Perspectives 2019 2020 Public Sector

10 Citi Q&A Interview: The Future of Money: Cryptopia or Fiatland? What is the Fiat Currency Alternative? TM: Fiat currency systems have been developing for decades. Fiat currency rests on a stack of capabilities and platforms including Real Time Gross Settlement Systems (RTGS), Automated Clearing Houses (ACH), international card networks, new real time payment systems and global wallets. All of these things are undergoing radical development, becoming more 24/7, more global and more inclusive as time moves on. And this story is less well known than the crypto story. How can Crypto succeed? TM: For crypto to succeed a number of conditions will have to be met. Some of them are practical and some of them are more ideological. On the practical side, crypto systems have to get faster and be more scalable. More deeply, crypto systems cannot be seen to introduce a new form of intermediation to replace old forms of intermediation, otherwise what is the point. For cryptocurrency to be accepted by governments, government would have to accept a different relationship with the monetary system. It would have to accept more privacy in terms of payments and less ability to monitor domestically and internationally where money is moving. How do Fiat Currency Systems need to adapt? TM: The stewards of the fiat currency system need to tell a narrative of fiat 2.0. They need to explain how RTGS systems are likely to go 24/7, how ACH systems are getting faster, how real time payment systems are providing a framework for completely new banking services, how open banking APIs provide a new infrastructure for fintechs to develop entirely new services. All of these developments are hidden in technical journals — only read by a specialized audience. For the debate about the future of money to be effective these subjects need to be brought to the surface and that narrative has to be explained so that crypto currency is not seen as the only alternative for the future of money. Is a Synthesis possible? TM: A synthesis between the crypto view of the world and the fiat view of the world may be difficult to achieve. There have been attempts. There are Initial Coin Offerings (ICOs), which as investments are neither fish nor fowl. There have been suggestions of Central Bank Digital Currencies (CBDC), which may undermine the commercial banking system. There are some ‘Stablecoins’ which are no more than e-money schemes. And there are suggestions of using private cryptocurrencies in international payments, which seem to only add inefficiency to the process. So the reason why a synthesis might be difficult to achieve is because crypto and fiat are complete different ways of running a monetary system. So time will tell but at the moment some of these systems have been worst of both worlds solutions rather than best of both worlds. Is the Future of Money bright? TM: The debate between the crypto view of the world and the fiat currency view of the world is extremely positive for the future of money because some of the criticisms of existing systems are well founded. And if the only service that the crypto community gives is to stimulate developments in the fiat currency systems and make them better, then that would be a great thing. Whatever happens, whoever is judged to be right in the fullness of time, the future of money is certainly more 24/7, more global, more real time — and that is to be welcomed by everyone.