Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Cryptocurrencies: A Banking Perspective

332 views

Published on

A banks and monetary policy perspective on crypto assets, mass securitisation and crypto currencies

Published in: Economy & Finance
  • Be the first to comment

Cryptocurrencies: A Banking Perspective

  1. 1. 21 February 2018 Hadi Kabalan Wardrobe Place Capital Management Cryptocurrencies: A Banking Perspective 1
  2. 2. Cryptocurrency ✤ A unique record that is 
 tradable for value 221 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  3. 3. Blockchain Record ✤ Secured through cryptography ✤ Once verified, can no longer be deleted or modified ✤ Is available to all participants in the network ✤ Is verified through a consensus mechanism ✤ Has no central point of control 321 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  4. 4. Tradable forValue ✤ Available to anyone 
 on the internet ✤ Clear, transferrable title of ownership ✤ Exchangeable into monetary value Cryptokitties are digital tokens with unique DNA, trading at up to $150,000 per token. They breed further saleable tokens… Unique, liquid, and dividend-paying. 421 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  5. 5. Mass-market Securitisation ✤ Anyone from anywhere can issue a digital asset or share of an asset with no intermediary ✤ In very small, or very large quantities ✤ And trade the asset with instant settlement 521 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  6. 6. Sovereign-Issued Cryptocurrency ✤ Central banks have already tested sovereign cryptocurrencies: ✤ Digitally programmable money-supply ✤ Direct digital relationship between the user and the central bank ✤ Each unit is uniquely identifiable and trackable 621 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  7. 7. Sovereign-Issued Cryptocurrency ✤ Directed monetary policy could: ✤ Restrict cash injection to specific uses, e.g. healthcare or housing ✤ Incentivise consumer or infrastructure spending through programmed expiry or accelerated value-erosion of money 721 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  8. 8. Commercial Banks Face Risks ✤ Banks could be part of the currency issuance and verification protocol ✤ Risk losing deposit-taking role ✤ Risk losing fractional credit creation ability ✤ Risk severe client loss if the relationship is not re-defined around around fee-based business 821 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  9. 9. Deposit- Fungible 
 Sovereign Cryptocurrency ✤ Central banks know they do not have the mandate or expertise to take over the credit role of commercial banks ✤ Sudden end of fractional reserve banking system would destroy the economy ✤ Political and social ramifications unacceptable in most countries … today 921 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  10. 10. Deposit- Non-fungible Sovereign Cryptocurrency ✤ Exactly equivalent to physical notes and coins in circulation ✤ Programmable ✤ Could be subcontracted to commercial banks to issue, for domestic consumer use 1021 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  11. 11. Liquidity Risk Management 11 Deposits Loans Fiat Only Fiat <-> Crypto ✤ Instability in loan capacity may require greater liquidity, lower leverage ✤ Develop ability to issue own cryptocurrency term instruments to retain customers within bank network Today Tomorrow ? 21 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  12. 12. Commercial Banks Can Prepare ✤ Instant settlement without reliance on correspondents and Swift means global competition ✤ Develop KYC as a Service ✤ Develop crypto-custody as a service ✤ Develop credit assessment as a service to diversify from balance sheet lending ✤ Develop cryptocurrency broking and merchant payment solutions to keep users within your network 1221 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  13. 13. 2018 Predictions ✤ Regulators will find global consensus on regulating crypto-securities as an asset class in developed markets ✤ At least one top 10 global technology company will issue a regulated cryptocurrency ✤ At least one company from a currency-controlled country will issue a global regulated cryptocurrency 1321 February 2018 Copyright 2018 Wardrobe Place Management Ltd Hadi Kabalan, CFA
  14. 14. Thank you 14

×