The Future of Money: five developments you need to know this week

Dear friends - welcome to my new 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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1. China gets serious with launching its Central Bank Digital Currency

After screenshots of a mobile app accepting China’s new digital currency (called Digital Currency Electronic Payment or DCEP for short), went viral online, the People's Bank of China confirmed in a statement that a pilot is being launched on a trial basis in four cities: Shenzhen, Suzhou, Chengdu and Xiong’an.

The government will even start paying half of employees’ transport subsidy in a district of Suzhou in the digital currency. 

Whilst the novel coronavirus may have initially slowed down any rollout plan, the risk of paper money transmitting the virus may have acted as a catalyst, especially as China has been taking banknotes out of circulation to disinfect them with ultraviolet light and high temperatures. 

The short term impact may be limited. China is practically a cashless society already today with over 90% of people in cities using mobile tools like Wechat Pay or Alipay as their primary transaction method.

However, this matters because it is not a question of if but rather when central banks will issue digital currencies. 

Whilst there are always concerns over data privacy and financial inclusion that remain to be addressed, countries from the United Kingdom and Sweden to the Bahamas and the Marshall Islands have been exploring and experimenting with CBDCs.

Still, this launch will give China a leading advantage as the first large global economy to properly pilot such a novel concept which could set the standards for the future of money.

2. Hackers return the stolen funds!

When is the last time you heard of robbers returning stolen money to the bank they robbed? Worst heist movie ever right?

Well that happened last week in the crypto space where hackers returned most of the US$25 million worth of crypto currency which they stole earlier.

Why? Whilst details are still unknown and the platform in question mentioned that it was a collaborative effort involving a range of folks from partners to law enforcement, it is possible that these hackers had no choice after their funds were blacklisted. 

Unlike fiat money, most cryptocurrencies are traceable and allow law enforcement to see where the funds are moving in real time. Whilst there are some tools like mixers or scrupulous brokers that still allow criminals to launder their crypto without asking the required questions, the reality is that such activities are becoming increasingly difficult and risky.

For example, less than 0.46% of crypto activity last year was related to criminal activities when you remove traditional ponzi scheme scams. So next time you want to commit a crime, use cash. These hackers learned their lesson the hard way!

      Source: Chainalysis

3. After the ICOs, here come the Reversible ICOs

Around US$20 billion were raised in 2018 by Initial Coin Offerings (ICOs) before falling to (only) US$4 billion last year. However, ICOs will mainly be remembered for scams, regulatory investigations and pumps and dump schemes. Make way for the Reversible ICO.

In a Reversible ICO, buyers reserve tokens and then buy those reserved tokens over a period of time (e.g. many months). During this time, these buyers have the option of getting their funds back at any time if they are dissatisfied with how the project is moving forward or even after simply changing their mind.

It's a bit like buying a house after seeing the design plans but having the right to a refund anytime before the house is ready.

This matters as, despite all the bad press surrounding them, ICOs offer many benefits, from democratising access to capital to enabling new business models. The Reversible ICO could potentially provide everyone -- including regulators who could be more open to this -- with more peace of mind. . 

Quote of the week

"When I had money,

everyone called me brother."

Polish proverb

4. Money keeps pouring in the crypto space 

The entry of institutional investors into the crypto space is a topic that is often discussed. Crypto asset manager Grayscale announced in its Q1 update last week that it had received inflows of over US$500 million in the first three months of the year. 

What is interesting is that 88% of inflows came from institutional investors, the overwhelming majority of which were hedge funds.

The fact that Bitcoin may have outperformed many other asset classes over the last 12 months (+40%) despite its most recent +50% drawdown may have picked the attention of many.

5. Libra 2.0

Did you really think I wouldn’t talk about Libra! The Libra Association issued an updated whitepaper last week which points to fundamental revisions like moving from a permissionless blockchain to a permissioned one, focusing on single currency stable coins and changing the Libra coin from being a separate digital asset to being a digital composite of those digital coins. You can find my LinkedIn summary on the 10 things you need to know here.

It’s perhaps no coincidence that this development comes only days after a report from both the European Council and the Financial Stability Board warning of the systemic risks of global stable coins. But the Libra Association made it clear that it intends to work with regulators, central banks and financial institutions over the coming months. 

You may like Libra. You may hate Libra. But one thing that is sure is that its announcement nine months ago, has brought the topic of the future of money on top of the agenda of any policy maker, central banker or regulator. This was a much needed catalyst. 

Tweet of the week:

You may be wondering what many Americans are doing with their US$1,200 government cheque? 

Crypto exchange Coinbase sees a sharp increase in the number of deposits of that exact amount...

Funny post of the week:

Nothing beats the global crypto community in predicting the end of U.S. Dollar….

  Source: cryptoaims

Video of the week

When you are done watching Tiger Kings, worth spending two minutes to understand why we need to educate policy makers on Libra and CBDCs from Reddit co-founder Alexis Ohanian.

My Upcoming (Virtual!) Speaking Engagements:

28 April - UK Fintech Week - Digital Asset Regulations and Opportunities in Asia

11 May - Consensus Distributed - Launch of the 2nd Global PwC Crypto Hedge Fund Report 

Henri in the News:

Bloomberg - Crypto Freeze Continued Last Year as Deals Plunged

Coindesk - Crypto M&A and Fundraising Dropped Sharply in 2019

The Block - Crypto M&A and Fundraising Deals Shifting Outside of the U.S.

Yahoo Finance - PwC Claims Crypto is Not Immune to Global Crisis

Enjoyed this content? Make sure to subscribe or share it with a friend! A new Future of Money newsletter will be in your inbox each Saturday!

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 and Asia FinTech Leader, the Chairman of the FinTech Association of Hong Kong and an Adjunct Associate Professor at the University of Hong Kong, where he teaches the first FinTech university course in Asia.

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.

Chambers Global recently named him 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.

You can learn more about Henri on his website (www.henriarslanian.com) and you can reach him at [email protected]