The Future of Money: The 3 New Ideas You Need to Know this Week (Issue 14 - 3 October 2020)
Henri Arslanian
Co-Founder, Nine Blocks Capital - Crypto Hedge Fund | ex-PwC Global Crypto Leader & Partner | Co-Host, Crypto Weekly TV show on CNBC Arabia | Host of Crypto Capsules & The Future of Money podcast | Best Selling Author
Dear Friends,
Welcome back to my weekly newsletter where I share some of the major developments on the future of money that you need to know about!
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If you enjoy this content, you will also love what I post on Twitter (@HenriArslanian) and the library of videos on my YouTube channel.
1. Do Americans Understand Money?
An interesting survey was conducted by Genesis Mining to try to understand how Americans perceive money.
The findings show that one third of surveyed Americans believes that the greenback is backed by gold or oil.
Source: Genesis Mining
The ability to convert US Dollars into gold ended during the Nixon administration in 1971, so it’s interesting that so many Americans still believe in the gold standard nearly 50 years after it ended. Let’s not even start on an oil-backed dollar...
The survey also tried to understand how well the average American consumer understands the Federal Reserve, banking, and fiat money.
Source: Genesis Mining
Whilst nearly 60% of the surveyed public answered correctly, a quarter of respondents said that the US Mint (which merely makes coins in response to policy demand) was responsible for creating more money.
All in all, this survey shows that a lot of education on this topic is needed.
But interestingly, or not surprisingly, (depending on which side you stand!), the survey shows that over 95% of Americans trust their banks.
This is significantly higher than what is generally observed in other parts of the world.
For example, a recent survey indicated that more than half of consumers in Hong Kong don’t trust their banks.
The data also shows that Americans trust banks more than they trust the police.
And maybe not surprisingly trust banks more than politicians...
Money Quote of the Week
“When people ask me if I have any spare change, I tell them I have it at home in my spare wallet.”
Nick Arnette
2. Deutsche Bank on CBDCs
Deutsche Bank has published a report on central bank digital currencies arguing that CBDCs, if implemented, will have major and profound implications for all economic actors that should not be taken lightly.
The report highlights the benefits that CBDCs can have for central banks.
For example, Deutsche Bank highlights that CBDCs can help central banks in ensuring that any shift in monetary policy is not diluted by the string of financial intermediaries.
A policy change could in theory be implemented directly in the CBDC without the need to have to wait for intermediaries (e.g. commercial banks) to transmit policy decisions to individuals and companies, often with a delay or in a modified form.
Second, central banks could use CBDCs to address specific problems around low or negative interest rates.
For example, with extremely negative interest rates and no ability to hold back cash for future purchases, investors could find it more desirable to spend money now (thus stimulating economic activity) or invest in (non-deposit) financial assets.
Source: Deutsche Bank
Third, central banks could use CBDC as “helicopter money” to stimulate demand by directly and quickly transferring money to individuals rather than relying on the transmission via banks and traditional channels.
This can be extremely useful in times of bank lending tightening and declining consumer confidence due to a deterioration in economic conditions.
Deutsche Bank also highlights the benefits of CBDC from the government’s point of view.
It mentions that CBDCs would make it easier for regulatory authorities and commercial institutions to see and trace every transaction and spot certain behavioural patterns, making it easier to crackdown on money laundering or tax evasion.
Governments or other parties could also use CBDC as a better mechanism to manage social benefit transfers. For example, with a CBDC, claims by companies and individuals could be directly met, with a lower possibility of mispayment or fraud.
However, Deutsche Bank rightly highlights some of the serious pitfalls.
CBDCs could become an external as well as internal political tool of control.
Adoption of CBDC in key bilateral trading relationships could also erode the U.S. Dollar’s primacy in the global financial market.
And a CBDC could also change the internal institutional dynamics of a country – for example, by reducing the independence of the central bank as the distinctions between monetary and fiscal policy become ever-more blurred.
Source: Deutsche Bank
In any event, this is just another example of the growing importance of the debate around CBDCs, not only in academic or policy circles but in banking and financial circles as well.
Funny Post of the Week
Referring the first documented purchase of goods in Bitcoin: two pizzas for 10,000 Bitcoin, the equivalent of US$41 at the time. We covered the full story in a previous issue of this newsletter.
3. Is Bitcoin Wealth Being Distributed Equally?
Over the past several years, one of the biggest criticisms of Bitcoin was that it was dominated and controlled by a small handful of individuals that held a lot of Bitcoin, often referred to as “Bitcoin Whales.”
But whilst Bitcoin still has its “whales,” new data from Coinshares suggests that the cryptocurrency is gradually becoming more and more diversified in terms of who’s driving the market.
Three indicators, in particular, allow us to measure this development.
First, smaller accounts account for an increasing proportion of the aggregate supply as shown in the visual graph with data from 2011 to 2020 below.
Second, the majority of Bitcoin addresses only hold small balances, with the majority of addresses holding less than 100 U.S. dollars of Bitcoin.
Third, the level of hashpower (the number of times the dice is being rolled for those who have watched my Explainer video on how Bitcoin works) has not only increased exponentially over the years but has also been more widely distributed.
This ensures that the network is secure and cannot be taken over by a single party.
So with the increased parity in the crypto ocean, perhaps we’ll begin to see fewer whales, opening up more opportunities for all of the other marine life out there!
My Crypto Capsule Commentary This Week
My Latest (Long Form!) FinTech Capsule Interview
You love the short form FinTech Capsule clips on LinkedIn but would love to see more? Well, the long form interviews are now available on my YouTube page.
My Upcoming (Virtual!) Speaking Engagements
6 October - Futurism Forum
6 October - FinTech South
7 October - LA Blockchain Week
14 October - Bermuda Tech Summit
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See you all next week!!
Henri Arslanian
*Please note that this newsletter reflects Henri’s personal views and not those of any organisation he is involved with.
Who is Henri?
Passionate and focused on the future of finance and money, Henri Arslanian is the PwC Global Crypto Leader, the former Chairman of the FinTech Association of Hong Kong and an Adjunct Professor at the University of Hong Kong, where he teaches the first FinTech university course in Asia.
Henri advises many of the world’s leading crypto exchanges, investors, financial institutions and tech firms on their FinTech and crypto initiatives as well numerous governments, regulators and central banks on Fintech and crypto regulatory and policy matters.
With over 500,000 LinkedIn followers, Henri is a TEDx and global keynote speaker, a best-selling published author and is regularly featured in global media, including Bloomberg, CNBC, CNN, the Wall Street Journal and the Financial Times.
Henri was named by LinkedIn as one of the global Top Voices in Economy & Finance and is the host of the FinTechCapsules? and CryptoCapsules? social media series.
Henri was recently named by Onalytica as the #1 most influential individual on Finance globally on LinkedIn out of 50k+ individuals working at the top professional services and management consulting firms in the world.
Chambers Global also named Henri the “highest profile FinTech consultant in Hong Kong” and Asian Private Banker awarded him the “FinTech Changemaker of the Year” award.
Henri’s latest book, The Future of Finance: The Impact of FinTech, AI and Crypto on Financial Services, published by Palgrave Macmillan, was ranked as one of Amazon’s global top 10 best-sellers in financial services and was recognized as one of the “Best FinTech Books of All Time” by Bookauthority.
Before joining PwC, Henri was with a FinTech start-up and previously spent many years with UBS Investment Bank in Hong Kong. Henri started his career as a financial markets and funds lawyer in Canada and Hong Kong.
You can learn more about Henri on his website (www.henriarslanian.com) and you can reach him at [email protected]
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4 年Always enriching information
Co-Founder, Nine Blocks Capital - Crypto Hedge Fund | ex-PwC Global Crypto Leader & Partner | Co-Host, Crypto Weekly TV show on CNBC Arabia | Host of Crypto Capsules & The Future of Money podcast | Best Selling Author
4 年Happy to see all the good feedback on this newsletter! Stay tuned for the next issue every Saturday!
+9 Years in Blockchain ? Founder 5ire.org (+1.5 billion USD) Techstars ? Speaker ? Ex- EU , UN
4 年An average american trusting more banks than police worries me as much as the fact that some part of the population think that the president is responsible for issuing currency! Henri Arslanian very eye-opening & comprehensive report.
LinkedIn Top Voice I Banker I Helping High Networth clients protect & grow their Wealth I Relationship Management I Diversity & Inclusion Enthusiast I Author I Succession Planning
4 年Interesting post Henri Arslanian Particularly enjoyed the first section on "Do Americans understand money"
Board Member at Mushaf Muscat Fund, SQU
4 年Great and Thanks