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First Move with Julia Chatterley
Beijing Calls Online Gaming Spiritual Opium, Tencent Shares Tumble; Wuhan Now Testing 11 Million People; Simone Biles Wins a Bronze and a Standing Ovation. Aired 9-10a ET
Aired August 03, 2021 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:22]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Game over. Beijing calls online gaming spiritual opium, Tencent shares tumble.
China's COVID crackdown. Wuhan now testing 11 million people.
And Biles beams. The U.S. gymnast is back, wins a bronze and a standing ovation.
It's Tuesday. Let's make a move.
A warm welcome once again to FIRST MOVE, a day where we focus on the bulls, the bears, and Biles. Yes, we'll take you live to Tokyo as I mentioned for
Simone Biles return to the balance beam and a bronze medal that's worth its weight in gold, and then some I think.
In the meantime, let the games begin in the business world, too. We've got Beijing's boxing match with Big Tech online gaming in the ring Tuesday with
state media calling it, as I mentioned there, spiritual opium. Plenty of parents I think would say gaming is addictive. Tencent though taking a six
percent hit during Tuesday's trading session, all the details on that coming up.
Plus, Robinhood's high dive. Shares of the popular trading app approaching that $38.00 IPO price after last week's belly flop, and the U.S. debt
ceiling dash also in focus. The Treasury now taking emergency steps to conserve cash, as Congress dithers on raising the borrowing limit.
In the meantime, on Wall Street, investors going for gold. Futures are higher amid hopes for a trampoline like bounce after Monday's weakness.
Sentiment was hit by a weaker than expected reading on U.S. manufacturing. Chinese factory growth also slowed to a 15-month low, and now, they are
facing COVID driven restrictions once again as well.
Europe in the meantime, as you can see, trying to move higher there. The Xetra DAX under a little bit of pressure in Germany as big corporate names
hit the earnings bull's eye, names like BP and SocGen doing well. Car giant, Stellantis also raising its full year guidance, too.
Asia though, far from the winner's podium. Drugs of course are banned at the Olympics, and nearly as addictive according to Chinese state media,
online gaming may soon be curtailed in China, too.
Let's get to the drivers on that story. Clare Sebastian joins me now. Clare, great to have you with us, and as I mentioned already, plenty of
parents I think, think that online gaming is degrees of addictive. The difference of course in China, when Chinese state media start shedding and
throwing a spotlight on it, the instant reaction from investors is, they are next in line for regulation and that is kind of what we saw overnight.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, the context of this is absolutely key. It all started, of course, with an article that was
published in the "Economic Information Daily," a business newspaper that's owned by the Xinhua News Agency, which is of course, the official news
agency in China. So, very much seen as having been either approved or having come from the government.
This is post, by the way, has now been removed, but it really spooked not only Tencent stock, but other gaming stocks as well. The AVR is listed in
New York.
So, they called it spiritual opium, they call it an electronic drug in his article. There was a line that said, "Insiders warn watch out for the harm
of online games." And they singled out Honor of Kings, which is one of the most popular games produced by Tencent, an online game very popular on
mobile.
So, that is what happened. As I said, the post has now been removed. But clearly, this is being read as the next installment in what we've seen over
the past few months, Julia, the crackdown from the Chinese authorities on their tech sector, which the reasons for which have really run the gamut
from antitrust and monopolistic behavior through to sort of cybersecurity and data concerns, like we saw with DiDi, the standards for food delivery
workers, even this profitability of the education sector, which we saw last week.
This has led to huge drops in the stock prices across China's tech sector, and a very big concern now is that gaming and entertainment will be next.
The share price is down about six percent in Hong Kong today. And as I said, other gaming stocks followed.
CHATTERLEY: Yes, I mean, there's so much in there. And to your point, there are those that look at this and say this is a wider crackdown of the
control and the powers of Big Tech, but then there's a consumer element to all of these as well. As you mentioned, I mean, they are not the only
nation that worries about the impact on their young people of constant gaming, and hours sort of wasted away, whiled away -- I'll be careful how I
say this -- on computer games just to pull this specific point.
[09:05:04]
CHATTERLEY: What we've typically seen is that these Big Tech giants respond. How has Tencent responded?
SEBASTIAN: Well, so the really interesting thing here, Julia, is that in 2019, after a previous crackdown by Beijing on video gaming, where they
tried to reduce screen time for young people, they did introduce some restrictions.
What Tencent has now done today goes even further than that. A number of measures to reduce the amount of time minors spend playing these games,
what they've done is they've said that they're going to limit screen time for people under 12 to an hour on weekdays and non-holidays and two hours
on holidays.
They are also going to -- they banned in-game spending for people under 12 and they are calling for an industry-wide discussion on whether gaming for
under 12 should be banned altogether. So, this is really interesting. If you were in any doubt as to whether that article in the "Economic Business
Daily" was sanctioned by the government, clearly, Tencent isn't. They are going much further.
This mirrors really what we've seen from other tech companies who have been the subject of a crackdown, the likes of DiDi, you know, submitting
willingly to the cybersecurity review. They don't put up a fight, they willingly accept any rules and regulations. Clearly, the Chinese Communist
Party has immense power over these companies, and I think that's really behind what we've seen to be the sort of repricing of these tech stocks
over the past few months.
CHATTERLEY: Absolutely. Great analysis, and we shall see where this goes. But to your bigger point here, I think the response that we seem to be
getting from these Big Tech giants is fast and furious, but they have made that into a movie -- have they yet? Well, it is a movie. They have made it
into a computer game.
Clare Sebastian, thank you for that.
Now, speaking of an immediate response, the Chinese City of Wuhan is testing its 11 million residents for COVID-19 after finding its first
infections in over a year. Seven cases reported on Monday -- seven cases -- China is grappling with an outbreak of the delta variant that has now
spread to at least 26 cities and 16 provinces.
Steven Jiang joins us now from Beijing. An immediate response and a significantly scaled response to, Steven. Talk us through this.
STEVEN JIANG, CNN SENIOR BUREAU PRODUCER: That's right, Julia. The spread of this cluster really shows no sign of abating hitting not only Beijing
and Shanghai. As you mentioned, now, Wuhan, the original epicenter of this global pandemic. And in that city, officials really just like their
counterparts in many other locations seem determined to err on the side of over-caution. That's why you see the citywide testing of 11 million people
despite fewer than 10 cases being reported.
We've actually also seen social media posts and videos of residents emptying supermarket shelves, stocking up on food and supplies, with their
memories of the brutal three-month lockdown from 2020, obviously, still very much raw; and officials in Wuhan and its surrounding regions have also
asked residents not to leave town. And this is something being increasingly echoed by authorities across the country in the middle of the peak summer
travel season.
We are really seeing local authorities here re-impose some very draconian measures we hadn't seen for months, including strict lockdowns. And here in
Beijing, for example, they have effectively banned people from so-called high or medium risk areas from entering the Chinese capital by suspending
all transportation links to those regions.
And now, of course, there are more than 110 such areas across China. So, all of this really indicating the central leadership, the governments, they
are sticking to their current approach of zero tolerance towards locally transmitted cases, despite growing questions about its long term
sustainability, especially given the potential loss of billions of dollars of revenues not only in tourism, but also in other industries as well.
But Julia for now, in the words of one Beijing official, they are trying to prevent the further spread of this cluster at any cost -- Julia.
CHATTERLEY: Yes. I was looking at some of the comments over the weekend and one from a researcher at the C.D.C. there in China telling reporters
that breakthrough infections in vaccinated people are expected, which is -- I know much of the discussion that's going on elsewhere, at least in the
West.
What proportion, very quickly, Steven, of people in China are vaccinated? And of course, we know that the efficacy rate -- we believe the efficacy
rate of the Chinese vaccines is relatively lower, but what proportion of people have been vaccinated?
JIANG: Well, they've been touting the pace of vaccination, saying nationwide, they have administered more than 1.6 billion doses. But given
the large population base, obviously, the percentage of the population have been fully vaccinated, they still have a long way to go.
As you mentioned, this cluster has called into question again the efficacy of their vaccines because a lot of the newly infected patients actually
have been fully vaccinated, including staff members at several Chinese airports, but they have come out to defend their products to say it's too
early to draw conclusions, but also pointing to some other countries that have used the Chinese vaccines to say their vaccines are effective in
dealing with even the delta variant especially in preventing deaths and severe cases.
And the latest development, Julia, is the government has approved the use of one homegrown vaccine for minors aged between three and 17, so they are
determined to what continue to push for more vaccinations across the country and across demographics -- Julia.
[09:10:10]
CHATTERLEY: Yes. Thank you very much for that, Steven Jiang. Great to have you with us.
Okay, let's move on. Biles bounces back. U.S. gymnastic superstar Simone Biles has won bronze on the balance beam. She made the triumphant return to
competition after withdrawing from other Olympic events citing her mental health.
Selina Wang is live in Tokyo. Selina, and I believe you were actually there watching her compete. How was that?
SELINA WANG, CNN CORRESPONDENT: Julia, it was incredible to be inside the Ariake Gymnastic Center, the energy there, the anticipation, it was
palpable. There were so many nerves. I was nervous sitting on the edge of my seat knowing what the stakes were here, Julia. It was her last chance to
take home an individual medal at these Games. And that is exactly what she did.
She won a bronze. This was a victory.
Her performance was an act of courage and perseverance. She has pushed through mental health challenges, what she has called the weight of the
world on her shoulders. She was the only survivor of Larry Nasser's abuse competing at these Games.
And of course, she has also most recently been dealing with this mental block that gymnasts call the "twisties." She said even just a few days ago
that she was still struggling to orient herself in the air that her mind and body were not thinking, but she said she was able to compete in beam
because it involves less twisting and she changed her dismount to make it less risky.
And despite, Julia, all of this anticipation, all of this pressure, she got on that four-inch beam -- four-inch beam and executed her performance with
grace and with stability, and oh my goodness, when she got off, the crowd went wild.
Of course, there are far fewer people in the stands than there would be at a normal Games, but this was the largest amount of people I've seen at a
gymnastics event yet. Journalists and delegates, standing up giving her a standing ovation.
And Julia, this is what she said after she competed. She said, quote: "It's been a very long week, a very long five years. I didn't expect a medal
today. I just wanted to go out and do it for me, and that's what I did. It definitely feels more special, this bronze, than the balance beam bronze at
Rio. I will cherish it for a long time."
And Julia, this is the seventh Olympic medal for Simone Biles. That puts her on par with Shannon Miller as a U.S. gymnast to have the most medals
ever. But she had achieved so much. She had achieved something remarkable before she even got on that balance beam today.
She had perhaps transcended her sport. She had sparked this global conversation about mental health. She illuminated the pressures that elite
athletes face, and she showed the world that it is okay to put your own wellbeing above the expectations of others.
CHATTERLEY: Yes, it gives me goosebumps actually, just to hear all of that. The win here was about way more than medals, but actually just coming
back at the end there and competing and actually managing to win a medal. As I said at the top of the show, this bronze is worth its weight in gold
and then some, not just for her, for many others to that she was fighting for here.
Selina Wang, great to have you with us. And great to be there, too. How amazing. Thank you.
Okay. Let me bring you up to speed with some of the other stories making headlines around the world. Iran's Supreme Leader has given his
confirmation to the man elected as the new President, Ebrahim Raisi will be sworn in on Thursday. He won a largely non-competitive presidential vote
after key rivals were barred from the race.
Fred Pleitgen is in Tehran covering the story for us. Fred, great to have you with us, too.
What does Iran under the influence of this President look like compared to, of course his predecessor, former President Rouhani? And I do you have to
say that the prospects of a return to the nuclear deal do certainly feel dimmer even than they were before.
FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, well, I think the new administration, Julia, they still want to rejoin -- well,
they don't want rejoin, but they want the nuclear agreement to come back and come back into full force and for the U.S. to rejoin, but certainly you
are right, the whole parameters really will change and are going to change.
On the whole, of course, we have to say that Ebrahim Raisi is a lot more conservative than Hassan Rouhani was, but I think the biggest change is
actually, they are going to be in the sphere of economics.
One of the places where Ebrahim Raisi does have big credentials actually was in fighting corruption. He was of course, until now the head of the
Iranian Judiciary. Of course, there was some controversy, he was pretty hardline in that as well. However, fighting corruption is something where
he did try to make a lot of headway. And it was interesting today, at that acceptance meeting that he had today with the Supreme Leader, fighting
corruption was really very high on his agenda there. He said that's something that is very important here in this country.
But if you look at the whole way that the economy is going to be conducted here in this country, there are some big changes that could happen. One of
the things that we saw, and we've been covering over the past really, eight years since Hassan Rouhani has been in office, of course, Iran has been
trying to get back into international economics.
They've tried to get foreign and direct investment here in this country. Of course, that's also part of what the JCPOA, the Iran Nuclear Agreement was
in fact about. Putting Iran back into the international economy again, plugging it in again, getting sanctions relief. All of that was stymied
when President Trump came into office and he put in place those very tough sanctions.
What Ebrahim Raisi is now saying is that yes, Iran still wants that sanctions relief, but they want the economy to become more self-reliant.
The big term of that here is a resistance economy, so, not relying in investment from Western countries, from foreign countries, even if the
sanctions do get lifted.
[09:15:22]
PLEITGEN: The economic sphere really is going to be very big. And as far as international politics is concerned, the two words that we keep hearing
there is active and dynamic. Iran does want to play a very big role, not just in this region, but in global politics as well -- Julia.
CHATTERLEY: We shall see. Fred Pleitgen, great to have you with us there in Tehran.
Okay, a Belarusian activists living in Ukraine has been found dead at a park in Kyiv. Vitaly Shishov was the leader of an organization helping
Belarusians flee abroad. The group says he has been under surveillance before his death. Police are investigating all possible explanations,
including that of murder.
First responders in Southern Turkey are battling devastating wildfires for a seventh straight day. Officials say the flames have been fueled by an
intense heat wave that's gripping the Eastern Mediterranean. Temperatures are expected to remain high throughout the week.
Okay, still to come here on FIRST MOVE, the $20 million hack, SolarWinds puts a figure on its cyber breach, but warns the final cost could be even
higher.
And, one way tickets only. The U.K. reopens to U.S. travelers, but borders remain close to those traveling the other way. I speak to the U.K.
Ambassador to Washington. Stay with us. That's next.
(COMMERCIAL BREAK)
CHATTERLEY: Friends and family reunited. These are the emotional scenes that Heathrow Airport after the U.K. allowed fully vaccinated travelers
from the United States and the E.U. to visit without quarantining.
But you won't see anything like this across the Atlantic just yet with the U.S. keeping COVID travel bans firmly in place amid concerns about the
delta variant.
The travel industry, however, is pressing the Biden administration to reconsider.
For more, let's speak to the U.K. Ambassador to the United States, Karen Pierce who joins us live from Washington, D.C.
Ambassador, fantastic to have you with us. Thank you so much for your time.
I think most of the world is watching the U.K.'s progress on reopening even if we don't see the reciprocal response here from the United States. Can I
just ask from the U.K.'s perspective, firstly, this is evidence, fact, data-based, this decision?
[09:20:03]
KAREN PIERCE, U.K. AMBASSADOR TO THE UNITED STATES: Yes, that's right. It is. We look at the data very carefully. We take it very seriously.
Ministers consider the scientific evidence. We act according to that evidence. We've been able to open up because of the success of vaccines in
the U.K., 90 percent of adults are fully vaccinated, and 70 percent of -- I beg your pardon, 90 percent have had one shot, and 70 percent are fully
vaccinated.
So because of that, thanks to that, we've been able to ease restrictions.
CHATTERLEY: And yet, when you look at the United States, it remains closed to inward visitors for those living here too, without a green card or a
passport. They have to quarantine in a nation like Mexico, for example, for a couple of weeks.
Do you think their current stance and their decision lacks the same evidence, data, scientific analysis that the U.K. is applying here?
PIERCE: No, I think the American system, the American authorities are using good data. You have very good scientists, you have C.D.C., Dr.
Fauci's analyses. Our scientists talk to Dr. Fauci all the time. I think you have a different situation here in the United States. You have lower
vaccine rates, for example.
We would like to see the executive order lifted, so that Brits can come and go here. We're talking to the American government about that. We have a
task force that we set up when President Biden visited the U.K., and we continue to talk to them and to the airline industry about trying to get a
path to opening up.
CHATTERLEY: Do you have any sense of timing?
PIERCE: I think I'm afraid, I wish I did, but it is something that we talk almost weekly to the U.S. authorities and we continue to map out with them
possible routes to opening up. But I can't put a time limit on this, I'm afraid.
CHATTERLEY: You know, we are foreigners in the United States. And so, we have a perspective both of a vaccine hesitancy in the United States
relative to what we see and are seeing happen in the U.K. What do you make of some of the reticence to have vaccines here in the United States and the
sort of available information that's out there that's quite frankly, incorrect and spreads fear?
PIERCE: Well, I think anything that spreads fear is incorrect, particularly when it preys on people's worries about health. I mean, I
think that's unconscionable. What people need to see is good scientific data and people should trust these scientists who are trying to get the
U.S. back on track after the pandemic.
The C.D.C. puts out very good guidance. I think it is a very well-renowned organization, the W.H.O., the World Health Organization works very closely
with C.D.C. and with equivalent organizations in the U.K. But I think it is true that you have more vaccine hesitancy in the U.S. than we see in the
U.K.
CHATTERLEY: And obviously, what we're watching certainly here, but again, I think around the world is the fact that we saw that delta driven spike in
U.K. COVID cases, and now we seem to see those cases coming down.
I just wonder, among your discussions, and as you said, you're having them on a weekly basis, if not more, I'm sure of why we think that's taking
place in the U.K. Why those cases are coming down?
PIERCE: It's a really good question. I think anecdotally, one would assume it is because of the very high rates of vaccination. So, you have a very
high majority of people in the U.K. who have some protection against the virus. But we're not complacent. We need a lot more data before we can say
for certain why the rates have come down dramatically.
CHATTERLEY: And what about the discussion about third doses potentially? It's obviously a debate that's being had in the United States and in the
U.K., Israel, of course, as well, and yet at the same time, and we talk about it on the show all the time, the fact that huge swathes of the rest
of the world have not had any vaccines and are desperate for them.
Ambassador, where do you stand? It's a sort of an economics question. It's a moral question. It's a jobs related question. Where do you stand on third
vaccine doses?
PIERCE" Well, I'm not going to give an opinion on that, I'm afraid. I'm not a qualified doctor. The government is looking at that prospect. Our
Health and Science authorities are looking at that and guidance will issue in due course.
But I do want to agree with you on developing country vaccines. It was a huge priority at the G7 Summit that the Prime Minister hosted in Cornwall
in June. We, the U.K. have contributed to a billion vaccine doses going to the developing world. It's not enough. We want to do much more.
But we are working with our G7 partners, notably the U.S. President Biden has given a very strong lead on vaccines to the developing world, so we are
trying to get those to them as fast as possible.
[09:25:07]
CHATTERLEY: If sort of feeds into the debate about eventually trying to open up the tourism routes and the travel routes there as well. And
obviously, one of the things that the U.K. government has been grappling with is whether to introduce this amber phase to at least give travelers
warning of a country that perhaps is going to join what they call the red list under the traffic light system, which then of course, requires
travelers to pay quarantine back in the U.K.
What do you make of the decisions over that? Because clearly, the government is trying to make it easier for people and to give them warning.
But there is some pushback from the industry, too, and of course, I know, you're talking to industry on both sides of the water.
PIERCE: And while the government is trying to take decisions based on scientific evidence and is trying to enable people to reunite with their
families and businesses to do their business internationally. And as with all these things, it is an intersection of getting the right balance and
following the scientific evidence.
So, the British government will continue to examine the evidence very carefully, and then we'll take our decisions sequentially, based on that
evidence.
CHATTERLEY: Yes, it continues to be day by day. Ambassador, fantastic to have you with us. Thank you so much for your time today.
Karen Pierce, U.K. Ambassador to the United States.
PIERCE: Thank you.
CHATTERLEY: Thank you once again for joining us.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:30:04]
CHATTERLEY: Welcome back to FIRST MOVE, and Hippo Home Insurance with the opening bell this morning. It feels like a long time since we've seen
unmasked smiling faces and people behaving naturally on that bell. So good to see.
U.S. markets are up and running this Tuesday and it is a high start across the board. Traders trying to shake off some of the early August angst that
crept into the stock markets yesterday, but the specter of more Chinese tech turmoil still weighing, I think on sentiment as Beijing appears to
target video game makers with new regulations as we've discussed already on the show.
In the meantime, sports apparel firm, Under Armour, one of the big Wall Street winners in the early price action, shares sprinting ahead after a
sporty earnings beat to boost to its outlook from Under Armour, too.
And drink deal making also helping juice up the markets. PepsiCo selling a controlling interest in its Tropicana brand to a private equity firm. Pepsi
looking to focus on higher growth drinks.
And the crypto investors hoping they won't get squeezed by S.E.C. Chair Gary Gensler. Bitcoin, a little softer today as Gensler speaks at a
Securities Forum. He said in a separate interview that more crypto oversight is required. He did not speculate, though on when Securities
officials might rule on Crypto Exchange Traded Funds, or ETFs. That will be a big one.
Now, Big Tech is now so big that it is a risk to the global financial system. That's a warning from the Bank of International Settlements. It
says the vast amount of data held by the likes of Google, Facebook, Alibaba, and others means these companies could easily and rapidly reshape
finance and that could have a destabilizing effect on existing banking systems.
The BIS says it wants to see regulators rein in Big Tech fast.
And joining us now is the General Manager of the Bank of International Settlements. Agustin Carstens.
Sir, fantastic to have you on the show. This was a fascinating new report. I read the entire thing yesterday. Can you start by explaining this
specific fear, how we go from these Big Tech giants with access to huge volumes of data to potentially seeing entire banking systems destabilized?
What's the key?
AGUSTIN CARSTENS, GENERAL MANAGER OF THE BANK OF INTERNATIONAL SETTLEMENTS: Well, thank you very much for having me in your program, Julia.
I mean, I think the key issue is what we call the DNA of a Big Tech. Here in the BIS, DNA is data, networks and additional activity. The things that
by the use of a data in a network environment, that can multiply the number of transactions that is being done through a particular payment service,
and that will produce more information and it will produce more advantage.
The real issue is that today, commercial banks do not have an equitable access to all the information that Big Techs have. And well, of course, big
information is a key input into financial services. And therefore, if you have a larger or broader command of information, you will have a
comparative advantage.
So, these has a lot to do also with who has the control of the information of people. So, what we are trying to steer is a debate on how information
should be used, who should have command of it, and in that way, I would say, it has competitiveness in the future in the financial services
industry.
CHATTERLEY: I mean, you use a specific example and that's China where we know two big tech companies, Alibaba with Alipay, and of course, WeChat
with WeChat Pay account for 94 percent of the payments market, and they scaled up incredibly quickly.
Now, it's a completely different market to some extent than others like the E.U. and the United States. But do you see that specific number there as a
reason perhaps why the Central Bank is looking at digital payments, looking at a digital coin, a Central Bank digital coin of its own, because that
amount of power in the hands of private companies is frightening for any nation, China or anywhere else.
CARSTENS: Well, I would say that there are two big instruments that Central Banks and financial authorities have, in particular Central Banks.
That's regulation and the other thing is to provide Central Bank digital currencies.
I think that is very hard to imagine a world today with all the cyber currencies, cyber assets. And I would say the appetite of the public to
have a digital solution for transactions and not have Central Bank digital currencies.
[09:35:10]
CARSTENS: At the end of the day, I think that the reality will impose itself, and what we are seeing today is a lot of drive by Central Banks to
move forward. We see the CBDC.
Each country will take their own decisions, but this is a very important area, and the other is regulation. Yes, what you said at the outset in this
question, is that tremendously fast progress that Big Techs with financial aid services -- as a financial services provider can give. And I would say
the unequal treatment from the point of view of regulation is what puts commercial banks in a disadvantage.
So, what we would -- what we are really trying to put on the table is a need to have equal treatment between the different providers of financial
services.
CHATTERLEY: So, if we take an example of the United States, I mean, you've got Google, you've got Facebook, you've got Amazon, for example, only
really Apple Pay, as an example for Apple is one that's really pushed into the payment space in some fundamental way. Are you saying that regulators
need to look at the activity level, look at the scale of data, and sort of formulate regulation for entry for these tech companies, for example,
before they try and go into the payment space in a more fundamental way, because once they do it, they can scale up so quickly, it then becomes
really hard to tackle.
CARSTENS: Well, the issue of regulation is very complex, entry certainly is one in a for example, to date, to have a bank, you need to have capital,
you have to obey different rules on liquidity, leverage, and so on. That is something that at some point, given the different types of services that we
take financial services that Big Tech might offer, it might be adequate to move in that direction.
The other important aspect, as I say is the use of data. Today, banks have some very specific regulation on how they can use data, that is not
necessarily the case a with Big Tech, and finally, there is another important issue, and that is that many of these Big Techs provide some
services that have become key in the financial sector industry, for example, Cloud services.
So you have competitors also being important services providers for financial systems. So, therefore, I think there is a lot of things that we
need to think and to basically have a system with three characteristics that is competitive, that is safe, and that respects privacy of people.
CHATTERLEY: Yes, and the classic example of this is Amazon with their access into e-commerce. The next step to payments and facilitating those e-
commerce purchases would be very easy for them. The question is, to your point, is there a level playing field with what the banks can provide? And
right now there isn't.
You know, there's a trust issue here as well. A lot of people don't trust Big Tech, but they don't trust government, quite frankly, either, and
that's part of why we've seen I think the interest in cryptocurrencies.
And I saw back in January, you said, look, there's real risks here. And that Bitcoin, for example, could go to zero. How do you feel about this
today? And how do we separate all of these issues and make sure we get all of them right? The regulation in each sector, because there are those that
say, the most efficient way of using and facilitating payments in the future in the financial system is crypto. Where does the BIS stand on this?
CARSTENS: Well, where we stand here is that we need to certainly take advantage of all the technology that is out there. For example, that
technology on which Bitcoin is based. The LTM blockchain is a wonderful technology and I think we need to adopt it.
Now, the real issues is the application. I think that Bitcoin in the way it was formed, is not really delivering what it is supposed to deliver, which
is a good substitute for cash. It's not a good deposit of value, it is not a good medium of exchange.
It is hugely volatile. It's an ecological disaster.
So, what we want to do is to use the technology and offer people a better representation of really trusted money. What is a really trusted money that
is out there? Well, it is basically cash, and today, a cash is just represented in papers and coins and people are asking for the digital
solutions, and therefore we have to raise to the challenge and provide them with a cash in the form -- in the digital form.
[09:40:15]
CARSTENS: That also would facilitate many financial transactions. It will facilitate, you know, for example to reduce transaction costs in cross
border payments. It will facilitate also a financial inclusion. We have many still, even in countries like the U.S. a high percentage of the
population still doesn't have access to financial services. And therefore it would be interesting to look for something like this to make a dent in
that regard.
CHATTERLEY: You know, every time I think about the payment space and the future of payments, my head explodes because there's so many things to
consider and this was a whole new one, this report and I loved reading it.
Sir, come back and talk to us soon, please. Great to have you with us. Agustin Carstens, the General Manager of the Bank of International
Settlements. Great to talk to you, sir.
CARSTENS: Thank you very much.
CHATTERLEY: All right, coming up after the break -- thank you -- SolarWinds reveal how much last year's massive hacking attack cost the
company. We will speak to the CEO, next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. SolarWinds, the tech company at the center of a global hack attack last year says the incident cost it $20
million in the first half of this year. Hackers exploited lapses in SolarWinds system security to infect some 18,000 customers worldwide,
including the U.S. Treasury.
Joining us now is Sudhakar Ramakrishna, he is President and CEO of SolarWinds. Sir, fantastic to have you on the show, and I know this
announcement is part of your earnings, which we'll talk about too, but let's just talk about the cost of the hack attack. Is that it? Is that the
full cost or might those costs increase further?
SUDHAKAR RAMAKRISHNA, PRESIDENT AND CEO, SOLARWINDS: Julia, first of all, thanks for having me here. The $20 million that you mentioned is a part of
the ongoing set of improvements and initiatives that we are expanding in the context of what we call secure by design.
As a result of the hack, we did have consultants and third parties work with us to address what happened and what lessons we can learn. But most
importantly, we are investing in the future through our initiative's called secure by design, as we evolved from a company that was building powerful
and simple solutions to a company that delivers powerful, simple and secure solutions.
[09:45:10]
CHATTERLEY: So, you said it's part of the ongoing cost of upgrading your systems, and I know you weren't, of course, the CEO when this hack attack
happened, and you've come in and said, look, we're going to put our best foot forward, and we're going to tackle a lot of these things.
How great might those costs be? And can you give us a sense of what they are? What does beefing up security, tackling some of the weaknesses that
you identified cost in practice? Because this is practical and an issue for many companies that are facing the threat of cyberattacks?
RAMAKRISHNA: Absolutely. Think of the $20 million that we mentioned as an ongoing part of our business into 2022 and beyond. There are three key
elements of what we call secure by design. One is enhancing the security of our internal infrastructure itself. So for instance, things like zero trust
solutions, endpoint detection solutions, and so on.
Second is to enhance the security of the build systems themselves, which includes new software to provide specific permissions and isolation of our
build systems. And the third one, which is the most important in my opinion, is to improve the integrity of the supply chain itself, the
software supply chain.
Here is where we have invested quite a bit and innovated in building secure software build processes, and we hope to make them a standard in the
industry.
So, one of the things that I was determined to do is, not only are we going to improve our environment, but we belong to a community that is
necessarily focused on the safety and security of all of us, because no single company is capable, regardless of the sources that it has, as well
as the competencies that it possesses to protect itself all by itself.
So, we are planning to share our learnings and findings and our research to the broader community through the secure by design initiative.
CHATTERLEY: I mean, I think, for all of those that were looking at this, the hack itself was incredibly sophisticated. The initial entry wasn't and
there were systemic failures, whether it was an intern with a password or a lack of steps of verification. Can you look at your systems now,
particularly in light of how high profile we now know your clients are, all swathes of the government, The Pentagon, for example, just in the United
States alone, and say something like this can never happen again at SolarWinds. Can you guarantee nothing like this will ever happen again, at
SolarWinds?
RAMAKRISHNA: I wish I could state that about SolarWinds or for that matter about any company out there, Julia. As you know, unfortunately, all we can
do is continue to learn and constantly be on vigil. So the operator phrases that I use internally are constant vigil and constant learning.
So, we've invested a lot, both our Intel resources, as well as third parties to comb through our systems, comb through our environments, and
have no evidence of any threat actor being in our network at this point in time.
At the same time, we have shared all of our learnings very transparently with both the authorities as well as our industry peers, so that they don't
have to go through the same predicament that we went through.
So, this is very much a community vigil activity as I like to describe it. And while we constantly have to learn from one another, and share the
knowledge, I would say there is no guarantees that this will never happen be it for SolarWinds or for that matter, any company out there.
CHATTERLEY: Yes, it's why everybody has to be so vigilant because you can't make that promise, even today with what you know and what you've been
through.
As I mentioned, what made you so alluring was your client list: large firms, state institutions around the world. What are they saying to you?
Have you had any contracts that have not been renewed? Or is it too early to say, a client staying with you or have you lost some?
RAMAKRISHNA: As you stated, we just coming out of our earnings, Julia, and I'm pleased to say that our customer retention rates are ahead of the
pacing that we predicted at the beginning of the year.
That is, I would say a testament to our employees who are super committed to customer success, as well as the relevance of our solutions to
customers. Equally, many of our customers are also developers of software. So, when they see a supply chain attack like this being inflicted upon
somebody like SolarWinds, they can also visualize and imagine that they could be next as well.
So, in many ways, it has created a greater collaboration with our customers where we are able to transparently share our learnings and findings and
that's actually given the level of trust a boost I would say from our customer standpoint towards SolarWinds.
[09:50:02]
CHATTERLEY: Do you think from a corporate risk perspective that ransomware payments should be illegal? Or should companies be allowed to make a choice
in these circumstances when they are -- when they face a demand from a hacker? Should they still be allowed to make the decision? Or should those
be made illegal in your mind, Sudhakar?
RAMAKRISHNA: I'll give you my perspective. Nobody should be in an unfortunate situation to have to pay ransomware. But in many cases, you
cannot generalize and have a one size or one rule fits all because of the criticality of businesses and the timeliness of having to respond.
In some cases, the most prudent and the safe thing to do might be to actually pay and get on to the next level. But this is a larger topic that
needs better regulation, better support across both the public and the private sectors, such that we can continue to reduce and strive to
eliminate the situations that we are all in from a position of having to pay ransomware.
CHATTERLEY: It is part of the problem here. There's no easy answers. Sudhakar, I have about a minute left. What more does Congress need to do to
help support companies and face this threat, whether it's tackling Russia or China, those that have been accused of being behind some of these recent
attacks.
RAMAKRISHNA: I have dealt with a number of Members of Congress, Senators, Congressmen, and others, what I have been urging for is tighter public-
private partnership, specifically not creating a victim shaming environment, where victims must be encouraged, I would say, to come out and
share their breaches and knowledge, because in this particular case, the adversaries have tremendous resources and no scruples. In our case, we have
to follow all of our regulations.
So, one thing that I would encourage Congress to do is provide support and cover regulations that encourage people to speak up more and be more
transparent, as opposed to hold information, delay, and suffer more in the future.
CHATTERLEY: Yes, transparency and swift communication when once something like this happens or is discovered. Sir, fantastic to have you with us.
Thank you for joining us and talking about your writings. And hopefully we'll speak to you soon.
The President and CEO of SolarWinds, Sudhakar Ramakrishna, thank you.
More FIRST MOVE after the break. We'll be back.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE with a quick final look of what we're seeing in terms of early price action and after a higher start, U.S.
stocks have turned slightly lower. Airlines and other reopening names pulling back on delta variant concerns.
Not helping sentiment, too, Alibaba shares also moving lower. The Chinese tech giant reporting weaker than expected sales growth as it faces
increased competition from firms like jd.com, of course, a similar story with Amazon, of course after the splurges that we saw throughout the
pandemic recovering -- competing with the prior year is tough.
[09:55:13]
CHATTERLEY: Now, Watch out SpaceX, Boeing set to launch its long awaited Starliner spacecraft on an unscrewed test flight to the International Space
Station. It is being called Boeing's answer to SpaceX's Crew Dragon which has already begun carrying astronauts.
The Starliner launch comes after a botched first attempt a year and a half ago and mishap last week involving a Russian module on the ISS delayed the
second mission. All being well, the Starliner should dock on Wednesday. Fingers crossed for that. Third time lucky.
That's it for the show. If you've missed any of our interviews today, they will be on my Twitter and Instagram pages, you can search for
@jchatterleyCNN.
In the meantime, stay safe. "Connect the World" with Becky Anderson is up next.
We'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
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