Cheap electricity attracts Japanese cryptocurrency miners to Mongolia
Cheap electricity and cold weather are the two major aspects every bitcoin mining firm loves. So far, Malta, Switzerland, China, and other countries are in mainstream media and very recently Mongolia is also turning up as the ‘cryptocurrency mining hub’.

The mining firms which are already situated in this location are yielding high profits in cryptocurrency. Eventually, Ginco, e-wallet Company based in Tokyo is the latest name to operating within the capital city of Mongolia, Ulaanbaatar. Launched in October 2018, Ginco firm has two ventures within the location. Presently the firm has 600 mining computers and all set to expand 1000 units soon this year.

The cryptocurrency market for mining firms has performed extensively well during 2017 but the sudden crash in 2018 has effected major firms to collapse and stop their operations. For instance, GMO Internet Inc has incurred the loss of $321 million in late 2018 and gave up on cryptocurrency mining. This isn’t something that discourages Ginco Tokyo based wallet firm, conversely, despite the plummeting cryptocurrency market, Yuma Furubayashi, CEO of Ginco Mongol is confident of generating profit out of it. He says

“The business environment is increasingly harsh, but we can still produce a profit,”

Betting on the future potential of Bitcoin
The report adds that the electricity rates available at Mongolia are quite cheaper than the rates in Japan as well as China. Eventually, Mongolia is now seen as the ‘mining hub’ beside US and Sweden where miners can actually have the stake of profit despite the market crash. Notably, iTool is the successful running business in Mongolia. Having said that, ‘Mongolian company’ is set to leverage the ‘resources available’ and create opportunities for new business entities as well.

Bitcoin which was trading at the peak of $19000 in late 2017 has fallen down to the figure of $4000 in late 2018. No doubt the currency is still holding the first spot in terms of ranking but struggling to grip the value of $4000 this week. Although the graph of bitcoin has remained negative for quite long now, the manager of Tokyo-based consultancy LayerX, Hiroyuki Maruno urged that ‘bitcoin holds value’. He added that;

Many big cryptocurrency mining companies have shut down their operations. But “bitcoin, which has become synonymous with virtual currency, will always hold value,

Under the framework of this commitment, Food and Agriculture Department of Ulaanbaatar city and the Green Asia Network NGO signed a cooperation agreement to establish a factory with capacity to process 600 tons of sea buckthorn berries per year with non-refundable aid from the Korean International Cooperation Agency.

Russia is reportedly ranked as China’s tenth biggest trade partner, while China remains a major importer of Russian produce, accounting for 15 percent of the country’s international trade as of 2017. Feng highlighted that Beijing was ready to expend efforts to strengthen the ties between the states.

According to the latest data by China's customs administration, trade turnover between the neighboring states grew 27.8 percent from January through November 2018 compared to the same period in the previous year, and totaled $97.23 billion. Exports of Chinese goods to Russia increased 12 percent and amounted to $43.45 billion, while Russia’s sales to China surged 44.3 percent to $53.78 billion.

In November, Chief Executive of the Russian Export Center Andrey Slepnev said that the projected figure of $100 billion worth of mutual Russia-China trade could double in the years ahead. The partners are promoting settlements in ruble and yuan in an attempt to bypass the US dollar and other Western currencies due to numerous anti-Russian sanctions and persisting trade pressure placed on Beijing by Washington.

According to a study conducted by the Bank of Mongolia (BoM), higher royalties lead to lower gold purchase, which ultimately affects foreign exchange (FX) reserves. For instance, gold tax was at an unbearably high level of 68 percent with the sudden income tax in 2006-2013. As a result, gold purchase fell from 15.5 tons to 2.1 tons by 2010. In other words, the BoM’s treasury fund was almost drained empty.

Officials explain that the sudden income tax, which raised gold tax from 5 percent to 68 percent, was due to boom in copper price; however, the decision had more adverse effects than its benefits as the number of artisanal miners drastically increased as a result.

The 2.5 percent gold royalty was approved in 2014. The result was almost immediate as gold purchase consistently increased in an annual amount, reaching a record high of 22 tons last year, which is 10 percent higher than the previous record in 2017, expanding FX reserves by USD 800 million to a 15-year record.

Therefore, the increased gold royalty is raising concern over a potential tax avoidance of gold producers, reduced gold purchase and increased illegal transportation of gold. A spokesperson of the BoM previously stated, “This law was ratified to boost the economy that was collapsing in 2014. The 9 percent royalties will increase budget revenue by only MNT 50 billion. BoM views the 2.5 percent royalties should be extended by at least 3 years.” BoM estimates to increase foreign exchange (FX) reserves by USD 750 million this year. The 2019 Monetary Policy Guidelines ratified by the Parliament stated to increase FX reserves to USD 6.5 billion in the middle-term.

As for other countries, gold royalty stands at 3 percent in the U.S, 5 percent in Brazil, 4 percent in Indonesia and 2.5 percent in India. This shows that the current 5-10 percent tax is higher than average.

Miners and investors seek favorable tax environment. China, for instance, deduct only CNY1.2-7 per ton of gold depending on the capacity of the mine, technical conditions and locations, as well as 2 percent royalty on import golds.

Credit, legal and operational risks have made it very difficult for Mongolian banks to access global capital markets. This second landmark transaction of Frontclear in Mongolia has made it possible for Development Bank of Mongolia LLC (DBM) to competitively access the swap market with foreign banks and hedge the proceeds of a Samurai bond issue into USD. Both cross currency swap transactions were documented under an International Swap and Derivatives Association (ISDA) agreement, whereby Frontclear customized the swap confirmation to overcome legal issues in the Mongolian market.

The transactions helped to further clarify certain legal issues related to close-out netting in Mongolia, which were mitigated by effective Frontclear deal arranging and structuring. The transaction documents introduced best practice operational and legal concepts, which were reviewed and discussed in a Frontclear organized Executives’ Roundtable in Ulaanbaatar in September 2018. Frontclear is already planning further technical assistance in Mongolia to address those legal issues as well as other roadblocks preventing Mongolian banks effecting accessing global funding and swap markets.

“We are proud to execute our second transaction in Mongolia and the key role we have played in originating the structure and bringing Societe Generale to work in money market transactions in the country. The transaction strengthens Mongolian banks’ ability to mitigate legal and operational risks and sets a benchmark for the development of Mongolia’s money market going forward,” according to Andrei Shinkevich, Senior VP at Frontclear.

“This is DBM’s first ever swap transaction with Societe Generale and we look forward to working with new partners to expand our treasury operation,” – Amgalan Battulga, Head of Treasury Management of Development Bank of Mongolia noted.

“Societe Generale is delighted to have concluded this transaction with Frontclear allowing Development Bank of Mongolia to hedge interest rate and currency risks related to its Samurai bond. It illustrates the strength of the collaboration between our two institutions, Societe Generale and Frontclear, which share the common objective to participate to the development of capital markets in emerging countries,” says Jérôme Sabah, Global Head of Rates, Credit and Forex Sales for Financial Institutions at Societe Generale said.
source: Development Bank of Mongolia

The partnership’s aim is to utilize Terra’s blockchain technology and change how Mongolian citizens pay for goods and services, as well as to reform the largely cash-based infrastructure of Mongolia by enabling more transparent and convenient digital payments. Terra’s payment solution will first launch in Ulaanbaatar City’s Nalaikh District through a pilot program, with plans to expand citywide.

Mongolia’s fintech market is still in its early stages, but has recently experienced a series of successful IPOs from local startups that display the market’s rising potential.

The pilot program in Nalaikh City will launch with two main features:

peer-to-peer (P2P) payments to allow instant transfer among users of different banks, and
mobile payments to build the infrastructure for secure, contactless payments.

Facilitating P2P and recurring utility payments with Terra are important first steps towards building a blockchain-based financial infrastructure in Mongolia,” commented Daniel Shin, Co-founder of Terra. “From there, we will build out a wider range of financial services, reforming the remittance, loan, and overall banking industry. We are extremely honored to work closely with the Mongolian government and look forward to the launch of Terra in Ulaanbaatar.

We believe this pilot program with Terra will reform how the people of Nalaikh City make everyday payments. It will contribute to the development and enrichment of the nation’s digital payment infrastructure, while creating a new online platform to easily share information and offering great opportunities to connect with our citizens through advanced technology. We look forward to becoming the first customers of this blockchain payment system and setting into motion financial reform in the capital city,” said Radnaabazar Choijinsambuu, Governor, Nalaikh District of the Capital City.

The pilot program is set to launch within the next 6 months. A special task force made of key players from Terra, Nalaikh District, and XGround – a fintech company with a strong base in Mongolia – will oversee the initiative.

There has been rising anger over a long-running corruption case related to allegations that Enkhbold and other political figures had looked to raise 60 billion tugrik ($23 million) by selling off government positions. Enkhbold has denied the allegations.

The Mongolian opposition Democratic Party (DP) January 7 demanded to hold immediate general elections accusing MANAN of leading Mongolia to poverty.

A cross-party group of politicians who are boycotting the parliament’s plenary sessions has signed a letter demanding Enkhbold’s resignation. Enkhbold rejected to step down.

On December 27, 2018 nearly 25 thousand people took to streets in Ulaanbaatar to protest against "corrupt officials."

As of 10.30 a.m., today (10 January), the exchange rate stood MNT 2670- MNT 2675 at the ‘Naiman Sharga’ market.

The Bank of Mongolia increased its foreign reserve to USD 3.4 billion and purchased 22 tonnes of gold in 2018. As a result of high commodity prices on international markets, Mongolia’s export revenue rose and the State Budget was positive for first time in last six years. However, Mongolia’s currency rate is continuing to fall against the US Dollar.

Mongolian students who study in universities and institutions receive a monthly allowance of MNT 70,000.