Zář 29

US Stocks Dip on New Trade Tensions; Should Investors Move To Bitcoin?

As reported by the Financial Times yesterday,  market participants are not too sure about the latest trade developments between the US and China. Coupled with Washington’s political scenario concerning Trump’s impeachment row, stock prices fell on Friday. Does this mean that bitcoin (BTC) is the obvious alternative now for investors?  


S&P 500 Falls, Nasdaq, and Dow Jones Too

Wall Street stocks took a hit on Friday, in response to latest reports coming from the White House. As per, the Inquirer, the US government is considering restricting American business investment in China and the country’s assets. Plus delisting Chinese companies from US stock markets is also on the cards.

The S&P 500 registered its worst performance in 5 weeks by falling one percent through the week. It closed the day on Friday at 2,961.80, with a 0.5 percent loss. Nasdaq Composite Index fell 1.1 percent to end the day at 7,939.63, and the week with a 2.2 percent drop. The Dow Jones Industrial Average also joined the downhill ride with a 0.5 percent drop to 26,820.25.

BTC Markets Are Shaky At the Moment

As per an analysis published by Bitcoinist a couple of days ago, massive margin call liquidations from Seychelles based bitcoin derivates exchange BitMEX is responsible for the sad state of BTC markets. But there are other possible factors too which might have led to the same.

Zooming out the picture, in the current quarter, it can be seen that bitcoin prices have put up a dismal performance so far. With the latest crash to $7,800, down from recent levels above $10,000, BTC is on track to log the worst third quarter since 2014.

Atlantic Capital founder, Bruce Fenton added further perspective to this matter in his latest interview with BlockTV. On being asked about his opinion on the latest BTC pullback putting a bad reputation on investment attractiveness in the space, he said the current conditions are part of the natural cycle of cryptocurrency markets.

Nonetheless, Bruce pointed out that it’s a concerning thing. If a lot of investors lose money due to such sporadic volatility, then it turns them off from the market, he said.

The most high-quality coin is bitcoin, and that has the largest market cap. But even bitcoin is still very risky and speculative. It’s a speculative risky asset. I believe in it. I believe in its superior technology. It think we can demonstrate and prove that it is superior technology. But…. superior technlogy doesn’t always win, in terms of economic performance. 

On speaking about BTC’s safe-haven narrative, Mr. Fenton’s said that although he has benefitted from being an early adopter in the top crypto asset, he doesn’t believe in bitcoin being an investment alternative in times of downturn. Although people should have some exposure compared to not having BTC at all.

Bitcoin In Macro Bull Trend & Will Bounce Back Soon

Noted cryptocurrency analyst, Josh Rager came out with a rather positive stance in response to the current bitcoin market situation.

On BTC’s 42 percent pullback over 91 days this year, he opined that this isn’t a big deal, as bitcoin has seen 75 percent pullback to lows coupled with a 1600 percent surge to all-time highs. This phase too shall pass and there will be a great resurgence in buying sentiment in the market in the near future.

Also according to Hans Hauge of Ikigai Asset Management, bitcoin fundamentals are pretty robust and BTC as a solid investment platform is not going anywhere.

Has the current pullback dashed your hopes in bitcoin, or is this another buying opportunity? Let us know your thoughts below. 


Images via Bitcoinist Image Library, Twitter: @ReformedBroker, @skew_markets, @Josh_rager

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Čvn 01

Binance Research: ‘Non-Crypto Public’ is Now Getting Into Bitcoin

Institutional demand for crypto assets is decisively starting to affect the crypto space. Bitcoin remains the “bellwether” of the industry, while data showing that the crypto market has already bottomed out is becoming more explicit, according to Binance Research.


Institutional Appetite For Crypto Is Skyrocketing

The crypto industry will continue to gain momentum over 2019, with the pace of evolution potentially speeding up if crypto asset prices get a boost, according to a new Binance Research report released on May 31, 2019.

The report underscores the all-time high volumes of crypto assets recently traded on the CME Group. Indeed, over USD 1 billion were traded during a single 24-hour period in May 2019.

CME bitcoin futures

Specifically, as Bitcoinist reported, the CME Bitcoin futures reached a record high of 33,700 contracts on May 13, 2019. This impressive number of contracts was 50 percent higher than the previous record of around 22,500 contracts that had been reached on April 4, 2019.

This extraordinary flurry of trading reveals that institutional demand is entering the crypto market. Thus, the Binance Research report concludes,

Institutional investors, currently representing (in our conservative assumptions) less than 10% of all long-term investors, are growing their exposure to digital assets and cryptocurrencies, as illustrated by a premium of nearly 40% for Grayscale Bitcoin Trust (GBTC) over BTC spot price at the end of May.

General Public Getting Back Into Bitcoin

Investors’ interest in Bitcoin over-the-counter (OTC) trading is also increasing. According to the report, in May Bitcoin OTC trading surged, reinvigorating interest in the BTC-USD pair.

Moreover, during May, the OTC market saw the participation of investors previously unrelated to the crypto space. The report states,

We have definitely seen more interest from the non-crypto public this month, and hope that the market ‘behaves’ such that the interest continues to build.

The prospects for the crypto industry could be even rosier if projects in the pipeline, either running on private or partially private closed systems, materialize by providing blockchain-based business solutions to everyday users. And the report goes notes that,

Thanks to their large user-bases comprised of both retail and institutional clients, these initiatives could ultimately benefit the whole crypto asset industry, with new users moving onto decentralized, permissionless and non-custodial platforms.

Furthermore, Binance Research also extensively analyzed changes in crypto asset correlations based on market structure, concluding that “Bitcoin exhibited the highest correlation with other assets…”

This, the report notes, makes BTC “the bellwether of the industry.”

Given Bitcoin’s stellar performance so far in 2019, it also reiterates a conclusion from April 2019, declaring ‘crypto winter to be over.’

Having emerged from a period of the highest internal correlations in crypto history, the data may support the notion that the cryptomarket has already bottomed out.

What do you think about the growth of institutional investors in the crypto space? Let us know in the comments below!


Images via Tradingview.com, Shutterstock

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Kvě 21

Argentina: Bitcoin Bought at $20K Retained More Value Than the Peso

Bitcoin has proven to be a store-of-value in Argentina where you would have been better off buying BTC at its peak rather than hold the peso.


Argentina Ensnared Political and Economy Turmoil

The Argentinian economy continues to shrink, afflicted by stubbornly high inflation, which President Mauricio Macri, who is running for re-election, has been unable to rein in. Hence, he is becoming increasingly unpopular.

On May 19, 2019, the country’s grim economic outlook became even muddier when former president Cristina Fernandez de Kirchner announced she was running for the vice presidency alongside Alberto Fernandez (her former cabinet chief), in the upcoming presidential elections in October 2019.

Ms. Kirchner made the announcement a few days before the beginning of her trial for alleged corruption offenses related to public works contracts. The trial is scheduled to start on May 21, 2019. Reuters wrote,

Cristina Fernandez is considered by investors to be a riskier prospect because of her past populist policies. She introduced currency controls and tax increases on farm exports while in office between 2007 and 2015.

Fearing that if Ms. Kirchner returns to power it would bring populism back to the country, investors are now more than ever seeking refuge in safe-haven currencies, such as US dollars and Bitcoin.

In effect, Bitcoin’s value in relation to the Argentinian peso and Bitcoin’s trading volumes are reaching all-time highs. Likewise, the US dollar is an all-time high against the Argentinian peso. This set of circumstances will most likely reinforce Argentina’s inflationary spiral.

Argentinians Better Off Holding Bitcoin

Officially, as of March 2019, Argentina’s annual inflation rate reached over 55 percent. But even this elevated rate of inflation is questioned. Economist Steve Hanke argues that when using high-frequency data, the inflation rate in Argentina is over 80 percent.

Such a high inflationary rate significantly erodes the purchasing power of the peso, to such an extent that replacing the peso with Bitcoin to save Argentina’s plummeting economy no longer seems like a crazy idea.

As a result, many are turning their attention to Bitcoin’s deflationary attributes. For example, one strong argument put forward is that Bitcoin is a better store-of-value than the peso.

In this regard, Partner at Sixtant, Josu San Martin, noted:

If an Argentinian had bought Bitcoin at the highest point of the ‘biggest bubble in history,’ in 2017, he would have been better off than leaving his money in his Argentinian bank account. So tell me again how Bitcoin is a horrible store of value.

As a completely new asset class, Bitcoin is still volatile. Nevertheless, in the long run, Bitcoin is proving to be a better (and rapidly appreciating) store-of-value than gold, even more so in a digital economy.

In this regard, Grayscale Investments, one of the largest cryptocurrency asset managers, details key features to highlight Bitcoin’s superiority to gold in, verifiability, divisibility, durability, fungibility, portability, and recognizability.

Moreover, a compelling and most relevant argument for the Argentinian economy is Bitcoin’s inflation-resistant nature, which is strengthened by its scarcity. Only 21 million bitcoins will ever be created by around the year 2140.

Furthermore, Grayscale compares the cryptocurrency to gold in the features shown in the chart below.

To save the failing economy, President Macri has already received advice to bear Bitcoin in mind. In March 2019, serial investor Tim Draper advised him that to attract foreign investors he must dramatically transform Argentina’s economy and replace its peso with Bitcoin.

How do you think that Bitcoin can help Argentina to minimize inflation? Let us know in the comments below.


Images via  Grayscale, Shutterstock

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Kvě 12

‘Facebook Coin’ Will Be More Like Bitcoin Than Starbucks Rewards, Says Analyst

Speculations about the purpose of Facebook’s planned digital coin are getting wilder. Ignoring key features like independence and decentralization, one analyst predicts that ‘Facebook Coin’ would look more like Bitcoin or Ethereum than your Starbucks reward points.


Facebook Coin Might Encourage Viewing Ads

With growing interest, many are trying to envision Facebook’s planned ‘FaceCoin.’ Lacking specifics from Facebook, speculations abound about everything from the coin’s name to what it will be used for.

Under the code name “Project Libra,” tech journalists say, Facebook, Telegram, and Signal are devising their own digital token, which would allow their billions of users to exchange money across the Internet, through their payment systems.

Others argue that Facebook’s coin will be more like one of the major cryptocurrencies. In effect, one analyst, Lisa Ellis, a MoffettNathanson partner, predicts:

The Facebook (FB) coin (Facecoin, perhaps?) would actually look more like one of the large public cryptocurrencies such as Bitcoin or Ethereum and less like the internal-payment or loyalty systems that companies like Starbucks(SBUX) use.

She adds that FBCoin will likely be a more-public coin that’s governed by an independent board such as Ethereum and its foundation.

Except That It Won’t…

But regardless of the type and number of predictions put forward, one thing is sure. Facebook’s digital coin won’t be anything like Bitcoin.

It will be issued, developed and controlled by a centralized authority. Its ledger will not be immutable, and access will likely require your Facebook account.

The social media giant has not explicitly denied or acknowledged any of these speculations too. The latest statement on the subject from the company was issued to Barron’s on May 10, 2019,

[Facebook is] exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.

Visa, Mastercard Would Welcome a ‘FaceCoin’

But while Ellis didn’t mention any specifics, Ellis believes Facebook’s coin probably will end up being a tool to encourage users to watch ads.

This is something Brave has been attempting with its browser and native BAT token though some haven’t been impressed and are working on a more bitcoin-friendly version.

Meanwhile, Ellis had also earlier warned clients that cryptocurrencies could pose an existential threat to Visa, Mastercard, and Paypal. In contrast, she argues that Facebook’s coin would actually benefit these payment giants. Ellis wrote,

If Facebook(FB) launches an open digital wallet and checkout button, the company will need to collaborate with Visa and Mastercard(MA) to enable a variety of card-based funding methods in its wallet (similar to Apple Pay, PayPal(PYPL), or Google Pay).

So how will it be like Bitcoin again?

Will Facebook’s digital currency be anything like Bitcoin? Let us know in the comments below!


Images via Shutterstock

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Kvě 04

Singapore Students Receive ‘Tamper-Free’ Digital Certificates On Blockchain

Students at the high-school level and above in Singapore will from this year receive digital certificates upon graduation. The initiative uses blockchain technology to enable an “easy and reliable way” to prove qualifications through tamper-free certification.


Authenticating An Education

The concept is simple enough. Graduating students receive digital certificates via email, each of which has an embedded cryptographic proof. Schools also add the certificates to an individual’s MySkillsFuture account – an online portal charting career and lifelong learning pathways. A copy also resides on the Ethereum-blockchain-based OpenCerts platform.

When applying for jobs or further studies, students send the digital certificate to the employer or school.  Relevant parties can verify the certificate against the copy stored on the blockchain.

Education Minister Ong Ye Kung described the initiative as a “tangible example” of the benefits of Singapore’s Smart Nation journey.

With OpenCerts, we are harnessing the power of blockchain in a practical way. It allows for any education institute to issue OpenCerts, and for anyone to quickly check the validity of a digital certificate.

Cutting Through The Paperwork

This should make the job application and hiring process smoother for both the applicant, employer, and issuing institutions.

Students would no longer have to request certified-true copies of certificates from schools. Patrice Choong of Ngee Ann Polytechnic (NP), said that NP issues around 10,000 of these every year. He added that “issuing and verifying certificates was a ‘productivity issue’ that they wanted to deal with.”

In turn, employers could immediately verify digital diplomas as genuine, without having to approach the issuing institution. Mr. Choong says that NP receives around 2,000 such requests per year.

However, he stressed that students would still receive a physical certificate at a graduation ceremony.

Singapore Has Always Been An Asian Jewel

Singapore has been one of the most positive nations when embracing Bitcoin, cryptocurrency, and blockchain technology. The Central Bank of Singapore developed a blockchain-based settlement system for tokenized assets, and its sovereign wealth fund is a major investor in US-based exchange, Coinbase.

This latest initiative, however, is the first blockchain-based project rolled out at a national level.

Will this use-case prove to be a useful app for blockchain? Share your thoughts below!


Images via Shutterstock

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Dub 02

Augur Prediction Market Platform May Have Design Flaws

An analysis of irregularities discovered in the Augur decentralized prediction market platform has identified a number of design flaws. Namely, it identified a potential attack vector based on discrepancies between a market’s expiry date and its outcome date.


How A Prediction Market Works

A prediction market would seem an ideal use-case for blockchain, harnessing the trustless nature and lack of centralized control. Augur uses the Ethereum blockchain, and allows an individual to create a prediction market based on any definable event.

The market creator defines the topic, end date, and potential outcomes, plus an adjudicator if so desired. Trading (denominated in ETH) continues until the event-end, at which point Augur token holders (or designated reporter) determines the outcome. Token holders stake their Reputation (REP) on the outcome and receive settlement fees.

Houston, We Have A Problem (or Two)

Aside from potentially-illegal markets, covering topics such as assassinations and terror attacks, there are some key fundamental issues.

Owing to its steep learning curve, many Augur users rely on various web interfaces, which offer non-standard features and are open to manipulation. In particular, many users gravitate towards markets which appear trustworthy to others. This creates a feeding-frenzy around the few markets with reported volume, which the market creator may well have manipulated.

Disputed outcomes go to a voting procedure, with users staking REP, and receiving rewards if they choose the winning outcome. This incentivises users to vote for the most popular outcome, regardless of whether it is the true outcome. On top of this, the validity bond, which is lost if a market is deemed invalid, remains fixed, so bad actors can continual create bogus markets.

Potential Attack Vector

A recent example of how this system can be manipulated, was based on the ‘general price of Ethereum’ at the end of the day on March 31st (UTC). The market expired at 01:59 on April 1st (UTC+8), which is before the outcome date, which could cause this contract to be deemed invalid.

By creating multiple outcomes, one of which was unrealistic (ETH over $1000), and one seemingly easy to achieve (ETH between $100 and $1000), it just required a bit of wash-trading to lure punters in.

The attacker would then send a limit sell order for the ‘easy’ outcome, for a quote which is above the reward for an invalid result, but below that of a supposed ‘good deal’. Thus users will fill the order, unknowingly being potentially stuck in an invalid market.

An invalid market results in an equal amount of ETH going to shares of each outcome. In a three outcome market (the final outcome being ETH < $100), each outcome would be marked at 1/3 value. With the majority of participants backing the ‘easy’ outcome, a disproportion return would go to the ‘unrealistic’ backers.

Fixing A Hole Where The Rain Comes In

Whilst Augur has already identified several of the concerns, there has been no official announcement of improvement implementation. Meanwhile, users are still exposed to this kind of attack.

Indeed, the same creator has already made a new market with the same flaw called ‘Ethereum Price at End of April’. There are also copycat markets springing up to catch users unawares.

Until these flaws are fixed, users should probable consider Augur, ‘buyer beware’.

Will blockchain-based predictions markets realize their potential? Share your thoughts below!


Images via Shutterstock

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Bře 29

Hong Kong Wants STO Investing To Be Reserved for the Super Rich

The Hong Kong Securities and Futures Commission (SFC) will no longer let its citizens invest in STOs–unless they have at least $1 million.


STOs for ‘Professional Investors’ Only in Hong Kong

In what they call a move to protect investors, Hong Kong’s financial watchdog clarified its position on STOs yesterday. The Hong Kong Securities and Futures Commission (SFC) reminded investors that digital assets are still highly risky. This means they should be in the realm of ‘professional investors’ only.

To be clear, it doesn’t matter if savvy investors have made the right call on the market or sharpened their trading skills. If they don’t have a portfolio of at least $1 million (HK $8 million), STOs are off the table for them.

The announcement comes after the SFC launched its regulatory sandbox for cryptocurrency companies in November 2018. In a statement on Thursday, the SFC said that security tokens fall into the same category as securities, which meant that they were subject to the same existing laws.

Foreign Entities Can No Longer Freely Target Hong Kong Investors

The latest crackdown on STOs, which have become a compliant replacement to ICOs in just about every corner of the world, is not limited to companies based in the region. According to the SFC statement, anyone marketing or distributing security tokens targeting Hong Kong investors must obtain a local license.

Moreover, digital asset providers must comply with three key requirements laid out by the SFC. They must restrict their offerings to professional investors only. They must provide clear and comprehensive investment advice and guidelines, and must encourage investors to carry out their own due diligence.

If they fail to do this, they will either lose their license or trigger “disciplinary action” from the financial watchdog. According to the statement:

It is a criminal offence for any person to engage in regulated activities without a licence unless an exemption applies.

SFC: Not an Outright Ban But Almost as Bad

ICOs are all but dead. This time last year, ICOs raised $1.74 billion. This year the figure is bearly making the chart at just $46 million.

STOs have emerged as a more secure and regulated way to invest in cryptocurrency companies. Unlike ICOs, they bear most of the hallmarks of IPOs, depending on the jurisdiction.

However, even in the United States, with its 70-year-old rules, not all STOs are reserved for the super wealthy. Hong Kong may not be outright banning STOs like mainland China. But they’re moving a step further to strangling innovation here–and leaving retail investors at the gates.

Should and will STOs be reserved for wealthy investors? Share your thoughts below!


Images via Shutterstock

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Úno 13

IMF Proposes to ‘Fork Off’ Cash From E-Money

Interest rates in many countries around the world are still languishing at near-zero levels since the last financial crash. Which doesn’t leave much space to move in the event of, say, the next financial crash. At least as far as cash is concerned. So the Intentional Monetary Fund (IMF) have been looking at solutions to make negative interest rates a viable option.


Less Than Zero

Recessions require tough measures, which has historically resulted in around 3-6 percent cut from interest base rates. But with many nations still maintaining near-zero rates from the last financial crisis, that doesn’t leave them much wiggle room.

The problem, of course, is cash, which has a lower-bound interest rate of zero by design. A negative base rate would necessitate commercial banks to either compress their margins or charge interest on deposits. And charging negative interest on deposits would likely cause a mass withdrawal of cash.

The IMF notes that:

…instead of paying negative interest, one can simply hold cash at zero interest. Cash is a free option on zero interest, and acts as an interest rate floor.

So why don’t we just get rid of cash?

Cashless Society

A cashless society would not be limited by a lower bound on interest rates of zero percent. Central banks could reduce the rate to a negative figure, forcing consumers to pay interest on deposits. This would encourage investing or simply spending money as a preferable option, boosting the economy.

ECB

But if cash exists then this cannot happen. People would simply hold cash at zero percent interest rather than paying for bank deposits in safes and mattresses.

Interestingly, countries such as largely-cashless Sweden have already pushed rates slightly below zero. The inconvenience and expense of taking out and holding large amounts of cash has deterred most depositors from doing so.

But cash still plays a significant role for payments in many countries such as Japan, Switzerland and Hungary. People kinda like the ‘P2p’ (person-to-person) nature of it.

Hard Fork

The solution proposed by the IMF would be to enact a divorce between cash and electronic money, creating two separate currencies. In doing this, a central bank could make cash as costly as a bank deposit with a negative interest rate.

Sounds great, doesn’t it? How can we make cash more costly? But it’s all to maintain the inflation target at all costs, according to the IMF. An excerpt reads:

While a dual currency system challenges our preconceptions about money, countries could implement the idea with relatively small changes to central bank operating frameworks. In comparison to alternative proposals, it would have the advantage of completely freeing monetary policy from the zero lower bound. Its introduction would reconfirm the central bank’s commitment to the inflation target, rather than raise doubts about it.

Anyway, the electronic currency (e-money) would pay the policy rate of interest (either positive or negative). Then cash would have an exchange rate to the e-money. In times of negative interest, the cash exchange rate would depreciate at the same rate as the negative interest.

Prices would be advertised separately in e-money and cash, so in terms of goods or e-money, there is no benefit to holding cash.

“This dual local currency system would allow the central bank to implement as negative an interest rate as necessary for countering a recession, without triggering any large-scale substitutions into cash,” the post reads.

Or you could always take your suitcase full of cash to a shady geezer you met on LocalBitcoins, and swap it for some shiny inflation-free Bitcoin.

IMF

Seriously. When the banks cause another financial crash, then tell us that they want to make all our money worthless. At that point, will anyone still have any faith at all left in the banking system?

It’s no wonder IMF’svery own head, Christine Lagarde, thinks fintech will “shake the financial system.”

Will central banks succeed in phasing out physical cash in the next 10 years? Share your thoughts below!


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Úno 09

CBOE and CME Bitcoin Futures See Lowest Volumes Since Launch

Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) have seen the lowest Bitcoin futures volumes since they launched to much fanfare in December 2017. 


Battle Of The Markets

New research by TradeBlock shows that at their summer 2018 peak, combined trading volumes reached near-parity with spot trading volumes across five top US exchanges.

Bitcoin futures trading volume has fallen significantly since peaking in the summer. The latest numbers from December 2018 show the lowest volumes since the products were launched in December 2017.

What’s more, the vast majority of that volume has been through CME. Whilst the two markets were initially neck-and-neck, the gap between them has steadily widened since February 2018.

Volume grew rapidly following the products’ launch, reaching a high-point in July 2018 when it topped $5 billion. At the same time, spot trading volume was falling at digital currency exchanges in the US. Across five of the largest US exchanges (Coinbase, itBit, Kraken, Bitstamp, and Gemini) it fell dramatically, from over $20 billion, down to just over $5 billion.

Between January 2018 and October 2018, spot-trading volume fell 85%, following the general trend of the bitcoin price 00. Although volumes did start to pick up again in November and December 2018.

Back To The Futures

Meanwhile, following the peaking of the futures market in July and August 2018, volumes almost halved in September and have fallen steadily since. The exception to this was November, when volumes spiked, following volatility and a number of price crashes.

This decline in futures trading over H2 2018, coupled with the resurgence in spot trading, has seen spot trading volumes pull ahead again at the start of 2019.

But 2019 will see the launch of several new bitcoin futures products, from firms such as Bakkt, Nasdaq, ErisX, and CoinFLEX. It will be interesting to see the effect of these platforms on volumes as they come live over the next few months.

And of course, we may need to factor in the effects of volatility in price, should any also occur during this period.

Will futures volumes rebound with increasing price? Share your thoughts below!


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Led 26

Davos: IMF’s Lagarde Says Fintech Will Shake The System

International Monetary Fund Head, Christine Lagarde, told the World Economic Forum in Davos, “fintech is going to shake the system.” She also urged against relying on central banks in the next financial crisis, at the CNBC-hosted panel.


Central Banks Have Very Limited Ammunition

Her comments followed UBS CEO, Sergio Ermotti, saying that he hoped “we don’t rely on central banks to resolve the issues,” in the wake of another crash. He suggested that some central banks have “very limited ammunition,” while others perhaps had a bit more flexibility.

Lagarde concurred that,

It would be very nice if the economies at large didn’t have to rely on the central banks yet again in order to resist the next shock.

She singled out Mark Carney of the Bank of England, and Jay Powell of the Federal Reserve, as two of the very few central bankers who have a little bit of space to maneuver in the wake of the next downturn.

Complete Reforms While The Going Is Good

Both Lagarde and Ermotti suggested that it was important to complete reforms while the economic environment is good. Central Banks took unprecedented measures to stimulate lending and economic growth after the 2008 crash (by printing a record amount of money).

However, a belief that this fallback will always be there, can lead to complacency, meaning critical reforms are never implemented.

Ermotti said that countries must “take the bitter medicine” and implement changes that would benefit their citizens. Lagarde urged policymakers to “take the right course of action” on reforms. Although work had begun, this in some cases barely scratched the surface. It is essential to complete these critical reforms and that they go deep enough.

Fintech Is Going To Shake The System

Lagarde concluded by saying that banks needed “purpose” beyond just the single-minded pursuit of profit. She warned against complacency regarding fintech, which includes virtual currencies and bitcoin, that she said would “shake the system.”

Repeating her view that a regulated fintech with AML measures and consumer protections was a positive force, she continued to say that many large banks realized this, and were either incorporating fintech companies or moving in the same direction themselves.

Of course, Bitcoin didn’t exist at the time of the last financial crisis. In fact, it was ‘spawned’ as a direct response to it, according to ECB Executive Board member Benoît Cœuré.

Meanwhile, adoption is always accelerated by national economic failures and unrest. The next global financial crash could provide a key momentum swing, leading to the eventual collapse of banks that have indeed become complacent with their monopoly over money creation.

Do you agree with Lagarde in the disruptive power of fintech? Share your thoughts below!


Images courtesy of Shutterstock

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