September 28, 2021
Photo: Budrul Chukrut/SOPA Images/LightRocket via Getty Images
Hello and welcome to Protocol | Fintech! This Tuesday: China tries to control crypto, Revolut wants its own token, and a digital wallet size contest.
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China is run by a central committee, so it shouldn't be surprising that bitcoin and other decentralized digital currencies don't have many fans among the Politburo. The question is whether China's crypto crackdown risks going so far that it ends up popularizing crypto technologies that even the Great Firewall can't contain.
On Friday, China outlawed virtually any activities involving digital currencies, marking a crescendo in its fight against crypto. First there was the shutdown of crypto mining, then a ban on financial firms engaging in crypto transactions.
The crypto measures come as China moves to rein in Big Tech generally. And to the extent that crypto companies have a presence in the country, the crackdown is having an impact.
A smarter strategy for the government could be to co-opt crypto. Benefiting from blockchain innovations doesn't necessarily require engaging with the open internet.
But the risk to China is that innovation and capital will go elsewhere. That will mean a brain drain just as crypto-related industries like asset management are taking off elsewhere.
If China loses, who benefits? Businesses that avoided China could look smart as they pick up more business. And ultimately, technologies that route around central government control could get more powerful.
That's why China's crackdown may backfire on Beijing. When the music industry shut down Napster, file sharing didn't go away: It fractured into hundreds of programs and networks. China risks driving its crypto enthusiasts deeper into the DeFi camp, and unleashing their creativity on an ever-more decentralized financial infrastructure. In a speech proclaiming the People's Republic of China in 1949, Mao Zedong described the state system as a "weapon we must firmly grasp." But what if there's nothing to squeeze?
— Tomio Geron
As of February 2021, roughly one year into the pandemic, the urgency around obtaining location intelligence had skyrocketed, with one survey conducted by Boston Consulting Group finding that 95% of executives view geospatial data/mapping as important to getting business results.
Coinbase wants its customers' paychecks: The crypto marketplace is accepting direct deposit, and converting the money straight into cryptocurrency. It's also helping some employers pay workers in crypto.
What fintech trend are you most excited about?
I love seeing financial disintermediation leading to lower fees and costs. Broadly speaking, I think incumbent financial services firms make too much money based on the value they give to clients. They have been walled off from innovation due to high regulatory hurdles and as a result can collect fat margins simply by inserting themselves between transactions. Finance in the purest form is the allocation of resources. Financial services are roughly around 20% of the world economy, meaning we spend $1 in figuring out how to allocate the other $4, and I think that's too expensive. Fintech firms should drive efficiency in financial services to reduce costs, and therefore unlock money to be put to more productive use.
What fintech trend is most troubling for you?
Too many fintech platforms aimed at the everyday consumer are overly focused on the short term. Your personal finances stretch over your entire lifetime and your financial health is a result of beneficial habits practiced over long periods of time. Much like physical health, you don't get fit by going to the gym once. You get fit by going consistently over years and decades. Many fintech apps don't take this perspective and are solely focused on short-term financial entertainment: "Trade stocks, crypto, options now! Price changed — change your strategy! Want something? Buy it now and you can figure out how to pay for it later." These are not instilling tried-and-true financial habits to improve people's financial well-being.
What's your favorite pastime that doesn't involve a screen?
I like two-wheeled vehicles, both human-powered road bikes and engine-powered motorcycles. On both, there's a special feeling of being connected to the road and moving fast. Cycling is a great workout, and motorcycles, well, they're just fun.
That's the total amount of money customers kept in PayPal's mobile wallet as of June, nearly tripling from five years ago, according to Payments Dive. Square's total soared to $2.85 billion from $44 million.
Thanks for reading — see you Friday!