Five Basic Digital Asset Questions this Week

The financial media took a more basic view this week, covering some of the basic questions on digital assets and payments after nearly six months of major interest and investment.

The end of privacy?
The Financial Times reports on the plans of central banks to launch digital coins. The article emphasizes their reluctance to give up monetary control while giving them the ability to monitor every transaction. The FT quotes Randall Kroszner of the University of Chicago Booth School of Business. “A digital currency revolution could go in two directions: either a triumph of decentralisation and market forces or a triumph of centralisation and government monitoring of every transaction.”

Would a digital dollar make FedNow obsolete?
American Banker ponders whether the U.S. Federal Reserve’s realtime payments system, scheduled to go online in 2023, would make sense if it issues a digital currency, which would have the same immediate payment properties. “Whereas FedNow will likely require consumers to open an account at a bank that will help facilitate the real-time transaction, a central bank digital currency could cut out intermediaries like banks.” Lower transaction costs and increased access to digital payments to more people could result. One thing for sure: banks will have to radically adapt their services in either case.

Can bitcoin replace fiat currencies?
Treasury  & Risk asks the question after El Salvador announced that it would consider bitcoin legal tender. The answer: not likely. It may be tempting for countries to toss off their dependence on the U.S. dollar but the increased volatility of bitcoin is a pretty high costs. We’ll have crypto, central bank digital currencies, faster payments, credit cards, and cash. More choices, most based on national currencies.

Who’s in charge? An overview of U.S. digital asset regulation
A lot of FinTech and crypto entrepreneurs ask that question. Congress appears to be making some progress with ongoing discussions reported almost weekly. Reuters provides a basic article that covers the main regulators. There are more than 60 including the 50 states. American Banker reports that the feds and states may have reached an accord on at least one issue: a federal charter that would grant banking powers to nonbank FinTechs.

Cryptocoins are proliferating wildly. What are they all for?
The Economist calls bitcoin an “investment sensation” accounting for 40% of the total value of all cryptocurrencies. Other cryptocurrencies, however, have different functions that bitcoin cannot fulfill. “Many listed on exchanges are “tokens”, which can become tools of speculation but, in contrast to “coins”, do not aspire to the full functions of money.” That’s where bitcoin may lose its dominant position. “The threat comes instead from currencies with nimbler blockchains that can do more than record payments.” Ether and its clones, for instance, are programmable, enabling much more sophisticated financial transactions without the centralized financial institutions that support them.

The next wave. How are they getting funding?
Plus one more. As FinTech investment continues to grow, Insider has been tracking a new set of start ups blending finance and technology. See the article 7 pitch decks that FinTechs looking to disrupt banking, wealth management, and credit scores used to raise millions.