Say hello to Facebook’s cryptocurrency

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‘Facecoin’ is here

Facebook has unveiled its ambitious and hotly anticipated plan to create an alternative financial system built on a cryptocurrency named Libra, Mike Isaac and Nathaniel Popper of the NYT write.

As with Bitcoin, software developers would be able to build digital wallets and other services on top of Libra.

• Unlike Bitcoin, it would be directly backed by government currencies like the dollar or euro, so it wouldn’t fluctuate wildly in value.
• To acquire Libra digital tokens, which would be dispensed through a new Facebook subsidiary called Calibra, people would probably have to show government identification. That would make it unappealing for illegal activity.
• Initially, Libra would be used for payments — but in the future, it could be used for lending and investing. (Read more about how Libra could work.) Facebook hopes it will go live next year.
• The currency would be controlled by an independent nonprofit entity in Switzerland overseen by other companies.
• So far, Facebook has 27 partners, including Visa, Spotify, eBay and PayPal. That’s expected to rise to 100 next year. Each partner will be expected to invest at least $10 million.

“It would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies,” Mr. Isaac and Mr. Popper write. The company hopes that Libra “could become the foundation for a new financial system not controlled by today’s power brokers on Wall Street or central banks.”

But it faces plenty of skepticism “from people who question the usefulness of cryptocurrencies and others who are wary of the power already accumulated by the social media company.” One big issue: Facebook will have to overcome concerns about the data privacy of its users. (Facebook says Calibra would not be allowed to share financial customer data with other Facebook divisions.)

Expect governments to pay close attention. “Financial regulators in the United States and other countries could stop Libra before it is even released,” Mr. Isaac and Mr. Popper write, given their worries about its potential use in crime or its ability to amplify Facebook’s power. Politico has more on what that could look like.

More: Bitcoin has edged above $9,000 to a 13-month high, again outperforming more conventional asset classes.

Companies don’t want more tariffs. Tough.

Businesses, from toymakers to port officials, testify this week in seven days of hearings about the Trump administration’s plan to impose tariffs on $300 billion worth of Chinese imports. Those companies think their efforts will be largely futile, Ana Swanson of the NYT writes.

• Toymakers are worried, because 85 percent of all toys sold in the U.S. are now made in China, and the tariffs would hit just as they’re stocking up on holiday-season products. (One lobbyist, Rebecca Mond, clutching a Pikachu doll, said, “This guy is not a security threat.”)
• Mark Corrado, the president of a women’s underwear maker, testified that America no longer has enough people who can sew to make brassieres as well as they’re made in China.
• John Reinhart, the head of the Virginia Port Authority, warned that the proposed new tariffs could raise prices for the cranes that unload ships: “The cost of imposing tariffs on gantry cranes poses a significant risk to continued economic growth for the communities of Virginia and beyond.”

Several companies testified at previous tariffs hearings only to see the levies imposed anyway.

Prospects of dodging tariffs this time look shaky. President Trump is set to meet with President Xi Jinping of China at the Group of 20 gathering later this month. But White House officials say that they are unlikely to strike a deal then, and it remains unclear what would persuade Mr. Trump to back off.

More: The trade war is lowering gas prices. That’s not necessarily a good thing.

Sotheby’s now belongs to a French billionaire

The auction house has sold countless artworks, sometimes for well over $100 million. Now the 275-year-old company has sold itself for $3.7 billion — to Patrick Drahi, the French-Israeli telecom mogul.

The deal comes as Sotheby’s trails its archrival, Christie’s, which has been owned since 1998 by the French billionaire Fran?ois-Henri Pinault. Private ownership allowed Christie’s to offer financial guarantees to sellers that Sotheby’s couldn’t justify to public shareholders.

Now Sotheby’s will be owned by Mr. Drahi, who built his $9.1 billion fortune through a series of high-priced deals. His international telecom empire, Altice, has grown through acquisitions like the nearly $18 billion takeover of Cablevision. (He’s also an art collector, though not a well-known one.)

True to form, Mr. Drahi is paying a huge premium. His offer of $57 a share is 61 percent higher than Sotheby’s stock price before the deal was announced. “I think he’s bonkers to pay that,” an unnamed London art dealer told the FT.

The sale was praised by Dan Loeb, the activist hedge fund manager who gained a seat on Sotheby’s board in 2014 after arguing for big changes at the company. The billionaire (and fellow art collector) told the NYT that he was pleased “to see Sotheby’s pass into such capable hands.”

Did the Fed make a mistake?

Today is the start of a two-day Fed policy meeting, and the big question at the central bank is whether it was wrong to keep raising interest rates last year — and whether reversing course now would be another mistake, Neil Irwin of the Upshot writes.

In hindsight, raising rates looks like an error. Economic growth is slowing; wages are only tentatively creeping up; and investors appear to believe that inflation won’t be a problem anytime soon. So higher interest rates aren’t needed.

But lowering them now might be a mistake too. It might show that the Fed is too worried about short-term market movements, or give the impression that the central bank will bow to political pressure from President Trump.

The smart money is on the Fed lowering rates — but not now. Most investors think it will telegraph such a move after this week’s meeting ends, but hold off actually doing it until next month.

One thing to watch: The Fed’s dot plot, which shows individual governors’ expectations on interest rates. It will be released tomorrow.

Huawei predicts a huge hit from Trump’s attacks

The Chinese technology giant has slashed sales expectations for this year by around $25 billion as the Trump administration’s clampdown on the company takes a bite out of its business, Raymond Zhong of the NYT reports.

Annual revenue will flatline. It’s expected to come in at about $100 billion both this year and next, according to the company’s C.E.O., Ren Zhengfei. It had more than $105 billion in sales last year, and Mr. Ren had predicted that figure would reach $125 billion this year.

The damage came from aggressive policies by the Trump administration. Last month, the U.S. government cut Huawei off from the American chips, software and other parts that go into its products, saying that it represented a threat to national security.

That had a greater-than-expected impact, according to Mr. Ren. The company had stockpiled components in anticipation for this kind of situation, but it may not be enough. “It’s like we’re on a damaged airplane,” Mr. Ren said. “We only protected the heart. We only protected the fuel tank. We did not protect other, smaller parts.”

Russia’s weakening economic ties with Venezuela

In the past, President Nicolás Maduro of Venezuela often turned to Russia for support. That is looking increasingly untenable, Anatoly Kurmanaev writes for the NYT.

• “Russian state-owned companies are cutting back on the business they do with the bankrupt nation to protect their bottom line.”
• “Russian banks, grain exporters, even weapons manufacturers have all curtailed business with Venezuela.”
• “The Russian government has not filled the breach, refusing to issue Venezuela new credit lines, to commit to new investments or even to provide relief on existing debt to ease Mr. Maduro’s battle with the opposition.”

The shift shows the limits of President Vladimir Putin’s strategy of “propping up an ally and antagonizing the Trump administration.”

Revolving door 

Alibaba gave its C.F.O., Maggie Wu, responsibility for strategic investments alongside vice chairman Joe Tsai. (Analysts saw the move as preparation for Mr. Tsai’s eventual departure.)

Swedbank has ousted Robert Kitt, the C.E.O. of its Estonian branch, and Vaiko Tammevali, the unit’s C.F.O., amid an inquiry into suspected money-laundering at the outpost.

Google has named Stanley Chen, who led its operations in Taiwan, as the new head of its China operations.

The identity-software maker Okta has added Robert Dixon Jr., a former executive at Procter & Gamble and PepsiCo, to its board.

The speed read 

Deals

• UBS was excluded from the bond sale of a Chinese state-owned enterprise after one of its economists made a joke about Chinese pigs. (Business Insider)
• Collective Health, a health care start-up, has gathered $205 million in a new fund-raising round led by SoftBank’s Vision Fund. (Axios)
• Shares in MoneyGram international soared in after-hours trading after the payments company sold a stake to Ripple, a blockchain-technology provider. (Bloomberg)
• South Africa’s government employee pension plan is reportedly considering reducing its stake in Naspers, the tech investment firm. (Bloomberg)
• The Hollywood director J.J. Abrams is said to be near a $500 million production deal with WarnerMedia. (NYT)

Politics and policy

• President Trump ordered 1,000 more troops be moved to the Middle East as tensions with Iran soared. It raises the question about whether he actually wants a better nuclear deal with Tehran, as he once claimed. (NYT, Politico)
• Justice Clarence Thomas said that the Supreme Court shouldn’t follow “demonstrably erroneous” precedents, potentially making future rulings much less predictable. (Axios)
• Joe Biden suggested at a fund-raiser hosted by the hedge fund mogul Jim Chanos last night that he has raised $20 million for his 2020 campaign, outpacing Democratic rivals. (NYT)
• Prime Minister Justin Trudeau of Canada is planning to discuss his new Nafta deal with the House speaker, Nancy Pelosi, and the Senate majority leader, Mitch McConnell, this week. (Politico)
• Paul Manafort was transferred to a detention facility in Lower Manhattan ahead of his arraignment on state fraud charges. (NYT)
• Britain’s chancellor of the Exchequer, Philip Hammond, is reportedly prepared to resign over the spending plans of the outgoing British prime minister, Theresa May. (Reuters)

Tech

• Regulators have their sights set on Big Tech, but will that actually lead to criminal inquiries? Also: How rival companies could help the government’s antitrust investigations. (DealBook, Axios)
• How Europe’s privacy rules, known as G.D.P.R., have helped tech giants. (WSJ)
• Hospitals are being overwhelmed by robocalls. (WaPo)
• The Supreme Court ruled that First Amendment free speech protections don’t apply to a New York nonprofit’s public-access cable television station. (Pacific Standard)
• Sixteen of the world’s biggest advertisers plan to lobby big tech companies to do more to tackle dangerous and fake content online. (Reuters)

Best of the rest

• KPMG has agreed to pay $50 million to settle an S.E.C. investigation into claims that it altered audits that had already been completed. (FT)
• After years of cheap money and sky-high prices, global property markets are slumping. (FT)
• Five TV station owners agreed to settle Justice Department charges over illegal coordination of ad sales. (WSJ)
• Airbus announced a long list of orders for airplanes as the Paris Air Show starts. Boeing ... not so much. (CNBC)
• Sexual harassment reports are declining. (Bloomberg)
• Gloria Vanderbilt, the society heiress who built a designer jeans empire, died yesterday at her home in Manhattan. She was 95. (NYT)
• Social media influencers aren’t even real people anymore. (NYT)

Thanks for reading! We’ll see you tomorrow.

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