BitDepth#1425
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Mark Lyndersay
EMMANUEL DANIEL, author of The Great Transition, a forward-looking evaluation of the state of financial technology, agreed to answer regionally relevant questions about fintech following my review of his book (https://cstu.io/71e06d).
His 2,000 word response has been excerpted for length but the full interview is available on technewstt.com. Emmanuel Daniel is a 2021 and 2022 global top ten influencer on the Fintech Power50 list and a researcher and consultant in the field.
Q: The Eastern Caribbean digital currency is an example of a central bank pursuing fintech to solve a problem, an island group that needed a more agile currency. Are there other models that might encourage central banks to engage with fintech?
ED: After publishing my book, I visited with the governors of several Latin American central banks, including the eastern Caribbean.
I was told in confidential conversations that the digital currency of the Caribbean countries had a take-up rate of less than two per cent (I suspect it's less than one per cent) because these countries are wholly dependent on American tourists who swipe their credit cards, which are picked up mostly by the foreign banks that do business in their jurisdictions.
There are no "what's in it for me" benefits with the banks that operate in these countries. In fact, the central banks expect these banks to invest in the processing capability for CBDCs (central bank digital currencies).
At the time of writing, I was hoping that the cost-benefit of a central bank digital currency would work in places where getting to remote places was a factor and the Caribbean areas were prime examples.
But what I think I saw was that because the CBDCs are designed for the poor islanders who lived away from the more developed parts of the countries, the infrastructure further alienated the islanders from the mainstream economy, thus keeping them poor.
My clear opinion now is that "CBDCs are designed to fail" for several reasons.
The Chinese CBDC has suspiciously been in pilot mode since 2018. All the "use cases" being touted today belie the fact that the original directors have been removed, the pilots are all running only because of discounts and incentives at the expense of taxpayers, and the government is terrified of making the project go live because of possible unintended consequences to the traditional banking system.
The CBDC technology being introduced by central banks cannot keep up with the innovations taking place in cryptocurrencies and stable coins. Here, I notice that the BIS (Bank for International Settlements) has been, in parallel, introducing new rules for banks and central banks to carry cryptocurrencies on their balance sheets from 2025 while simultaneously promoting CBDCs.
Q: What fintech model would serve the "underbanked" in an environment in which cash is the dominant form of value exchange in the middle and lower class of a country's society?
ED: Let me tackle the question of the "underbanked"
