MD's Insight: Dec 21st - 27th
The Fintech Solution for a Problem that won't Exist
Toward the end of last week, Visa released a technical paper outlining an offline payments system (“OPS”) to be used for point-to-point payments transactions of central bank digital currency (“CBDC”). The basic concept is premised upon the inevitability of the ubiquitous use of digital currency via CBDCs, and the elimination of physical currency altogether. However, if one were to read between the lines, it would become clear that the OPS protocol provides a solution to what will ultimately be a non-existent problem.
I think there’s a consensus today that in the not-so-distant future, all currency will be digital. A corollary of this is that in the future, all currency will move from place A to place B digitally via some form of internet protocol. This sort of technological innovation is already happening today.
The OPS protocol is based on the notion that money will still need to be moved from point A to point B off-line because the future won’t provide ubiquitous internet access. Therefore, we will still require a high-tech mechanism to emulate the transactional point-to-point movement of physical money with a combination of Bluetooth and NFC communications, and storage hardware built into our mobile devices.
Taken in sum, the Visa paper undercuts its own assumptions about the technological advancements of the future - specifically, universally accessible internet. In doing so, it’s making an argument for the necessity of a high-tech, form factor change instead of a high-tech, revolutionary systemic change. To my mind, if the future means physically knocking phones or wearables together to conduct off-line money movement because I’m transacting in the middle of nowhere - Antarctica perhaps - I’m good with keeping my cash, or any other physical store of value. Alternatively, if for some reason I lose internet connectivity for a few seconds in the future, developed world, I’ll conduct my money transfer via Venmo in the five or so minutes it takes me to locate another cell signal.
Wishing all our subscribers a happy and healthy holiday.
- Adam T. Hark, Managing Director, Wellesley Hills Financial, LLC