One World, Two Systems is Here; Stop Pretending it Won’t Affect the Dollar; Crypto: Ban, Contain or Regulate? CBDCs are coming for global banking
Bangkok Edition!
1. One World, Two Systems is Here; Stop Pretending it Won’t Affect the Dollar
2. Crypto: Ban, Contain or Regulate?
3. CBDCs are coming for global banking
Festival, Prasong Luemuang, 1988. Art Centre Silpakorn University, Bangkok, Thailand
This week’s art is inspired by stay in Bangkok! My first time out of China in nearly 3 years! I thought that this piece was just as vibrant as the city!
The artist Prasong Luemuang has been inspired by traditional local culture; however, the dynamics of those elements were illustrated on canvases through a different lens. Within his work, powerful patterns, shapes derived from imagination, and vibrant colors were all present.
Unlike in the Western world, Thai art values and celebrates flatness in their artistic expression. The values passed on from generations through paintings and murals on the walls of temples.
1. One World, Two Systems is Here; Stop Pretending it Won’t Affect the Dollar
One World, Two Systems is here; stop pretending it won’t affect the US dollar and the US's lifeblood its treasuries.
Download: Here
Credit Suisse’s Zoltan Pozsar with a brilliant end-of-year paper, which shows how China and BRICS+ nations are changing the rules in the “Great Game.”
I’ve been saying this for years and showed in “Cashless” how the digital yuan would have a part to play. That role is now dubbed: "potentially lethal."
From the report:
[China’s] “One Belt, One Road means… …One World, Two Systems. Maybe not in these words, but I am sure you have heard these themes before and that you are aware of them. And if you are… …you should stop pretending that this means nothing for the U.S. dollar or demand for Treasury securities.”
“If the world is going from unipolar to multipolar; if the world is gradually drifting from “one world, one system” (globalization) to “one world, two systems” (friendshoring and Belt and Road); and if the G20 is seemingly splitting into the “G7 + Australia”, “BRICS+”, and “the non-aligned,” it’s impossible that this split won’t affect the international monetary system…”
The importance of BRICS+, isn’t new:
“A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. ..... Eurasia is thus the chessboard on which the struggle for global primacy continues to be played...” Z. Brezinski, 1998
The role of sanctions:
“Our currency, your problem” – pushed too far with sanctions – boomeranged. Secretary Jack Lew was right when in 2016, he said that “the more we condition the use of the dollar and our financial system on adherence to U.S. foreign policy, the more the risk of migration to other currencies and other financial systems in the grows”.
De-dollarization is accelerating:
“The map of BRICSpansion here, together with the map of Brzezinski’s “nightmare” above, suggests that the drive to de-dollarize intra-BRICS trade and soon intra-BRICS+ trade will speed up. Don’t tell me that doesn’t threaten the dollar’s supremacy, or that it won’t hurt the “exorbitant privilege”.”
On the threat of CBDC:
"CBDCs are interweaving BRICS central banks to replicate the global correspondent banking system that the U.S. dollar system runs on, with 🔥potentially lethal consequences for the dollar’s supremacy. "🔥
“For the Fed, don’t fix what’s not broken. 🔥 CBDCs are an existential threat. Don’t hasten the downtrend of the use of the dollar by dismantling “the hierarchy” through the launch of a regulated liability network. 🔥
Takeaways:
One World Two Systems has arrived, though many continue to live in a state of denial.
Watch for 2023 to be the year of the “petroyuan” which should prove to all that the world is changing.
The process will be slow! It is important to think of these changes on a very long time scale, 10-15 years. Still, that doesn’t mean that during that period, nothing significant will happen.
2. Crypto: Ban, Contain or Regulate?
What to do with crypto? You pick it: Ban, Contain, or Regulate?
Download: Here
2023 will be the year when crypto feels the wrath of regulators. Any thought of crypto “self-regulation,” something we've heard a lot about over the years, has been crushed by the magnitude of failures.
Even crypto fans recognize the limits of self-regulation. Witness how Binance’s recent proposal to self-regulate with a blockchain “proof of assets” went over like a lead balloon!
The BIS (no fan of crypto) states that policymakers are facing three major decisions:
1. Ban specific crypto activities (“ban”):
“The extreme option is banning crypto activities, either in their entirety or in a targeted manner. In terms of pros, and assuming that a ban is effective, any potential harm to the financial system would be eliminated. The main downside is that any useful innovation from crypto would be lost or delayed.”
China is clearly the model for this approach with its crypto ban. What is interesting in China’s case is that it is pro-blockchain and has reduced the downside by recreating NFTs and other innovations.
2. Isolate crypto from TradFi and the real economy (“contain”); and
“The second option is to isolate and contain crypto so that it remains more of a niche activity. This could be done first and foremost by limiting the flow of funds into and out of it and by limiting other connections with TradFi. Importantly, this option would avoid giving crypto a “seal of approval”, which might encourage its growth.”
Crypto isolation already exists! The BIS’s “Basel Accords” will make it very expensive for banks to hold crypto on their books.
3. Regulate the sector in a manner akin to TradFi (“regulate”).
“This approach would treat crypto in a similar way to TradFi, applying the same principles and tools. This approach would ensure consistency in regulating financial activities – whether performed by crypto players or TradFi. Moreover, it would allow responsible actors to innovate with regulatory compliance and oversight."
Same risk, same regulation. I expect this to be the dominant approach by regulators this year. Crypto proponents will say that regulators are killing innovation, but they will be powerless to stop them.
The BIS makes the point that these approaches can be combined. One can ban dangerous “algorithmic stablecoins” while putting useful DeFi services under regulations.
Takeaways:
Crypto is in for a tough in 2023 and has forfeited any “right” to self-regulate
Same risk, same regulation will apply!
Bans for algorithmic coins are likely.
Crypto will be hammered by AML/KYC closing the gap with CBDC!
CBDCs are coming for global banking! (podcast)
My first new post of 2023 a podcast where I make it crystal clear that CBDCs will change global banking in 2023!
The podcast and the article generated from this interview can be found: Here
A huge thank you to K Yatish Rajawat and moneycontrol.com! This is a great interview that touches on the role of digital and CBDC in society! See also Yatish's great interview with superstar Brett King!
The link below is an ARTICLE and podcast!
Timestamp:
1:00- CBDCs in global context?
90% of banks investigating CBDCs! Disruption of cash systems coming!
4:20- What did China learn in its 7-year development of CBDCs?
CBDCs need context! Compare them with Bitcoin and WeChat, and Alipay.
7:00- UPI and India! Listen to Yatish explain how wonderful UPI is!
UPI is FANTASTIC! India should be congratulated for seeing digital payment as a public good, the opposite of how the US thinks of payments.
12:00- What will be the role of banks with CBDCs?
CBDCs will not destabilize banks. Nonsense! SWIFT and dollar use are a matched pair, and CBDCs will disrupt both within the next year due to BRICS nations. Sanctions will be impossible to enforce! De-dollarization, yes! Toppling the dollar, no!
18:00- De-dollarization and the CBDC world hit to bank profits?
Bank profits from foreign exchange will suffer! Banks' FX profits are a sunsetting business.
21:50- Digitization of the economy
The biggest question in the world right now! From fake news to free speech, this is the question of our time. We need to codify into law our privacy rights.
25:50- Social media’s duopoly?
Antitrust is coming for Facebook and many other Big Techs!
30:00- Will data localization change social media?
Yes, who has your data is key! We need to understand this!
31:45- The rise of CBDC and the death of crypto! Listen at 32:10 for a great joke!!
I acknowledge the debt of gratitude we all owe to crypto. I have zero tolerance for crypto’s culture of greed and deceit! Crypto fraud should disgust everyone! Regulation is required.
36:30- Crypto will follow regulation?
Yes, we have regulations like KYC and AML because they are common sense requirements that have been around for quite a while!
40:00- Smart contracts and smart money?
People are conflicted about smart contracts! They are required, and we already have them!
44:17- When machines pay, they’ll need programmable money!
Programmable money terrifies some people! Debit cards already have programmable features! They are determined by companies, not gov’t which is even more dystopian!
46:40- CBDCs don’t have superpowers!
Your account can be frozen NOW without CBDCs!
See how deep the “cashless” rabbit hole goes!
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
Please check out my books on Amazon:
Cashless: HERE
Innovation Lab Excellence: HERE
