One of my regular rants is that, even with all of this innovation and disruption with technology, no one has really reinvented banking and finance. The nearest we get are companies like Ant Group, PayTM, NuBank and a few others who are offering truly differentiated financial services, but the majority are just sorting out what banks cannot do digitally. Obviously, there is a demand for that – otherwise PayPal, Stripe and Adyen wouldn’t be used – but these are incremental changes rather than fundamental changes.
What would be a fundamental change?
A digital currency? A democratised digital currency? A democratised, decentralised, digital currency? A currency that no government can control?
This is why the moment we live in is so interesting. We are living through a moment where digitalisation could change everything. The challenging question is: will it? Can governments stop the march of digitalisation? Can governments shut down currencies they don’t agree with? Can regulators tell companies to stop doing what they’re doing? Can politicians tell citizens to stop behaving badly?
Historically the answer is yes but, in recent times, we have seen things changing. We saw it particularly during the Arab Spring where countries were overwhelmed by citizens. Even when governments tried to cut the network – Egypt being a good case in point – the government could not stop the network.
If you’re not aware of what happened in Egypt, Mubarak cut the wires for the internet into and out of the country. But the rest of the world cared a lot about Egyptians and so they started sending messages via alternative routes:
Years after Egyptian protests led to the demise of Hosni Mubarak’s authoritarian regime, analysts continue to debate the effect of social media and the government’s move at the time to cut off access to the internet.
Facebook and Twitter – the protesters’ most powerful weapons that helped them to spread messages and set up demonstrations – were suddenly severed in January 2011.
Hackers immediately focused on getting around the block. They began using proxy computers to beat government censors. They set out to “anonymise” online data and focused on getting information to the internet by bouncing content to computers in other countries.
I’ve thought about this a lot over the years since. Can governments control citizens anymore?
Just take a look at China one of the most authoritarian governments in the world. Can they stop their people trading in cryptocurrencies? It doesn’t seem like it. For every crackdown China makes on bitcoin, it appears to have no impact on bitcoin mining.
In fact, the more the PRC tries to restrict their bitcoin community, the more that community moves elsewhere:
Poolin is the second largest bitcoin mining network in the world, with most of its operations in mainland China. The country was home to around 70% of global bitcoin mining power, until the clampdown sent the price of bitcoin into a tailspin and caught miners off guard.
Now China's "bitcoin refugees" are urgently scrambling to find a new home, whether in neighbouring Kazakhstan, Russia or North America, because for bitcoin miners, time is literally money.
A global network with global citizens is hard to regulate when you are national governments with domestic interests. The rest of this century will be fascinating to see how the regulators regulate what cannot be regulated.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...