future of currency - insights to date
TRANSCRIPT
The Future of Currency Insights from Discussions Building on an Ini4al Perspec4ve by Patrick Teng | CEO | Six Capital
Context This ini4al perspec4ve on the Future of Currency kicked off the
Future Agenda 2.0 discussions. This updated summary includes addi4ons from events to date to be further challenged, built upon and enhanced.
Ini4al Perspec4ves
Global Discussions
Insight Synthesis
Sharing Output
A New Order? We are witnessing the transi4on to a new order: New na4onal interests,
new trading routes, new products / services are all emerging. How to ensure the development of trade in this environment will be key to success.
Combining Currencies Doesn’t Work A cri4cal lesson that Europe has taught Asia is that combining currencies doesn’t work. Over the long term neither do currency pegs… Many expect
that the next decade will see an unraveling of the European model.
The US is in Flux 60% of the world’s output is linked to the dollar. It’s easy to see the advantages of this for the US but not for everyone else: The system
does not include a guaranteed lender of last resort.
US Global Control Some countries have build up significant dollar reserves but, for many,
the cost of its dominance is beginning to outweigh the benefits, par4cularly as the US share of world trade and GDP is in decline.
New Trading Routes The next decade will see the post-‐war routes eclipsed by the power of the
Indian Ocean region with new port construc4on plus proposed railways from coast-‐to-‐coast across South America showing the shape of things to come.
Cross-‐Border Commerce Cross-‐border commerce is growing faster than domes4c commerce and so will become increasingly important and influen4al. Cross-‐border flow of goods,
services and finance could increase threefold to $85 trillion by 2025.
China as Asia’s Voice Despite growth of other ASEAN na4ons, for the next decade China remains the clear economic leader in the region – becoming more influen4al as the
primary source of capital and the voice of Asia on the world stage.
ShiHing Power and Influence The centre of gravity of economic power con4nues shi^ing eastwards, back to where it was 200 years ago. Recent superpowers seek to moderate the pace of change but the reali4es of popula4on and resource loca4ons are immoveable.
Sleeping Eagle -‐ Waking Dragon China uses economic might and so^ diplomacy to reshape the world order, usurp the dollar and dominate world trade. As a result migra4on to Asia
increases, changing established market places. Africa will suffer as a result.
China’s Influence is Extending China is opening up and wants the natural privileges a vast economy might expect: a big say over global rules of finance
and trade and a widely used currency.
The Start of Change for the Yuan Special Drawing Rights (SDRs) are a start as they effec4vely mean
official recogni4on by the IMF that the Yuan is ac4ng as a reserve currency despite China’s extensive capital controls.
Good RegulaOon is Significant – for Stability and Confidence The response to the 2008 crisis has not had the desired effect -‐ limi4ng the ac4vity of bankers but enabling asset-‐rich investors, sovereign wealth funds, hedge funds, hungry for new investments, to take a greater share of the pie.
Born Free Change across all regions is inevitable: The emerging markets, free of constraint, are likely to seek to stabilize their currencies
and so be able to support more foreign investment
Global vs. Bilateral Agreements A key ques4on for the next decade will be whether we will be able to achieve true global agreements, or will bilateral trade agreements remain the way by which na4ons can befer manage and control economic influence?
Technology has Increased the Speed of Currency Trade With profit as the mo4vator and with deal speed at a premium, currency traders are rarely able to pause to consider what the impact of their
transac4on could be on a wider society.
TradiOonal Currencies are Being Challenged. Blockchain is to trade and currency what email was for the postal service.
It is allowing direct trade without recourse to a trusted third party and at a frac4on of the transac4on cost.
Changing Times Tradi4onal currencies as a means of exchange are challenged by
the growth of non-‐tradi4onal payments systems and peer-‐to-‐peer currency exchange and remifance firms.
Currencies of Meaning New trusted currencies of exchange emerge to befer facilitate transac4ons,
trade, authen4ca4on and valida4on. Money as a means of exchange is complemented by new systems to which we afach increasing significance.
Digital Money Cash is gradually, but not completely, replaced by digital money providing consumers with more convenience / choice – and organisa4ons with lower cost transac4ons. More new offers emerge, including in the black economy.
Low Value Payments One area that is likely to see significant transforma4on is low value payments -‐ everyday, high-‐frequency purchases for which cash is used (typically sub $10
transac4ons) and make-‐up the bulk of cash transac4ons today.
Sub $10 transac4ons will become increasingly fric4onless, 4ed into pay-‐as-‐you-‐go business models i.e. on-‐demand content.
ProliferaOon of Currencies People will increasingly use mul4ple forms of currency in different contexts: alongside na4onal legal tender, we will see more local and crypto-‐currencies – many decoupled from exis4ng systems.
Unfit For Purpose Perhaps it’s now 4me to recognise that the way we manage money
is not fit for purpose in today’s world and is unlikely to adapt to the changes over the next decade.
Empowering the Crowd In the future anyone will be able to trade, immediately knowing the
amount they are paying in the currency of their choice. The number of par4cipants will drive the market rather than single, large-‐scale investors.
Pick and Mix As banks, companies and communi4es all provide different currency op4ons, users pick and mix to suit their needs: Expect a mul4-‐4ered currency system to be normal.
Imagined RealiOes Currencies are no longer backed by assets like gold but by a belief in the economy and imagined reali4es. New currencies will emerge built on percep4ons of stronger trust and more tangible assets.
Global Currency PlaVorm Alterna4ve currencies gain trac4on and we see the emergence of a
parallel global digital currency plaiorm that operates without na4onal borders -‐ and outside the influence of the central banks.
Financial Services DisrupOon The banking industry will be reinvented by the adop4on of
crypto-‐currencies that also cause further disrup4on around insurance, liability, audi4ng, notary and other associated professions.
Bank Robbers of Tomorrow As currencies become increasingly digital and unsupported by the state,
so deposits are increasingly virtual and dispersed and therefore poten4ally vulnerable to a new genre of ‘bank robber’.
Market Chaos The currency markets are chao4c and they are likely to become even more so over the next ten years as na4ons increasingly unpeg themselves from the dollar and other currencies.
A 3D View of Currency Technology will allow mul4ple variables to be compared in real-‐4me,
producing a 3D view allowing traders to consider what they are buying, why they are buying it and the impact that this may have instantaneously.
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