Happy Chinese New Year & Predictions for 2018: Banks Take Revenge, Taxi Jobs Drivers Safe, The Little Guy Wins

Filmed by Luke Carter, Editing by Emmanuel Carter, Special thanks: Donald.farmer, Darren Foong, Ann Luo, Isaac Carter, Alex Siow, Alex Capri !

2018 will be an important year banking transformation. The banks lost that share of the pie last year and will roar in with vengeance. Businesses other than banks will find they desparately need a formal Data Strategy, Cybersecurity Strategy and Fintech Strategy to compete with the global businesses that have landed on their local shores and are stealing local companies. We will see developments in actionable intelligence (a faster version of data science) where smart business leaders will build focus on building data science talent inside. I penned down three predictions for 2018 and beyond:

Prediction #1: Bitcoin will be replaced by a government backed cryptocurrency.

Prediction #2: Taxi drivers won’t lose their jobs to driver-less cars, someone else will.

Prediction #3: Third world countries will go cashless before first world countries.

Prediction #1: Bitcoin will be replaced by a government backed cryptocurrency

My prediction is that Bitcoin and other extant cryptocurrencies will soon be replaced by a legitimate cryptocurrency, backed by government or governments.

The advantages of using bitcoin as a currency are vast, for both the individual and national governments. A digital wallet provides incredible convenience, and is as secure as money in the bank without the hassle of electronic transfers or cash withdrawals. Tax administration would also be significantly simplified.  Central banks would be able to monitor the velocity and flow of money, and enact monetary policies to influence this at much faster rates. The benefits of cryptocurrency are well known and private individuals and nations, including China, Russia and Japan, are starting their own. Benefits have been solid:

- In 2017 more than $1billion was raised in Initial Coin Offerings (ICOs) and were a viable option to venture capital

- Cryptocurrency Exchanges were and are still earning between USD 20,000 and USD 50,000 per day on average.

- Companies like Kodak that adopted the new currency saw their stock prices increase

- Countries that regulated them got noticed as next generation business destinations

Even with these benefits there is a challenge, with Bitcoin or any cryptocurrency, few major economies other than Japan and Korea recognize them as daily currency. Thus they have no intrinsic value and are not backed by anything - not a good choice to instil confidence or security. With the backing of a national government,  or a group of nations, this legitimate cryptocurrency would have all the advantages with the surety of government bonds.

By itself, Bitcoin is not ideal as a national ‘coin’. Near the end of 2017, the community were up in arms about the long processing times and large transaction costs, due to the volume of traffic on the network exceeding original design specifications and intentions. China also controls a majority of the bitcoin miners in the world, which threatens the independence of the digital decentralized autonomous (DAO).

A nation-administered cryptocurrency could be designed to address these issues, backed by national reserves, with recognition in the legal jurisdiction. In the meantime, genuine concerns about potential abuses of Bitcoin - money laundering, financial and tax fraud, wild speculation - has led to Facebook banning ads for cryptocurrencies and China banning the exchange and ownership of cryptocurrencies.

Cryptocurrencies that can be completely tracked and centrally controlled like Ripple would be the choice of governments. Perfect taxation on every transaction and inflationary controls from a central money supply. Tokens like WeChat, and currencies like Ripple fit in this category.

The rise of a legitimised and fully transparent cryptocurrency would inevitably lead to a grey market ‘coin’, for transactions people prefer to be invisible to governments - as was the original intention of bitcoin.  The convenience and utility of a decentralized, mineable, cryptocurrency and the potential anonymity and privacy it provides will continue to encourage the use of grey/black market coins.

Prediction #2: Third world countries will go cashless faster than first world

A strange phenomenon has occurred in third world countries as they modernise. They entirely bypass landline telephones and fax machines, and move directly to smartphones and wifi. By missing out on investing in infrastructure of the last generation, they have leapfrogged to the most modern -- with even faster internet speeds than developed regions like Europe and the US. The same is likely to happen with adoption of cashless payments.

Digital currency provides many boons to national administrations - like a national ‘coin’. Operationally, it reduces the burden of mints and banks to print, circulate and legislate against currency. If everything is done online, tax administration can be automated effectively, and with better records for data, tracking and transactions. The solution need not be a cryptocurrency - digital wallets, app tokens and other solutions are equally viable.

Widespread adoption and use of a digital currency would eliminate plenty of headaches for businesses. To allow customers to pay with a credit card, a restaurant is paying about a hundred dollars per month per terminal, often with an additional phone line or data plan, alongside transaction costs for credit cards. A cryptocurrency would go a step further by resolving issues with foreign exchange costs - which today is simply a tax for doing business in a country, inflicted by the bank.

There are only a few real Fiat currencies in the world. USD, EUR, GBP, CNY, SWF, YEN. Any others are pegged or translated to these as a basis. This leaves small nations in a constant inflation spiral where they can’t pay off their debt which is normally denominated in one of these currencies. Other than pride and the bank tax* for exchange into a country there is no reason to have a fiat currency that other than the big 6. Case in point, the best economy in the caribbean is the BVI that uses USD and the best economy in Southeast Asia is Singapore which essentially pegs to the USD.

Small nations consider these benefits of joining together under a cryptocurrency pegged to the dollar:

- National debt to external parties would not be under inflationary pressures

- Eliminate money supply maintenance

- Eliminate the currency risk of foreign direct investment and global business expansion

- Instantly gain more tax revenue through increased tourism spend

- Reduce tax administration with full visibility into transactions

- Take great strides to being a smart nation by using the data to efficiently allocate services to citizens

- Enable everyone to participate in banking all the way to the smallest street seller.

* I call the requirement to exchange money to do business in another country a bank tax. Before you buy one machine, pay one worker, or get an office you need to convert your money to the currency of the country and the banks take a share. Repatriate the money out, back to headquarters and the banks take another share. That is a tax, not a convenience. A single currency like the Euro eliminates that so banks need to think of a way to replace that risk free, lucrative income.

Prediction #3: Self-driving AI will get bus drivers fired, not cab drivers

The incipient technology of driver-less cars has got cab drivers riled up about the threat to their industry. It’s been a rough decade; first Uber, and now robots that can do their job. But their concerns are largely unfounded; if anything, it should be bus and train drivers looking over their shoulders.

The business model of a taxi company bears examination; it owns a fleet of cabs which it rents out (alongside medallions or equivalent business licenses) for about 12-20% on the value of the vehicle. The taxi cab company eventually recoups the value of purchasing the cab at wholesale price within 1.5 - 2 years; rental revenue after that is pure cash. Meanwhile, the taxi driver himself bears the risk and liability of operating the cab, including any accidents which may occur or repairs and maintenance necessary for the cab.

Viewed like this, taxicab drivers are similar to franchisees -- there would be no point replacing steady sources of revenue. Besides, the initial cost for self-driving taxis would be far too high to consider retrofitting the entire fleet. In contrast, bus and train drivers are direct salaried employees for rail and bus companies, and can easily be replaced. Many metros around the world are already driver-less, including Singapore’s Circle and Downtown lines.

Other considerations may yet prolong the occupation of the taxi-driver. Self-driving cars cannot maintain the cleanliness and upkeep of the interiors, which means some central depot must be staffed with human cleaners to address issues whenever they arise, potentially at all times of the day. With self-driving cars, legal risk and liability in case of accidents returns to the cab company rather than the driver, which is an unnecessary burden. Finally, a key aspect to taxis includes the social element - human interaction, recommendation for tourists and political discourse for locals, and path-finding for obscure locales. Self-driving taxis may remain an unusual novelty rather than a norm, for some time yet.

Just two years ago, many of these predictions would have sounded absurd or highly unlikely -- then again, plenty of absurd, unlikely events have transpired in the last two years. In my assessment, these predictions are more likely to come true than not. What are your predictions for the near future, or why do you disagree with them? Leave me a comment, and let’s discuss!

Happy Chinese New Year 2018!

Keith B. Carter

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Hebrews 11:1 "Now faith is confidence in what we hope for and assurance about what we do not see."