Top international headlines: Bitcoin and the impact of the climate crisis
Bitcoin becomes a legal tender in El Salvador, economic losses are expected due to the climate crisis, and more.
The G7 makes a historic decision on minimum tax rates for multinational companies, while facing the reality of losing trillions to climate change. The semiconductor shortage is expected to ease up later this year, although supply bottlenecks and finished products are unlikely to make up for lost demand at Volkswagen.
Bitcoin legal tender in El Salvador
El Salvador has become the first country in the world to adopt bitcoin as legal tender in an effort to promote “financial inclusion”, investment and economic development.
The cryptocurrency’s use as legal tender – alongside the US dollar – will go into law in 90 days and the bitcoin/dollar exchange rate will be set by the market. Salvadorans will be able to pay their taxes in bitcoin and “every economic agent” will be required to accept the cryptocurrency as payment unless they lack access to the necessary technology.
G7 could lose trillions in climate crisis
The world’s biggest industrialised economies, under the G7 countries, will lose 8.5 percent of GDP a year, or nearly $5 trillion wiped off their economies, within 30 years if temperatures rise by 2.6ºC, as they are likely to on the basis of government pledges and policies around the world, according to research from Oxfam and the Swiss Re Institute.
The economies of G7 nations contracted by about 4.2 percent on average in the coronavirus pandemic, and the economic losses from the climate crisis by 2050 would be roughly on the scale of suffering a similar crisis twice every year, according to the research.
Supply bottlenecks expected long term
German automaker Volkswagen expects a shortage in semiconductor supply to ease in the third quarter but sees the bottlenecks continuing in the long term, a board member has said.
Murat Aksel, the head of procurement on the Volkswagen board, told the Handelsblatt newspaper in an interview that he expects around 10 percent shortage in chips over the long term as building up production capacities takes up to two years.
Volkswagen has previously said that it would be unable to build 100,000 cars due to the shortage, and would not be able to make up for the shortfall in 2021.
Oil prices rally
Oil continued its rally in New York as investors showed confidence that accelerating vaccinations and easing travel restrictions will continue to boost demand.
West Texas Intermediate futures surpassed the $70 mark to close at its highest since October 2018 after briefly touching the key psychological level earlier this week. It was reported that US oil supplies fell 2.11 million barrels at the start of June.
At the same time, confidence in the outlook for oil demand continues to grow as accelerating vaccinations allow people to travel more. The Middle Eastern Dubai benchmark is trading in its steepest backwardation – a market structure that indicates supply tightness – in almost a year after the region’s physical market had a strong start to the month, reports Bloomberg.
Rich countries reach landmark tax deal
An agreement by the G7 finance ministers meets a US demand of a minimum tax rate of “at least 15 percent” on foreign earnings and paves the way for levies on multinationals in countries where they make money, instead of just where they are headquartered.
The landmark deal could help countries collect more taxes from big companies and enable governments to impose levies on tech giants such as Amazon and Facebook.