- JD Dykes - DaLand
China Leapfrogs the World in State-Sponsored Cryptocurrency. What Now?
According to a recent Bloomberg article China is rolling out a state-backed cryptocurrency. For any Mr. Robot fans out there, this rings eerily similar to the plot of the series. Except the circumstances are reversed, with the US being behind the curve on this one. With fresh press like this, and DaLand always having our watchful eye on new trends and theories, we're asking ourselves: What's happening? What does this mean? Take a look at this snippet: “The consensus is that the token will be a private blockchain, a peer-to-peer network for sharing information and validating transactions, with the People’s Bank of China in control of who gets to participate (emphasis mine).” Bwah, you say? A P2P network not just for moving money but for... sharing information? Isn't information one of the fabled cousins of data? And isn’t data the gold and oil of the 21st century? And not only is this some new and shiny tech. The article’s author (Andy Mukheerjee) prophesied this will supplement, or perhaps entirely replace, traditional ledger-dependent banking methodologies. Blasphemy, you say? "Ever since the advent of the 17th-century goldsmith-banker in London, the most crucial thing in banking has been the ledger, a repository of irrefutable records to establish trust in situations where it doesn’t exist. When Peter in Vancouver agrees to send money to Paul in Singapore, they’re forced to use a chain of interlinked intermediaries because there’s no ledger in the world with both of them on it. Blockchain’s distributed ledgers make trust irrelevant. Paul devises a secret code, and shares its encrypted version with Peter, who uses it to create a digital contract to pay Paul. A cumbersome and expensive network of correspondent banks becomes redundant, especially when it comes to the $124 trillion businesses move across borders annually. Imagine the productivity boost" In that massive hunk of words, the author is essentially saying that ledgers are used primarily to establish, track, and retain trust. With a ledger, you know where the money came from and where the money went. With cryptocurrency and blockchain, on the other hand, the importance and requirement of ledgers fades. Where money came from and where it went is tracked as part of the transaction, not as a separate journal entry in a back-end GL system. That means more data that’s required to be tracked in fewer places. Here's what's crazy. Despite a potentially inevitable disruption to how monetary transactional data is conventionally handled, the agility of a cryptocurrency to connect a wallet holding consumer directly with a centralized FI will accelerate the trend of FIs spinning out of the vortex of irrelevance into obsolescence. Who needs to work with a local or regional FI if my local coffee shop, pizza parlor, or brew pub will take my digital money? And that digital money is "held" where? The central bank of China, in the case of this article (or other FI juggernauts that quickly hop on this train). Mukheerjee explains where this hits the road when he cites: "As Agustin Carstens, the general manager at the Bank for International Settlement, noted recently, 'If the central bank becomes everybody’s deposit-taker, it may find itself becoming everybody’s lender too.'" Now that you've gotten your routine (hopefully healthy) dose of DaLand anxiety, we, of course, have a proposal for you. While "what's happening" is governments and central banks are trending toward issuing state backed cryptocurrencies that could drive deposit dollars toward a central bank, that, by no means, has to be the sole outcome of this trend. That word TRUST still rings in DaLand's ears, and remains a vital component to the fruitful and beneficial deployment of this shiny new tech. Consumers might neither be inclined nor disinclined to have their money represented in a state back crypto and held at a central bank. BUT, they are inclined toward intuitive technology that allows them adequate leverage and ease of use with their money in the local, regional, and global marketplace. Alongside that, if their local FI is able to offer them this ease of connection and transaction, then the trust factor is all the more reason for their money to be held there, instead of directly with a central bank. DaLand intentionally designed C2C (Coin2Core) in anticipation of these trends. C2C allows for local FIs to interact with the crypto marketplace, connecting with exchanges and central banks, while allowing the actual (or digital) funds to be stored on your core database. So, while deploying the flexibility that will be expected by consumers and required by relevant FIs, it will also engender the trust (another consumer expectation) inherent in the relationship between them and their local FI. The icing on the cryptocake is that this also means the deposits will be with your FI AND the data and information will be at your fingertips. Instead being left to be anxious and immobilized, C2C positions your FI to stand squarely at the center and be the life of the digital currency party. Give us a shout and let us know how we can jump into the party together.