Outlook 2020: New financial technologies will radically transform commerce


I’m pretty sure cryptocurrencies and blockchain technology will play a more prominent role in our lives in the coming decade.

I realize it can be difficult at times for the average business person uninitiated to the technology to approach cryptocurrencies with anything other than deep skepticism. There are so many ill-conceived cryptocurrency projects out there. As it turns out, devising a viable business model around a decentralized philosophy isn’t so easy in a world accustomed to centralized systems based on client-server network models.

The ethos of centralization may be a byproduct of civilization itself or possibly even hardwired into us at the DNA level of resolution – point being, centralization is not an easy concept to negotiate and supplant in the real world. Not impossible, but really hard.

So why am I confident blockchain and cryptocurrencies are here to stay (albeit perhaps in evolved formulations) and will increasingly impact our lives? On the blockchain side, the immutability and transparency of properly implemented blockchain systems mean that it’s possible to create things in the digital world that are practically impervious to counterfeiting. As former Google CEO Eric Schmidt recognized, there is “enormous value” in that.

We can also cryptographically secure transactions in a way that virtually guarantees against fraud and tampering. The digital revolution gave us a dual-edged sword where the millionth copy of a file could no longer be distinguishable from the original. We now have the technological means to overcome that if we so choose, and it will have significant implications for the way we live, transact and do business.

On the cryptocurrency side, the effects could be even more fundamental. One way of looking at Bitcoin and the thousands of privately issued cryptocurrencies that are in circulation today is to view them as a reaction to the paradigm of inflationary growth underpinning the global economy since the effective end of the Bretton Woods system in 1971. Rightly or not, people are increasingly distrustful of the intentions of governments and central banks and the solutions offered by those institutions.

But a reaction can beget a counter-reaction. There has been an explosion of development work on digital fiat currencies (DFCs) around the world – that is, legal tender in digital form, cryptographically secured and issued by the central bank or monetary authority of the issuing country.

More than 40 central banks and monetary authorities are exploring DFCs. Most of the projects are still embryonic (a few have declared actual implementation, but those claims are either unverifiable or did not involve the issuing of digital legal tender usable by the public). China is close to implementing its “e-renminbi,” which, as far as we know, is a hybrid that doesn’t involve retail-level DFCs.

But there is one project that is live and open to the public. The digital “Sand Dollar” project of the Central Bank of the Bahamas (CBOB), developed in conjunction with the CBOB’s technology partner, NZIA Ltd., officially launched on December 27, 2019. Sand Dollars are now being used by consumers, merchants and financial institutions, including banks. Even street vendors are transacting in Sand Dollars.

One can imagine that the velocity of money through the economy will increase. Settlement will be near-instantaneous. New businesses will spring forth to take advantage.

But there’s more. Mark Carney, governor of the Bank of England and former head of the Bank of Canada, has proposed that we consider replacing the U.S. dollar as the world’s reserve currency with a digital currency (dubbed a “synthetic hegemonic currency”) backed by a basket of digital fiat currencies issued by a number of countries. The economic and geopolitical implications are staggering. It’s all coming our way sooner rather than later.•

John Kim is a partner in Norton Rose Fulbright’s global business group based in Canada, Singapore and Korea.