2021 is the year when Fintech comes of age, and will change the world forever by an unexpected route.
It’s the year when the plans will be laid and the designs made for the future of money. This is a matter of huge social and societal significance that will require a democratic mandate.
It’s also emerging that this will be the biggest disruption yet. Becoming one of the chief battlegrounds of geo-politics – on which it is already impinging. Creating what amounts to new world order. With China – at least initially – in the ascendant. As we’ve seen.
“National digital currencies could also trigger a reshuffling of the world’s most dominant currencies.” FT 14 June 2021. Diminishing the power of the existing incumbents, in the west. Creating new tools and capabilities that redistribute power – between and within nations.
This could be a huge boon for civilization – leading to a new era and a data dividend beyond the wildest of dreams. Or it could forever cement the exorbitant privileges of an increasingly extractive financial sector.
Currently, the design of the new system lies in the hands of central banks, working together with their commercial counterparts. It doesn’t take any kind of oracle to guess which of those two paths will be taken If we do nothing. A change of this magnitude, affecting generations to come surely calls for a democratic mandate – Preceded by a thoroughgoing public debate?
Currently this is being avoided. CBDCs are being downplayed. Presented as a purely technical matter, that can safely be left to the experts. The bankers.
The vast majority of legislators and policymakers, tend to be more or less ‘at sea’ with ‘digital’ let alone Fintech, and will need all the help they can get to get up to speed. So here are seven things that legislators need to know to navigate the coming year:
- This is big – bigger than Brexit. Bigger than the Internet. It’s worthy of your attention because it’s the rapid arrival of the Internet of Money. Here and right across the world. The mother of all disruptions it will make a deep impact – reshaping the political and economic landscape.
- It will happen at speed – because it’s being driven by external geo-political forces. Now that the covers are coming off the digital Yuan has accelerated ‘trials’ from 4 to 11 regions in a month – and with digital yuan withdrawals now available at more than 3,000 ATMs in Beijing alone.
- Nor is it ‘just’ a change to the nature of money. China’s emerging ‘Silk Cloud’ strategy – a next generation trading platform for those both on and off the 21st century Silk Road – is driving this disruption and taking it to a whole new, global, level.
- It’s already started. Almost 90% of the world’s central banks are quietly working on their own national digital currencies, along with the partners in the commercial banking sector. Yet few people know either what they’re doing or the implications.
- There is currently no effective scrutiny – despite the fact that what happens next, and the design of a new national digital currency – digital Sterling, digital Dollars etc – will affect everyone, everywhere for generations to come. This surely requires a democratic mandate. It’s inconceivable that such a major systemic change – bigger than Brexit – could be made without one.
- This is also an unprecedented opportunity for UK PLC to provide world leadership. But to do so will require rapid and vigorous action – and a major investment in our Fintech community. As well as a major education process – including in Westminster and Whitehall. A new way of thinking about the future. The USA, riven by partisan politics and plagued by fake news, is ill-equipped to play its accustomed role as ‘leaders of the free world’.
- The stakes could hardly be higher. On the one hand with the right, democratic, mandate and design this could become the beginning of a new era with a rebalanced and non-extractive financial system free of the ever increasingly exorbitant privileges and extraction of the incumbents. With it, with the right safeguards, a huge data-dividend from the daily torrents of valuable data, harnessed for the public good.
The alternative is a hugely consequential extension of incumbents exorbitant privilege. Entrenching their position and providing yet more opportunities for unearned rent extractions now and into the medium and long term.
An FT article last week asked if this is ‘The End of Privacy?’. Loss of Privacy is most often quoted (and then too soon dismissed) as the main risk but the reality is that this goes much deeper – both as a threat and an opportunity for society.
Quite apart from all the implications already outlined above the governance, ownership, control and transparency of the next version of our national money is clearly at stake – as is it’s guardianship and the question of who will benefit.
If these are not matters or consequence of the first rank, and a matter for lawmakers attention, public debate and require a democratic mandate, then I don’t know what ever could be!
Navigating this complex and fast-moving global paradigm shift will be a major challenge for all involved. It will need a strategy based on clear thinking going forward – and on a clear understanding of both the frontier tech and its possibilities and developments globally.