Sex, drugs and fraud at FTX, Instant payments are HOT, Put all finance on-chain with RLN, Top 10 CBDC lies, My e-CNY TV interview!
FTX reveals a broader systemic failure!
1. Instant payments are hot!
2. Regulated Liability Network puts finance on-chain
3. Sex, Drugs, Celebrities, and Fraud Cover-up Systemic Failure at FTX
4. The top 10 lies about CBDC!
5. “15 minutes of fame:” my digital yuan TV interview
Andy Warhol’s “Marilyn” (1967) seems to fit today's stories. All are getting their 15 minutes of fame, especially SBF. Warhol examined “pop culture,” and you can’t look at the FTX crash without asking about the culture that spawned it. I too got 15 minutes this week.
1. Instant payments are hot!
Instant payments are hot and wherever introduced kill checks, reduce cash use and flatten card growth!
When instant payments arrive in a nation many things change! Download the IMF paper here!
This IMF paper on instant payment is relevant to the coming launch of FedNow in the US and CBDCs that are coming to nations across the globe.
The paper covers instant payment systems in 12 nations all of which benefited from an increase in payment system efficiency, by lowering payment costs, and a reduction of payment risk. These are big wins for any country.
The IMF states that the benefits of Instant payment are clear:
“The main benefits of instant payments compared to other payment instruments involve: immediate use of funds versus delayed availability; typically, lower payment costs; no or little restriction on payment operating hours; and no, or minimum settlement risk.”
No one wants to write checks!
The stars of this publication and the reason it got me excited are the graphs on pages 8 & 9 and table 1 on page 10. They steal the show and I urge you all to have a look.
The graphs show that whenever a country adopts instant payments, they grow geometrically upwards in just a few years. This behavior is shown in all 12 countries showing just how effective instant payments are!
What is also interesting is what happens to checks & direct debits, cash, and cards after launch. The IMF finds that across all nations the greatest impact of instant payments is to checks & direct debits and then to cash. Checks & direct debits are hit hardest, about 3x more than cash. Clearly, no one likes writing checks!
Credit cards interestingly hold their own but their expansion grinds to a halt. So card companies cannot be complacent that their use will always increase. Competition with instant payment and someday CBDCs will be fierce.
Competition for CBDCs?
For CBDCs the IMF says that as both CBDC and instant payment are free and immediate that instant payment’s first mover advantage may hinder CBDC adoption. I think that’s somewhat true, but that the IMF ignores CBDC's other features. CBDC's off-line usage, smart contracts, and financial inclusion all need more careful consideration.
CBDCs do more than instant payment! China, Hong Kong, and India are examples of nations that will have both instant payment and CBDCs. I think that the RBI, HKMA, and PBoC know better than the IMF that instant payment is no substitute for a CBDC. Time will tell!
Takeaways:
Instant payments rule! Whether by CBDC or other means they replace checks, cash, and stall card growth!
CBDCs are a form of instant payment but have programmability and offline features that are impossible to replicate in instant payment systems.
The US is late with Fed Now, a full 14 years behind the UK! Still, when it launches I predict a disruption in payments in the US! It’s going to be fun to watch.
2. Regulated Liability Network will put our world on-chain
The RLN White Paper is the read of the year, and makes CBDC look small by simply putting all “regulated liabilities” on-chain!
This superb white paper outlines why the Regulated Liability Network (RLN) is the future by envisioning a world where simply all “regulated liabilities” (RLs) are on the blockchain.
And to show you that “the future is coming faster than you think” the NY Fed is running a 12-week RLN pilot right now! (https://nyfed.org/3Vh5u9B)
Special thanks to Citi’s Tony McLaughlin, originator of the RLN concept, for sharing!
🔹Regulated only:
RLs are sovereign money including the liabilities of regulated public- and private- sector issuers: central banks, commercial banks, and regulated non-bank e-money issuers. Regulated stablecoins may be included, but unregulated crypto need not apply.
🔹THINK BIG!
“RLN is Financial Market Infrastructure that could deliver an interoperable network of all facets of the sovereign currency system. (Big enough?) The RLN concept explores the conjunction of shared ledger technology and the sovereign currency system to upgrade financial services.”
🔹Go digital or crypto may win:
”In the digital money race, shared ledger technology might possibly offer a sustainable competitive advantage to non-sovereign forms of digital money. These advantages could lead to the progressive substitution of [crypto for fiat] over time which is highly undesirable.”
🔹To beat crypto, join crypto:
“If shared ledger technology is a superior computing substrate, then the sovereign currency system should consider adopting it in a joined-up manner. The future of the sovereign currency system should not be a one-way bet on a set of enhancements to the existing paradigm of payments. We might consider a new way to structure the database of sovereign money: it may have to be represented 'on-chain'’”
🔹RLN's end game:
“The objective should be the modernization of the entire national currency, not just the public portion of national currency. This suggests a potential pivot in the projects examining the merits of CBDC and individual bank coins toward a broader industry focus on the digitization of regulated liabilities. The suggested pivot is from ‘CBDC’ to “Digital Sovereign Currency.”
🔹RLN’s value:
RLN will not be achieved overnight. Its true value is to give us a new paradigm, and I think that is extremely valuable. The pragmatist in me, however, wants a CBDC now to capture the low-hanging fruit in cash transfers. The Fed PoC seems to agree as it pragmatically focuses on wholesale CBDC but does so in an RLN-compatible format!
Takeaways:
RLN requires you to think big and see the value of going on-chain!
Its shortcoming is that it is ambitious in reimagining our entire financial system, not just one piece, as with CBDC.
CBDC is the low-hanging fruit in that it can be used now without a massive replumbing of the financial system
RLN’s immediate value is to help us change paradigms.
3. Sex, Drugs, Celebrities, and Fraud Cover-up Systemic Failure in the FTX Collapse
If you aren’t concerned, you should be! The FTX crash is far bigger than one corrupt individual.
My latest long-form read is only available on substack: here
I mentioned last week that I would write a long-form article on FTX. Now that the dust is nearly settled, I thought it was time. As you read this, you will invariably find additional societal failure points that I forgot to put in my article. Please let me know what I left out.
4. Taking on the top 10 lies about CBDC!
🔥 I’M GOING ON THE ATTACK🔥 I take on the TOP 10 LIES about CBDC with the ever-fantastic Efi Pylarinou!
This podcast is also available on Spotify: here.
There’s a lot of anti-CBDC propaganda out there that strives to stoke fear rather than educate. Many have ulterior motives, and the biggest fearmongers are those selling gold, crypto, and survival bunkers. I’m not joking about the bunkers because some see CBDC as the beginning of “the end of days” and think that you should start “prepping.”
In this podcast, I tackle some of the common lies, and I will likely make this a regular feature!
Timestamp:
🔹3:00 Anti-CBDC attack theme! Retail vs. wholesale CBDC.
People are only concerned with retail CBDC.
🔹5:50 NO 1, An account with the Central Bank!
You will not have an account at the central bank! Instead, you will get CBDC -tokens- from your bank as you do with cash today.
🔹9:15 NO 2, Banks are not going to disappear!
CBDC will not destroy banks. Banks will have the same role in cash distribution that they have now with cash and credit cards! You keep your bank!
🔹10:30: NO 3, Visa and MC will die!
No, they, too will participate in CBDCs!
🔹11:25: NO 4, Arthur Hayes "CBDCs are EVIL!"
Arthur Hayes is FEARMONGERING! He believes that money should be free of gov’t and is a convicted criminal in the US because of it.
Arthur knows that CBDCs keep the relationship you have with your bank. The gov’t doesn’t know who is spending CBDC. They don’t have KYC data!
🔹15:55 NO 5, CBDCs are dangerous and used by authoritarian regimes! The future is permissionless!
CBDCs are similar to credit cards and not dangerous. Bitcoin maximalists have a religious belief in permissionless but try getting them to pay taxes! Authoritarian gov’ts don’t need CBDCs to control! China’s CBDC delivers greater privacy than what they have now!
🔹24:20 Why would gov’ts need more authoritarian power than they already have?
Canada shut down 300+ bank accounts this year without CBDCs! You have digital money today; the gov’t can shut it down.
🔹26:50 NO 6, Programmable CBDCs are Satan incarnate.
The gov’t will program your money and tell you what to buy! We ALREADY HAVE programmable money! People demand it for social payments!
🔹32:50 NO 7, CBDCs will be the only payment option!
In the future, digital wallets will have many digital ways to pay, not just CBDC. So you will have more choices!
🔹37:20: Money laundering and crypto.
The crypto world was founded upon a lie that the crypto community was good and would use crypto for good! Permissionless, untraceable money doesn’t work in real societies with BAD people. Crypto has a right to exist, but it MUST be regulated!
🔹42:00: NO 8, Russell Brand, CBDC leads to social credit.
I live in China; believe me I know what social credit is! Late payment for a gas bill is not social credit. Social credit is data collected from social contact, payments are a small part.
🔹48:00 NO 9, Exec order 14067 allows the US gov’t to turn your money off!
BUNK! This is Biden’s executive order to research CBDC! It isn’t authorization to build one!
🔹50:00 NO 10, Will CBDCs allow overprinting?
The real issue is how much gov’t is spending through BONDS! NOT CBDCS! Bond issuance causes more debt than CBDCs!
Takeaways:
Many harsh anti-CBDC pundits are simply fearmongering and willfully misrepresent CBDCs.
Ask yourself whether they are selling gold, crypto, or survival bunkers.
CBDCs aren’t perfect, and every design has compromises; we need honest discussion not BS!
Thank you so much to Efi for having me on the show!
5. “15 minutes of fame:” my digital yuan TV interview
Talkingyuanital yuan with “Global Business” host Robyn Dwyer on CGTN Europe.
I am always honored when CGTN Europe calls for commentary on the digital yuan! Unfortunately, this runs 4:30 which means I still have about 10:30 seconds of fame left…right?
Today’s interview was an update on e-CNY that followed their FTX coverage.
Questions:
🔹China’s Alipay, Wechat Pay and the digital yuan:
WeChat and Alipay are already very strong in China, and now we are going to have a third with the digital yuan. This is fundamentally good for Chinese consumers and all of them will coexist. Theyuanital yuan will not eliminate WeChat Pay or Alipay, all of them have slightly different uses or niches. You will pick the money you want to use based on its functionality; on what you want the money to do.
🔹What’s the goal why has China introduced the e-CNY?
China is introducing the digital yuan as part of a societal digitization program. China is already “cashless” through WeChat Pay and Alipay which have already brought tremendous benefits to GDP and commerce in China. Now China is taking the next step, taking it further, to bring more digitization to society with the digital yuan that can be programmed and used as the national currency.
🔹What are the infrastructure challenges with launching the digital yuan?
What you are seeing right now is that the digital yuan is in trial phase and the Peoples’ Bank of China is “meticulously” rolling out the e-CNY in city after city. They are responsible for making sure that it works, the first time and every time you go to use it.
The infrastructure is mostly there because people in China already pay with QR codes with WeChat and Alipay, that same QR code is how you’ll pay with e-CNY. It’s the software that connects everything behind the scenes that the PBOC is working on. This is a long and very careful process.
🔹China moving toward cashless will other countries embrace the technology?
Absolutely! Right now some 90% of the central banks in the world are looking at CBDC. They are looking at the idea that cash someday will leave paper format and go completely digital. Now the interesting thing is that the most advanced countries investigating CBDC are all in Asia. We are looking at a future where Asia and China are going to lead the West with CBDC. As I like to say China has a “first mover” advantage.
🔹Bonus question on yuan use that wasn't asked, from my notes:
-This year the IMF increased the yuans weight in SDR basket by 12% showing great progress.
🔥The most exciting advance, however, comes from trade data. A full 30% of trade with China now settled in RMB compared to 20% two years ago. A 50% increase over two years shows that the yuan is making great gains!🔥
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.
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