Earlier this month, our Founder and CEO, Gilbert Verdian, appeared on Fintech Futures’ ‘What the FinTech?’ podcast to share his insights on the evolution of blockchain technology within the financial services space, its use cases within banking and capital markets, the rise and future of central bank digital currencies, and the potential benefits of programmable payments.
The episode kicked off with the ‘News in Numbers’ segment, where Gilbert was tasked with bringing a news story featuring an interesting number to discuss. He shared that “over the next two years, financial services firms plan to increase investment in blockchain and DLT by 20%, AI investment is 21%,” which proves blockchain is just as important.
Podcast host, Paul Hindle, asked, “do you believe these numbers highlight that blockchain is now finding its place in the sector?” Gilbert answered, “blockchain by its very nature isn’t visible, but its abilities are transformative – financial services know what it is and what it can do.”
“Financial services are now seeing how blockchain can enable new revenue streams, cost savings and the ability to introduce new asset classes of instruments like CBDCs, programmability and tokenisation.”
Paul then shifted the conversation towards the role CBDCs will play in the future global economy. Gilbert began by stating what makes a digital pound different from a normal one, the answer being that current money is electronic. And in an increasingly digital society, this is no longer fit for purpose. He added “by adding programmability and logic to money, enabled by multi-party lock systems, we can code logic into money, which means we can tell money: if this happens, then do that.”
Continuing the discussion around CBDCs, Paul asked whether concerns around privacy and governmental control are valid. Gilbert’s belief is that “we’ve seen the same apprehension whenever there’s been innovation in banking or payments. It’s important to remember that governments don’t need CBDCs to investigate people’s accounts, they already have the tools to do this today”. He continued, “central banks are focused on monitoring systemic risk and ensuring the stability of the financial system – not an individual’s spending behaviours.”
“So, when can we expect to see CBDC projects formally launched?” Paul asked. “Last year was a catalyst for banks to take the next step, they are now seeing the benefits and business cases add up and looking at what a CBDC could look like in the financial system – Project Rosalind is a good example because it tested what it would mean in a real-world setting” said Gilbert.
He continued, “we can expect to see CBDCs by the end of the decade, but commercial banks don’t want to wait till then – they are already underway in exploring what tokenised money could look like for them.”
Moving on from CBDCs, Paul directed the discussion towards tokenised deposits and programmable payments, and the impact of this on the digital money ecosystem. Gilbert began by saying “tokenised bank deposits provide banks with new payment flows and the ability to tackle fraud – but the current form of money is not equipped to tackle fraud.” He went on to explain why, “programmable payments allow us to build fraud prevention into money, which gives banks the opportunity to tackle fraud once and for all.”
Focusing on the impact for capital markets, Gilbert shared that we’re now “seeing an appetite for simplifying the post-trade process and using tokenised funds to lower the barriers to entry for new investors to gain access to new liquidity pools.” He made an interesting point in terms of industry adoption, “we expect tokenisation to be mainly driven by financial services, but we’ll see it across other industries too, as most need to transact in one form or another.”
For consumers, Gilbert believes the “most significant benefit is automation, removing friction from processes that could impact the user experience, or simplifying processes with multiple steps, such as purchasing a home.” This is achieved by adding logic into money, and for consumers, this will ultimately mean better products and services.
Paul concluded the episode by asking Gilbert what fintech buzzword he would send to ‘Fintech Jail’. “There is a flight to safety because people are risk averse, so as commercial banks implement tokenised bank deposits, this will slowly become the preferred payment method over stablecoins, which are not issued by banks” he said. “That’s why in its current form, I think stablecoins should be put into jail, because we’re seeing a migration of digital money to safer forms.”
Listen to the full episode here.
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