Friday, November 24, 2017

Fintech Innovation - Where is it Headed?

We have clearly entered into a new world in terms of financial technology that is slowly but surely altering the landscape of banking, payments systems, and even perhaps legal tender currencies. All this technological innovation is filled with buzzwords and companies trying to become "the next big thing" that changes the world in a truly meaningful way.

We have "Bitcoin", "Blockchain", "Distributed Ledger", "CBDC" (Central Bank Digital Currencies) as new buzzwords that have popped up in recent years. Lately we see even newer efforts to try and innovate to improve "blockchain" (see Hashgraph here). I believe there are now over 1,000 private "cryptocurrencies" vying for capital in the marketplace. 

Right now there is so much happening so quickly in terms of competing ideas and technologies, it can quickly become overwhelmingly confusing to most people who are not technological experts and just want a simple, inexpensive, and secure way to transact their business with a currency that holds it value over time. 

We have covered this topic pretty well here, but as it can be quite confusing and things keep changing constantly (funny how innovation works that way), I thought perhaps an analogy that most people can relate to might be helpful to see where things stand right now. With that in mind, let's use the old Sony Betamax vs. VHS technology battle as our guide. 

Readers from my generation will quickly recall this technology battle. Younger readers might find it an interesting footnote in history that illustrates how there is a constant technological struggle to gain universal adoption that really never ends. Even in this case, after the VHS technology for video players won out in the marketplace, it was eventually replaced by DVD's, then Blue Ray etc. But perhaps this process can help us understand the ongoing technology battles in the fintech arena?

First, here is how the Betamax vs. VHS battle played out as described in this wikipedia article on the topic:

Videotape format war

"The first video cassette recorder (VCR) to become available was the U-matic system, released in September 1971. U-matic was designed for commercial or professional television production use, and was not affordable or user-friendly for home videos or home movies. The first consumer-grade VCR to be released was the Philips N1500 VCR format in 1972, followed in 1975 by Sony's Betamax. This was quickly followed by the competing VHS format from JVC, and later by Video 2000from Philips. Subsequently, the Betamax–VHS format war began in earnest. Other competitors, such as the Avco Cartrivision, Sanyo's V-Cord and Matsushita's "Great Time Machine" quickly disappeared.
Sony had demonstrated a prototype videotape recording system it called "Beta" to the other electronics manufacturers in 1974, and expected that they would back a single format for the good of all. But JVC in particular decided to go with its own format, despite Sony's appeal to the Japanese Ministry of Trade and Industry, thus beginning the format war."
. . . .
"Sony had met with Matsushita executives in late 1974 or early 1975 to discuss the forthcoming home video market.[6] Both had previously cooperated in the development and marketing of the U-Matic video cassette format. Sony brought along a Betamax prototype for Matsushita's engineers to evaluate. Sony at the time was unaware of JVC's work. At a later meeting, Matsushita, with JVC management in attendance, showed Sony a VHS prototype, and advised them it was not too late to embrace VHS "for the good of the industry" but Sony management felt it was too close to Betamax production to compromise."


"The main determining factor between Betamax and VHS was the cost of the recorders and recording time. Betamax is, in theory, a superior recording format over VHS due to resolution (250 lines vs. 240 lines), slightly superior sound, and a more stable image; Betamax recorders were also of higher quality construction. But these differences were negligible to consumers, and thus did not justify either the extra cost of a Betamax VCR (which was often significantly more expensive than a VHS equivalent) or Betamax's shorter recording time.

JVC, which designed the VHS technology, licensed it to any manufacturer that was interested. The manufacturers then competed against each other for sales, resulting in lower prices to the consumer. Sony was the only manufacturer of Betamax initially and so was not pressured to reduce prices. Only in the early 1980s did Sony decide to license Betamax to other manufacturers, such as Toshiba and Sanyo.

Sony's decision in 1975 to limit Betamax's maximum recording time to one hour (for NTSC systems) handicapped its chances of winning this marketing war. VHS's recording time at first release (1976) was two hours—meaning that most feature films could be recorded without a tape change. It was not until the early 1980s that Betamax offered recording times comparable to VHS. In UK, the L-750 Betamax tape lasted 3 hours and 15 mins, while VHS was limited to a 3-hour maximum (The E-180), though later on an E-240 tape lasting four hours became available, though picture quality wasn't as good.

By the time Sony made these changes to their strategy, VHS dominated the market, with Betamax relegated to a niche position."

So, how can we relate this old technology battle to what we see going on in Fintech today? I think in a number of ways. 

As with most technology battles, what is being sought is a universal standard that everyone can easily use and will want to use. Before a universal standard is adopted for anything, there are usually competing versions of new technology vying to become the universal standard. Once most manufacturers pick what they want, one technology tends to "win out" and become what everyone adopts. Sometimes it matters less which technology is actually "superior" than it does which one gets adopted by more manufacturers. Once a critical mass of adoptions takes place, the standard becomes accepted across the board.
Applying this idea to the new banking and currency technologies we see just about everywhere now, I think we are in the process of seeing which innovative technology will gain the broadest adoption by the key "manufacturers" in this arena. In this analogy, I think the major banks and central banks are the "manufacturers" because whatever most of them adopt is more likely to become the global "standard".  The general public (as always) will have the final say because whatever end "financial product" is adopted will have to meet the needs of the end users (we, the people). 
It is important to distinguish between the underlying ledger technology that is used to support a currency system and payments system (blockchain and hashgraph for example) and the actual currency unit itself. As an example, one new Fintech innovation just introduced (Glint) does not use blockchain at all, but does hope to re-introduce the idea of gold as a currency people can use in daily transactions. Ben Davies of Glint has this to say about the ledger system they are using:

"One way we did it was to create our own ledger systems using micro-services architecture. It was about taking cutting edge technology and integrating into financial services. The innovation is in the application of that technology.”

Right now what we are seeing is that the major banks and central banks around the world are looking at which underlying supporting technology (like blockchain, hashgraph, various hybrids, etc) works the best in real world testing. 
Until we can get to a universal standard for this kind of underlying ledger technology, it is not really possible for central banks to move forward with the concept of central bank digital currencies. The currencies themselves are not really the innovation. They are just another electronic version of the legal tender currencies they already produce now. 
What is needed is an underlying ledger system that makes it possible to implement a digital version of their currency that is inexpensive, fast, and secure.  It also needs to be "interoperable" (connect to) other banks and central banks existing systems (Bitcoin running on very slow blockchain ledger technology cannot do this and will remain a private virtual currency).
The first technology that central banks can adopt that meets these goals will likely "win out" and gain widespread global adoption in the existing banking system. At that point in time, it becomes more realistic to think in terms of a new "global digital currency" that can utilize whatever new underlying ledger technology eventually gains adoption as the universal standard. Just as VHS became the standard for video players, some new underlying ledger technology will likely do the same in the banking system.

I see the process above as playing out over time in stages. I believe right now we are in the middle of the technology battle for universal adoption of an underlying ledger system that all banks and central banks can plug into. Until that stage is completed, I would expect most central banks (and the IMF) to hold off on moving towards so called central bank digital currencies. I would expect a few central banks to step into the central bank digital currency waters first on test basis using what they believe will become the universal underlying ledger technology that all banks can plug into relatively easily (I am watching Singapore in 2018 for now). 
If and when these initial tests prove successful and the general public finds it attractive, I would then expect to see more and more central banks join in around the world further cementing the technology chosen as the "universal standard" that everyone can plug into. After all that, it would not surprise me to see the IMF look more seriously into the concept of an "IMF Coin" as they mentioned recently
This seems to me like the logical way for things to progress over time and why I have said I expect this process to take some time to unfold. What is sometimes overlooked is that it always takes more time than many expect to test out various concepts in the real world and make sure they will actually work and truly meet the end objectives of the final end users. In this case, the final end users would be the general public which will have the final say on what they prefer to use. I
I view that as a good thing. The final product (for a new official global reserve currency) will have to be easy to use, safe, and inexpensive. Any such currency will need to be able to demonstrate it can hold its value over time and retain the public confidence. If legal tender currencies fail in that regard, people will look elsewhere (perhaps to new gold payment systems or virtual currencies like Bitcoin). These days, there are more of choices available for people to consider. That also helps keep the system more honest. If people have real choices, then you must offer them a genuine product that meets their needs and has their confidence or they will opt out to another choice one way or another.

Meanwhile, innovation moves forward as it always does and we wait to see what emerges as the universal standard (or if one actually does emerge). 

Monday, November 20, 2017

New Gold Backed Payment System from Glint Launches - Q&A Interview with CEO Jason Cozens

Today Glint launched a new product that I think readers here will find very interesting. It is a honor to be able to present a detailed Q&A style interview with the CEO of Glint, Jason Cozens.

He kindly agreed to do a Q&A interview with us to help provide some basic information on this potentially game changing new financial product. Below are his answers to some questions we sent by email on how Glint will work. I strongly encourage readers to both read the interview and pass this news along to others who may have interest in this topic. This is an exclusive interview done for readers here.

Jason Cozens - Glint CEO

Q: What is Glint and when should we expect to see it launch?

Glint ( is a new payments service that is reintroducing gold as money. For the first time ever we’re making gold a global currency that can be used in today’s electronic payments world.

Glint lets you spend, exchange, store and send local and foreign currencies, including physical gold - the most universally trusted form of money. You can pay with your Glint Mastercard, through the global banking payment system and via P2P (email).

We just launched today after being in stealth for a few years.

Q: What prompted you to get involved with Glint? 

First of all, I just became very interested in gold. Like many, the global financial crisis had woken me up to the fact that today’s fiat money is inherently unfair since it doesn’t maintain its purchasing power due to central bank policies. I also realised that a bank account is not the secure deposit of money that I once thought it was. Instead it is lent out, intentionally put at risk. We used to get an interest rate in return for that risk, but not so much these days. When your money can’t buy you what it used to and when banks go bust, even in the UK, it makes you think twice about what you use as money and where your money is stored.

So, I learnt that gold holds its purchasing power over time and – if it’s kept in an independent vault – it’s free from the contagion of a financial crisis. 

The problem with it until now has been that it is stuck in a vault and can’t buy you a coffee. I’d spent the previous 15 years leveraging emerging digital technology to help us do things differently, more efficiently or faster, so this problem was like a red rag to a bull. I set out to find out how to reintroduce it as money in today’s electronic payments world and then make it so. I then teamed up with Ben Davies who had a similar mindset and who had co-founded Hinde Capital (, arguably the world’s first gold hedge fund. Glint is now the combined effort of a team of 30 talented people. 

Q: Do you see a strong consumer demand for a gold backed digital currency that can be both held as a store of wealth and also used in regular commerce?  

First of all Glint gives you real actual gold, it’s not a digital currency that is ‘backed’ by gold. Glint allows you to spend and receive physical gold itself as money. There is no credit, no need to sell your gold in advance into fiat. But in relation to using gold as money: I talk to people from different walks of life, young and old, and many of them have the belief that our hard-earned money should be sacrosanct and incorruptible. Why should the money that we have worked so hard to earn, whether you are an artist or an engineer, be subject to corruption by the policies of central banks? Why should its purchasing power be diluted over time? The emergence of, and interest in, cryptocurrencies is a clear demonstration of this world view. However, unlike gold, cryptocurrencies are not universally trusted. Gold is accepted globally, anytime and anywhere. Glint’s ability to use gold as money in electronic payments is an unprecedented event and gives us all the tantalising opportunity of a bottom-up return to sound money. 

Q: Followup: Where do you see that kind of demand coming from?

At first I thought that the product market fit was closest with the wealthy. They have the most to lose. But then we realised that this was not about wealth tiers. This is about a world view, a philosophy. No one wants to have their money corrupted, to lose its purchasing power or lose it in a financial crisis or an overstretched bank. Whether it’s your savings or ‘ready money’, owned by someone who had built a successful business or by a farmer in a developing country. The people who have pre-registered for Glint come from across the demographic landscape. There are of course some cultures where there is already a strong proclivity for gold, such as Germany, Italy, the Middle East, India and China. These are counties where the vast majority of people have never really trusted their banks or domestic money.

Q: Will the gold backing Glint be allocated physical gold?  If so, where will the gold be vaulted?

Yes, all the gold that Glint clients buy or receive is physical gold that is legally allocated to them. It is insured and stored in one of the world’s most secure and independent vaults run by Brink’s. So if the banks or currencies have a wobble, your gold is safe and secure.

Q: How easy will it be for merchants to accept Glint from customers?

Someone told me that we should take a leaf out of the Japanese Bitcoin community because they had managed to get 200,000 merchants signed up to accept Bitcoin. This kind of limited scale was never good enough for us. We wanted your gold and other currencies in your Glint account to be accepted anywhere and anytime, just like any other form of money within electronic payments. So, we have invested a lot of time and money to fully integrate it with the world’s financial system. Glint is accepted anywhere that Mastercard is accepted and can also be used in payments to traditional bank accounts around the world. Merchants don’t know what currency you are paying with, whether it is gold or another currency in your account, they get their currency of invoice. 

Q: How will Glint work for a consumer who wants to use it to pay for retail purchases?

You hand over your Glint Mastercard, the merchant swipes it and your default currency, whether you have set it to gold or one of your domestic currencies, is debited for the equivalent value using the real exchange rate at the point of purchase. You can easily change your default currency by swiping the wallet on the dashboard of your Glint app which you can download from Apple’s App Store. Of course you will have to have enough money in that currency in order for it to be approved.

Q: What advantages will Glint provide over using regular fiat currency or cryptocurrencies such as Bitcoin?

Unlike fiat money held with banks, Glint does not lend your gold out and it is legally allocated to our clients so it is not on our balance sheet, or the vault’s.

Gold is proven to retain its purchasing power over time unlike the US dollar which has lost 98% of its value since the Federal Reserve Bank was set-up in 1913.

Unlike cryptocurrencies, gold has stood the test of time. Your gold at Glint cannot be corrupted, lost or disappear. Gold is a constant from the moment it is created when neutron stars collide, it will be here long after the last computer dies or humans leave the planet. 

Q: What advantages will Glint provide over using other gold backed currency products such as Goldmoney? 

Glint has enabled gold to be used as money in real-time. As soon as you get your Glint card and app you can spend it straight away if you wish. You don’t have to first sell your gold for cash and then spend it.

Q: Will Glint be usable globally or just in certain parts of the world?

You will be able to use your Glint account and Mastercard to make payments anywhere in the world. However, in order to ensure quality control we will stagger the role out, starting off with those registered in the UK, then Europe, then other parts of the world. It’s on a first come first serve basis so I’d encourage people from all over the world to download the app and register. We’ve started out with an Apple iPhone app and we’ll have an Android version out soon.

Q: What kind of investor backing does Glint have? 

We are very fortunate to have some fantastic investors who have given us a huge vote of confidence with their investment and with the advice they give us. We have a number of individual investors as well as Bray Capital, NEC Capital Solutions and the Tokyo Commodities Exchange (TOCOM). Bray Capital is an early stage VC, NEC Capital Solutions is the affiliated company of NEC Corporation, a leader in the integration of IT and network technologies. TOCOM is Japan’s largest and one of Asia’s most prominent commodity exchanges.

Q: Do you think Glint can attract support from institutions like banks and pension funds or even sovereign wealth funds?

Glint already has the support of these types of institutions. We spent months preparing for and then receiving regulatory approval from the UK’s Financial Conduct Authority and from the corresponding bodies across Europe. We also worked hard with the UK banking community to ensure money in client wallets is stored in segregated and safeguarded accounts at a UK Tier 1 bank. Apart from the reliability and independence that Glint’s global gold currency brings to our clients, we also believe in providing choice and control to our clients. Therefore, whilst essentially independent of the financial system we are still totally integrated with it. That’s why we have worked with the incumbent institutions, regulators and banks to bring a comprehensive solution.

Q: Is Glint regulated and by whom?

Glint is regulated by the UK’s Financial Conduct Authority as an e-money institution and has regulatory approval across Europe.

Q: Do you think Glint will attract new demand for physical gold or just divert demand from people already purchasing gold? 

TOCOM invested in Glint because they realise that Glint will grow the size of the gold market, not just take market share. People normally restrict how much gold they have because it has traditionally been stuck in a vault. Glint allows people to put more of their wealth into gold than they would normally. They can put their ‘ready money’ into it too and still have instant access to it, since they can use it as money at a moment’s notice.

Q: Will Glint have a silver backed product or just gold?

We believe that gold is the transcendent money. We don’t want to confuse the Glint proposition with other forms of money at the moment.

Q: Is there anything else you would like for readers to know about Glint?

I’d encourage everybody to download our app at the Apple App store ( They can also find more information, view video’s, access Frequently Asked Questions (FAQ’s) and read our online Perspectives magazine at our website (


Added notes: 

Just for reader information, I have no affiliation of any kind with Glint or any financial investment in it. I am providing this information as a service to readers because I believe this is truly significant news about a new financial product with the potential to both impact the global gold market and the global financial payments system. I greatly appreciate Mr. Cozens taking time from what must be a very busy schedule to do this interview and provide such detailed insight into how Glint is designed to work. We will continue to follow Glint with interest over the coming months and wish them good luck with this new venture!
Glint is getting good global news coverage of their launch. Here are some article links:

CNBC - Gold becomes shoppers new digtial way to pay

Express UK - Glint Challenges Bitcoin

TechCrunch - Glint DeCloaks

City AM - Glint launches MaserCard App

Quartz - Startup thinks now is time to pay with gold

The Times (UK) - Gold Startup

Bank Innovation - Glint lets Users pay for goods in gold

Financial Times - Gold App brings gold into the digital age

Sunday, November 19, 2017

IMF Executive Director Talks Renminbi

A couple of additional articles here that point out that any expansion of the Chinese currency in regards to its role in the world is likely to be a gradual process. Below are links to the two articles and then an excerpt from each one.


IMF Executive Director Talks Renminbi

“China has made great achievements in liberalizing its financial sector,” Jin said. “But there is still a long way to go before it is fully internationalized.”

. . . .

“The inclusion of the renminbi into the SDR is truly a milestone for China to internationalize its currency, but it’s only one of the first steps,” Jin said.

The Rise of the Renminbi

"Beijing has worked hard to encourage the international use of the renminbi, which accounts currently for around one percent of the foreign exchange reserves held by the world's central banks."

. . . .

"To be a safe haven, a currency has to be traded in deep and liquid markets; during a crisis, investors value nothing more than liquidity. Moreover, for a currency to act as a safe haven, investors need to feel confident that there won't be unpredictable changes in the rules of the game.

In the country that controls that currency, the central bank and financial regulators must be insulated from politics; they should be legally and financially independent. Contract enforcement must be evenhanded, treating residents and foreign investors alike. Finally, the system of government must feature institutional checks and balances on the arbitrary decision-making power of the executive."

Added news notes: 

Earlier this year we covered the ill fated attempt by the Allocated Bullion Exchange (ABX) to launch BullionCoin. While that venture did indeed fall apart, the ABX did just announce a partnership with European Commodity Clearing to offer gold and silver trading in the EU. Here a quote from the news release:

“We are very excited about the partnership with ECC”, says Eric Maine, Chief Strategy Officer of ABX. “Bringing one of the largest financial markets onto an electronic, institutional trading platform which is centrally cleared by ECC and their 23 global clearing banks and 400+ member firms, is a major step for both ABX and for the precious metals industry. ABX and ECC’s efficient, cost-effective, transparent and robust centrally cleared model is what the global physical precious metals industry and related regulatory bodies have been waiting for, and represents a superior and viable alternative to the opaque, legacy, unallocated market.”

In other gold related news:
Monday (11-20) is the anticipated launch date for London based Glint which has attracted investment capital from some high profile investors

We will get our first look at how Glint is designed to work in a Q&A style interview with Glint CEO Jason Cozens he provided for readers of this blog (will post to the blog at 7:30 am Monday 11-20).

This is a great interview with a lot of good information on how Glint will work. Here is a quote from the Glint news release on its investors:

"NEC Capital Solutions and TOCOM join a number of high-profile individuals already invested in facilitating the global currency. These include Haruko Fukuda, former CEO of the World Gold Council and non-executive director of Investec Bank; Oliver Bolitho, formerly chairman of Goldman Sachs Asset Management Asia; Hugh Sloane, co-founder of asset manager Sloane Robinson; and Lord Flight Of Worcester, formerly of Guinness Flight Global Asset Management. Bray Capital, the eclectic venture capital group specialising in start-ups and growing businesses, has also invested in Glint."

Saturday, November 18, 2017

Cato Institute Monetary Conference - Speakers Lament "Opportunity Missed"

The Cato Institute held its 35th Monetary Conference recently in Washington DC. There was a strong list of speakers including Dr. Judy Shelton. This Reuters article however notes that the mood at the Conference was more along the lines of an "opportunity missed" to get some true monetary system reform. Below are some excerpts and then a few added comments.

"The Cato Institute’s annual monetary policy conference on Thursday could have been a celebration of President Donald Trump making good on his 2016 campaign promise to shake the pillars of official Washington, including the Federal Reserve.

Instead, the event at the libertarian think tank became a eulogy of sorts for the idea that Republican control of the White House and Congress would significantly change how the U.S. central bank operates, and an acknowledgement that the political center is holding firm in some key ways."

. . . .

“It is a bit demoralizing to realize that after delivering the same message for decades - that the world needs a rules-based monetary system - we have made virtually no progress,” Trump economic adviser Judy Shelton said to the crowd gathered in the Cato Institute’s F.A. Hayek auditorium in Washington.

“I have not been able to make the case ... I have not convinced lawmakers on the Hill, let alone a sitting president, that it is time for the U.S. to initiate reform.”

. . . . 

“I don’t expect to see invitations going out next week for a new Bretton Woods conference at Mar-a-Lago,” she (Dr. Shelton) said, referring to the conference that established post-World War II monetary arrangements and institutions like the International Monetary Fund.

“I do think we will see more language out of the Treasury emphasizing the importance of stable exchange rates,” she said. “People are willing to talk about this in a way they have not been before.”

My added comments: Here we have more evidence that it is not likely we are going to see the kind of major monetary system changes we watch for here unless some kind of significant new crisis forces change to take place. 

When I started this blog in January 2014, it truly seemed as if we were on the verge of some kind of major monetary system change. It is why I started this blog and why I have continued to monitor events for all this time. Instead, what has actually happened is that the prospects for any kind of sudden dramatic change have been reduced in favor of enormous efforts to just try and maintain the status quo. 

This is what we have been reporting here for some time in an effort to try and publish the most accurate assessment of the situation we can as we see it. Without a doubt, there are never ending articles, websites, etc. constantly predicting that some kind of major shakeup to the existing system is on the immediate horizon. I am sure articles here seem somewhat boring in contrast to many I see that predict major change is coming right away.

By no means am I criticizing the idea that there are all kinds of potential triggers for that kind of major change out there. I fully agree there are and that a new major crisis could arrive really at almost any time that does start the process into motion. 

Based on years now of following all this pretty closely. I think at least some reasons why that has not happened yet are:

- the 2008 financial crisis scared the existing banking and central banking system nearly to death. They have been in somewhat of a survival mode ever since just trying to keep the existing monetary system we have afloat. While there are many reasons why good and positive reforms might help the present system, trying to implement them in an environment of near systemic collapse was not appealing to those running the present system because there is no way to predict who the public will blame if things go wrong

- while there are all kinds of people (and nations) who would love to see the US dollar dethroned as the worlds global reserve currency, the age old problem of reality tends to assert itself. You can't suddenly replace the US dollar unless you have something viable in place that can take over that role without major disruption to world commerce. The power of the so called "petro dollar" has been overwhelming and everyone around the world is so tied to it that changing that dynamic is not easy to do. Also, there is no consensus around what the replacement should be. Some like another currency like the Yuan, some like gold, some like a new version of the SDR, some like all kinds of combinations of these alternatives. To have a universal standard, YOU MUST HAVE UNIVERSAL CONSENSUS OF AGREEMENT. So the US dollar wins by default because it is already in place in that role and there is NOT universal consensus on what to replace it with or on the mechanics of how to actually do that in the real world

- the enormous political divide in the world (and especially in the US) makes obtaining a broad consensus for change very hard to do for anything, much less changing the system that impacts the money people will use and how to administer it. Trust in governments, officials, etc. is so low that it is virtually impossible to get a solid majority of people to trust anything now (and its hard to blame them when almost every day a new example of scandal in leaders emerges).

I have tried very hard to report what is actually happening here on this blog as best I can with the information I have. I don't push an agenda on purpose because I am not an expert myself (so any agenda I might have would not be worth any more than one my readers may have) and because I truly believe that what really matters for the average person like myself is WHAT ACTUALLY HAPPENS, not what any one analyst or group of people thinks will happen or should happen.

To make intelligent personal financial decisions, it is critical to base them on what is actually happening. Sometimes what is actually happening may seem somewhat boring compared to exciting headlines that declare something dramatic will happen any day now. But I would prefer to be boring and present accurate information even if that means far less reader interest. If I attract readers with some kind of hyped headline and then report bad information, I am not serving or helping anyone.

Right now it appears that the most likely path for systemic change is for the new Fintech technologies to gradually prompt change over time so that is what I have focused on lately.

I will continue to monitor events at least until mid 2018. By then I feel it will be clearer if something dramatic leading to the kind of major change I watch for here is coming soon or not. If something does arise and I am aware of it, I will surely report it here. 

Meanwhile, I feel the best service I can provide readers is to present the most accurate information I can find from what I feel are highly credible sources so that people can hopefully use that information to better inform their opinions on monetary system issues. These really are important issues and if some day something does prompt calls for major change, the better informed we are, the better off we will be. That is my view on it here and the goal of this blog.
Added note: I just got back the answers by email for a really great Q&A style interview from Glint CEO Jason Cozens. I plan to publish the interview next Monday after Glint launches their new global currency product. I think readers will really enjoy this interview which describes some really cool new technology that I think can potentially impact the global gold market. 

Thursday, November 16, 2017

IMF: Fintech and Cross Border Payments

We have covered quite a bit of fintech news lately because that topic has emerged as the most likely to impact the overall monetary system whether because of private virtual currencies challenging the various legal tender currencies around the world or because a number of central banks are looking at implementing some kind of central bank digitial currency (CBDC).

The IMF has made it clear that they are also following all this closely to see where things may be headed. Here we have a recent speech by IMF Deputy Director Dong He on the topic of Fintech and Cross Border Payments. Below are a few excerpts.


"It’s a pleasure to join you here today, at Ripple’s “Central Bank Summit,” as we explore some of the key issues facing central banks raised by the current acceleration of progress in “fintech.”
The IMF has been carefully studying the trends in fintech, and my colleagues and I have gathered some initial thoughts about the way that the financial realm is likely to change. We’ve also been weighing how financial regulation and central banking will need to respond."
. . . . 
"In my remarks here today—focusing on implications of fintech for cross-border payments, I'll explore three broad areas:
  • First, a sketch of the economic framework on how fintech applications will affect financial services and the market structure.
  • Second, the current landscape of cross-border payments, and the possible evolution of cross-border payment systems; and
  • Third, the role of central banks, themselves, and the possible reasons for them to issue their own digital currencies."
Central Bank Digital Currencies
"Let me now turn to a second possible avenue for DLT application to be used as a means of payment: Central banks could offer their own digital currencies.
A “Central Bank Digital Currency—let’s call it, in shorthand, a “CBDC”—would not be a parallel currency. It would merely be a digital form of central bank money that can be exchanged in a decentralized manner. In other words, it can be transferred or exchanged peer-to-peer, directly from payer to payee without the need for an intermediary.
Such a CBDC would be exchanged at par with the central bank’s other liabilities (its cash and reserves)—either through banks or directly at the central bank."
Why Issue a Central Bank Digital Currency?
. . . . . . 
My added comments: I publish this kind of information not only to give readers a look at what the IMF and others are saying on these issues, but also to try and illustrate how these changes are unfolding very gradually and the outcome is by no means certain or predetermined. I see a lot of speculation that "China is about to replace the US dollar with a gold backed yuan" or "China will endorse a gold backed SDR to replace the US dollar" all the time. Many articles suggest that these kinds of major changes to the existing monetary system are about to happen any time now. 
Of course, I can't possibly know for sure what is going to happen in the future or when something major might change in the global monetary system. We have listed many potential triggers for that kind of change that really do exist and are pretty much present all the time despite the fact that no such changes have taken place so far. 
Also, there is no doubt that both Russia and China (and probably a number of other nations) are working towards the day when the US dollar does not hold its place at the primary global reserve currency. We see obvious proof of this all the time in both statements of officials and actions taken by those officials in those nations.
However, if you take the time to read what the various central banks, the IMF, and the BIS have released publicly on all this, you do not see any indication at all that they are moving rapidly to towards any major changes in the current monetary system dominated by the US dollar as global reserve currency. 
There is a lot of talk, a lot of studies, and a lot of various new technologies being introduced and tested that could lead to some big changes, but none of them appear to be leading towards a major global change in the near future as best I can tell. It feels like a universal technology standard formed by consensus (of the banks and central banks) needs to emerge first and we seem to be in the process of working through that now with a variety of concepts being tested. I view it as somewhat like the old BetaMax vs. VHS battle for standard universal adoption for video players back in the day (more on that in an article next week).
It appears that a slow and steady gradual movement towards change is underway driven by innovative new technologies. But the process will probably take some time to unfold at the current pace without some kind of major trigger (like a global crisis that took out the current monetary system). The best evidence I have from what I consider to be excellent and very high credibility sources is that we might expect to see a few central banks test out a central bank digital currency by next year. If that goes well, then others may follow and some of the bigger central banks might be tempted to test that out as well. If it does not go well, expect major central banks to be very cautious about making any big changes. My guess is that the IMF will sit back and watch all this to see how things turn out and which technology gains consensus widescale adoption in the banking system (or if any of the new technologies are able to obtain that status).
While I can't be sure what China and/or Russia might do of course, I don't expect them to try and force some kind major change to the existing global monetary system before all parties who would have to be involved in that are ready to agree on that. I don't find any public evidence that anything like that is anywhere on the near horizon despite articles I see constantly that speculate along those lines. The US seems to view efforts to undermine the US dollar globally somewhat along the same lines as a declaration of war (here is an alternative media view on that idea). I always remain open to evidence to the contrary should it arise.
As always, an unexpected crisis event can change things quickly. The most probable known event that could be in that category would be if the US is unable to resolve its problems with North Korea without a major shooting war taking place (Jim Rickards latest analysis is still 70% chance for war). The could certainly be a trigger for a major disruption of the current monetary system so we will continue to monitor that situation until it is resolved one way or another. (added note - see Jim Rickards Twitter comment on North Korea here)
By mid 2018, I feel like it will be pretty clear if any of this will lead to the kind of major monetary system change we watch for here and if further regular articles are really needed. It may be that I can just go into "monitor" mode and only produce an article if something that is significant in terms of monetary change surfaces. 

Wednesday, November 15, 2017

News from the Singapore Fintech Festival

We have previously noted here that Singapore desires to be a global leader in pushing forward new Fintech technologies. This week the MAS (central bank of Singapore) made some announcements in regards to some things we have talked about here that could lead to the first central bank digital currency by next year. Here is a link to the article and below is an excerpt from it (bold underline emphasis is mine).

"SINGAPORE plans to work with partners in Hong Kong and Canada in developing the use of blockchain technology, the Monetary Authority of Singapore (MAS) announced on Tuesday.
The MAS will set up a cross-border platform with the Hong Kong Monetary Authority to boost trade finance using distributed ledger technology. This will enable the seamless transfer of digital documents and data across the Singapore-Hong Kong trade corridor. This is expected to go live in early 2019.
Speaking to participants of the Singapore Fintech Festival 2017, MAS managing director Ravi Menon said that blockchain technology offers good promise to make trade finance safer and more efficient. He said that today, trade finance is largely paper-based. This is not only inefficient, but increases risks such as fraud and duplicate invoicing, he added.
The MAS also plans to collaborate with the Bank of Canada to link both of their payments system that test the use of distributed ledger technology for cross-border payments."
Please click here to read the full article

Added notes: Later this month I will try to provide a bit of an update of where things seem to stand in regards to the potential for monetary system change from the new Fintech technologies that continue to move forward around the world. Some things that will or could happen on the near horizon include:

- the launch of GlintPay based in London (I plan to cover that launch)
- perhaps some further news later this year from Singapore on progress towards a central bank digital currency
- the Cato Institute conference/discussion on the need for a rules based monetary system
- an interesting video interview from 2014 that readers may enjoy