c2c #40: Fintech pitches, crypto lawyers, carbon markets, UK's new chancellor
I’m the author of Cowries to Crypto about the history of money, and the c2c newsletter is my personal take on innovation in finance and capital. In here you will find:
1.???Work from the Week: highlights from my day job covering fintech
2.???Talk of the Town: internet hot takes on tech and finance
3.???c2c: thoughts on innovation and related topics
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1. Work from the Week: Stories from DigFin: Fintech demo day, crypto lawyers unite, AirCarbon Exchange
What ideas are Hong Kong fintechs pitching? I hadn’t been to a fintech demo session for a while. Accenture hosted a day at Cyberport as part of a bigger fintech event – I’ll have some takeaways next week.
The morning began with five fintech presentations, and a trio of VCs as “judges”, although they didn’t actually judge, they just asked a question or two. Not sure why – perhaps the pool of fintechs was too limited. Not sure if I should read anything into that. Anyway, I thought I would do what no one else seemed keen to do, which is, open my big fat mouth.
Legal eagles fight for crypto retrievals: In this era of search optimization and keywords, I’m supposed to have a very Google-friendly headline. But sometimes I just like to play around.
Nonetheless, it was interesting to speak with some of the lawyers that have formed a local chapter of a budding group that seeks to facilitate law enforcement within the crypto space.
My question is, now that we’re normalizing crypto so it’s kinda sorta on par with tradfi, can we do better? Because AML and other rules for licensed banks don’t actually work.
DigFin Green: AirCarbon X’s Thomas McMahon: Yet another cutting-edge platform being built out of Singapore, this time to bring liquidity to voluntary carbon credits.
There’s an interesting fork in Asia, with Singapore driving next-gen markets for green finance and Hong Kong becoming the region’s key player for green bonds – the closest thing to sustainability instruments in today’s capital markets.
2. Talk of the Town
?Notes from Yesterday – the lost paradigm.
Bloomstran's thread is an incredible dismantling of ideas that require very selective fact-picking. Anyone in sales, please take note.
Meanwhile British commentator Frances Coppola has the best take on Ben Bernanke winning the Nobel Prize anywhere. I've seen a lot of hot takes about how he created the mess in 2008 and blah blah blah. Less commentating on the work of Diamond and Dybvig, except for Dybvig's preference to look like a hobbit. Coppola cuts to the heart of the matter by asking "what is a bank" to understand the 2008 crisis and how the Fed responded. Read her thread.
Notes from Today
Another thread worth exploring:
领英推荐
I'm not sure which is more over: the libertarian wing of crypto, or global prospects for Chinese innovation.
Schneider's view may turn out to be misleading - we don't have enough info yet on this and the data points he's looking at may be cherry picked or incomplete. But the wind ain't blowin' the other way.
I'll conclude by this not-actually-helpful tweet by Larry Summers, who has so far been correct about inflation and wants to see the Fed remain hawkish. Its ability to do so will be constrained by the risk of driving up unemployment, so a Volcker-like response seems out of the question in this environment. Summers knows this and the exasperation kinda sums up where we are.
3. Weekly c2c: Why Kwasi Kwarteng is gone
After all the hullabaloo around the UK’s budget – collapsing pound, BoE interventions, pension fund duration mismatches – the firing of chancellor of the exchequer, Kwasi Kwarteng, didn’t even merit a headline in the major media. I guess it was just so obvious that the financial press basically took it as given. Now Jeremy Hunt grasps the nettle.
Kwarteng fell on his sword for his equally misbegotten prime minister, Liz Truss. But why? What’s wrong with championing free markets, private enterprise, and a competitive tax regime?
Thatcher and Reagan were voted in to kill stagflation, a terrible situation of high inflation and high unemployment. The UK just suffered the indignity of an IMF bailout. Paul Volcker provided the necessary assistance at the Federal Reserve, establishing the power of the independent central bank. Government debt as a ratio to GDP was manageable. The era of fiat money, global capital flows, global tax avoidance, and globalized manufacturing was just getting started. The Communist block was still disconnected from the rest of the world.
That is not today’s world. Today we have out-of-control flows of global capital lorded over by the US dollar, the vast financialization of the industrialized economies, the return of (moderate) inflation, high public debt (that will be dealt with by tolerating moderate inflation), a hot war in a Europe that gave away any energy independence, gross social inequalities, authoritarian China in an increasingly fraught competition with the US, and a huge investment need for energy transition.
Bringing in a Thatcherite agenda for a world that looks more like the early 1950s than the late 1970s was a colossal misread, not just of the British electorate (which didn’t actually vote for this) but of the world today.
The heart of this misread is the assumption that the status quo of free capital flows and laissez-faire economics is the norm. This would assume that the world’s decoupling from Russia is an exception, or even temporary. It is not. Russia is merely the most extreme example of more to come. The US has now passed a sweeping act to prevent China’s technological rise, even requiring US passport holders to quit working for many Chinese tech companies. It’s just a matter of time before the US bans its pension funds etc from investing in VC or other funds that support China’s tech sector.
The overly strong dollar is wreaking havoc among emerging markets and even the UK, Europe and Japan. Before, some of these countries could rely on Chinese loans, but the price of Chinese largess is going to increase. The world needs a tax on crossborder financial transactions; what it’s more likely to get is a growing number of countries and regions raising capital controls.
The need for most countries to reduce their debt and invest in their own infrastructure and social programs will also mean a greater role for government spending and a tolerance for middling but persistent inflation. This is a vote-getter as well as a way to gradually restore public finances and shore up fiat currencies.
In the more innovative corners of the market, there will be plenty of funding and vast needs for tech. Alternative investments will be very popular with institutions that are otherwise being forced to swallow lots of unappetizing government bonds. But the hype cycles in VC over the past 20 years will give way to something more mundane – and LP flows will becoming increasingly domestic. VCs beyond the US will have to rely increasingly on local sources of capital, so the ability to innovate will correlate to a country’s capacity for domestic capital formation and allocation.
Were I the new UK chancellor, I’d create a budget with these things in mind.
See you next week
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About Jame
Jame DiBiasio is a book author, financial journalist, media entrepreneur, and a speaker/moderator. In 2015 he launched DigFin, an online media covering digital finance that is part of the digital arm of Hong Kong-based financial group AMTD. Jame is also a member of the board of the Hong Kong Fintech Association.
He is author of “Block Kong” (co-authored with Charles D’Haussy) profiling 21 blockchain entrepreneurs in Hong Kong; and “Cowries to Crypto: The History of Money, Currency and Wealth”. He is currently working on a book about the venture capital industry.
Jame has also written books about Asian history, including “Who Killed the King of Bagan?” and “The Story of Angkor”. He writes thrillers too. You can find all of Jame’s published books on Amazon.