In our fourth and final article in series on how the fintech industry is being covered at Davos 2017, Henry Blodget, CEO and Editor-in-Chief of Business Insider, quesitons the panel on the rise of bitcoin and opens up the panel for closing remarks on the fintech industry.
A lot of people say bitcoin is a new form of money, and one of it’s advantages is that it’s not controlled by any central bank that might be politically motivated and that might devalue the currency with that in mind. We’re starting to see a lot of transactions with bitcoin that are cross-border and outside of the banking systems, which a certain segment of users are excited about. What do you think about bitcoin?
Cecilia Skingsley (Deputy Governor, Swedish Central Bank): As an economist looking at what money is, it’s both a payment method and a store of value. In order to make this sufficient it has to be a stable store of value. You can do that by pegging your currency to another currency or through inflation targeting. This sense of a stable store of value is something that bitcoin or the other cryptocurrencies do not have. They are volatile, so it’s more of a speculation in a financial asset than money in the economic sense of view. When people introduce the question: “Are you seeing bitcoin as a competitor to Swedish currency?”, I reply: “Do you use bitcoin?” They say: “No of course not”. They say it’s not stable enough to use, and that is the point.
We still have a strong product to offer from the stable bank. If people don’t like it or don’t trust the state, then yes you can make transactions through other methods, you can use bitcoins or a similar alternative…that’s up to you, if you think that’s efficient and safe. We provide the state option, which is safe and efficient and is widely distributed. It also has a stable store of value. I love the technology behind it though and that’s very interesting.
David Craig (Prseident, Financial & Risk, Thomson Reuters): I think blockchain distributed ledgers is potentially transformational, and there’s a lot of experimentation going on. 2017 might be the year that those experiments start to work. I want to link it back to the trust discussion, because what I’ve really learned about this technology is blockchain and distributed ledgers distributes trust amongst a group of people who have to work together, but don’t necessarily trust each other. The financial system and what the distributed ledgers does is create a group of participants who have to collectively agree on a standard of how they federate that trust.
Historically the financial industry hasn’t been particularly good at collaboration: It tends to be lots of groups of people part-collaborating and part-competing, and this offers a way of changing how that operates. It also does something very interesting around utilities: There’s a lot of questions around where utilities need to exist in a world where you’ve got distributed ledgers. They exist but they change, as do their roles.
We don’t have to have centralised ledgers and infrastructure and be the source of that central trust. We can now federate that around the participants, be it payments, security clearing, transactions – in a different way. And I think that's really exciting. Technology aside, it changes how the participents of the industry have to function for this to work. As it was said before, no one player can solve the financial industry on their own, they have to work together. If there’s one thing I’ve found at Davos 2017 it's that the discussion around collaboration and partnership is at an all time high, underpinned by some of this technology and that’s really interesting.
Let’s end on where we’re heading, namely some fearless predictions about the future.
Francisco Gonzalez (Group EC, Banco Bilbao Vizcaya Argentaria SA): It’s very difficult to know what’s going to happen over the next five to ten years. Technology is evolving. Cyber security is a big thing that has to be addressed, not just by the banks but also the authorities. The authorities have to be really involved in how to tackle it. On the other hand you have the big guys, like Facebook and Google, who are managing AI ahead of everyone. In my view AI will be a real changer. Blockchain is also a changer but it will also be a standard. The difference will be made by the guys who manage data and AI.
Henry Blodget, David Craig, Francisco Gonzalez, Cecilia Skingsley were all speaking at The Global Fintech Revolution conference at Davos 2017