The Great Financial Crisis was the defining macro event of a generation (Millennials). It remains poorly understood. If we don’t understand the past, we can’t re-invent the future. See my piece on
The Chinese central bank has a new digital currency chief who says its upcoming digital yuan has features not offered by Facebook Libra. “Its functional attributes are exactly the same as paper money, but it is just a digital form,” Mu said. Perhaps most notably, he set out some of the digital currency’s technical aspects, and compared it with Facebook’s Libra.
The Swiss regulator FINMA, completely unaware that the Financial Action Task Force regulations are 99.9 percent ineffective, has issued a set of guidelines for how projects like Libra must comply with their banking laws when dealing with Swiss Citizens.
A Zurich think tank released a paper on Libra that I thought was a) very well written, b) pretty much smart, and c) only in a few places completely wrong. You can read the original paper, or you can just watch my video review and see both their thinking and mine:
They worry that world-scale demand for Libra might put too much buying pressure on the Swiss Franc, but I explain in my video that they can probably deal with it by selling assets. I forgot to mention, however, that the Libra team will constantly be watching to see their effects on various currencies and can easily adjust their mix to keep things stable. Too many people are creating too many far-off scenarios about Libra that simply won’t happen. We need more experiments like Libra. Let’s get it started and see how it goes. Regulators will have full visibility and will be able to do nasty things to the project later if they want, but let’s not stop it now based on a bunch of armchair thinking.
The Minister in Assistance to the President and Environment, David Paul lays out the plans for a sovereign currency using blockchain technology. This is a brave initiative, gets high marks for being cool and techy, but it is poorly conceived and has no chance to survive. The islands are too small, the dollar too strong, and the monetary policy too naive. They want their money supply to increase 4 percent per year, regardless of what happens. This will be too much in many years, causing unnecessary inflation, possibly not enough in an emergency, and has no chance to cool off an overshoot. Still, it's worth understanding ...
The Government Blockchain Association is having its second symposium on the future of money, September 14th in Washington, DC. Unfortunately, I won’t be speaking, as I’ll be in California on assignment for a client. But if you can go, you should:
The Digital Money Forum is pioneering a path to the digital economy by gathering companies and leaders who’ve been at the forefront of fintech, blockchain and cryptocurrency advancements. If you’re heading to CES next year, be sure to include the Digital Money Forum, at CES on January 7-10th 2020 in Las Vegas.
I published an essay last week on AML effectiveness. It’s based on my conversations with Ron Pol, an expert on regulatory outcomes with in-depth knowledge of the AML regime’s track record. It’s abysmal.
I would be interested to write a textbook for a major publisher. Until then, I’m writing a chapter at a time as essays. I’m also including online resources. And I’m looking for any bright people who want to help scour the web for good content. Contact me (firstname.lastname@example.org) if you want to join our team. Meanwhile, please bookmark and read …
Sweden is anticipating a cashless society by issuing the e-krona. The Swish bank summarized a report detailing the monetary policy, and predictions on how the Riksbank will implement a cashless society using the the e-krona.
There are many stablecoins out there, and most of them are either not stable or they are stable at a very high price to those maintaining the stability. I haven’t yet seen a crypto-collateralized stablecoin I thought would work. If anyone is going to do it, I have high hopes for the Reserve team, but they have huge regulatory headwinds in front of them.
One smart stablecoin is the ndau, by Cosimo Ventures (disclosure - old friends of mine). ndau is a stablecoin backed by a large basket of mostly real-world assets. It is priced using curved bonding. That makes it very interesting. It’s a significant project with a lot of good thought and people behind it. The product is just now getting listed on exchanges.
Banks remain reluctant to partner with the global crypto market due to money-laundering concerns. Consequently, this reluctance hinders UK based cryptocurrency businesses to bank overseas. Iqbal Gandham, the CryptoUK chair challenges this traditional mode of operating with a call to action, asking to establish the steps that are needed to take in order to get easier access to banking.
Over the past decade, China has leapt forward tremendously in payments, while the US is still mailing checks and signing credit card receipts. A new Brookings Institute paper by Aaron Klein takes us deep into the world of Chinese payments and shows how far we in the West have to go just to catch up. Klein shows us that in Asia payments are integrated into commerce, whereas in the West they are still part of the banking apparatus. That’s a big deal. This is important reading:
France is creating a G7 task force to study how central banks ensure crypto currencies like Facebook’s Libra are governed by regulations ranging from money-laundering laws to consumer-protection rules. “We want to combine being open to innovation with firmness on regulation. This is in everyone’s interest,” Governor of France, Francois Villeroy de Galhau told finance industry officials.
According to a study done by the IMF, several banks are considering implementing a form of a Central Bank Digital Currency (CBDC). While motivations for this initiative differ by country, one similarity reveals that most central banks are not interested in issuing an entirely anonymous CBDC, as the institutions want transactions to ultimately be traceable by authorities when necessary.
Coogan Brennan at Consensys has written a cogent overview of the Libra ecosystem. There’s a lot of overlap with mine. I point out a few red flags he doesn’t, but his in-depth look at the Move programming language is great for people interested in the details.
Be sure to sign up for as many of the Consensys newsletters as you can - they are all worth reading.
“Remittances are too costly and inefficient to tackle the persistent economic problem of global money for the poor” The solution? An effective and reliable means of international payment to provide cross-border liquidity for the poor. In this piece, Camila Villard Duran argues that we need blockchain and cryptocurrencies to solve the problem of micropayments. It’s short. Please read:
The creation and exchange of physical cash is costly- which leads to the on-going adoption of digital currency. The Future Agenda predicts that existing payments and banking chains will spread out and fragment, leading to further growth in non-traditional financial institutions. There will also be growth in alternative currencies and money networks, and the first state issued flat digital currencies.
In early August, George Selgin (Cato institute) debated Saifedean Ammous at a Soho Forum event. The question they tried to resolve was: “Can bitcoin replace government-issued money?” Selgin argued that while bitcoin is a good product, it doesn’t have what is necessary to replace fiat currencies, while Ammous said “It’s the only thing we’ve got, deal with it.” Interestingly, Ammous managed to convince the audience and move them in his direction. I believe Selgin is right. He’s very well informed, though I disagree with his concept of “very vulnerable to hacking” - I think that’s a misunderstanding. But his argument is mostly based on volatility, and that’s key. Please watch:
Outgoing (he’s leaving and he’s vocal) Bank of England governor Mark Carney said at Jackson Hole yesterday …
“It is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies.”
“An SHC could dampen the domineering influence of the U.S. dollar on global trade.”
Carney is excited about the potential of blockchain to re-plumb the world’s money system. It’s too bad he doesn’t understand how to properly govern his own currency, the pound. But on a technical level he’s a champion of the future. He “coined” a new term: Synthetic Hegemonic Currency. In other words, Libra.
I gave a webinar yesterday on the BrightTalk platform. I think I described the Libra ecosystem fairly in 45 minutes. You have to register, but it’s a great source for excellent talks, so I recommend watching when you have time: