As I am always on the lookout as to where I can stash the family fortune I thought that I would pop along to find out more about cryptocurrency. There can be few people more qualified to discuss this topic than Sir Jon Cunliffe, Deputy Governor of The Bank of England for Financial Stability, and Tom Duff Gordon, Vice President of International Policy at Coinbase, an American secure on-line platform for buying, selling and storing cryptocurrency. The event was chaired by Danni Hewson, broadcaster and financial analyst.
Ms Hewson began by outlining the format of the presentation, with her interviewing the guests and then throwing the opportunity to the audience to ask questions. Throwing was the operative word, as the microphones given to the paying customers were housed in foam cubes and hurled to those who had put their hands up to speak. No one was injured in the course of this event.
Danni Hewson
Sir Jon began by outlining where he saw the value of this new method of payment. It is quick and cheap, as it won’t require outside input, or even inside output. The vision was illustrated by the example of buying something on line. At present you place the order and pay for it, it is then delivered and, should you decide to return it, the refund will get back to you several days later. With cryptocurrency you will order the goods but the money will not be taken until the courier takes a photograph of it being delivered at which time your account will instantly be debited. Similarly with returns, the money will be back in your account the moment the courier takes possession of the unwanted item.
Obviously there are larger financial implications such as with investments when you will get the value of them at the time of purchase, rather than when the transaction is processed by your investment fund.
Sir Jon Cunliffe and Tom Duff Gordon.
The thing which struck me about cryptocurrency was the huge range of them. I think we have all heard of Bitcoin but Tom Duff Gordon said that his company receives many requests to handle new additions to the market but, due to their strict vetting process, only about four or five per hundred make it. The others are presumably handled by other platforms so a mind-boggling array.
He said that there are two kinds of cryptocurrency; secured and unsecured. The descriptions speak for themselves in that the former has assets, often gilts, behind them to the value of the units purchased, whereas the latter relies solely on the confidence of the users that the payments will be honoured when it is time to use them.
Mr Gordon also subdivided the currency into that which is used for trading and that solely for speculating on. They tend to be the same as the first two divisions.
The subjects of fraud and money laundering were brought up and what amazed me was that this is not a very good way of laundering money as the full transaction history of each unit can be traced back to its creation. There is scope for pseudo traders but it is not as easy as you might imagine. Sir Jon said that cash is still king when it comes to money laundering, its only downside being its bulk! Fraud was no worse than the other scams which are widespread on the internet.
Mr Duff Gordon said that cryptocurrency is most widely used in countries with unstable economies such as Turkey and Venezuela, where the population would rather have their assets held by private digital platforms than the central bank.
I don’t propose to delve much further into the details of the subject, for a start, some of the jargon was a bit beyond me and, although I got the gist, I probably would misinterpret some elements. What did surprise, and reassure, me was that the two gentlemen were in complete agreement with the need to both advance the development of cryptocurrency and also regulate its creation and use. Being somewhat of a mild cynic, it disturbed me a little that the trader and regulator were in agreement, was there something they had both missed? Probably not.
There were some telling questions from the audience, as well as the seemingly obligatory one from someone with an obvious agenda, which had nothing to do with the subject. If I am a mild cynic, he was a rampant one. There was discussion of a government backed cryptocurrency being issued which would make it totally guaranteed, but this chap kept insisting that he didn’t trust the government, the banks or seemingly anyone but himself, and even then he wasn’t too sure. Despite being asked for solutions or the reason he took such a stance, he just repeated his belief. I must congratulate the professionalism of Ms Hewson and the two speakers, who managed to move on seamlessly to the next question without causing offence. I would have been tempted to remind him that there is a perfectly adequate airport about ten miles out of town and, if he were so upset about it, he could catch a flight to a country in whose government he was more confident, perhaps Turkey or Venezuela.
This was another ‘fireside chat’ which lived up to the aims of LIFI23 by stimulating thought and discussion. The only disappointment being that I am no wiser as to where to hide my slush fund, what with the traceability of the hoard and that it is probably uneconomical for me to mess about converting my twenty-five quid into crypto anyway.
Feature image from Chapter81, photographs by Stan Graham
Tyke It To The Limit 