TheChek News Flow

At this point, the test network for the Norwegian CBDC uses not the public Ethereum ecosystem, but a private version of the enterprise blockchain Hyperledger Besu.

The small Nordic country of Norway may not be particularly notable on the global crypto map. With its 22 blockchain solution providers, the nation doesn’t stand out even at the regional level.

However, as the race to test and implement central bank digital currencies (CBDCs) accelerates every day, the Scandinavian nation is taking an active stance on its own national digital currency. In fact, it was among the first countries to begin the work on a CBDC back in 2016.

Dropping cash

In recent years, amid a rise in cashless payment methods and concern over cash-enabled illicit transactions, some Norwegian banks have moved to remove cash options altogether.

In 2016, Trond Bentestuen, then an executive at major Norwegian bank DNB, proposed to stop using cash as a means of payment in the country:

“Today, there is approximately 50 billion kroner in circulation and [the country’s central bank] Norges Bank can only account for 40 percent of its use. That means that 60 percent of money usage is outside of any control.”

A year before that, another large Norwegian bank, Nordea, also refused to accept cash, leaving only one branch in Oslo Central Station to continue handling cash.

This sentiment came in parallel with Bitcoin

BTC

tickers down

$22,778

enthusiasm, as DNB enabled its customers to buy BTC via its mobile app, local courts demanded that convicted drug dealers pay their fines in crypto, and local newspapers widely discussed investments in digital assets.

Recent: Bitcoin mining in a university dorm: A cooler BTC story

Last year Torbjørn Hægeland, executive director for financial stability at Norway’s central bank, Norges Bank, outlined to the project’s goal of replacing cash use in the country:

"With this background, the decline in cash use and other structural changes in the payment system are key drivers for the project."

The experimental phase of the Norwegian CBDC will last until June 2023 and end with recommendations from the central bank on whether the implementation of a prototype is necessary.

Ethereum is the key

In September 2022, Norges Bank released the open-source code for the Ethereum-backed digital currency sandbox. Available on GitHub, the sandbox is designed to offer an interface for interacting with the test network, enabling functions like minting, burning and transferring ERC-20 tokens.

However, the second part of the source code, announced to go public by mid-September, has yet to be revealed. As specified in a blog post, the initial use of open-source code was not a “signal that the technology will be based on open-source code,” but a “good starting point for learning as much as possible in collaboration with developers and alliance partners.”

Earlier, the bank revealed its principal partner in building the infrastructure for the project — Nahmii, a Norway-based developer of a layer-2 scaling solution for Ethereum of the same name. The company has been working on this scaling technology for Ethereum for several years and has its own network and tokens. At this point, the test network for the Norwegian CBDC uses not the public Ethereum ecosystem, but a private version of the enterprise blockchain Hyperledger Besu.

In late 2022, Norway became part of Project Icebreaker, a joint exploration with the central banks of Israel, Norway and Sweden on how CBDCs can be used for cross-border payments. Within its framework, the three central banks will connect their domestic proof-of-concept CBDC systems. The final report for the project is scheduled for the first quarter of 2023.

Local specifics, universal problems

In terms of hopes and fears, what defines the Norwegian CBDC project among others is the national regulatory context. Like its geographical neighbors, Norway is known for its cautious approach to the digital assets market, with high taxes and the relatively small scale of its domestic crypto ecosystem — a recent study by EU Blockchain Observatory estimated its total equity funding at a modest $26.9 million.

Norwegian serial entrepreneur Sander Andersen, who has recently moved his fintech company to Switzerland, doubts that the upcoming project will co-exist peacefully with the crypto industry. There are already more than enough problems for tech entrepreneurs in the country, he said in a chat with Cointelegraph:

“Despite the country's strong infrastructure for entrepreneurs in other industries, such as low energy costs and free education, these benefits do not extend to the digital realm. The tax burden faced by digital companies makes it nearly impossible to compete with businesses based in more business-friendly jurisdictions.”

As central bank digital currencies have the potential to compete with private cryptocurrencies, and the goal of any government is to control financial transactions as tightly as possible, Andersen doesn’t see Norway among the exceptions:

“The Norwegian central bank's CBDC project can also pose a threat to the legal status of private stablecoins in the country. The introduction of a CBDC may prompt increased regulation and oversight of private stablecoins, making it harder for these companies to operate.”

Speaking to Cointelegraph, Michael Lewellen, head of solutions architecture at OpenZeppelin, a company contributing its contracts library to the Norges Bank project, doesn’t sound so pessimistic. From a technical perspective, he emphasized, there is nothing stopping private stablecoins from trading and operating alongside CBDCs on both public and private Ethereum networks, especially if they use common, compatible token standards such as ERC-20.

However, from a policy perspective, there’s nothing that can stop central banks from performing financial gatekeeping and enforcing the Know Your Customer (KYC) standards, and this is where the CBDC looks like a natural development. Banks will not sit idly by as the blockchain ecosystem grows, as there is a lot of shadow-banking activity happening on-chain, Lewellen specified, adding:

“CBDCs offer central banks the ability to better perform gatekeeping and enforce KYC rules on CBDC holders, whereas enforcing the same standards against entities using non-governmental stablecoins is far more challenging.”

Recent: Ava Labs and Amazon’s partnership could ‘expand the pie’ for blockchain

Could Norway’s CBDC offer anything reassuring in terms of users’ privacy? It’s hardly possible from both technological and strategic points of view, Lewellen said. Today, a mature solution doesn’t exist that would allow privacy in a compliant manner regarding the use of CBDCs.

Any national digital currency would almost certainly require every address to be linked to an identity, using KYC and other means we see in banks today. In fact, if done on the private ledger, like the one that Norges Bank is testing right now, the CBDC will offer not only less privacy for a single customer, but at the same time less public transparency with regard to blockchains.

Since December, LVMH has announced new CEOs for Louis Vuitton, Dior and the family holding company that controls the world’s largest luxury conglomerate itself. It has installed a mix of next-generation Arnaults and industry veterans in key roles. And there may be more change to come, as some of the group’s most trusted managers approach retirement.

The market took this month’s reshuffle in stride. Last week, shares hit a record high.

It’s not hard to see why investors are confident in LVMH’s future. On Thursday, LVMH will report its 2022 results. While it typically doesn’t break out individual brands’ sales, the group’s financials should give analysts confidence to declare LVMH flagship Louis Vuitton luxury’s first brand to record €20 billion in annual sales (HSBC and others have previously estimated 2022 sales crossed that threshold). A looming recession, China’s Covid outbreak and the lack of a permanent menswear designer don’t seem to have hurt the brand much at all (though it’s worth keeping in mind that LVMH shares also started last year at an all-time high, only to tumble amid doubts about whether wealthy consumers would keep up their pandemic-era spending).

For now at least, the challenges facing new Louis Vuitton CEO Pietro Beccari are mainly about how to grow a brand that’s already operating at an unprecedented scale. As BoF’s Robert Williams wrote shortly after his appointment, “shock and awe” marketing tactics helped get Vuitton where it is today, but it’s no longer the only brand staging large-scale travelling shows or tapping renowned artists to create installations for its stores. A €20 billion brand can’t be niche, but going too broad carries risks of its own.

For the first time since the pandemic, LVMH executives will meet financial analysts in person after releasing their earnings. The event has typically served as a forum for Bernard Arnault to articulate his vision for the group in the coming year. If he speaks he’ll have plenty of past accomplishments to brag about, but we’ll be more interested in hearing about what’s coming next.

Lunar New Year begins

Modefabriek trade show in Amsterdam

Sacai, Maison Margiela and others close out Paris Fashion Week, Men’s

Couture Week begins in Paris: Schiaparelli, Iris Van Herpen, Dior, Giambattista Valli are among the day one highlights

Eurozone consumer confidence data released

Swiss watch exports for December released

Chanel, Ronald Van Der Kemp, Alexandre Vaulthier, Giorgio Armani show couture

Texworld trade show begins in NYC

Levi’s, Zegna report results

Jean Paul Gaultier, Valentino couture shows

LVMH reports fourth-quarter and full-year results

Mugler, Robert Wun, Fendi couture shows

H&M reports results

Today marks the start of the Lunar New Year of the Rabbit. As the Chinese holiday season kicks off, luxury shoppers are expected to rush back to luxury stores with the same speed as the lop-eared animal they are fêting. After three years of lockdowns and repeated restrictions on personal freedoms and movements, they are eager to travel again and spend money.

That’s the expectation of a dozen investors, store managers and luxury goods executives who spoke to Miss Tweed in the past week. Since China announced in December it was putting an end to its zero-Covid policy and re-opened its borders on Jan. 8, luxury shares have rallied. LVMH stock reached an all-time high this week. The giant that owns Louis Vuitton, Dior and more than 75 other brands became the first European company in history to be valued at more than €400 billion. It is now the 12th most valuable company in the world, according to Bloomberg. LVMH CEO Bernard Arnault, who owns just under 50 percent of the company, is now the world’s richest man. However, Arnault’s elevation has also been aided by the wealth tumble taken by Elon Musk, the former world’s richest man, as a result of his takeover debacle at Twitter.

But the long Covid lockdown in China has meant that while the luxury goods industry is hopping with anticipation about the expected surge in spending, there will be obstacles to overcome for Chinese luxury shopping to return to its 2019 levels. From curtailed airline travel to a lack of Mandarin speaking sales staff in luxury boutiques, the road to Chinese luxury sales recovery will be a bumpy one.

“It’s going to take us at least a year to be completely up and running vis à vis the Chinese clientele,” the CEO of one of the biggest luxury brands told Miss Tweed on condition of anonymity.

Still, the new year of the Rabbit is expected to serve as a starting gun for luxury sales in a way it has not done since before the pandemic.

Jonathan Siboni, CEO of the luxury data analysis firm Luxurynsight, said that his firm’s data shows business in China has already picked up for many luxury brands since the beginning of the year. Next week is when the rush should start as the Chinese are on holiday. “I think business for luxury brands in China is going to be very brisk over the next few weeks,” Siboni said. Those Chinese coming to Europe this month have been mainly professionals with easier access to visas, like wholesale dealers buying products for department stores and online retailers in China, he said.

What is certain is that, as was increasingly clear before the pandemic, the winners in the race to bring Chinese shoppers back into stores are likely to be the biggest brands with the strongest financial firepower. At the summit sits LVMH. When LVMH publishes annual results next week, analysts expect weaker sales growth than earlier in the year, but the group should cheer up investors with upbeat comments about business in China gaining momentum.

Having a store network in China has again become crucial. Many Chinese over the holidays are expected to travel domestically to see family and friends. Only a minority intend to leave the country during the festive period, China-based English-speaking media have reported. Louis Vuitton has 50 shops in mainland China and around 7 in Hong Kong.

Less than one million passports in China were issued in 2022 compared to dozens of millions pre-Covid, according to official statistics. Chinese authorities have warned those who wished to leave the country that if they did, members of their family who stayed behind could get into trouble. Chinese officials are not allowing entire families out of the country. They want to make sure they come back, local sources have said.

“It’s like the Berlin Wall that has just opened for the Chinese,” explains David Baverez, a China columnist for several media such as France’s L’Opinion. “China will open internationally but those trying to leave will have strings attached.” Baverez expects China’s regime to harden in the coming months. “The Chinese do not like seeing capital leaving and not coming back,” he said.

Regardless of whether their store network is ready for Chinese visitors, luxury brands have been seeking to wet their appetite by printing rabbits on every type of product to mark the new year. Mulberry is selling handbags with prints of Miffy the Rabbit on them. Hugo Boss sweaters feature Bugs Bunny. Versace sells T-shirts with its own character Biggie Bunny.

The importance of Chinese shoppers remains crucial for brands. The dependence of Richemont on China became evident again this week when the group that owns Cartier and Van Cleef & Arpels blamed the country’s zero-Covid policy and store closures for weaker-than-expected sales for the three months to Dec. 31. “The impact from China is massive, but we see it as temporary,” said Jean-Philippe Bertschy, luxury goods analyst at Swiss brokerage Vontobel. “The catch-up from Chinese consumers will come as strong as sales decelerated in the (fiscal) third quarter, as they were able to save money during the lockdowns.” Richemont’s investor relations office told analysts: “Following the peak of the massive Covid wave in the major cities in China, stores have reopened, traffic has come back and we are experiencing a strong retail rebound pre-Chinese New Year.”

Burberry, which also published a trading update last week, said it had seen a drop in traffic in stores in China in December, but those recovered in January. “We've had more Chinese consumers that are moving into Hong Kong, and also Macao is showing very good signs, very good green shoots,” Burberry CEO Jonathan Akeroyd said in a conference call with analysts. “These tend to be the first areas that will improve. Hainan is another one. And then, it usually goes into the rest of Asia, and then it goes into Europe.”

Gucci owner Kering publishes its annual results on Feb. 15. As well as anticipation over its China outlook, there’s also high expectation about whether the French group will name a replacement for Gucci’s star designer Alessandro Michele who abruptly departed end-November. Investors expect a new design-led renaissance at the brand could be another attraction for Chinese shoppers as they make their way back to European stores.

In the 1990s, the Japanese were luxury brands’ biggest customers. Twenty years later, they were outnumbered by Chinese nouveaux riches eager to show off their wealth and success. Before the pandemic, luxury brands constantly tracked and analyzed Chinese tourists’ whereabouts and travel patterns. With the country’s re-opening, those studies will resume.

Many store managers and industry experts contacted by Miss Tweed do not expect Chinese shoppers to arrive in Europe or the United States before the early spring due to airline capacity constraints and waiting times for visas and passport renewals. Luxury boutiques in Milan, Paris or London may have to wait until the summer to see a strong inflow of Chinese tourists, those people told Miss Tweed. Global air traffic will take up to a year to come back to its 2019 levels and for China, international traffic will lag the busy domestic market as airlines gradually restore service, say airline industry analysts.

The airline industry has been shattered by the pandemic. Even if there is demand and the airlines want to expand capacity quickly, they cannot because there are not enough planes. Too many have been grounded and now the industry is struggling to get them to fly again and source all the spare parts they need due to supply chain disruptions. China ending its zero-Covid policy from one day to the next has taken the industry by surprise, airline industry experts say.

Luxury industry analysts forecast that after travelling within China, the next stop for Chinese shoppers will be places like Hong Kong, Macau and South Korea. Dior and Louis Vuitton have been pulling all the stops in China and South Korea. Dior this week replicated the Avenue Montaigne flagship in ice in the upmarket resort at Lake Songhua Seibu Prince Hotel in in Jilin province, China, not far from Harbin and Vladivostok. Dior did its first show in South Korea last year and opened a new concept store in the capital where it has built a futuristic-looking flagship.

Japan is also high on Chinese shoppers’ wish-list as the weak yen has made luxury goods cheaper than at home. Louis Vuitton has been rolling out an impressive worldwide campaign with Japanese artist Yayoi Kusama, decorating entire buildings with her work in many big cities. Doubtful of the efficiency of the home-made vaccine, affluent Chinese are also traveling to Thailand where they can get a Pfizer shot for $400. The first Chinese tourists back to Bangkok this month were greeted with flowers and welcome packages in front of government ministers, international media reported.

This week in Europe, in spite of the cold wave, there were many tourists queuing in front of luxury shops. Only a handful spoke Mandarin.

“I think the Chinese consumer will not come back to Europe in droves but in small numbers,” said Antoinette Lemens, founder and head of the head-hunting and retail specialist firm Lemensearch. “However, department stores and flagships should get ready for their return.”

Paris department store Galeries Lafayette, who did great business with Chinese shoppers before the pandemic, said it was too early to get prepared for their return. Meanwhile rival Printemps said they were not planning anything specific to welcome more Chinese customers. London-based Selfridges declined to comment.

Managers of luxury boutiques are starting 2023 in a relatively serene state of mind, having enjoyed a bumper year in 2022. They worked well with the local clientele and with U.S. and Middle Eastern tourists. But this aloofness may play against them as they need to prepare for the inflow of Chinese shoppers. Many boutiques in the West have lost their Mandarin-speaking staff during the pandemic. It will take them months to recruit new ones.

Bulgari is one of the few luxury brands that does not force customers to wait outside in a line. The brand’s flagships are spacious enough to welcome many guests. “Making someone wait outside in the cold is not really providing a luxury service,” said Jacopo Facchetti, manager of Bulgari’s Rome flagship housed in an 18th century building in the heart of the Italian capital. “If you have the space, it’s so much better to invite customers to come in, especially when we have a museum inside like in Via Condotti.”

Facchetti is of many luxury store managers who have adopted a “wait-and-see” attitude regarding the return of the Chinese. “We are not planning on making any major organizational changes,” Facchetti said. “For the moment, the reality is that Chinese customers are not back yet, partly due to lack of air connections. But if traffic comes back to 2019 levels, then of course we will need to recruit more sales advisers.” He said the boutique was hosting an event for Chinese customers on Friday and Saturday in honor of the New Year. Despite the absence of Chinese customers since 2020, Facchetti said his boutique had managed to roughly double sales last year thanks primarily to local customers and more recently foreign shoppers from America and the Middle East.

Nicolas Rebet, head of the consultancy Retailoscope specialized in luxury retail and customer experience in-store, just came back to Paris from a week in New York. He said he did not see many Chinese shoppers there either. As in Paris, London or Milan, the only ones to be seen are mainly local Chinese.

DON’T FORGET LOCALS

However, once Chinese tourists do return to Western shopping meccas, Rebet said luxury brands would be well advised not to forget their local clients who supported their business in the past three years. If they do, they will regret it as foreign customers come and go. And for sales assistants, tuning back into the specific needs of the Chinese clientele is not going to be that easy. “Chinese customers are known for being quite transactional in their approach. They do not have much time. Therefore, product availability will be key.”

Jonathan Siboni from Luxurynsight, believes there is a lot of room for improvement in the way luxury brands welcome Chinese tourists. There are many things they can do,” he said. “Simple things like offering them a cup of warm water as they enter and giving them a Wifi code so they can connect on WeChat and check what products they want.” Many flights from Asia arrive in cities like Paris, Milan or London early in the morning, Siboni remarked. But most luxury shops do not open before 10:30. If they welcomed Chinese shoppers an hour earlier, they would do solid business during that one extra hour, he argues.

With the Chinese consumer so crucial to the luxury industry, an earlier wake up seems worth it.

‘Why would I invest in a basket of dinosaurs?’ one die-hard says of other big U.S. stocks

After a brutal year for technology stocks, individual investors have lost their appetite for buying the dip, with one notable exception. They are still scooping up shares of Tesla Inc. TSLA 4.91%

Individual investors’ net purchases of a basket of eight popular tech stocks hit a recent peak in November, before dropping sharply through the end of the year, according to Vanda Research. Buying has since picked up slightly in the new year as tech shares rebound.

As for Tesla, individuals have been steady buyers since the end of 2021, doubling down when the stock tumbled to close out 2022. They have spent more money on Tesla shares in the past six months than in the five years prior, Vanda found. And on Jan. 10, one-day net purchases of Tesla shares hit a record high of $316 million.

“As markets took a big hit, we saw retail investors shift into their favorite tech stock rather than investing across the whole sector,” Vanda analyst Lucas Mantle said of Tesla. “It might be the last shoe to drop.”

The Federal Reserve’s fight to tame inflation through aggressive interest-rate increases last year abruptly changed the outlook for big tech stocks, which for years had lifted the major stock indexes to new highs. Investors were forced to reassess the pros and cons of investing in companies whose appeal centered on the prospect of huge profits years down the line.

Tesla shares dropped 65% in 2022, their worst year on record. Facebook parent Meta Platforms Inc. sank 64%, and Netflix Inc. declined 51%. But tech and other growth stocks have rebounded to start the new year, buoyed by hopes that the Fed will slow its pace of rate increases. The S&P 500 has edged up 3.2% in January.

In the coming week, investors are awaiting quarterly earnings reports from Tesla, along with Microsoft Corp. , Intel Corp. and other big companies for the latest updates on how they are weathering tough economic conditions. They will also parse the Fed’s preferred gauge of inflation for clues about the trajectory of monetary policy.

Even as skeptics cite concerns about production disruptions, demand worries and Chief Executive Elon Musk’s divided attention after his acquisition of Twitter Inc., Tesla’s most ardent supporters keep their faith in a long-term payout.

Abhas Gupta, a 41-year-old entrepreneur in Irvine, Calif., said he moved his whole equity portfolio into Tesla shares in 2018, enamored by its electric cars and promise of disruptive innovation. Last year, he lost his entire seven-figure retirement fund after taking out margin loans and using options to turbocharge his bets on Tesla, he said. Still, he said he is far from calling it quits.

“I basically burned a lifetime’s worth of wealth, but none of this has shaken my confidence in the company. There is just no company even remotely close to Tesla on innovation,” Mr. Gupta said.

“Why would I invest in a basket of dinosaurs?” he said of the S&P 500.

Mr. Gupta said he is aggressively buying long-dated call options on Tesla. Call options give traders the right, though not the obligation, to buy shares at a stated price by a certain date, while put options grant the right to sell.

Overall, options volume in Tesla has grown in the past few months, according to Cboe Global Markets. One of the largest options bets on Tesla is that shares will reach $825 in the next three years; the stock closed at $133.42 per share Friday.

Gabriel Wilson, a 52-year-old physician who splits his time between Texas and New York, said the Fed remains his primary concern in the market. After first leasing Tesla’s Model X in 2018, he said he moved all of his investments into Tesla. Although he cashed out his holdings around the end of 2021 due to concerns about near-term market weakness, he is looking to buy Tesla shares again soon, he said.

Despite last year’s market turmoil, he hasn’t touched a roughly $100,000 trust fund for his son held solely in Tesla shares, he said.

“No one can compete with Tesla,” Dr. Wilson said. “I have absolutely no doubt Tesla is the future.”

Many professional investors remain cautious on tech stocks to start the new year. Fund managers rotated out of technology stocks in January and are more underweight the sector than their historical positioning, according to Bank of America Corp.’s latest global fund manager survey.

But some individuals are betting that tech could reign supreme again if the Fed signals plans to pivot from raising interest rates. Federal-funds futures, used to wager on the course of interest rates, show traders expect the central bank to cut rates later this year, even though Fed officials have repeatedly said their work to cool the economy isn’t done.

Nicki Bourlioufas, 51, said she bought shares of Advanced Micro Devices Inc. and Nvidia Corp. last year, then refrained from adding new positions as those semiconductor stocks struggled. The financial public-relations consultant in Sydney said she is looking for opportunities to pick up shares of Tesla, along with Microsoft, Apple Inc. and Alphabet Inc.

“As soon as there’s any hint that interest rates will be cut, then I expect tech stocks will rally and I’d like to be there and positioned,” she said. “I use their products and I’d like to also reap their profits.”

The rule takes effects February 21, 2023 and equips the nation with a new clean power source to help drive down emissions across the country.

The design is an advanced light-water SMR with each power module capable of generating 50 megawatts of emissions-free electricity.

NuScale’s VOYGR™ SMR power plant can house up to 12 factory-built power modules that are about a third of the size of a large-scale reactor. Each power module leverages natural processes, such as convection and gravity, to passively cool the reactor without additional water, power, or even operator action.

Signature and Silvergate turn to government-chartered lenders after customer withdrawals surge

Two of the biggest banks to cryptocurrency companies are rushing to stem a flood of customer withdrawals by borrowing billions of dollars from Federal Home Loan Banks, the system originally designed to support mortgage lending in the 1930s.

Signature Bank SBNY 7.47% tapped its local home-loan bank for nearly $10 billion in the fourth quarter, among the largest such borrowings by any bank since early 2020, according to securities filings. Silvergate Capital Corp. SI 13.00% , a competing lender that shifted its business toward crypto a decade ago, received at least $3.6 billion.

The borrowings at Signature—a commercial bank mostly known for multifamily real-estate lending before hitching onto the crypto craze—are more than double its previous highest sum in several years. Silvergate, meanwhile, didn’t have any home-loan bank borrowings a year earlier.

The $1.1 trillion home-loan bank system provides low-cost funding to its more than 6,500 members, which include commercial lenders, thrifts, credit unions and insurers. Comprising 11 government-chartered cooperatives, Federal Home Loan Banks, also known as FHLBs, were founded to help support housing finance during the Great Depression. Now they funnel cash into the banking system, using their implicit government backing to borrow money cheaply.

Although helping banks shore up liquidity is part of the mission of FHLBs, some observers say backstopping the crypto industry’s fallout is far removed from the original intent.

“This is why I’ve been warning of the dangers of allowing crypto to become intertwined with the banking system,” said Sen. Elizabeth Warren (D., Mass.). “Under no circumstance should taxpayers be left holding the bag for collapses in the crypto industry—a market brimming with fraud, money laundering and illicit finance.”

The banks began hemorrhaging deposits last year when crypto prices collapsed and FTX, one of the industry’s largest exchanges, filed for bankruptcy. The two were among a small subset of banks that vacuumed up deposits from crypto companies when the industry was booming and many other banks shunned their business.

Deposits declined at Signature in 2022 for the first time in its two-decade history, dropping below $89 billion from nearly $103 billion at the start of the year. Silvergate raced to cover $8.1 billion in withdrawals, selling assets at a steep discount and leading to a fourth-quarter loss of more than $1 billion. Shares of Signature and Silvergate are down around 60% and 85%, respectively, over the past year.

Eric Howell, Signature’s chief operating officer, said the bank’s higher borrowings are “pretty low historically for banks,” especially as Federal Reserve tightening has drained liquidity.

Signature has doubled down on its recent commitment to reducing crypto-linked deposits and said it has already begun paying down some of its borrowings.

“There’s still some runoff left to go in crypto,” said Mr. Howell. “For the next couple quarters, we’ll have to use higher-cost borrowings to replace deposits.”

Silvergate declined to comment. The bank has taken a different approach, emphasizing its commitment to the crypto industry despite the recent turmoil.

“This industry has experienced a significant crisis of confidence across the ecosystem because of all of the overleverage in the system and some of the bad actors and the bankruptcies,” Chief Executive Alan Lane said on a January conference call. “What we’re trying to communicate is that we are here; we are here for the long haul.”

Crypto banks aren’t the only ones in need of quick cash. Borrowing from home-loan banks surged to $661 billion in the third quarter last year, the latest period for which data are available, up from $344 billion a year earlier and approaching a recent peak of nearly $800 billion in the first quarter of 2020.

Traditional banks are struggling to retain customers who have been enticed by higher-yielding Treasurys and money-market accounts. Through the first three quarters of 2022, cash balances at small banks, or those with less than $3 billion in assets, fell to 6% of total assets, down from more than 13% just nine months earlier, according to the Federal Reserve Bank of New York.

Traditional finance has remained insulated from crypto contagion thus far, though FHLB lending to crypto-exposed banks threatens to amplify that risk. Home-loan bank advances are superior to all other debt, meaning that in the event of a member bank’s bankruptcy, an FHLB bank would be first in the collection pecking order, even ahead of the Federal Deposit Insurance Corp.

To be sure, banks receiving advances provide a generous amount of mostly mortgage-tied securities to back their debt, and FHLBs have yet to book a credit loss in their 90-year history.

Ryan Donovan, president and chief executive at the Council of Federal Home Loan Banks, said FHLBs “have been a financial first responder” during times of crisis by extending their balance sheets to members.

“You can’t have mission without margin,” Mr. Donovan said.

Still, investors said they would rather see banks attract deposits than go to a home-loan bank for cash.

“If you tapped FHLB advances in a big way, you’re going to have to explain why that was more attractive than organically going out to new or existing customers,” said Brett Rabatin, head of equity research at Hovde Group. “The pressure and need for funding will only increase—I expect bank borrowings from FHLBs will continue to grow over the coming quarters.”

Enrico Buonocore’s Italian restaurant chain, now opening in St. Moritz, is winning a well-heeled following with its minute-fresh fish and savvy partnerships.

The new ski-in, ski-out Langosteria that just opened at the foot of the slopes in St. Moritz, Switzerland, has many of the same features as the original namesake restaurant in Milan’s Design District: plush-red banquettes, robata grill, high-piled seafood towers. But there are Alpine peaks out the window. And the waitstaff navigate the 150-seat dining room and an equally expansive terrace in parka-topped uniforms custom-made by Moncler.

“It’s Langosteria, but Langosteria in the mountains,” says founder Enrico Buonocore, 46, of the Swiss outpost of his fashion-world haunt, a destination for seafood since 2007. “Our restaurants are not copy and paste, all are unique projects. The layout is the same, the gastronomic line is the same, but the restaurant is different.”

This season, the St. Moritz menu includes seafood with white-corn polenta and king crab fregola—new dishes developed for the chalet branch, specifically—along with baked potatoes served with a choice of four caviars, as part of a collaboration with Caviar Kaspia in Paris.

Justice Department’s search of president’s Wilmington residence lasted about 12 hours

WASHINGTON—A Justice Department search of President Biden’s home in Wilmington, Del., Friday prompted authorities to take possession of six additional items with classified markings and some related materials, according to Mr. Biden’s personal attorney Bob Bauer.

The search of Mr. Biden’s home, which came after his team offered Federal Bureau of Investigation agents full access to the property, lasted more than 12 hours and “covered all working, living and storage spaces in the home,” Mr. Bauer said. The six items taken included some papers from Mr. Biden’s tenure in the U.S. Senate, where he served for 36 years. Others came from his time as vice president.

During the search, which lasted from around 9:45 a.m. to around 10:30 p.m. Friday, members of Mr. Biden’s personal legal team were present along with officials from the White House Counsel’s Office, according to Mr. Bauer’s statement. Federal investigators also took materials including handwritten notes, “for further review,” Mr. Bauer said.

According to Mr. Bauer, the Justice Department had full access to the president’s home, including personally handwritten notes, files, papers, binders, memorabilia, to-do lists, schedules and reminders going back decades.

Friday’s search is at least the fifth that has turned up classified material in places used by Mr. Biden.

The first batch of papers was discovered in early November at the Penn Biden Center, a Washington think tank. Additional documents marked classified were found at Mr. Biden’s Wilmington home in December. Then, earlier this month, Mr. Biden’s lawyers revealed that another batch was found at the home.

Mr. Biden has played down the earlier instances. “I think you’re going to find there’s nothing there,” Mr. Biden said Thursday while in California to tour storm damage. “I have no regrets. I’m following what the lawyers have told me they want me to do. It’s exactly what we’re doing. There is no there there.”

A Justice Department spokesman said “the FBI executed a planned, consensual search of the president’s residence in Wilmington, Delaware,” but declined to comment further.

Agents opted to do the search before a newly appointed special counsel Robert Hur, a former Trump-appointed U.S. attorney, formally begins his work, after Attorney General Merrick Garland tapped him for the role on Jan. 12. People familiar with Mr. Hur’s plans have said he plans to begin in the coming days.

Department officials earlier considered having FBI agents monitor a search by Mr. Biden’s lawyers for classified documents at his homes but decided against it, both to avoid complicating later stages of the investigation and because Mr. Biden’s attorneys had quickly turned over a first batch and were cooperating, the Journal reported this week. Some FBI officials had discussed the possibility of going further by asking Mr. Biden’s team for consent to have agents search the property themselves, the Journal reported.

Officials didn’t immediately take those steps in part to preserve their freedom to take a tougher line as the investigation progressed, including by executing a search warrant, the Journal reported.

Instead, the two sides initially agreed that Mr. Biden’s personal attorneys would inspect the homes, notify the Justice Department as soon as they identified any other potentially classified records, and arrange for law-enforcement authorities to take them.

After Mr. Biden’s team alerted the Justice Department to the presence of classified documents at the president’s Wilmington home last week, his lawyers made the offer to the Justice Department to have them search the property in full, according to people familiar with the matter.

The actions suggest federal investigators are girding for an inquiry that could stretch well into Mr. Biden’s third year in office and overlap with his re-election campaign should he decide to seek a second term—and that Mr. Biden’s legal team wants to resolve it as quickly as possible.

“Since the beginning, the president has been committed to handling this responsibly because he takes this seriously,” Richard Sauber, the special counsel to the president, said Saturday evening.

The situation has drawn parallels with the discovery of a much larger number of documents at former President Donald Trump‘s Mar-a-Lago home in Florida, which federal agents obtained a warrant to search in August after more than a year of negotiations between Mr. Trump’s lawyers, the National Archives and the Justice Department and after Mr. Trump’s lawyers said all documents had been returned.

In the case of Mr. Biden, his personal lawyers offered FBI agents access to the home, avoiding the need for them to ask a judge to sign a warrant.

Mr. Trump’s supporters have accused the Justice Department of a double standard in treatment. Mr. Biden’s supporters have pointed to the cooperation of the president’s legal team and its swift moves to inform the Justice Department of the documents’ discovery as a key difference.

Mr. Biden was welcoming mayors at an event in the East Room of the White House as the search of his home was being conducted. He typically travels to Wilmington on weekends, but on Monday the White House said that this weekend he would be going to Rehoboth Beach, Del., where he also has a home.

Asked on Friday if the president’s travel plans were related to the documents inquiry, White House press secretary Karine Jean-Pierre said, “As it relates to his travel, as you know, he often travels to Delaware on the weekends.”

ChatGPT earned a solid grade and outperformed some humans on a Wharton course

Elon Musk has long dismissed the MBA as irrelevant or damaging, but now a company backed by the outspoken tech entrepreneur is threatening to directly undermine the value of the flagship business degree: the artificial intelligence chatbot ChatGPT.

Christian Terwiesch, a professor at the University of Pennsylvania’s Wharton, one of the oldest and most prestigious US business schools, decided to put to the test growing concerns about ChatGPT’s power, and found to his surprise that it could outperform some of the students on his operations management course, a core MBA subject.

In his white paper “Would Chat GPT3 Get a Wharton MBA?” published this week, he concluded: “Chat GPT3 would have received a B to B- grade on the exam. This has important implications for business school education,” citing the need to overhaul exam policies, curriculum design and teaching.

The chatbot, which has been temporarily overwhelmed by a surge in queries in the past few weeks, has sparked concern from many academics including those in business schools that students will use it to cheat in their essays and exams.

“I’m one of the alarmists,” said Prof Jerry Davis at the University of Michigan’s Ross Business School, which has convened a faculty meeting on Monday to discuss its implications. “Our whole enterprise in education is being challenged by this, and it’s only going to get more challenging. Time for a top-to-bottom rethink.”

Francisco Veloso, dean of Imperial College Business School in London, said: “We are having serious discussions and a working group is analysing the implications of ChatGPT and other similar tools that we know our resourceful and inventive students are using, and we will be formulating policies around that soon.”

While stressing that the growing use of AI technology was inevitable and even largely desirable, he called for clear disclosure policies in class on whether students had used ChatGPT, and predicted mitigation measures including “going back to handwritten work, as well as more oral and class — or at least synchronous — discussions.”

Microsoft, the software giant co-founded by Bill Gates, who dropped out of Harvard University without even finishing his undergraduate degree, is currently considering a $10bn investment in OpenAI, the company behind ChatGPT on top of the $1bn it laid out in 2019.

Many are predicting the technology will radically shake up a broader range of activities beyond education, including internet searches and the world of work.

Musk himself, the founder of Tesla and one of the original funders of OpenAI, has argued that MBA graduates lack sufficient critical-thinking skills and focus too much on boardroom meetings and financial performance at the expense of getting close to product and walking the factory floor.

Ironically, Terwiesch concluded that while ChatGPT proved impressively literate and analytical in drafting answers to the questions he gave it on operations management and process analysis, its numeracy skills were far more limited. He did not test it against the full MBA curriculum, which includes marketing, finance, accounting and other subjects.

“I was just overwhelmed by the beauty of the wording — concise, choice of words, structure. It was absolutely brilliant,” he told the FT. “But the math is so horrible. The language and intuition are right, but even relatively simple middle-school math it got so wrong.”

But he stressed that it could quickly improve its answers when given clues, and more broadly the technology offered considerable scope in the future including in drafting and marking tests to free teachers for more valuable student support.

He also suggested an application of ChatGPT that could threaten the many business school alumni who pursue careers as consultants churning out reports and recommendations.

Current students could hone their judgment against the chatbot’s strong performance in “playing the role of that smart consultant (who always has an elegant answer, but oftentimes is wrong),” Terwiesch’s report said.

Kara McWilliams, head of the ETS Product Innovation Labs, which applies AI to learning and assessment and has developed tools to identify AI-generated answers, said: “We really need to embrace advanced technologies in education. Remember when the calculator came into play and there was a big fear about using it? I’m of the mind that AI isn’t going to replace people, but people who use AI are going to replace people.”

She argued that ChatGPT could help faculty with lesson planning, syllabus creation and developing notes for lectures. “They will be able to get a lot of menial higher education tasks off their plates so they can focus on learning. There is a real opportunity for enhanced personalisation.”

Andrew Karolyi, dean of Cornell University’s SC Johnson College of Business, said that while many academics had been taken by surprise by ChatGPT and that codes of conduct and academic integrity statements would need to be updated, “my own hope is that professors will bring up the topic actively in their classrooms to involve the students in framing AI as a valued learning tool.”

“One thing we all know for sure is that ChatGPT is not going away,” he said. “If anything, these AI techniques will continue to get better and better. Faculty and university administrators need to invest to educate themselves.”

ChatGPT replied to the FT that it was “unlikely” to kill the MBA.

“While AI and machine learning can automate certain tasks and make them more efficient, they do not yet have the ability to fully replicate the complex decision-making and critical-thinking skills that are developed through MBA programs,” it said. “Additionally, MBA programs provide networking opportunities and access to industry professionals that cannot be replicated by technology.”