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A Fortnight in Fintech: Bitcoin, banks, Libra and LendIt

3 October 2019

 

Where finance meets technology, interesting things continue to happen.

We’re pleased to report that we’re still part of fintech news ourselves. Our collaboration with BitPay to accept Bitcoin as fee payment has been reported not just by accounting publications but as ‘a major development for cryptocurrency adoption’ by BTC Manager, the Satoshi Nakamoto Blog, the American Crypto Association and other cryptocurrency sites.

At the same time, recent articles and personal experiences have got us thinking about non-digital currency and whether a ‘cashless society’ and its benefits are more elusive than perhaps we thought. Read on to find out more.

Libra, BIS and Basel

Last month, an interesting meeting took place in Basel. It was hosted by the Bank for International Settlements (BIS) and attended by officials from the Bank of England and 25 other central banks. Other attendees included representatives for Libra a.k.a. Facebook’s digital currency.

The topic, as stated in the BIS press release, was ‘policy and regulatory issues posed by the emergence of “stablecoin” initiatives backed by financial institutions and large technology companies’.

We can’t have been the only people curious about what the central banks (against whom a fiat currency is centralised) make of a group of commercial organisations essentially centralising a currency of their own.

Benoît Cœuré, Chair of the BIS-hosted Committee on Payments and Market Infrastructures, has referred to “a number of serious risks related to public policy priorities. The bar for regulatory approval will be high.” French finance minister Bruno Le Maire has been blunter, saying: “I want to be absolutely clear – in these conditions, we cannot authorise the development of Libra on European soil.”

It later emerged that Facebook had a series of meetings in April and May with UK government and finance officials, apparently to discuss Libra.

You may have heard people refer in corporate terms to ‘the cryptocurrency space’; you’ve surely heard the expression ‘watch this space’. Both apply to this topic.

Another day, another dollar?

Talking of central banks and digital currencies, this Wall Street Journal article highlights how central banks are looking at turning their own currency into a fully digital one.

It raises some interesting points on the impact this would have on how the financial system currently works, and how it may challenge the status of the US$ as the global currency of choice.

What it doesn’t address is that there are large sections of society still dependent on cash, or those without access to the necessary technology. Introduction would need to be managed in steps to safely navigate the change.

We’re strongly inclined to favour the idea of a cryptocurrency backed by a central bank over one backed by a consortium of commercial entities.

The need for change

Our financial services team had an insightful time at the LendIt Fintech Europe conference at London’s Business Design Centre. It was interesting to hear from bright and innovative businesses (and fun to see some good-spirited teasing between fintechs and banks!).

(We may also have mentioned the brief distribution of our own currency: ‘Bank of BKL’ banknotes that we gave to guests at our financial services casino night last month. We must confirm that they are not legal tender.)

A personal reflection from one of our financial services partners, Jon Wedge:

‘Whilst walking back to the station after, I was twice asked for spare change by homeless people. I had none.

This got me thinking: yes, it is great for me to have mobile payments and contact less cards rather than cash.

However, the advances in fintech are in danger of leaving sections of society behind or causing damage in other ways.

A completely cashless society would currently put further strain on the homeless and other sections of society.

And whilst quick access to finance or payment plans at the point of sale for consumer goods may be great for customers, allowing people to use higher amounts of their available credit does have dangers attached.

Innovation in this area is amazing but change needs to be managed responsibly. Wider issues also need to be overcome so that fintech’s benefits can be enjoyed without detriment to others.’

Fintech, funding and the future

We enjoyed Raconteur’s recent Future of Fintech newspaper supplement, bringing news and opinion on cutting-edge technology to a more traditional medium (albeit with some of the articles also available online). Its front page headline was a reassuring one: UK startups defy Brexit jitters as funding jumps.

A comment from Tech London Advocates’ Russ Shaw expresses why this is the case:

“Britain benefits from a deep-seated heritage in banking and financial services, a collection of the world’s greatest universities, highly skilled talent and a progressive, forward-facing regulator in the Financial Conduct Authority.”

The article also carries a note of caution, including the Digital Finance Forum’s statistic that only 1 in 3 UK fintech founders are optimistic about the UK’s position as global leader in five years.

Whatever economic jitters lie ahead, our specialism as fintech accountants and advisers means we can help clients explore opportunities to grow their businesses and become more resilient.

For more on how we can help fintech businesses, take a look at our fintech page or contact us using our enquiry form.

You can also read our previous fintech news roundup here.