Tokenization is coming to banking and with it permissioned DeFi as banks go digital or die trying! In this existential crisis not even incumbents' Visa and Mastercard are safe!
But how will this work in a society where digital trust is being eroded?
Artwork of the day: The Stairway, Fernand Léger, 1913
In 1911, Fernand Léger was one of a handful of artists who were responsible for revealing Cubism to the general public for the first time in an organized show.
Léger was fascinated by the all-encompassing technological transformations wrought by modernity. The world of the machine became the focus of his work, a world in which even human beings appear as mechanical constructions.
His designs, composed of cones and cylinders striped in red-white or blue-white, mutate into mechanical robotic creatures. The picture achieves its effect by combining contrasts: cylindrically rounded appendages contrast with angular steps.
Fernand Léger’s fascination with technological transformations would serve him well in today’s world! I wonder how he would paint the concept of digital.
Tokenization and permissioned DeFi will change the very nature of the financial system. Don’t think of them as slight changes. These technologies will disrupt everything from cash transfers to securities and are coming faster than you think. That’s why they are the number 1 and 2 stories this week.
Larger, digitally sophisticated banks are actually pushing these technologies. They’re not doing it because they love the tech but out of raw fear. Fear is a great motivator!
They realize that mastering these technologies will give them an advantage over less sophisticated competitors and that if they don’t do it, someone else will!
This is why the third article is titled: “Banks Must Go Digital or Die Trying.” Big tech and payment companies are worthy competitors, and their struggle to adapt to new technology is truly existential.
If you don’t believe that read the fourth article on how connecting fast payment networks in SE Asia is going to eat Visa and Mastercard’s lunch for cross-border transfers.
No incumbent financial institution is safe with the new technology we have, whether the card duopoly or banks!
Where does that leave us? With a digital trust gap that is putting all of these digital advances at risk. There is no fintech, CBDC, or digital bank unless people trust digital tech, and the problem is trust is declining!
I hope you enjoy this week’s read!
Tokenization is the evolution of banking, can they evolve fast enough?
Tokenization is coming for bank high-value wholesale transfers, and Oliver Wyman predicts four potential futures, all of which involve lower margins. The biggest question is: Can banks or traditional finance (TradFi) evolve fast enough? I think they can! This time they don’t have a choice; they see the digital writing (QR Code) on the wall!
Permissioned DeFi for cross-border transfers is coming, but wholesale CBDC and Deposit Tokens will be first to market.
Permissioned DeFi is fabulous tech, its adoption will depend on who runs the blockchain network. The full article from BCG can be viewed: here 👉TAKEAWAYS BCG and Fireblocks estimate that the average transaction cost in the new model will be 60%–80% cheaper than the cost incurred by traditional models.
Banks MUST Go Digital or Die Trying as they Face-Down Fierce Competition from Payment Companies and Big Tech!
This is a great survey of bank digital tech sponsored by temenos and written by Economist Impact. While temenos focuses on the North American market, which it states clearly is lagging in the digital space, I think that the most interesting part is how the different regions view their competition!
Visa and Mastercard move over, in SE Asia cross border payments are going mobile!
SE Asia’s QR-based mobile payments are being linked to form a newly integrated payment network that will rival the West’s cards! This is a big story but the WEF misses half of it! Let’s see what they left out.Thanks for reading Cashless: Central Bank Digital Currency and China in Perspective! Subscribe for free to receive new posts and support my work.
Erosion of trust is a crisis of the digital age.
The United States retains its top position in the Network Readiness Index (NRI) for the second consecutive year, closely followed by Singapore. Singapore and Korea remain the only top 10 countries located in Asia and the Pacific, while the United States is the only economy located in the Americas. The rest of the top 10 rankings consist of European coun…
Articles that caught my interest this week!
OpenAI’s Agency Complexities: A Reflection on Business Models & Technology
Efi Pylarinou has one of the best articles on the OpenAI circus that I read this week. Her closing line is fantastic: “Don’t be blindsided by shiny AI products." Read: here
China and Saudi Arabia sign a $7 billion currency swap agreement, adding to de-dollarization push
I write frequently about de-dollarization and articles like this are a harbinger of the future. They don’t foretell the “death of the dollar” or any sudden shock, just a gradual but incessant change. The amount is small but you can bet that Beijing and Riyadh both wanted to send a message to Washington. Read: here
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