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Why Are Central Banks Creating Digital Currencies?

Source: Atlantic Council

Nineteen countries have started to test a central bank digital currency (CBDC) on a small-scale with a limited number of participants. The Atlantic Council defines CBDC as “the digital form of a country’s fiat currency that is also a claim on the central bank.”

As of today, the People’s Bank of China (PBOC) and the European Central Bank (ECB) are prominent players in the digital currency realm. The United States currently lags behind in the research phase, yet the Federal Reserve has expressed continued interest in the digital dollar.

As digital currencies expand globally, there are challenges ahead — the legal, political and regulatory properties of CBDCs remain unclear. But the IMF notes that there are also multiple benefits to having government involvement in digital currencies, including lower cash transfer costs, greater accessibility to banking services and easier implementation of monetary policies. 

Ruto Narrowly Wins Kenya’s Presidential Election

Source: BBC

Deputy President William Ruto won Kenya’s presidential election on Aug 9, 2022, after a close race between him and rival candidate Raila Odinga. After a week of tallying votes, Kenya’s electoral commission ruled that Ruto had won with 50.5% of the vote vs. former Prime Minister Odinga’s 48.8%. Ruto served as deputy president for nearly 10 years under President Uhuru Kenyatta.

The official announcement was delayed as Odinga’s campaign alleged that Ruto’s campaign had tampered with the ballot count, and four of the seven members of the electoral commission refused to endorse the result. Kenya has a history of disputed elections, with sometimes violent results — after the 2007 election, around 1,200 people were killed and 600,000 displaced.

After the contested 2007 elections, the International Criminal Court charged Ruto with crimes against humanity. The case was closed after he was elected Kenyatta’s vice president in 2016. However, he subsequently fell out with the president and positioned himself in the election as an outsider fighting the political dynasties of Odinga and Kenyatta.

Over Half of US Medicine Ingredients Are From India and China

Despite discussions over the onshoring of medicines manufacturing, the U.S. remains heavily dependent on active pharmaceutical ingredients (APIs) supplied from overseas, with over 60% sourced from just two countries — India and China. A recent analysis by USP highlights how 48% of APIs imported into the U.S. are from India, and 13% from China. Just 10% of APIs are made domestically.

Different stages of the pharmaceutical supply chain have different geographical concentrations. The U.S. leads in R&D — although China is trying to catch up. China and India are the world’s main players in API production, due to cheaper manufacturing and labor costs, and favorable regulations. Europe dominates the production of finished pharmaceutical products with Germany and Switzerland as top exporters. India, meanwhile, is the world’s largest supplier of generic drugs — although it, in turn, relies on China for some 70% of its APIs and raw materials.

With geopolitical tensions adding to anxieties, policymakers in the U.K., U.S., and EU have discussed boosting manufacturing independence. Other efforts have focused on supplier diversification. However, supply chain resilience isn’t cheap: keeping more inventory — or increasing domestic R&D and manufacturing — increases costs for health care systems just as funding pressures mount.

Analysis by Marsh McLennan Advantage. Sources: CPhI, EFPIA, GLG, OECD, OEC, Congressional Budget Office

The Metaverse: Regulating an Uncharted Territory

The metaverse is an immersive digital universe that will transform the way societies interact, work, and live. Presently, this decentralized platform is highly unregulated; while some existing regulations may apply, they often lack specificity to protect users from unique harms. 

Some of the biggest legal issues in the metaverse include data privacy and cybersecurity (almost one in two users are concerned about identity privacy), fraud, and intellectual property (IP) loss. While some existing laws may apply to the metaverse (personal data protections, IP, and contract law), they often fall short in the virtual realm due to anonymity and jurisdictional complications. Some governments have expanded the scope of existing regulations (U.S.’s Bank Secrecy Act), and others have enacted new regulations (UAE’s Virtual Asset Law) to specifically address metaverse concerns. 

The metaverse is expected to grow at a CAGR of 50.7% from 2022-2030. As regulators play catch-up, they must strike a balance between enabling innovation and protecting users from harm. All stakeholders — lawmakers, regulators, architects of virtual spaces, and businesses — will need to work together to appropriately regulate this rapidly evolving landscape. 

One Year After Taliban Take Power, Afghanistan’s GDP Plummets

Source: Financial Times

One year after the Taliban took power in Afghanistan following the withdrawal of U.S.-led troops, Afghanistan’s gross domestic product has sharply declined and food insecurity has risen. The UN Development Program estimated that Afghanistan’s GDP fell 20% in 2021 and will shrink another 5% this year. The World Bank and International Monetary Fund estimate that the country’s GDP could fall by up to 30%.

Afghanistan’s economic decline has been exacerbated by mismanagement under the government, rising inflation, and the collapse of the country’s banks. Even before the Taliban took over, 75% of Afghanistan’s economy was dependent on foreign aid — much of this aid has now been cut off by Western sanctions that have also frozen billions in foreign reserves. 

As a result, 37% of Afghan households say that they don’t have enough money for food. More than four out of five households say they have significantly lost income since the change in regime. However, the World Bank reports that employment has increased at the national level, driven largely by an expansion of employment in rural areas.

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