GEOPOLITICS | CRYPTO REGULATION | DEBT

Hi there! Special greetings to our Aussie readers on the occasion of the 50th anniversary of diplomatic relations between Mongolia and Australia. To many more years of cooperation! 🥂

  📌 DID YOU KNOW?

Good to know facts about the digital device usage of Mongolians:

• 98% of Mongolian households have cell phones.  As for smartphones, they are used by 78% of urban houses and 57% of rural ones.

• The Internet in Mongolia was first launched in 1996 with only 500 users. Now, 80% of the population are netizens. 

• 57% of households access the internet by landline and 37.4% use mobile broadband internet (4G, modem, USB).

• With only 17% of rural houses and 40% of urban houses owning a PC, 33% of all Mongolian households have at least one computer. 

• 30% of Mongolians aged over 15 have purchased products and services online. 56% of shoppers have  bought clothing goods, 11% - tech products.

 ⚖️ GEOPOLITICS: THE STRUGGLE TO JUGGLE 

The noise of the conflict around Ukraine swept across the whole world and left everyone wondering if there’s a full-scale war knocking on their doors. Mongolians, just like any other nation, are appalled by all the atrocities happening, but the geopolitical situation of our country is trickier than you imagine.  

👀 The big brothers are on the watch

• Sandwiched: Mongolia has only two neighbors, and they happen to be the world’s largest geopolitical players. As China and Russia play their own games around the globe, at times we have nothing left but to perform the role of an impartial spectator - all due to the inevitable economic reliance on the two. 

• Dependency: While China alone accounted for 82.6% of Mongolia’s total exports in 2021, Russia remains the main supplier of oil products, providing as much as 90% of total domestic demand.

• Equilibrium: Although the economic dependence is undeniable, we still manage to maintain close ties with, harshly speaking, the Western antagonists of our neighbors. That’s why the third neighbor policy devised by our diplomats might as well be an ingenious creation to ensure balance. 

🧠 A delicate matter - Ukraine

• Careful: Mongolia was one of the 34 countries that abstained on a U.N. resolution demanding the withdrawal of Russian troops from Ukraine. Considering the political and economic lockedness  of our country, some might say that we really had no other choice.

• Pitfalls: Indeed, with or without the vote, the conflict has already had a direct effect on the country’s economy. Since some Russian banks are now banned from SWIFT, transactions with Russian companies are becoming difficult. This is especially critical for important infrastructural sectors, such as the energy grid and railroad system, that are closely connected to Russia.

• Pearls: However, the messy situation in Ukraine might as well shift Russia’s focus more towards the East, which Mongolia could make use of. As the North Stream 2 halts, Putin is already eyeing a more intimate energy relationship with Beijing through Ulaanbaatar. 

Nevertheless, it’s hard to see Russia’s pivot to Asia as a silver lining if it’s induced by the sanctions of the West. Any political and economic retribution of our neighbors would not only dramatically damage Mongolia’s economy, but also put our balancing efforts in geopolitics at risk. And if China gets involved in the Ukraine issue, the already tricky situation of ours would become even trickier. 

📢 MNG SUMMIT 2022

As an attentive reader of Inside Mongolia, you already know that the MNG Summit 2022 will start just in a few days now. We’ve covered the general information in one of our previous editions and are happy to announce that the list of speakers is out!

Wrap up:

• 9 speakers: techies, entrepreneurs, investors, strategists, educators, professionals with international experience.  

• Notable alma maters: MIT, Cornell University, University of Oxford, University of Warwick, New York University.

• Companies to emphasize McKinsey & Company, International Monetary Fund, Heyday, Constellation.

Connect on LinkedIn:

• Khatantuul Zorig - entrepreneur and investor currently working on multiple projects.

• Anar Chinbaatar - founder of several companies, tech influencer.

• Nomin Jargalsaikhan - professional career coach, psychologist.  

• Undram Boldbat - Recruitment Coordinator at International Monetary Fund.

• Zolbayar Enkhbaatar - co-founder of Lemon Press, a business media agency in Mongolia.

• Tana Jambaldorj - Engagement Manager at McKinsey & Company.

• Namuun Purevdorj - Senior Supply Chain and Operations Manager at Heyday.

• Uuganbayar Otgonbaatar - Senior Corporate Strategy Manager at Constellation.

• Nami Bold - Leader of the Vision Team at the Prime Minister's Office of Mongolia.

Meet Inside Mongolia: 

As you see, our co-founder and Editor-in-Chief Zolbayar will also be holding a speech and leading one of the workshops at the event. Don’t hesitate to say hi and talk business!

Not registered? 

Do it now before it’s too late.

 ♨️ HOT PAN IN COLD WATER: CRYPTO REGULATION

Mongolians joined late in the $2.1 trillion global crypto market but didn't disappoint crypto fans. Only in the second half of 2021, there were back-to-back IEO announcements, and more than $166.8 million was raised from the public which is a lot in Mongolia. For more information, find our coverage in the previous edition.

However, with the Law on Virtual Asset Service Providers approved on Dec 27, 2021, 2022 seems to be the year of impeding the breakneck production of tokens and exchanges, not to mention the global slowdown in the crypto market. Let’s take a closer look at implementation and what it means for all parties involved.

For Exchanges

After the enactment, there will be no new exchange registration until Jun 25, 2022. The Financial Regulatory Commission (FRC) will start registering the exchanges operating before the law on Jun 25, and these exchanges must be registered by Sep  25. According to the draft regulation, exchanges must meet the requirements of at least $0.17 to $0.5 million in equity, human resources, and software, depending on the area of ​​activity. Additionally, there is a provision for exchanges not to manage 30 times more assets than their capital. 

For Investors and Creators

Following the law, the FRC will register crypto exchanges, and the exchanges will in turn be responsible for deciding which tokens to register. The FRC is also introducing criteria for new token introduction, technological safety, and cost-effectiveness. Until exchanges are officially registered, trading on the secondary market will continue as normal, but it is possible that some exchanges will not be registered by Sep 25. Therefore, current and new tokens have to consider making a switch and/or choosing an official exchange.  It is uncertain what will happen if some exchanges and tokens aren’t registered at the end, leaving investors on their toes. In the meantime, we recommend retail investors to improve their crypto literacy. 

The Good, the Bad, and the Ugly

It is important that regulators should be careful not to put extreme constraints on innovation. Cryptocurrency is a relatively new invention and rushed law could lead to a backhanded slap to the crypto lobbyists. Restricting novel exchanges and tokens until complete implementation is like putting a 60 km/h speed limit on a highway. Of course, regulations are in place to create a safer crypto ecosystem, increase confidence and stabilize the highly volatile market, but we have to strike a balance to make good regulations to foster innovation or things can get ugly.

Refining the regulation

From October, we can expect the crypto industry to be back on track. Until then,  any company that is not registered by the FRC will be held legally liable for offering, organizing, participating in financial activities, and providing services. On the other hand, It is your chance to contribute to the regulatory environment of the crypto industry as FRC is giving the public until March 27 to submit proposals on the draft regulation.

🔔 DATA STORY

The Total External Debt of Mongolia in 2021 is estimated to be $33.2 billion - more than twice as much as the country's GDP. Mongolia’s creditworthiness is rated by Moody’s at level B3, which means “obligations are considered speculative and subject to high credit risk”. Such an evaluation could lead to the decrease of countries willing to lend in the future. 

🏃 QUICK STORIES

📌 Global Money Week (GMW) to promote financial literacy in Mongolia. The celebration starts today and will continue until March 27, 2022. Last year, the GMW reached over 16,900 children and youth, 8,562 adults, and around 45,000 people overall. 2022 will be the 10th anniversary of the GMW campaign in the country.

📌 Almost 95% of banking transactions are now made electronically, says E.Anar, Director of the Payment Systems Department of the Bank of Mongolia. The digital transition was the result of the pandemic and the subsequent increase of online purchases among the citizens that rose by 133% last year.

📌 Direct flights from Ulaanbaatar to Frankfurt made available. The Mongolian MIAT national airlines will now make direct flights from Ulaanbaatar to Frankfurt every Saturday. As MIAT's planes are insured by a British company, it was required to make changes to flights to Europe amid the conflict in Ukraine to ensure a higher level of safety.

📌 Indian tea tasting event held last week. The tea party was organized by the Embassy of India to Mongolia. One of the participants, President of the Mongolian-Indian Business Council, mentioned that Mongolia has a tea market worth $10 million, demonstrating the common tea-drinking tradition between the two countries.

📷 A GLIMPSE OF MONGOLIA

About: The picture above shows a sandstorm approaching a village in Dundgobi province in 2021. It not only disrupted electricity supply and ruined roads and houses, but also left at least 9 people dead and 17 missing. Sandstorms usually occur in March/April, so if you plan to travel to the Mongolian countryside soon, be careful!

The vagaries of the weather: 

More often than not Mongolia’s depicted as a tranquil land of steppes with clear blue skies and ever-shining sun, but the weather’s brutal at times and it doesn’t hesitate to occasionally show its whims. And when it does, there are consequences. 

Atutumns - excluded: 

Winters can be accompanied by zuds, summers go hand in hand with droughts, springs - with floods and sandstorms. The only season that could be called calm is Autumn - the reason why many Mongolian poems include the phrase ‘nalgar namar’, which translates to ‘untroubled autumn’. 

See more? 😵

• 🌪️ Sandstorm

• ❄️ Zud

• ☀️ Drought

ESSENTIAL LINKS

• Not sure where to eat in Ulaanbaatar? Food and drink reviews in English. (Dodddo0)

• 5 tips to survive Mongolia’s brutal winter. (Breathe Mongolia)

• Must know geography facts! (Geography Now)

• Are the Mongolian stereotypes true? (Real Mongolia)