Well. The lovely people from FinTechStage, principally my old friends Matteo Rizzi (who was one of the co-founders of SWIFT Innotribe) and Lazaro Campos (who used to run SWIFT), persuaded me that Consult Hyperion’s more technological perspective on the potential for shared ledger technologies (SLTs) in financial services might be of interest to the delegates at FinTechStage Luxembourg in February. So off I went to dinner with, amongst others, the Minister of Finance for the Grand Duchy of Luxembourg, Pierre Gramenga. Indeed, I found myself sitting next to Pierre who, it turns out, is a very smart and interesting person. Unlike our own Minister of Finance, he is actually an economist and he spent a decade as the Director General of the Luxembourg Chamber of Commerce so he understands the relationship between regulation and business very, very well.
Since I’d been chatting to Pierre, when I was asked to give a few words about the potential for SLTs to the assembled CEOs I decided to put my prepared remarks to one side and talk instead about the way in which Ministers of Finance can change the course of history. I used the example of the Golden Horde to make my point.
When Genghis Khan took control of China in 1215, his fiscal policy was confused. His pacification plan was to kill everyone in China, no small undertaking since China was then, as now, the world’s most populous country. Fortunately, one of his advisors, a man who ought to be the patron saint of Finance Ministers everywhere, Yeliu Ch’uts’ai, pointed out that dead peasants paid considerably less tax than live ones, and the plan was halted. Under Pax Mongolia, China prospered. In 1260, Genghis’ grandson Kublai Khan became Emperor and with his financial advisors determined that it was a burden to commerce and taxation to have all sorts of currencies in use, ranging from copper “cash” to iron bars, to pearls to salt to specie, so he decided to implement a new currency.
A paper currency.
This must have been as shocking to contemporaries as the idea of digital currency is today. It was certainly a shock to Marco Polo, who wrote about it in his travels (I expand on this in a piece on Medium).
I explained to the Minister and the CEOs that Kublai’s monetary policy was refreshingly straightforward and robust. If you didn’t accept his new paper money, he would kill you. Naturally, in a short time, the new single currency was established and paper money began to circulate instead of gold, jewels, copper coins and metal bars. I wasn’t suggesting that Luxembourg institute capital punishment for those refusing to accept Bitcoin, but I was suggesting that a juridiction such as the Grandy Duchy might want to explore creating new kinds of financial markets founded on shared ledger technologies and the ambient accountability that will, as my colleague Salome Parulava puts it, dissolve the boundaries between auditing and compliance to the form a better, cheaper and safer market for asset management, transfer and settlement.
I think it went down OK.
Dave Birch gave one of the the most hilarious and original talks I ever listened to.
Matteo is much too kind, of course, but it was a fun event. One thing I particularly enjoyed (and this is a genuine sentiment) was disagreeing with my old friend Chris Skinner. Chris gave a thought-provoking presentation around his new book “Value Web”
Using a combination of technologies from mobile devices, wearables and the bitcoin blockchain, fintech firms are building the ValueWeb regardless
Chris’ thesis is that out of the blockchain of bitcoin will come a new shared database on the internet that banks will use that will be far cheaper and more geared to real-time than the proprietary structures they use today, but I think I disagree. Whether the blockchain is either instant or free I will leave as an exercise for the reader, but in my presentation on SLTs I chose to focus on a different set of emergent properties around transparency. My point was that even if the blockchain, to use Chris’ example, isn’t cheaper or more real-time than current asset transfer, clearing and settlement systems, it delivers a win-win-win for customer, service providers and (crucially) regulators. I made similar point when I was invited to take part in Lazaro’s panel with Simon Taylor of Barclays and Jon Matonis, formerly of the Bitcoin Foundation.
We didn’t agree about everything either. I think audiences get bored with bland backslapping on stage. Personally, I learn more from seeing smart people disagree about something than I do from sitting through a bunch of marketing slides. So, as you can imagine, I was delighted to be invited by Chris to take part in tonight’s Financial Services Club debate.
For the past year, banks have become really excited about blockchain technologies. The claim is that these technologies will allow banks to create instantaneous exchange over the internet for near free. But is this true?
Under Chris’ guiding hand as chairperson, I’ll be debating the issue with Jon and trying to convince the audience that financial services organisations should be learning about, playing with and planning for SLTs whatever they think about the speed or cost of the blockchain (or, indeed, a blockchain).