Cryptopia or Fiatland?

How Fiatlanders can respond Based on column inches, Cryptopians currently dominate debate about the future of money. Fiatlanders must respond in the following ways: • Communite how fiat currency is being improved for everyone’s good - communicate Fiat 2.0. • Central banks and other authorities should avoid sending mixed messages about Cryptopia. Warnings to retail investors about the dangers of cryptocurrency investment need to be more assertive. • Greater efforts are needed to drive financial inclusion from banks, regulators and fintechs. • Countries should adopt policies to improve the working of their currencies founded on national identity schemes, real-time payment systems and other national utilities like proxy databases mapping bank details to email/phone numbers. • Greater market innovation supported by good regulation. Fintechs and challenger banks need better access to banking rails to increase competition. • Migration of core banking systems from batch processing to real time 24/7/365 and digitisation of back offices to reduce costs. • Adoption of improved Strong Customer Authentication (SCA) to drive frictionless payment online and at point of sale. • Migration of clearing systems and SWIFT to ISO20022 and standardisation of bank APIs. • Development of 24/7/365 RTGS systems so that finality of settlement is always available in central bank money, and systems coordinate final settlement between always- on RTGS venues. • Emergence of next generation wallets that act as a front end on real-time clearing systems and bank APIs that facilitate lower costs for merchants. Victor or synthesis? The world is facing a discontinuity in the way that money operates but is currently not well prepared to evaluate the options. Cryptopians have made valuable contributions to the evolution of the monetary system by presenting radical alternatives to the existing order but are misrepresented through hyperbolic headlines. Fiatlanders suffer from the opposite problem; few understand the global developments taking place in fiat currency systems. It is far from clear which party will win the battle for the future of money. A synthesis of these two world views may emerge but evidence to date shows it will be challenging given the lack of common ground. Concepts such as initial coin offerings, central bank digital currencies and private permissioned ledgers have sometimes exhibited the worst of both worlds, rather than the best. Similarly, representations of fiat currency on blockchains fail to offer any advances on e-money, which already exists and is well regulated. Ultimately, the only measure of success for Cryptopia and Fiatland is adoption, the prospects for which should be judged on first principles rather than focusing on superficialities. Short-term technical deficiencies are likely to be just that; bitcoin’s low rate of transactions per second compared to established payment systems, and the relatively slow pace of ACH transactions compared to instant peer-to- peer payments, will be improved. What is clear is that money is changing rapidly. The emerging 24/7/365 digital world could dramatically lower costs, improve efficiency, enhance security, generate economic growth and bring millions out of poverty – changes that both Cryptopians and Fiatlanders should welcome. The world is facing a discontinuity in the way that money operates but is currently not well prepared to evaluate the options because crypto dominates the headlines.