At the end of January, the leading thinkers and doers of the fintech industry descended upon the Palais Brongniart, Paris. But we were not visiting it for its credentials as a previous host of the Paris Stock Exchange. Instead, it was its role as host of the fifth Fintech Forum that drew us there. With seven different stages — one being dedicated to crypto, blockchain and digital assets — and a large and mostly international suite of attendees, the event was the perfect place to discuss the issues, innovations and opportunities facing our sector.
The overarching theme of our discussions with banks, investment funds, payment providers, custodians and remittance services, along with our fintech peers, was tradition versus disruption. We have seen fast change in our landscape since the last Paris Fintech Forum — so this event was a great opportunity to take stock, as well as to think about where our industry could be catapulted to in the coming year.
Compliance and transparency
Over the last year, digital currencies have gone from a relatively ‘fringe’ topic within the media to dominating headlines. The question for the mass media is no longer “exactly what is a digital currency? Why do I care?” but, instead: “Who can legitimately issue a digital currency? What will a legitimate digital currency look like?”
Our talks on these issues consistently came back to two factors: compliance and transparency. A legitimate digital currency issuer must be compliant with the same standards and safety measures as banks. But, for any currency to become legitimate, it must be trusted. Gaining trust as a currency will naturally be a gradual process, but there are a number of ways this process can be supported. In this, transparency is key: over governance procedures; decision-making mechanisms; as well as transparency over how much the currency is ‘worth’ as a store of value.
We explained to a number of our peers how Saga’s performance page provides a daily, real-time attestation of how much is held in Saga’s bank reserve. Their reaction was positive, and many were impressed — noting that they find it rare in the industry to see such transparency over the inner workings of a crypto project.
New ground — but old tools
Many traditional financial players have shifted their attention to developing digital currencies. Naturally, the crypto community is watching this closely. This is particularly true with central banks, with more and more announcing Central Bank Digital Currency (CBDC) initiatives of their own. Sentiment across our discussions was consistent: central banks are following the technological tide change, but our peers remain in ‘wait and see’ mode until more information is available.
Another common sentiment was that banks who are digitally tokenizing their assets are finding themselves in a bubble. This is because they are tokenizing their assets in ways designed to fit their legacy systems. While this makes sense, this means the banks doing this are coming up against ‘brick walls’ of their own making — digital tokens designed for a single internal system are not interoperable for other institutions. Existing tokens, then, are needing to be retrofit with interoperability, but this can pose a considerable challenge from a security and compliance perspective.
Asking the right questions
With the energy and pace that our industry is moving, it is crucial that we interrogate our assumptions and ask the right questions. At the conference, Saga’s Founder and President Ido Sadeh Man spoke on a panel discussion on whether stable coins are as ‘stable’ as their name suggests. Stable coins are essentially tokenized fiat currencies — but what if the underlying fiat currency is experiencing volatility? “It’s about purchasing power on the international and global stage,” explained Ido. “If a national currency experiences sudden fluctuation in value due to national politics — like we have seen with the British pound and Brexit — this ultimately impacts the user of the currency. To me, that is not necessarily stable.”