There appears to be a power struggle underway between banks and politicians as the digital revolution eyes the disruption of finance and money itself.
Bringing the benefits of new technology to this very ancient area which hasn’t really seen much fundamental change since the 1,500s upgrade to paper money.
But while new inventions and competition may be very beneficial to individuals, businesses and perhaps even governments, incumbents being disrupted usually would rather all this new stuff just goes away.
Hence we hear Jamie Dimon, JP Morgan’s CEO, gloat at China’s ban, while suggesting governments of the free people might do the same. So joined by a chorus of other old bankers who can’t fathom how this new world would operate.
Including the president of ECB, who told off the millennial run Estonian plans to issue a government ICO in furtherance of a global state of sorts.
But, as much as fringe bitcoiners may not believe, and as much as those who understand its intellectual underpinnings predicted, this space is finding an unlikely alliance in governments and politicians themselves, at least some of them.
Many were surprised in 2014 when Britain came to the aid of this space at a very difficult time. I recall speaking to the treasury spokespersons back then asking for comments, who I expected to be cold, but to my surprise they were acting like jumping puppies so excited to inform.
In contrast, speaking to the American equivalents at the time felt like ice. They most likely believed the fringe rhetorics, which were hiding a gem, but the Brits had seen through it.
London is in many ways the world capital of banking. After they collapsed, they nearly bankrupted the country. The then David Cameron led conservative government had been given a mandate to make some very difficult decisions on public spending.
Banks held the public hostage, and they all new it. But what could be done? The likely strategy the British government came up with was to embrace the free market and increase competition in banking, which in many ways is a cartel of sorts.
It was the British government that coined the term Financial Technology (fintech). They probably saw traditional entrance to the market was low because banking is highly regulated and requires stupendous amounts of upfront capital. But they also likely saw that technology could change things.
Thus they encouraged greater competition to the point one of the regulators declared a “beautiful partnership” in 2016. Today, their approach is being copied across the world, except for America.
US’s problem is they lack an over-reaching regulator. With considerable layers upon layers of bureaucracy, over-lapping agencies, and an overall outright mess.
But they came up with a suggestion that the Office of the Comptroller of the Currency (OCC), which is, as the name says, in charge of the currency in non FED aspects, could take the nation wide regulatory role.
However, their plans are now entangled in a court case, at the same time as their private enterprise makes some significant advances. While their regulators are seemingly tacitly taking a non-enforcement approach where the spirit of the law is upheld, at the same time as discharging their duty in widely supported cases, such as where fraud is involved.
But, overall, they are clearly lacking leadership, and, realistically, they also appear to be lacking direction. Which brings us to a bigger picture.
With Cameron gone and UK mired in Brexit, Trump appearing to really be achieving nothing after nearly a year in office, while EU is busy shooting down their one bright spot in Estonia, and with China making an exit, an unlikely world leader has risen to back this space. Vladimir Putin, the President of Russia.
He personally got involved yesterday after the Russian Central Bank suggesting access to crypto-exchanges will be banned, with Putin saying:
“I would like once again to draw your attention to the need to use the advantages that are offered by new technological solutions in the banking sphere.
At the same time it is important not to create unnecessary barriers, of course, but rather to provide essential conditions for advancing and upgrading the national financial system.”
It is a unequivocal diplomatic statement which makes it clear he thinks digital currencies and blockchain technology is an upgrade of the financial system.
He probably sees an advantage, perhaps even strategic, which could considerably aid Russia’s economy in the same way as railroad tracks did in the 1800s.
Whether he is right remains to be seen. Cameron was. But Moscow is no London. However, that can be an advantage. In particular, their less developed banking system could allow them to leapfrog more easily.
With state backing and endless funds, the opportunities here can be immense, especially in industrial technology, which could connect to digital finance, giving machines a mean to automatically transact and exchange value.
That’s futuristic, in many ways, but the robots are here and they would be a lot more useful if, instead of being limited to just moving stuff, they could buy stuff too.
Something they can’t quite do with centralized money because they require input, such as a password or pin, while decentralized smart contracts automatically authenticate through the written network code.
And if the system can so be sufficiently good for bots, then it is probable it is pretty fine for humans too. Including bankers, who most likely will continue to play a role if they adapt, although perhaps a smaller role.
But it is likely there will be plenty of jobs for them, and for others. Better jobs, far more productive positions, just as it has been the case previously.
Because as we advance, complexity and entropy advances too. Creating plenty to do in the race for better, faster, stronger, and higher.