Bank of England’s (BOE) Governor, Mark Carney’s Senior Adviser, Huw van Steenis categorically states “decentralized ledger technology, cryptocurrencies are no cause for worry” or threat to future of financial services as cryptocurrencies are in no race as financial services.
Van Steenis, an ex-banking financial at Schroders and Big-5 financial institutions like Morgan Stanley is now leading the review of the Future of Finance.
Ever since blockchain technologies arrived in 2009 in the spectrum of financial services, its growing popularity has prompted governments to watch this cryptocurrency space. Many nations are experimenting with distributed networks as a Peer-to-Peer platform. One of the biggest such experiments is currently underway in Venezuela with the launch of the ‘Petro’ cryptocurrency, backed by national assets or oil reserves.
As a financial expert, his analytical skills in reviewing digital assets and similar new financial services are being exploited as Senior Advisor of the Governor of BoE.
“Failed tests of basic financial services”
In an interview with Bloomberg Television in Davos on Monday, Steenis shared his opinion on newer forms of financial “digital coins like Bitcoin.” He says “I’m not so worried about cryptocurrencies. They fail the basic tests of financial services. They’re not a great unit of exchange, they don’t hold value, and they’re slower.”
In his preliminary review, he has dismissed cryptocurrencies as financial services as they fail to match needs or requirements which identify them as financial services. The biggest stumbling block for these digital assets is that they have limitations as ‘unit of exchange,’ in a national financial framework. Apart from failure as ‘exchange’ asset, they do not have any value. Now, this is the biggest challenge as transactions are not possible when the medium of exchange lacks value. As an additional aspect, the top finance expert says blockchain technology is slower.
Steenis claims there is a bigger concern for BOE, “how to regulate newer financial products into the banking system, especially when they run on technologies” and do not have value as per conventional fiat currency standards.
Will Fintech beat traditional banks?
Steenis observes that “Fintechs are obsessed with customers and the challenge is will they get customers before the traditional banks can innovate.” The slow pace at which cryptocurrencies are being adopted, conventional banks are likely to innovate faster and offer financial services which could beat fintech innovation.