Fintech Enroute: This Week’s Industry News
Fintech Shutdown
The consequences of the 3-week government shutdown is causing anxieties not just for federal employees or on Wall Street, but also for tech firms across the country. The immediate losers here are companies gearing up for IPOs — think Lyft, Slack, and Uber — who will be experiencing delays processing their registration to go public. Nevertheless, a new sector of those-affected are appearing: smaller fintech firms who are being plagued by dealmaking delays, slower rates at which money can be raised, and the halting of pending ICOs. What are the greater implications of this? The shutdown could be casting a “pall of the presumed pre-eminence of the US as a fintech superpower”.
Read more at http://www.rollcall.com/news/fintech-shutdown-federal-government
The Belgium Option
In a testament to the influence of politics on fintech, British firms are preparing for the upcoming Brexit implications sweeping across the island. London-based international money transfer firm Transferwise is gearing up for a “no deal” Brexit by opening a satellite office in Brussels. EU membership allows for firms to benefit from “passporting” of financial services, a principle which allows companies to offer financial services freely across EU countries with “minimal additional authorisation”. While Transferwise’s Brussels expansion is not a groundbreaking development for the company, the loss of “passporting” for smaller fintech firms could be detrimental. London may be losing it’s mecca-status for fintech start-ups in Europe, begging the question: will Brussels be the next hotspot for Europe?
Read more at: https://techcrunch.com/2019/01/09/the-belgium-option/
Central Banks’ Interest In Use of Cryptocurrency Rising
Much to the chagrin of the libertarian advocates of cryptocurrency, central banks have been looking into utilizing a blockchain distributed ledger system to create their own centralized and stabilized cryptocurrencies. A recent study published by the Bank For International Settlements discusses the implications and difficulties involved in central bank adoption of digital currencies. The study, most poignantly, distinguishes between two different types of Central Bank Digital Currencies (CBDCs):wholesale and general purpose. Wholesale CBDCs will be used exclusively for the clearing and settlement of interbank loans and other high-level transactions. General purpose CBDCs, on the other hand, will be offered to the general public and will be pegged to fiat at a 1:1 ratio.
The study surveyed 63 different central banks representing jurisdictions that cover nearly 80% of the world’s population, two thirds of which represent emerging market economies. The general consensus is that most of the banks, if they plan to implement CBDCs, will do so in the medium term as opposed to the short term, defined as within three years. Approximately 40% of the central banks surveyed, however, are unsure about their authority to implement CBDCs. The central banks of Sweden, Uruguay, and Ukraine said they have already set up pilot programs to implement CBDCs.
Central bank utilization of cryptocurrency or blockchain, broadly construed, might be inevitable as the efficiency and security benefits of doing so abound. However, this use of the technology is undeniably antithetical to the goal of “decentralization.” The deployment of CBDCs might call into question the guiding philosophy behind distributed ledgers.
Read more at: https://cryptonews.com/news/three-central-banks-plan-to-issue-digital-currency-3172.htm
Read the full study at: https://www.bis.org/publ/bppdf/bispap101.pdf
