who said his company and clients were owed £22mn.

“It’s a horrible situation . . . It’s a bit like David and Goliath,” he said. “It’s been cloak and dagger the whole way through . . . Basically, the rug has been pulled. The headlines are saying they’re saving jobs. I know [supply chain] companies have already started laying people off.”

Navantia understands suppliers’ concerns and is committed to developing H & W’s capabilities and “supporting the local industry,” said one person familiar with the company’s plans. It aims to “redevelop a healthy industrial ecosystem in order to support their [suppliers’] viability,” the person said.

The sale to Navantia is expected to close on Monday. Staff were told in an email last week seen by the FT that “the next chapter in the shipyard’s history is about to begin”, with Navantia bringing “the experience, stability and investment that is desperately needed”.

The Belfast and Appledore supplier said the so-called prepack sale was “being used as a means to write off debt at the expense of the trade creditors” which are mainly SMEs.

The UK government and Navantia have refused to disclose financial details, including the size of what Jonathan Reynolds, business and trade secretary, said was a “relatively minor” increase to the £1.6bn contract to build three Royal Navy support vessels in which Navantia and H & W are partners. Navantia had pushed for a boost to clinch the deal.

A government spokesperson said it “has not given any direct financial support to Navantia” and the deal contained “the minimum changes to the contract necessary — on commercial terms — to ensure its continued delivery”. 

Hilary Benn, the UK’s Northern Ireland secretary, on January 15 blamed unpaid invoices to suppliers on “the failure of the old H & W”.

“It now falls to Navantia to decide which of the invoices it wishes to pay, but it will want to secure a relationship with suppliers contributing to the fleet solid support ship programme,” he said.

FT : AI leaders clash over safety and $100bn Stargate project

AI leaders clash over safety and $100bn Stargate project
Top tech leaders at Davos such as DeepMind’s Demis Hassabis and Meta’s Yann LeCun in fiery debate

The biggest figures in artificial intelligence sparred over the dangers of the rapidly advancing technology at the World Economic Forum this week, as hype swirled around a $500bn AI infrastructure project touted by Donald Trump.

AI pioneers including Google DeepMind chief Sir Demis Hassabis, Anthropic co-founder Dario Amodei and “godfather of AI” computer scientist Yoshua Bengio used the gathering in Davos to reiterate stark warnings about the AI threats, as commercial interests and geopolitical rivalries steamroller concerns about safety.

While Hassabis acknowledged that the “genie can’t be put back in the bottle”, he said artificial general intelligence — when computers surpass human cognitive capabilities — could threaten civilisation if it runs out of control or is hijacked by bad actors. This is particularly the case with large language models that are “open source” and accessible by all.

“There’s much more at stake here than just companies or products,” the Nobel Prize winner said in an interview with the Financial Times. “[It’s] the future of humanity, the human condition and where we want to go as a society.”

Amodei, whose start-up makes the chatbot Claude and is backed by Google and Amazon, said he was concerned about authoritarian governments using AI and was “very worried about 1984 scenarios, or worse”.

“Science doesn’t know how we can control machines that are even at our level of intelligence, and even worse if they’re smarter than us,” added Bengio during a panel. “There are people who are saying, ‘Don’t worry, we’ll figure it out.’ But if we don’t figure it out, do you understand the consequences?”

Their stance was criticised as hypocritical by Yann LeCun, chief AI scientist at Meta, which has spent billions developing an open source LLM called Llama. He said that such concerns were belied by his rivals’ fierce competition to build, and sell, the best models.

“Yoshua and Dario have made opinions against open source and that’s actually very dangerous,” he said in an interview. “Obstacles to open source distribution would lead to regulatory capture by a few players, either of the west coast of the US or China . . . [putting] power in the hands of a small number of people.

“It’s very strange from people like Dario. We met yesterday where he said that the benefits and risks of AI are roughly on the same order of magnitude, and I said, ‘if you really believe this, why do you keep working on AI?’” LeCun added. “So I think he is a little two-faced on this.”

Whilst scientists and engineers debated the risk-reward of AI, business executives showed unfettered enthusiasm for the technology. 

“There are no contrarians,” said Ervin Tu, president of Dutch tech investment group Prosus. “If you have any appreciation for what large language models and agents trained on them can do, you would be hard-pressed as a human not to conclude that they are transformational and will be incredibly disruptive in every industry.”

On Wednesday, the febrile atmosphere was further charged by OpenAI, SoftBank and Oracle announcing a $500bn US AI infrastructure joint venture called “Stargate”.

Trump hosted their chief executives, Sam Altman, Masayoshi Son and Larry Ellison, in the Oval Office on Tuesday, before signing executive orders this week that would eliminate many guardrails around the development of the technology. The new US president said the moves would ensure American primacy in the technology.

“At OpenAI, we believe infrastructure is destiny,” said OpenAI chief financial officer Sarah Friar. “[Stargate] is about more compute. More compute builds better models. Better models answer more complex problems and deliver more benefits for people and businesses.”

Stargate dominated debate in Davos for the rest of the week, with many including Elon Musk taking to his social networking site X to question how the trio would fund the vast expenditure promised.

The FT reported on Friday that Stargate has not yet secured the funding it requires, will receive no government financing and will serve only OpenAI once completed. So far, SoftBank and OpenAI intend to put forward more than $15bn each for the project, hoping to raise a combination of equity from their existing backers and debt to fund Stargate.

The new venture was also taken as the latest evidence of a fissure in the relationship between Altman and Microsoft chief executive Satya Nadella and his top AI executive Mustafa Suleyman, the former DeepMind cofounder who left his own startup and joined Microsoft early last year.

“The tensions that surfaced between Mustafa Suleyman and Sam Altman at Davos last year were just the beginning,” said Salesforce chief executive Marc Benioff, which competes with Microsoft in selling AI-powered agents to businesses.

“Microsoft is now accelerating its own AI development . . . This pattern reflects Microsoft’s history with its ‘partners,’” Benioff added. “This could mark the beginning of the end for the relationship, making it critical for OpenAI to expand to other platforms quickly.”

“Marc has no idea what he’s talking about,” said Microsoft spokesperson Frank Shaw.

Microsoft has invested almost $14bn in OpenAI since 2019 and in return negotiated rights to its intellectual property and to be its exclusive cloud computing provider. But the latter agreement was terminated alongside the announcement of Stargate.

In Davos, Nadella also cast doubt on the Stargate spending pledges and touted Microsoft’s planned $80bn in capital expenditure.

“All I know is I’m good for my $80bn,” he said, later replying to Musk on social media platform X: “And all this money is not about hyping AI, but is about building useful things for the real world!”

Stargate is just the latest example of an infrastructure arms race for data centres in the US as it prepares for the next leg of the AI economic boom. Musk’s xAI built a supercomputer called “Colossus” containing 100,000 interconnected Nvidia chips in just three months last year and has pledged to expand the number 10-fold.

BlackRock and Microsoft are preparing to launch a $30bn AI investment fund to build data centres and energy projects to meet growing demands stemming from the tech sector. On Friday, Meta chief Mark Zuckerberg said the company would spend between $60bn-$65bn on capital infrastructure this year while expanding its AI teams.

“I’ve had nonstop customer meetings, across every sector. I don’t think there’s a single CEO I’ve spoken to who doesn’t know they need to be deploying AI,” said OpenAI’s Friar. “AI isn’t just on the agenda; it is the agenda. It is no longer just an abstract concept or futuristic vision. It’s here.”

FT : Rome vs Milan: how Mediobanca turned prey for Monte dei Paschi

Rome vs Milan: how Mediobanca turned prey for Monte dei Paschi
Prestigious Milanese bank has become latest pawn in government consolidation efforts

When Italian financial power broker Mediobanca helped its longtime client Monte dei Paschi di Siena structure a make-or-break capital raising in 2022, little did it know it would ultimately become a takeover target for the former poster child of the country’s failed banking system. 

On Friday, MPS astonished investors by launching a €13.3bn all-share bid for its larger rival at a premium of just 5 per cent to Mediobanca’s closing price a day earlier.

The takeover offer by a lender that is still partially government-owned represents yet another shock to the Italian banking system, the latest in a series of back-to-back deal attempts that could reshape the country’s financial landscape.

“This is the final battle between Roman [politics] and Milanese finance,” said one government official.

Since taking power in late 2022, Giorgia Meloni’s rightwing government has made it a priority to portray itself as market friendly, seeking to ease observers’ fears it would use a heavy-handed nationalist approach to business and financial policy.


However, a series of interventions in the financial sector — including an attempt to engineer the sale of MPS to rival Banco BPM last year and controversial amendments to the country’s capital markets legislation — as well as public statements against “international speculators” have reignited such concerns.

“It is simply unfathomable that a commercial lender, whose [largest single shareholder] is the government, launches a takeover attempt of a larger investment banking rival, with a nil premium and without a clear strategic objective,” said one veteran banking executive in Milan.

Following the lender’s successful turnaround, Italy has been cutting its stake in MPS — which it bailed out in 2017 — to meet EU commitments to return the world oldest bank to private hands.

But the state remains the largest single shareholder with a stake of more than 11 per cent — and MPS appears to play an increasingly important part of government efforts to create a new centre of financial power.

Last year, Meloni’s government hoped to merge the Tuscan lender, once a symbol of Italy’s leftwing parties’ financial clout, with Banco BPM to create a large domestic banking hub.

Dubbed the “third pole”, the aim was for the enlarged lender to compete with larger rivals UniCredit and Intesa Sanpaolo and maintain a strong Italian footprint.

UniCredit’s takeover bid for Banco BPM in November thwarted those plans and left the government scrambling for ways to counter chief executive Andrea Orcel’s latest manoeuvre.

Insiders now say MPS’s move on Mediobanca shows Meloni’s government has abandoned hope that UniCredit can be stopped, and accepted that it must find an alternative to BPM for its consolidation efforts.

On Friday, MPS chief executive Luigi Lovaglio said the takeover offer was “an industrial project we have been thinking about since 2022”.

“We will create the third banking group in the country,” Lovaglio said. He called the move “brave”, “innovative” — and “friendly”. Insiders say that Mediobanca’s chief Alberto Nagel does not see it that way.

“Obviously the takeover bid is a market transaction”, Meloni told reporters on Saturday. “The only thing I note is that MPS, which used to be seen as a problem by both institutions and citizens, is a perfectly healthy bank that launches ambitious operations and this should make us proud.”

Replacing BPM with Mediobanca and turning MPS into buyer instead of target also gives Rome a fresh opportunity: to capitalise on connections forged with two giants of corporate Italy and extend its reach over the insurance group Generali — a large investor in Italian public debt, and one 13 per cent owned by Mediobanca.

In the latest auction of MPS shares in November, the government sold sizeable chunks of its remaining holding to Delfin, the holding company of the billionaire Del Vecchio family, the construction tycoon Francesco Gaetano Caltagirone and BPM. 

Along with their new shareholdings in MPS, Caltagirone holds 7.8 per cent of Mediobanca and 6.9 per cent of Generali. Delfin has 9.9 per cent of Generali and 19.8 of Mediobanca.

Both Caltagirone and Delfin have long been at odds over strategy with Nagel and Generali chief Philippe Donnet, but have failed in bids to replace them.

Generali’s decision to enter an asset management joint venture with France’s Natixis, first reported by the Financial Times in November and announced on Tuesday, further aligned Rome with Caltagirone.

Meloni’s allies raised concerns over the risk Italian savings would be increasingly invested abroad and that the refinancing of Italy’s huge public debt might face hurdles going forward.

Such concerns resonated across the Italian establishment, and with Caltagirone. His representatives on the Generali board voted against the deal, according to people with knowledge of the deliberations.

Insiders see Caltagirone’s hand behind MPS’s move on Mediobanca, rather than MPS boss Lovaglio’s. In their telling, it is part of a broader attempt to take control of Generali and overhaul Mediobanca’s business and management, something the late billionaire Leonardo Del Vecchio set his eyes on years earlier. Caltagirone’s son Alessandro is a newly appointed member of MPS’s board of directors.

People close to Caltagirone and people close to MPS denied the Roman tycoon’s direct or indirect involvement in the transaction.

A merger between Mediobanca and MPS would help solve Caltagirone’s and Delfin’s long-standing complaints while also giving Rome a seat at the country’s most prestigious and influential financial tables.

There is no certainty that a deal will happen. MPS shares closed down 7 per cent on Friday, while Mediobanca’s shares rose almost 8 per cent.

Analysts’ responses were muted. Marco Nicolai at Jefferies noted that synergies between the two banks were limited and risks were high. “Cultural differences between the two companies could result in revenue dis-synergies, especially on the investment banking and wealth management front,” he added.

“Our first impression is that this offer has limited chances of success,” said KBW analyst Hugo Cruz.

But people close to MPS argued that Mediobanca “has stood still for too long”, and was overly reliant on its dividend from Generali, a long-standing criticism of the Milanese bank.

“The road ahead is long and winding, not just for MPS but for the whole Italian banking sector: lots of moving parts, lots of unknowns and too many actors involved,” said one chief executive.

FT : Japanese investors dump Eurozone bonds at fastest pace in a decade

Japanese investors dump Eurozone bonds at fastest pace in a decade
Net selling highlights how rising interest rates in Japan are reshaping global markets

Japanese investors have been selling Eurozone government debt at the fastest pace in more than a decade, with analysts warning that the move by one of the bloc’s cornerstone bondholders could lead to sharp market sell-offs.

Net sales by Japanese investors rose to €41bn in the six months to November — the latest figures to be released — according to data released by Japan’s finance ministry and the Bank of Japan and compiled by Goldman Sachs.

The prospect of higher bond yields at home and political upheaval in Europe — including the collapse of Germany’s ruling coalition, leading to elections next month, and turmoil in France, which has been operating under an emergency budget law — have accelerated the sales, said analysts. French bonds were the most sold during the period, at €26bn.

The sales add further pressure to indebted European governments already facing a jump in borrowing costs. They highlight how rising Japanese interest rates after years in negative territory are reshaping financial markets around the world.

Japanese investors returning home is a “game changer for Japan and global markets”, said Alain Bokobza, head of global asset allocation at Société Générale.

Although Japanese investors have been net sellers of Eurozone bonds for most of the past few years, the pace has picked up in recent months.

Japanese investment flows have been “a stable source of [European] government bond demand for a long time”, said Tomasz Wieladek, an economist at asset manager T Rowe Price. But markets are now “entering an era of bond vigilance” where “rapid and violent sell-offs” could happen more often.

Gareth Hill, a bond fund manager at Royal London Asset Management, said the scenario had “long been a concern for holders of European government bonds, given the historically high holdings [among] Japanese investors” and could put pressure on the market.


In addition, soaring costs of hedging against swings in the value of the yen have made overseas debt increasingly unappealing. Despite coming down from a 2022 peak, when hedging costs are accounted for, the 10-year Italian government bond yield for Japanese investors is just over 1 per cent, roughly the same as the Japanese 10-year yield, according to Noriatsu Tanji, chief bond strategist of Mizuho Securities in Tokyo. He pointed to regional banks in Japan as being among the main sellers of European debt.

“Japanese investors must be asking themselves quite hard to what extent they should be holding foreign bonds,” said Andres Sanchez Balcazar, head of global bonds at Pictet, Europe’s largest asset manager.

Norinchukin — one of Japan’s largest institutional investors — last year said it planned to offload more than ¥10tn of foreign bonds this financial year. In November, it recorded a loss of about $3bn in the second quarter after realising losses on its large holdings of foreign government bonds.

The pullback by Japanese investors is putting upward pressure on bond yields that have already moved higher since the European Central Bank started to reduce its balance sheet after a vast emergency bond-buying programme during the coronavirus pandemic, said analysts.


France — which has one of Europe’s deepest bond markets and historically been a favourite among Japanese investors due to the additional yield it offers over benchmark German debt — has seen large Japanese outflows in recent months.

Between June and November, as a political crisis deepened resulting in the fall of Michel Barnier’s government, Japanese funds’ total outflows reached €26bn, compared with sales of just €4bn in the same period the previous year.

“There is no question that for France the buyer base has changed,” said Seamus Mac Gorain, head of global rates at JPMorgan Asset management.

Over the past 20 years, Japanese investors have become a cornerstone of several bond markets as ultra-low yields at home have made foreign investments more attractive, including for big investors such as pension funds who need to buy safe sovereign debt.

Total holdings of foreign bonds by Japanese institutional investors reached $3 trillion at their peak in late 2020, according to IMF.

However, as Japanese investors have started to search for returns at home, their net buying of global debt securities have shrunk to just $15bn in total over the past five years — a far cry from the roughly $500bn in such purchases they made in the previous five years, according to calculations by Alex Etra, a macro strategist at Exante.

“Whereas Japanese bonds were quite unattractive for domestic investors in the past, they are more attractive now,” said JPMorgan’s Gorain. “That is a structural change.”

Barron's : Alphabet Has an Nvidia-Like Business. It Could Be Worth Hundreds of B

Alphabet Has an Nvidia-Like Business. It Could Be Worth Hundreds of Billions.

Alphabet has an Nvidia like business inside it. It could be the most valuable part of the internet search giant.

Some investors might not know that Alphabet has an AI chip business among its many segments. But it’s there: Alphabet’s internally designed chips end up in AI data centers and work in concert with products from Nvidia and others.

And, of course, the Google parent also has an AI business: Alphabet’s DeepMind is comparable to OpenAI.

Both businesses could be worth hundreds of billions and aren’t fully reflected in Alphabet’s stock price, analysts say.

“Is TPU [and] DeepMind Google’s most valuable business?” asked D.A. Davidson analyst Gil Luria in a Friday report. (Analysts, and many investors, still refer to Alphabet as Google.)

It’s a good question but requires some explanation.

TPUs, or Tensor processing unit s, are Alphabet’s chips. A TPU is “a matrix processor specialized for neural network workloads,” according to the company. That isn’t much help. Futurum Research explains that AI data centers have traditional CPU chips, GPU chips that Nvidia dominates, and TPU that, essentially, improve the performance of the AI computer. Microsoft, Amazon.com, and Alphabet—three big data center players—all have their own TPUs.

If Alphabet’s TPU and DeepMind were on their own, the value would be substantial.

“We believe the current value of a potential stand-alone TPU/DeepMind business may be over $700 billion, or as much as $60/share,” wrote Luria.

That’s a lot, considering Alphabet’s market value is about $2.5 trillion, with the stock currently trading around $200.

Luria is partially doing a so-called sum-of-the-parts, or SOTP, analysis of Alphabet, estimating what each business inside the company is worth. SOTP can be useful if a company is thinking about selling or spinning off a business—or if one business segment is losing money, masking the health of another part of a company.

Recently, SOTP chatter around Alphabet increased after the U.S. government won an antitrust battle labeling Google Search a monopoly. Remedies the government could try and impose might include a breakup of the company.

Any valuation methodology has its limitations. SOTP isn’t particularly useful when things are going well or when businesses are significantly interconnected. Alphabet’s chips are going into its cloud business and DeepMind’s AI improves its search business.

SOTP also isn’t as helpful as traditional valuations when there is little chance a split or sale is coming. That point is a reason why Luria rates Alphabet stock Hold.

“We are waiting for the company to indicate it is willing to release some of the SOTP value to shareholders, and until then maintain a [Hold] rating.” His price target is $200 a share.

Alphabet stock rose 1.1% on Friday, closing at $200.21, while the S&P 500 and Dow Jones Industrial Average fell about 0.3%.

Still, SOTP can help investors better understand businesses owned—and what’s possible for those businesses.

Barron’s recently wrote positively about Alphabet, believing the value of its various businesses wasn’t accurately reflected in the current stock price. Since the article appeared, Alphabet stock has gained about 22%.

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FINANCIAL TIMES
-In an animated call with Denmark's Prime Minister Mette Frederiksen, US President Donald Trump expressed his determination to take over Greenland. The call, which lasted 45 minutes, was reportedly marked by an aggressive and confrontational Trump. Frederiksen emphasized that Greenland is not for sale, and America's "big interest" in it. Five senior European officials who spoke on the call said the conversation had gone poorly, with Trump being firm and firm in his determination. The call is expected to deepen European concerns that Trump's return to power will strain transatlantic ties, as he pressures allies to relinquish territory.
-Donald Trump's victory speech in November credited several people, including UFC CEO Dana White, the Nelk Boys, Adin Ross, Theo Von, Bussin' with the Boys, and Joe Rogan. Trump skipped CBS's 60 Minutes during his campaign and spent about 17 hours with a group of podcasters, known as the "manosphere," who have become new media stars. Rogan, Von, and at least one member of the Nelk Boys attended Trump's inauguration festivities in Washington. Rogan sat alongside tech billionaires and former presidents Barack Obama and George W Bush. Influencers Jake and Logan Paul "pranked" Von, causing him to tumble out of his chair. Later, at the "Starlight Ball," the podcast brigade mingled with crypto entrepreneurs, donors, and celebrities.
-Hamas has released four female Israeli soldiers, whom it held captive. The four women have returned to Israel after being handed over to Red Cross personnel. The ceasefire deal in the Gaza Strip entered its second week, and 200 Palestinian prisoners held in Israeli jails were also set to be released. The four soldiers were seized from a military outpost on the Israel-Gaza border during Hamas's October 7, 2023 attack that triggered the conflict. Their freedom has become a central demand of the hostage release movement, which coalesced around the families of those still held captive in Gaza. The handover took place in Gaza City's Palestine Square, amid a rally of hundreds of uniformed and armed militants.
-Pete Hegseth has been confirmed by the US Senate to head the Pentagon despite allegations of sexual assault and alcohol abuse. The Senate voted 51-50 in favor of Hegseth, with Republican senators Mitch McConnell, Lisa Murkowski, and Susan Collins voting against his confirmation. Hegseth's former sister-in-law, Danielle Hegseth, accused him of being abusive to his ex-wife and abused alcohol for years. Hegseth, a vocal opponent of "wokeness," vowed to bring a "warrior" culture back to the US military and emphasized the need to secure the US-Mexico border.
-Private equity-backed companies are facing significant stress due to higher interest rates and lower consumer spending, leading to a record number of 110 bankruptcy filings in 2024. The failures, particularly in the consumer and healthcare sectors, highlight the challenges faced by certain corporate America sectors, despite the low unemployment rate and the S&P 500's higher earnings. The initial reason for filing for bankruptcy is the excessive debt, with private equity and venture capital-backed companies being particularly affected. High interest rates hit the US corporate landscape last year, with bankruptcies reaching their highest level since the financial crisis.
-The Securities and Exchange Commission (SEC) has reversed guidance known as SAB 121, which had called for institutions to treat digital tokens held for customers as liabilities on balance sheets. This move is one of the first pro-crypto moves of Donald Trump's second presidency, as it suggests a more welcoming approach towards the digital asset sector. Mainstream groups are taking more serious interest in crypto assets and technologies, with BlackRock chief Larry Fink calling on the SEC to "rapidly approve" the ability of companies to create tokens backed by stocks and bonds. Trump's executive order outlines his priorities regarding cryptocurrencies and calls for cabinet-level officials to report back with recommendations for regulatory and legislative proposals.
-US private equity executive Steve Schwarzman is acquiring paintings by 18th-century society portrait artists Joshua Reynolds and Thomas Gainsborough at record prices. Schwarzman, who was awarded an honorary knighthood by the UK government, is restoring Conholt Park, a 17th-century estate in Wiltshire. He is building a collection of masterpieces by making private offers to owners through dealers.
-Chinese AI lab DeepSeek, founded by Liang Wenfeng, has released its R1 model, revealing the technical recipe for its cutting-edge model. The model enables a large language model to learn and improve without human supervision. This has turned Liang into a national hero, defying US attempts to stop China's high-tech ambitions. US companies like OpenAI and Google DeepMind have pioneered reasoning models, a field of AI research aiming to match human cognitive capabilities. The release of DeepSeek's R1 model has sparked debates in Silicon Valley about whether better resourced US AI companies can defend their technical edge.
-Target will no longer practice diversity, equity, and inclusion (DEI) initiatives, becoming the first major US Company to do so since President Trump took office. The retailer will stop publicly sharing DEI goals and conclude career-building programs for Black employees in 2025. This follows a trend of US companies like Meta, Walmart, and McDonald's retreating from work on racial and gender equity amid pressure from Trump and other conservatives. Target aims to drive growth and stay in line with the evolving external landscape.
-BHP has lost interest in its bid for Anglo American due to the rise in the latter’s share price, making the deal too expensive for the Australian group. Anglo's share price has risen 40% over the past 12 months, while BHP's has fallen 17% due to lower iron ore prices and a weak Chinese real estate market. Anglo's ambitious restructuring plan would create a smaller company with a more focused revenue structure, with 54% of its revenues from copper and the rest from iron ore. The Australian group believes the Anglo’s shares are too expensive to justify a fresh bid in the near term.

NEW YORK TIMES
-Hamas has freed four female Israeli soldiers held hostage in Gaza, marking a significant step in the ongoing conflict. The release comes as part of a six-week cease-fire deal between Israel and Hamas. The Israeli military confirmed the women's return to Israel, where they will be reunited with their families. The deal is seen as a crucial test of the 42-day cease-fire between the two sides, with mediators hoping it will establish a permanent end to the war. The four women were abducted from a military base near Gaza during the Hamas-led attack on October 7, 2023.
-Israeli Army lookouts watched over Hamas in Gaza, but Hamas was also watching them. Four women released by Hamas after 15 months in captivity are "spotters" for the army stationed at a military base near the border. On October 7, 2023, gunmen attacked the base, killing dozens of soldiers, including 15 spotters. The gunmen also drove seven unarmed female conscripts into Gaza, some of whom were wounded. One of the injured was rescued three weeks later, while another was injured in an Israeli airstrike and killed by militants in Gaza's Shifa hospital.
-The Senate has confirmed Pete Hegseth as defense secretary after a battle with Democrats who deemed him unqualified and unfit to manage the US's 1.3M active duty troops and the Pentagon's $850B budget. The vote, 51 to 50, was the smallest margin for a defense secretary's confirmation since 1947. Hegseth, a military veteran and former Fox News host, has vowed to bring his "warrior" ethos to the Defense Department, which he believes has been weakened by "woke" generals and diversity programs. Republican leaders embraced his confirmation, stating that "peace through strength is back under President Trump and Pete Hegseth."
-President Trump has dismissed 17 inspectors general – they monitor federal agencies - marking a week of significant changes in the federal bureaucracy. The move, which did not affect Michael E. Horowitz, the inspector general for the Justice Department, is believed to have affected inspectors general at several major agencies. Critics argue that the firings threaten the independence of these internal watchdogs and could lead to widespread corruption. Senator Elizabeth Warren, a Democrat, has expressed concern that Trump is dismantling checks on his power and paving the way for widespread corruption.
-Trump's promotion of a speculative digital coin, known as $Trump, has left some crypto investors feeling blindsided and others seeing it as a gimmick that undermines the industry's credibility. The surprise announcement of Trump's cryptocurrency launch came on social media while many crypto executives were attending a pre-inaugural ball. The crypto millionaires and billionaires were caught off guard by the surprise disclosure, which raised fresh ethics and legal concerns about how Trump continues to cash in on his power and fame by marketing a digital asset in an inherently volatile and speculative market to millions of his followers. The announcement has raised fresh ethical and legal concerns about the way Trump continues to cash in on his power and fame.
-President Trump visited disaster zones in North Carolina and California, sparring with Democrats over recovery efforts. He called the Federal Emergency Management Agency a disappointment and promised government help without conditions. Trump embraced supporters in hurricane-ravaged North Carolina and pledged to provide support for recovery and rebuilding. He also pledged to help fire-stricken California, which he lost in the November election, but initially wanted to impose voter identification laws and change its environmental policies.
-Workers from Haiti and Venezuela, who have recently arrived in the US, have been working at Amazon, Toyota, Honda, hotels, restaurants, and assisted-living facilities. However, they have been informed by the Trump administration that they could be detained and deported. A memo by the acting secretary of Homeland Security instructs immigration agents to expedite the deportation of immigrants who have been admitted under certain programs created by the Biden administration. Many of these immigrants have protected status for another year or two. The memo leaves it unclear who could be deported, but some workers, like Haitian migrant Frantzdy Jerome, are concerned about their safety.
-The Department of Homeland Security has ordered a pause for several temporary immigration programs, including a key initiative for Ukrainians. The directive requires an immediate end to "final decisions" on applications related to these programs while the administration reviews and decides whether to terminate them. The pause will block the entrance of immigrants from unstable and desperate places, including Ukraine, Cuba, Haiti, and Venezuela. The decision indicates the Trump administration's plans to conduct an extensive crackdown on these programs.
- Guatemala City has seen two military jets carrying deported migrants from Tucson and El Paso. The US has authorized the military to assist in securing the border, following the Trump administration's executive order. The acting secretary of defense, Robert Salesses, announced that the Department of Defense would provide military airplanes to support the deportation flights of over 5,000 illegal aliens from San Diego and El Paso. The US Embassy in Guatemala cannot confirm the number of military jets expected to transport deportees or the timeline.
-China is experiencing public anger over the quality of domestically produced drugs, with some doctors and hospital leaders accusing domestic drugmakers of fraud. This scrutiny is a rebuke of Beijing's campaign to lower medical costs, which has been successful in driving down drug prices. The policy, which encourages fierce competition between drug manufacturers, has been largely absent from the government list of medicines covered under China's national health insurance and offered at public hospitals. The outburst of scrutiny is unusual in a country where authorities keep a tight grip on public criticism of the government.

NEW YORK POST
-Mexico blocked a plane carrying illegal migrants from entering the country after President Trump increased border security and ordered mass raids and deportations. The deportation flight was blocked from leaving the US after two Air Force C-17 flights successfully took off, carrying around 80 deportees to Guatemala. Tensions between Trump and Mexican President Claudia Sheinbaum have flared since Trump threatened to impose 25% tariffs on Mexican goods in response to migrants illegally crossing the border. The flight rejection was attributed to confusion over the Department of Defense flight manifest.
-Meta has activated an urgent status to address a problem where its AI chatbots on Facebook, Instagram, and WhatsApp continue to tell users that the US president is Joe Biden, despite Donald Trump's inauguration on Monday. Meta's chatbots initially told users that the current president is Joe Biden, but according to the most recent information, Donald Trump was sworn in as the president on January 20, 2025. Meta launched an emergency procedure called a "site event" to troubleshoot major problems. Meta spokespersons stated that they will continue to improve their features. The Post tested three AI chatbots on Friday, asking "Who is the current president?"

The Information : Crypto’s Glory Days Hide An Uncomfortable Reality

Crypto’s Glory Days Hide An Uncomfortable Reality

The most powerful and well-connected people in crypto seem to think they’ve entered a period of enormous prosperity, if the industry’s inaugural balls are any measure.

That prosperity may continue for some time into the future. But I think a little sober-mindedness now might prevent a helluva hangover later on.

Whenever I’ve spoken to someone in crypto lately, they do their best to keep the conversation focused on the market’s boring bits—stablecoins and so forth—in an effort to highlight parts of crypto that are practical, not flashy. (Our Yueqi Yang heard much the same when she wrote a Weekend Big Read last month on the current state of crypto.) They also really like to talk up Donald Trump, and they think his presidency will be great for them. I’m not so convinced.

Trump has signaled to crypto that his administration will take a very light touch to regulation, and he himself, of course, launched a Trump-branded memecoin shortly before taking office that has ballooned his net worth. He’s gotten richer by embracing the lack of rules, which could encourage others in crypto to do the same.

Crypto has gone to some substantial effort to rebrand itself as a safe asset class, but by encouraging an everything-goes attitude, Trump could drive people out of the market who don’t have the stomach for topsy-turviness—or at least it could make them far less likely to hop in. And isn’t that what crypto is hoping to do—encourage more investors to enter?

Since Trump is unlikely to get tough, crypto may need to do what no industry ever wants to do: practice some unpleasant self-policing. If the stablecoin set really does want to win over more investors, it may need to do things like actively—and frequently—speak out against investing in junk such as memecoins, and keep such speculative stuff off trading platforms and exchanges. It could mean losing some business among crypto die-hards in a bid to appeal to a broader market.

I think there’s a political imperative, too. Let’s say crypto parties hard for the next four years, and anything and everything goes. What will happen if a Democrat takes back the White House? That president’s desire to press down hard on a Trump plaything could make the Biden administration’s ham-fisted approach to crypto look enlightened by comparison.

TechCrunch : Stargate will use solar and batteries to power $100B AI venture

Stargate will use solar and batteries to power $100B AI venture

The massive $100 billion Stargate joint venture will reportedly be powered, at least in part, by solar and batteries.

The renewable power installations will be built by SoftBank-backed SB Energy, according to a report from Bloomberg, though they’re unlikely to be the venture’s sole source of energy. Stargate is a partnership between OpenAI, Oracle, and SoftBank Group, which promises to build a slew of new data centers to drive artificial intelligence applications.

The growth in cloud computing and AI in recent years has sent developers and tech companies scurrying to secure power. The U.S. Department of Energy expects that data centers could consume as much as 12% of all power produced in the U.S. by 2028, up from 4.4% in 2023. The looming crunch could leave 50% of new data centers underpowered by 2027.

Nuclear power has emerged as a darling of data center developers and tech companies. Google signed a 500-megawatt deal with nuclear startup Kairos, and Microsoft is restarting one of the shuttered reactors at Three Mile Island. Data center operator Switch announced an agreement in December with Oklo, the Sam Altman-backed small modular reactor company, for 12 gigawatts of capacity.

But nuclear’s recent history has been beset by cost overruns and delays. The fresh crop of nuclear startups were largely founded to overcome those hurdles by modularizing and mass-producing reactor components. If all goes as planned, the approach could speed approvals and construction of new nuclear plants.

But despite progress, none of the startups has yet to complete a reactor, and the first of their commercial reactors aren’t expected to come online until 2030, doing little to ease the near-term energy shortage. Natural gas power plants, another possible source for data centers, will also take years to build.

Solar and wind farms are much quicker to stand up. Compared with nuclear and natural gas plants, they can be completed in about half the time, according to one study of 50 years’ worth of power plant projects. More recent estimates suggest that the average time to completion for a solar power plant is around 18 months. Because of their inherent modularity, they can start producing power before the bulk of the project is complete.

The longest part of any solar project is permitting and interconnection, when the facility is connected to the grid. For data centers, grid connections can be optional — many could take power directly from the source. And given the apparent urgency of Stargate, it’s possible that permitting could be sped along, too, leaving solar as the likely frontrunner for the first data centers.