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!
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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