Päivi Heikkinen Suomen Pankki. Do you read Crypto? Aalto University Fintech Seminar Practical Questions and Solutions

Transcription

1 Päivi Heikkinen Suomen Pankki Do you read Crypto? Aalto University Fintech Seminar Practical Questions and Solutions

2 Do you read crypto currencies? 1. Ten years of a life cycle? 2. Bitcoin as example of virtual currencies 3. Easy riders and Hang-arounds 4. Reading virtual currencies 2

3 Ten years of crypto currencies Facebook to all Cloud computing mainstream Contactless EMV cards SWISH in Sweden Mobile NFC Android, iphone, ApplePay MobilePay Siirto ? Satoshi Nakamoto s white paper LocalBitcoins. com p2p Bitcoin trade Ethereum Ripple Mt GOX Final hack Bitcoin exchanges go bust: Bitstamp, Bitfinex, Youbit, Coincheck * In the mean time, European credit transfers and direct debits were harmonised to enable euro payments in T+1 * Visa and MasterCard dominate ad hoc payments * Internet banking goes mobile and struggles with strong customer authentication * Coss-border payments rely the traditional correspondent banking network 3 3

4 Bitcoin: introducing blockchain and distributed ledger Solving the problem of efficient global, anonymous, cheap and inclusive payments? Establishing new world order? Open source, full transparency Global peer-to-peer network No central authority, no middleman, no issuer or acquirer 24/7/365 Transaction history embedded in the transaction Open to everyone (inclusive) 4

5 What ever happened spring 2017? 5

6 Bitcoin as money or securities a long call Unit of account Commonly known, accepted Metrics for accounting Unites value to prices Medium of exchange Tradeable cowry shells, banknotes or mobile payments Measured in unit of account Also a store of value Store of value Intrinsic value or external backing Banknotes, gold or jewelry, equity, art Measured in unit of account Securities Investment traded in secondary markets like bonds or stocks Indicator of the value of the underlying asset Price reflecting the future expectations of the value 6

7 Bitcoin is rather poor a payment instrument Peer-to-peer network with distributed ledger too wide Slow Energy consuming Deflatory Volatile Speculative hype Community divided, centralisation due to high mining cost? Päivi Heikkinen Suomen Pankki Finlands Bank Bank of Finland 7

8 Where does the value of Bitcoin come from? No interest, divident or right of use No ownership Utopian hope of a new world order? Computing resources? Future blockchain implementations? Speculative returns? Value based on hope/promise that Bitcoin will be accepted as money one day 8

9 Easy Riders and Hang-arounds Value dependent of buyers and exchanges Estimate of 106 million users (Foley-Karlsen-Putnins 2018) Hype needed to boost the market Lot of noise but the emperor doesn t have new clothes Speculative market Initial coin offerings (ICO) to utilise the market May provide a type of crowd sourcing Too often semantics used to bypass securities regulation Plain scams Estimates of illegal activity related to Bitcoin (Foley-Karlsen-Putnins 2018): 44% of all transactions 25% of all users Illegal transactions up to 72billion USD p.a. 9

10 How to read crypto? Some jurisdictions have banned cryptocurrencies as such China banned exchanges, financial institutions and payment processors from handling crypto currencies and restricted ICOs Warnings of fraud and tulip mania by European Authorities European exchanges to fulfill KYC and AML since 12/2017 Commission FinTech Action plan Existing regulation needs to be upgraded to meet innovation potential Distributed ledger has great potential for future financial innovation IMF Regulation of crypto assets is inevitable, in the agenda of G20 UK ICO s need to be regulated as securities 10

11 DLT potentially a powerfull tool for what? Financial sector Generic Smart contracts Supply chain management? Bypassing clearing systems (and settlement) Ripple R3 Corda Immutable records? Ownership of land, securities Studied e.g. in Kenya for land register True sharing economy? Trust between counterparties Remittances? Own and monetize your personal data? Creator s value? Secures copyright and revenue to the artist Päivi Heikkinen Suomen Pankki Finlands Bank Bank of Finland 11

12 Thank you for your attention 12

13 BIS classification of digital money 13