The Future of Money: The 3 New Ideas You Need to Know this Week (Issue 19 - 8 November 2020)

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!

Make sure to subscribe (and join the over 15,000 who have already done so!) to receive your Future of Money newsletter in your inbox every weekend! 

If you enjoy this content, you will also love what I post on Twitter (@HenriArslanian) and the library of videos on my YouTube channel.

Following this intense US election week, we decided to have a special issue focused exclusively on the USA this week!

Here we go!

1. Are Americans’ Banking Habits Changing?

The 2019 FDIC report on how Americans do their banking was recently released. 

Whilst this data was collected pre-COVID, the report nevertheless reveals some fascinating trends.

First of all, only 5.4% of US households were unbanked in 2019, meaning that no one in the household had a checking or savings account at a bank or credit union.

Source: FDIC

But 5.4% still represents 7.1 million U.S.  households.

So why are so many Americans still unbanked?

The two main reasons commonly given for not having a bank account is not having enough money to meet minimum balances and not trusting banks. 

Source: FDIC

Geography also comes into play when focusing on unbanked rates, which have always tended to be higher in the South.

The unbanked rate in the South in 2019, for instance, was 6.2 percent, compared with 5.0 percent in the Midwest, 4.9 percent in the West, and 4.7 percent in the Northeast. 

Source: FDIC

The report also contains insightful data on the banked population. 

One of the most fascinating data trends included in the report concerns the use of mobile banking, with 34% of households using this as the primary means to access their bank accounts. This represents a nearly 25% jump in mobile banking since 2015.

For instance, 1 in 3 Americans used mobile banking in the last year alone as their primary method of account access. Back in 2015, it was only 1 in 10.

The report also zooms in on differences between non-bank financial transactions between the banked and unbanked. 

For banked households, those consist mainly of P2P payments on platforms like Venmo or PayPal. 

For the unbanked, money orders and check cashing represented the bulk of non-bank financial transactions. 

Source: FDIC

The survey will be conducted again in June 2021, with the results expected the following year.

It will be very interesting to see if COVID has any influence on the results... 

Pic of the Week

With Bitcoin surging past US$15,000, those who were waiting for the dip to get in may have to wait a bit longer…

Source: Cryptoaims

2. Why Americans Are Increasingly Investing in Bitcoin

A new survey from Grayscale has given us some interesting data on Bitcoin interest and adoption in the U.S.

More than half of American investors are interested in investing in Bitcoin, with 55% of survey respondents expressing interest in Bitcoin investment products in 2020. 

This marks a significant increase from the year prior, when only 36% of investors expressed interest of any sort in Bitcoin. 

Source: Grayscale

Among those who reported investing in Bitcoin, 83% have made investments within the last year. 

Meanwhile, 38% of Bitcoin investors have invested over the last four months, and nearly two-thirds of those surveyed reported that the ongoing ramifications of COVID-19 were a factor in their decision to do so.

Grayscale also looked into the factors and demographics that shape the likelihood of Bitcoin investment. 

For instance, investors who would consider Bitcoin are likelier to be younger males living in urban areas.

Additionally, the higher the level of education an investor has, the more likely he or she is to invest in Bitcoin: 29% of all investors surveyed with graduate degrees have invested compared to only 17% of those with no college degree.

Could this huge jump in interest in Bitcoin be one of the drivers behind the bull market that we are seeing today?

After all, it has been an absolutely crazy week in the crypto markets. 

Bitcoin surpassed US$15,000. ETH surpassed US$400.

And the total crypto market cap surged past US$430 billion.

Source: Henri Arslanian GIPHY page

According to Glassnode, the number of Bitcoin accumulation addresses has risen to a record high of 519,228. 

Accumulation addresses are addresses that have at least two incoming transfers and have never spent any BTC.

This metric also does not include addresses belonging to miners and exchanges or addresses that have been active for more than seven years.

Since the beginning of 2020, these accumulation addresses have increased by 9% and the number of bitcoins locked in them has risen 20%, which tells us that investors have been accumulating coins throughout the year.

The crypto derivatives market has also become a source of increased amounts of interest.

For instance, the open interest on Bitcoin options contracts has reached an all time high of US$2.9 billion.

Source: Skew

There seems to be no signs that this bull market is going to slow down any time soon. 

Bitcoin is already up over 100% this year and, for many, the question now isn’t whether Bitcoin will go up but how fast. 

Money Quote of the Week

“I have enough money to last me the rest of my life, unless I buy something.” 

Jackie Mason

3. How the U.S. Government Seized a Billion Dollars of Dark Net-Linked Bitcoin

This week, the U.S. Department of Justice filed a civil forfeiture complaint after completing the largest seizure of digital assets to date: approximately US$ 1 billion in Bitcoin and other cryptocurrencies

Source: Henri Arslanian GIPHY page

The seized funds stem from the investigation of the darknet marketplace Silk Road.

Silk Road was the first major digital darknet market where illicit goods and services, including illegal drugs, were bought and sold. 

In 2013, law enforcement shut Silk Road down and arrested its owner and operator, Ross Ulbricht, who was later sentenced to life in prison.

At its peak in early 2013, Silk Road accounted for nearly 20% of all Bitcoin activity. 

Source: Chainalysis

Earlier this year, law enforcement agents analyzed Bitcoin transactions linked to Silk Road and identified 54 previously undetected bitcoin transactions representing the proceeds of unlawful activity.

They also found that a hacker, represented as Individual X in the graph below, stole those funds from Silk Road. 

 Source: Chainalysis

Last week, federal investigators were able to seize and  transfer the assets into a government-controlled digital wallet.

As I’ve explained in previous issues of this newsletter (e.g. here and here), cryptocurrencies and blockchain provide the traceability and transparency that fiat money simply lacks, making illicit transactions that much easier to track for law enforcement.

My Crypto Capsule This Week

I needed more than 60 seconds this week...

My FinTech Capsule Interview This Week

Great interview filmed in January 2020 in Davos during the World Economic Forum.

My Upcoming (Virtual!) Speaking Engagements

17 November - HK Blockchain Week

17 November - CBDC Week

18 November - FinTech Americas

23 November - HK Institute of CPAs

8 December - Linkedup Conference

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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]