This Week in Finance: A new way to own big tech, Tether under the microscope and the mortgage market rolls on

FINANCIAL SERVICES

A new way to own big tech

Canadian investors got access to a new product this week, which allows them to own U.S. stocks without foreign currency risk.

Canadian Imperial Bank of Commerce launched the country’s first depositary receipts linked to shares listed on U.S. stock exchanges, starting with Amazon.com Inc.

The first Canadian depositary receipts (CDRs) are modelled after American depositary receipts, which have been available in the U.S. for decades and allow investors to buy shares of foreign companies without the risk of fluctuating currencies.

Retail investors have been hungry for high-flying tech stocks that benefited from restrictions wrought by the pandemic. CDRs offer Canadian investors a way to trade American stocks in Canadian dollars with a built-in hedge against shifting foreign exchange rates.

It also opens the door to fractional share trading, which allows investors to buy a smaller portions of a high share price.

CIBC plans to start offering CDRs — listed on Toronto-based upstart equity market Neo Exchange — linked to Google parent company Alphabet Inc., Apple Inc., Netflix Inc. and Tesla Inc.

—Stefanie Marotta

CRYPTO

Tether’d to another controversy

Stablecoin operator Tether is once again facing legal scrutiny, according to news reports that say the Department of Justice may be launching a criminal probe that focuses on the question of whether executives committed bank fraud.

The investigation is centered around trading activity when the company was still relatively new, determining whether or not executives from Tether misled banks and investors by not disclosing the fact that transactions were linked to cryptocurrencies. These reports stated that federal investigators reached out to individuals at Tether to inform them that they are under investigation, according to people familiar with the matter.

Tether (USDT) is the largest stablecoin with a market cap of around US$61.8 billion, according to CoinMarketCap. It pegs its value to the U.S. dollar and is often used to trade on digital platforms instead of traditional currencies to purchase bitcoin and other cryptos.

Since its launch in 2014, it faced a few controversies including a hack in 2017 and accusations of fraud.

One of these accusations of fraud include a case made in late 2019 when New York attorney general Letitia James accused Tether’s parent company, iFinex Inc., and the crypto exchange operator Bitfinex of hiding an US$850 million loss in client and corporate funds.

Court filings further alleged that the funds were stored in a Panamanian entity known as Crypto Capital Corp. The companies reached a settlement with James in February with Tether and Bitfinex agreeing to pay out a US$18.5 million fine.

This new case could have far-reaching implications in the rest of the crypto market, which has come under some heavy scrutiny in recent months. Criminal charges against a large digital asset company would be a very significant escalation of ongoing crackdowns.

Stablecoins in particular have come under central bank scrutiny for their potential risks to the financial system. U.S. Federal Reserve Chair Jerome Powell addressed stablecoins in a testimony in mid-July, arguing that a central bank digital currency (CBDC) should get more backing than a stablecoin, which he argued does not have an appropriate framework.

“You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency,” said Powell. “I think that’s one of the stronger arguments in its favor.”

—Stephanie Hughes

Real estate industry puts its money where its mortgages are 

It’s been a wild ride for the real estate industry in Canada’s major metropolitan areas. While the market ias beginning to pump the brakes for summer, it won’t stop a few real estate bulls from making their case.