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New Money Review podcast
37 minutes | 2 days ago
Money or markets—which came first?
Economics textbooks tell us humans created money to overcome the drawbacks of barter. If your chicken wasn’t worth someone’s bushel of grain, you had no bread and they had no meat. Anthropologists see things differently. Markets didn’t necessarily come first, they say. In fact, they argue, it’s the money we use that determines the type of society we live in. In the latest New Money Review podcast, ‘the future of money in 30 minutes’, anthropologist and historian Brett Scott talks about the origins of money, debt and finance. Scott is an author and a campaigner for alternative financial and monetary systems. His latest book, ‘Cloud Money’, will be published in 2021 by Penguin Random and Harper Collins. In the podcast, Scott explains why anthropologists approach the topic of money quite differently from economists. “Anthropologists ask, ‘how do people provision for themselves in the world?’” says Scott. “But economists start by saying ‘how do people trade?’,” he says. “And the way economists view money starts from the assumption that trade is the default in all societies, whereas anthropologists don’t assume that.” “Anthropologists would say that money creates markets, whereas economists would say that markets precede money.” In the podcast, Scott discusses: the origins of money monetary systems and modern market capitalism the ideological roots of cryptocurrency bitcoin and commodity money the hybridisation of traditional and crypto finance local currencies and community money decentralised mutual credit systems bigtechs and money the battle to preserve cash
33 minutes | 12 days ago
A money revolution is going on
The increasing adoption of cryptodollars—digital dollar tokens that can be passed hand-to-hand like cash—is a sign of the revolution that’s going on in money, says Nic Carter, our guest on the latest New Money Review podcast. Carter, a former cryptoasset analyst at fund giant Fidelity, is a venture capitalist and cofounder of blockchain data firm Coinmetrics. Cryptodollars—Carter’s preferred name for stablecoins that are settled on public blockchains—are a highly disruptive innovation, says Carter, calling them “the first killer app of crypto”. By contrast with volatile cryptocurrencies like bitcoin and ethereum, stablecoins offer to fulfil one of the key attributes of money—by working as a medium of exchange. They promise to help their users transfer value quickly and safely, even from one end of the world to another, without going through the banking system. “This is the first time the crypto industry has manufactured something of immediate relevance to the outside world,” Carter says. “By tying the settlement assurances of the blockchain with a token that represents an IOU for funds held in a bank account, you get something quite powerful. I think we’re just at the beginning of seeing the applications.” The invention of cryptodollars could even have far-reaching geopolitical implications, says Carter, who points out that blockchain-based dollars could help address the stubbornly high cost of money transfers borne by residents of the global South. Listen to the podcast to hear Carter and New Money Review editor Paul Amery discuss: Why demand for stablecoins is rising Why cryptodollars are today's eurodollars How stablecoin usage is evolving The growth of unregulated stablecoins The changing structure of the financial system The impact on geopolitics
27 minutes | 20 days ago
Digital currency—a central banker’s view
This year’s coronavirus pandemic has accelerated plans for the introduction of central bank digital currencies (CBDC)—a mobile-ready replacement for our state-issued banknotes and coins. But many of the most important design aspects of CBDC are still unanswered. In the latest episode of the New Money Review podcast, Aleksi Grym, head of digitalisation at the Bank of Finland, shares a central banker’s view on CBDC, the accelerating shift to online commerce and the growing role of big tech firms in money. Listen to the 30-minute podcast to hear more about: The digitalisation of payments Why demand for cash is increasing at the same time Finland’s past experiment with state digital money Where to strike the public/private balance in the provision of payment services Why the costs of cross-border payments remain stubbornly high How big tech firms’ role in payments is certain to increase further Why bitcoin is already challenging regulated payment networks Should there be transaction privacy in digital money? Could state payment services compete by offering better data protection? You can subscribe to the New Money Review podcast on Apple, Spotify, Stitcher and Blubrry
33 minutes | a month ago
Why Libra was bound to fail
Facebook’s ‘Libra’ digital currency project combined incompetence and arrogance and was bound to fail, says David Gerard, our guest on the latest New Money Review podcast. Gerard, a technology expert and journalist, is the author of a new book, called ‘Libra Shrugged’, on what he sees as Facebook’s attempts to take over the world’s money. In June last year, Facebook CEO Mark Zuckerberg announced his firm’s ambitions to provide the first global medium of exchange, for use across the firm’s social media channels, which include Messenger, WhatsApp and Instagram and reach over 2bn global users. According to Gerard, Facebook’s bid to launch a private currency was motivated by its desire to collect even more of our personal data. And if regulators hadn’t prevented the launch of Libra, says Gerard, the US technology firm would have obtained an almost impregnable competitive advantage, he argues. “If you think Facebook is hard to regulate now — just think how hard Facebook would be to regulate if it controlled not just the money, but your access to financial services outside Facebook,” he writes in his new book. According to Gerard, Facebook seriously misjudged the complexity of the regulations governing the world’s financial system. The firm apparently thought it could just launch a new global digital currency on the basis of a good idea, he says during the podcast. While the tech giant is likely to continue in its payments push, says Gerard, it will have to do so with vastly reduced ambitions. Facebook has already been forced to abandon its plans for a single global currency unit. In the podcast, Gerard also explains his long-standing dislike of cryptocurrency, calling bitcoin an ‘apocalyptic death cult’. While the cryptography supporting bitcoin is sound, he says, the 12-year-old digital currency—and its many spin-offs—have attracted serial scammers, who keep preying on gullible members of the public. During the interview, Gerard goes on to express scepticism about the current race to introduce central bank digital currencies (CBDCs). As payments become increasingly digital, CBDCs could replace national banknotes and coins. But most of these new digital moneys are a solution in search of a problem, argues Gerard, and are unlikely to take off.
31 minutes | a month ago
Flawed ID systems risk perpetual crisis
If we don’t fix our flawed digital identity infrastructure, says Bianca Lopes, our guest on the latest New Money Review podcast, we can expect repeat after repeat of crises like Covid-19. Digital ID is how we recognise people and things online. It’s how we know who we’re dealing with. ID systems also determine our money systems. To understand digital identity, we need to start by remembering that our biological make-up plays a big role in determining the way we assess and interact with the outside world. “The human brain is naturally wired to want to identify things,” says Lopes, a mathematician and identity and data expert. “It’s how we decide, ‘Hey, this is an enemy and I need to act’, or ‘This is an opportunity’,” says Lopes. According to Lopes, we can draw an important lesson from coronavirus. “We’ve realised that identity is so foundational to our society,” she says. “The pandemic has allowed us to see that cracks in the identity infrastructure exist,” she goes on. “It’s a systemic problem. If we don’t address it at the core, we will see the consequences coming out in times of crisis more than ever.”
34 minutes | 2 months ago
A cryptoasset snapshot
The global cryptoasset market is growing fast, but it’s one of the most opaque areas of finance. Now the world’s academic institutions are gearing up to map the sector. The Cambridge Centre for Alternative Finance (CCAF), part of the university’s Judge Business School, has established itself as one of the main cryptoasset research hubs. In the latest New Money Review podcast, Paul Amery, editor of New Money Review, interviews Apolline Blandin, the leader of CCAF’s crypto research team. During the podcast, Apolline discusses the CCAF’s third global cryptoasset benchmarking study, which has just been released. It’s a snapshot of the global cryptoasset industry, based on responses from 280 companies in 59 countries. The study focuses on four main market segments: mining, exchanges, payments and custody. Cambridge’s annual survey has global reach. It was sent out to respondents in eight languages: English, Spanish, Portuguese, Chinese, Japanese, Russian, Arabic and Korean.
31 minutes | 2 months ago
The money wires
When looking at financial markets, we should pay more attention to the physical stuff—the cables, boxes, chips and code—without which those markets wouldn’t exist. That’s because the money infrastructure has a huge impact on the way society and politics function. In the words of John Handel, our interviewee on the latest New Money Review podcast, “technical details are never just technical details”. Handel, a financial historian, works at the University of California in Berkeley. And as cash disappears, payments become fully digital and tech firms make their moves into money, the question of the functioning and oversight of the money system seems more topical than ever. Handel’s specialist area of research is the physical infrastructure of nineteenth century financial markets—the actual wires, telegraph poles, roofs and buildings involved in relaying information—and its impact on financial power.
38 minutes | 4 months ago
The message is the money
More and more of us communicate using digital platforms like Facebook, WhatsApp, Twitter, Instagram and TikTok. And soon, social media will become indistinguishable from money, says Lana Swartz, our interviewee in the latest New Money Review podcast. This is because money is best understood as a messaging system, says Swartz, an assistant professor of media studies at the University of Virginia and the author of a new book called ‘New Money: how payment became social media’. As an academic, Swartz studies how communications technologies change over time and how these changes impact the way we live our lives. “I think about money as a form of media, and then think about that media as having cultural meaning. Money has always been social,” Swartz says in the podcast. Looking at money as a messaging system also helps us broaden our understanding of a complex topic, says Swartz. “The traditional politics of money tends to be purely economic. It focuses on questions like ‘who has money, who hasn’t, how did they get it or not get it?’” she says. “Instead, I look at the actual mechanisms of money, the infrastructures of payment,” says Swartz.
35 minutes | 5 months ago
Breaking the grip of the platforms
A new European data market will help break the grip of large digital platforms like Facebook, Google, Apple and Amazon, says Michael Salmony, our guest on the latest New Money Review podcast. As money becomes increasingly digital, data has also become money. Starting in Europe, where regulators have pushed for competition in banking and faster, digital payments, financial technology (‘fintech’) firms have pioneered the use of transactional data to create innovative services. Europe’s open banking model is now being emulated worldwide. But it’s time for regulators to level the playing field between tech firms and banks, says Salmony. A new European data market will help digital information to move freely across the region, covering all industries and producing a huge, beneficial economic impact, Salmony predicts. The new data market will be a threat to closed systems, he says: the operators of those systems will no longer be able to maintain their effective monopoly over data and applications. In a broad-ranging interview, Salmony also discusses payments, banking, digital identity, stablecoins and cybercrime. Salmony, a computer scientist by training, has spent his career looking at disruptive technology across a number of sectors, including music, ticketing, encyclopaedias and more recently payments and money.
35 minutes | 5 months ago
Rise of the platforms
Big tech firms like Google, Facebook, Apple, Alibaba and Tencent want our payments data. Are we right to share it with them? “The entry of BigTechs into the provision of payment services raises serious market power and data privacy issues,” Agustín Carstens, general manager at the Bank for International Settlements (BIS), said recently. Although the tech firms have often only been in business for a decade or two, their market valuations are now many multiples higher than established payments players like the big banks or the credit card companies. According to Carola Westermeier, our guest on the latest New Money Review podcast, we’re witnessing a growing ‘platformisation’ of finance as the internet companies seek to monitor our financial activity while we’re using their websites and apps. “The ambition of tech-driven companies to gain access to financial infrastructures is closely linked to the growing importance of transactional data,” Westermeier wrote in a recent paper. “Payment services such as Google Pay, Amazon Pay and Apple Pay have built their platforms on top of these existing payment systems to collect that data,” she says. “Access to transactional data and control of payment infrastructures has political relevance and even geo-political implications,” Westermeier says. In the podcast, she explains why financial transaction data is so important and suggests that citizens worldwide need to use the financial system in a more conscious way. She describes the three models currently being used by tech firms to try to build payments businesses and explores their prospects of success. Westermeier explores the tensions created by the rise of digital payments and the declining use of cash. And she talks about the competitive playing field in payments between new entrants and incumbents.
30 minutes | 6 months ago
Pandemics can reshape economies
We can all see the short-term impacts of the coronavirus pandemic: fear, lockdowns, falls in output, restrictions on travel, frictions in supply chains, growing social tension and unprecedented government intervention. But will there be big changes over the longer term? If previous pandemics are anything to go by, there could be some quite dramatic shifts in economic relations, working practices and politics as a result of the events of the last few months. In the latest New Money Review podcast, Eleanor Russell, a PhD candidate in history at the University of Cambridge, talks about one of her specialist areas of research—the 14th century Black Death pandemic—and what it can teach us about the coronavirus. Eleanor recently co-authored a prize-winning article on the topic in the Conversation, a website bringing news and views from the academic and research community to the general public. In the podcast, Eleanor explains how the Black Death, which wiped out between a third and a half of Europe’s population, had a profound impact on wages, on the relations between employers and employees, and on the future structure of businesses and corporations. It also led to significant social and political tensions, some of which took decades to play out. But there’s a direct link, for example, between the Black Death, the subsequent attempts by the English government to control wages and restrict labour mobility, and England’s violent Peasants’ Revolt of 1381. There are big differences between then and now. The coronavirus has spread at a much faster rate than a medieval pandemic. Modern media have undoubtedly amplified its short-term impact. The disease itself has proved much less lethal than the Black Death. But some of the 14th century themes Eleanor describes in the podcast—the rise of mega corporations, centralisation, government intervention, new forms of taxation, increasing tensions between the general public and big business, a groundswell of support for local solutions—sound eerily familiar to a modern ear.
33 minutes | 6 months ago
We have to decentralise finance
It’s time to reverse the major trend seen since the 2008 financial crisis—centralisation. That’s the opinion of Alex Lipton, an academic and former Wall Street quant who now works at fintech start-up Sila. According to Lipton, our guest on the latest New Money Review podcast, centralisation has occurred at several levels: at central banks, which are taking on more and more balance sheet risk; at central clearing counterparties (CCPs), where derivatives market risk is increasingly concentrated; and at commercial banks, where the largest firms have been getting larger still. Decentralisation will be a generational project, warns Lipton. But it’s now time to start rebuilding, he says, even if the shape of the future system is not yet clear.
31 minutes | 6 months ago
Bitcoin’s strange feedback loop
Bitcoin’s design features cause it to behave weirdly: the more speculators buy it, the greater the short-term downward pressure on the cryptocurrency’s price. “There are two features of bitcoin that I think don’t exist for any other asset class,” says Peter Zimmerman, our guest on the latest New Money Review podcast. “The first is that its value depends on its usefulness as a means of payment. The second is the settlement constraint: there’s a hard-coded limit on how many transactions can be settled per second.” Zimmerman is a research economist at the Federal Reserve Bank of Cleveland and a former senior economist at the Bank of England, where he specialised in cryptocurrencies, blockchain, banking and financial regulation.
33 minutes | 7 months ago
We will make our own money
In the last decade, everyone has been able to join networks like Airbnb and Uber to rent out their property or services. The sharing economy now extends to electricity, where individuals can now supply as well as consume energy. It’s time to apply the same principles to money, says Simon Lelieveldt, a fintech and payments expert and our guest on the latest New Money Review podcast. “The classical way of thinking—in terms of producers and consumers—is outdated,” says Lelieveldt in the podcast. “We need to reconfigure our mindsets so that every consumer can be a producer, whether that’s in payments, the generation of solar energy or letting out properties,” he says. “There will be space for individualised, local payment systems. There’s an exciting future ahead of us,” he argues. Laws and regulations need to catch up with the reality of the changes in the technology of money, says Lelieveldt. “Our regulatory models need to adapt,” he says. “We need to create a free enterprise space for each individual, so I can do transactions, issue my own form of money and rent out stuff without immediately being labelled as someone that needs to follow various licence requirements.” Lelieveldt also criticises the recent attempts by governments to insist on the identification of all counterparties in virtual asset transactions, via the so-called ‘travel rule’ of the G20 Financial Action Task Force (FATF). Virtual assets are any digital representations of value that can be traded or transferred for the purposes of investment or payment. The definition therefore covers cryptocurrencies like bitcoin but also any private digital currency or payments token. “If I build an energy blockchain, where I put my energy coins in order to transfer them onwards to other people, the virtual asset regime of the FATF says that for each token transfer I need to give my name and the name of the recipient,” says Lelieveldt. “The travel rule—designed to cover all economic processes in the world—is outdated garbage from twenty years ago,” he goes on. “It needs to be taken out. The assumption should be that everyone is innocent, not that everyone is guilty. This is a fundamental privacy requirement that needs to be respected.” As governments build ever more-intrusive digital identity systems in response to the coronavirus pandemic, Lelieveldt also warns about future abuses of human rights. “The privacy rules under international treaties are more relevant than this whole bunch of data we’re gathering,” he says. “We need to change this, otherwise we’re creating a nightmare in terms of surveillance.”
31 minutes | 7 months ago
For the last four decades we’ve been living through a period of globalisation, with economies becoming ever more specialised. That specialisation has also meant we are all more reliant on our neighbours, both near and far. Raw materials may be sourced in one country, manufacturing may take place in another, research and development in a third and financial and legal services in a fourth location. In the last few weeks, we’ve all been able to see how fragile global supply chains can be. It’s not just medical equipment that’s been subject to shortages. The supply of other vital commodities like food has seen interruptions too. Meanwhile, there’s been an oversupply of energy that’s driven oil prices temporarily below zero. What is the impact of the coronavirus going to be on the way we manage global supplies and trade? How far are we likely to retreat from globalisation? Which countries are going to be the biggest losers from this trend? Could other countries even be winners from the disruption? And what can we do to avoid a descent into a global trade war of the kind that made the 1930s depression so much worse? To help answer these complex questions, Uma Kambhampati, professor of economics at the UK’s University of Reading, joins the latest episode of the New Money Review podcast.
32 minutes | 8 months ago
Crypto’s broken market structure
The dramatic March 12 price crash in cryptocurrency markets showed that the underlying market structure of bitcoin and ethereum is broken and needs fixing, says Kyle Samani, our guest on the latest New Money Review podcast. Samani is co-founder and managing partner at Multicoin Capital, an investment firm based in Austin Texas, with over $100m in assets under management. During the podcast, Samani talks about the events of March 12, which saw a collapse in bitcoin’s price from $7,800 to $3,700, with similar falls seen in ethereum and other crypto assets. Bitcoin and ethereum have since recovered most of those losses. According to Samani, excessive leverage, stale price feeds and network congestion all helped contribute to the scale of the downdraft. The introduction of a prime brokerage system across cryptocurrency markets, together with improved liquidation engines at trading venues offering leverage, could help reduce the chances of a similar episode happening again in the near term, says Samani. However, he predicts, the unregulated nature of cryptocurrencies and the limited incentives for crypto exchanges to collaborate mean a repeat event cannot be ruled out in future.
33 minutes | 8 months ago
At the sharp end
For anyone working in the financial markets of G20 countries, ‘compliance’ means adherence to a set of laws and regulations governing who can have access to the financial system. Compliance is mandatory and breaches of the rules mean you can be fired and prosecuted. But what does compliance mean in an era of permissionless cryptocurrency, open networks, virtual assets and dark web markets? Marian Muller, our guest in the latest New Money Review podcast, works at the vanguard of compliance by focusing on the cryptocurrency market, an area where old-world rules often don’t fit new-world designs and practices. Muller, a former investigations specialist at Amazon and now a consultant at Bitpliance, advises cryptocurrency businesses, law enforcement agencies and financial institutions on how to handle exposure to virtual currencies. His work includes financial and crime investigations, interpretations of securities law and providing educational materials on how to handle financial crime in an era of virtual currencies and the dark web.
34 minutes | 8 months ago
The new financial investigators
As a framework for transferring value, cryptocurrencies work in a radically different way to the banking system. Anyone with a bank account has an IBAN number, an identifier that provides the country, bank code, branch code and account number of the account holder. Your bank will retain additional identity information, such as your address and phone number. Cryptocurrency networks are the polar opposite: individual cryptocurrency ‘addresses’ have no inherent link to any specific identity. Any cryptocurrency user can generate millions of addresses. The contrast between the banking system and cryptocurrencies extends to financial transactions. Details of bank account transactions stay within the banking system, and in a hierarchical way. As a bank client, you can look up your own activity, but no one else’s. Each bank can only see its own and its clients’ transactions. But in cryptocurrency networks all transactions, past and present, are visible to anyone, via the linked set of blocks of data that we call the ‘blockchain’. The public nature of blockchain activity, together with the challenge involved in linking that activity to real-world entities, have spawned a new type of financial investigative work. Philip Gradwell, our guest on the latest New Money Review podcast, is chief economist at Chainalysis, one of several firms making a living out of tracking and analysing blockchain activity. Chainalysis, founded in 2014, has raised $54m in five funding rounds. Its clients are cryptocurrency businesses, financial institutions and law enforcement agencies.
31 minutes | 8 months ago
A massive boost to the financial system
New technology offers a massive boost to the resiliency, accessibility and transparency of the financial system, says Alex Batlin, CEO of Trustology, our guest in the latest New Money Review podcast. Centralisation and its drawbacks “If you have centralisation, you have risk. There’s always a trade-off between the efficiencies of centralisation and the risk of a single point of failure.” “If you submit a transaction to a central database, it’s very difficult for either party to prove who made the transaction. Was it the service provider who is responsible for entering the record of the transaction? Or was it the end-user? The end-user can claim there was an error and blame the database operator. This is why I got excited by blockchain. In blockchain, users sign transactions cryptographically with private keys only they possess. This gives the properties of non-repudiation and integrity: you can prove the transaction has been signed by that individual.” “So far, settlement has always been done by a central authority. Therefore, you need to trust that authority. Two parties who don’t know each other are not prepared to hand over money to each other, but they are prepared to hand it to a third party like BNY Mellon.” Blockchain and smart contracts replace trusted third parties “Because blockchain is decentralised, it’s extremely resilient.” “Blockchain enables you to create a trusted third party virtually, by means of a smart contract. We’ve never had this before.” “Under blockchain, there is no trusted third party in the traditional sense—an entity who does things for you. The trusted third party becomes the smart contract. So now you need to trust two things: that the network of transaction verifiers which powers the smart contracts is performing as wanted; that the code of the smart contract is correct.” Blockchain gives massive cost savings “To issue a new utility token to power a network you’re launching, you can write a smart contract on ethereum using the ERC-20 standard. You can buy that off-the-shelf for £25 and deploy it on the blockchain for less than a pound. You now have a global token that can be used anywhere. In the old financial system, to issue a security you have to talk to DTCC, the custodians, investment banks and broker-dealers. This would all cost millions of dollars. It’s a completely different cost profile.” “You can put a lot of business logic in a token to guarantee that only the right people are allowed to use it. And baking the logic into the token is a lot more efficient than relying on third parties to enforce rules.” The new settlement paradigm “Once you’ve issued the token, if you want to swap it for something else, say ether, you can also do this by means of a smart contract, rather than using a settlement agent.” “Currently, most securities settlements are batch-based. It can take as long as five days to settle a transaction, for example. In ethereum, most settlements take place within 20-30 seconds. Some people like the old system because it allows them free credit in the period before they have to settle.” Positive outcomes “We are massively improving the resiliency and auditability of the financial system.” “The technology is global and instantly accessible to anyone. That will lead to global liquidity pools, where the real power is going to be.”
34 minutes | a year ago
Rewiring the monetary system
The global financial infrastructure—a complex network of technical systems provided by central banks, exchanges, clearing houses and securities depositaries—supports trillions of dollars of trading a year and underlies almost all economic activity. But it could work faster, more cheaply and more safely, benefiting everyone. In India, a shift from paper-based to digital finance now promises a $700bn boost in economic output. Who is going to write the electrical circuit map for the new system? Some powerful names are already making a land grab. Mark Zuckerberg told us in 2019 he wants his own version of money to go with his social media networks. Cryptocurrencies, launched in the depths of the 2008/09 financial crisis, offer a more radical alternative. Facebook’s Libra may not come to fruition. But the current financial system is looking, if not obsolete, then increasingly outdated. There isn’t a single part of today’s infrastructure that will remain unaffected by technological change. And there are certainly going to be big winners and big losers by the time we reach 2030. But many of the new infrastructure initiatives are being introduced from the ground up, making it difficult to keep track of what’s going on. It’s also hard to assess what’s serious and what’s not. Ruth Wandhöfer, our guest on the latest New Money Review podcast, ‘the future of money in 30 minutes’, is well-positioned to see where things might be heading. A former banker, Ruth now consults a variety of clients as an expert on financial technology, infrastructure and regulation. Here are some of the topics she discusses with New Money Review editor Paul Amery during the podcast: · The emergence of new financial infrastructures · The path to speedier financial settlement · The role of blockchain in infrastructure reform · How to ensure a level playing field for different fintech players · The importance of digital identity · Open-source versus proprietary technology standards · How to survive and prosper in the new digital finance economy
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