What You Need to Know About the Future of Fintech
If you have your ear on the track, as they say, listening for the oncoming train carrying a digital currency and tokenization of a fintech future, you better look up, because it’s about to hit you.
Not only are America’s dollar-dependent trading partners turning to digital currencies, the U.S.’s own Federal Reserve is openly “experimenting” with a CBDC, central bank digital currency, while fintech companies are pushing tokenization of core banking functions including repurchase agreements.
The heat is on because of breakthroughs in artificial intelligence tools, in particular natural language generative A.I. models like ChatGPT.
China rolled out a central bank issued digital currency in April 2020, in four major cities, Shenzhen, Suzhou, Xiongan, and Chengdu. The rollout continued in 2022 to include Beijing and Shanghai. It’s estimated by Chinese authorities that almost a fifth of China’s 1.4 billion people have set up a digital yuan wallet to be able to use the new currency.
The digital yuan, or e-yuan, or e-CNY, digital renminbi, or digital RMB isn’t a cryptocurrency tied to a blockchain. It’s a digital currency or token, if you like, issued by the People’s Bank of China (PBOC) and valued the same as the standard renminbi (RMB). It is a legal tender digitized version of the physical RMB that can be used in transactions the PBOC claims are “faster, cheaper, and theoretically more secure.”
Transactions are completed instantaneously and at lower costs because intermediaries, namely banks, aren’t needed to participate in those exchanges. Security is supposedly enhanced by a “variety of technologies, including a digital certificate system, digital signature, and encrypted storage which makes double spending, illegal duplication and counterfeiting, transaction falsification, and repudiation unfeasible,” according to a PBOC White Paper.
More importantly than a digital yuan, the Hong Kong Monetary Authority is pushing a multiple central bank digital currency bridge project, called mBridge or mCBDC bridge project. The mBridge’s purpose is the establishment of a multilateral system that can accommodate different digital currencies and legal regulations. The project includes China, Hong Kong, Thailand, United Arab Emirates, and most importantly by a wide margin, the Bank of International Settlements, BIS, the so-called central bank of the world’s central banks.
If the inclusion of the BIS in the mBridge project isn’t a spotlight on a digital currency future, nothing is.
China’s also part of the bloc of nations known as the BRICS, Brazil, Russia, India, China, and South Africa, which as of the last BRICS meeting two weeks ago in Johannesburg, South Africa, may include new invitees Iran, Saudi Arabia, Ethiopia, Egypt, Argentina, and the United Arab Emirates, are looking into the creation of a cryptocurrency, possibly backed by gold, as a new international payments regime.
Recognizing the oncoming push into digital currencies, especially central bank-backed, even cryptocurrency-blockchain based alternatives now challenging established dollar-denominated payments systems, America’s central bank the Federal Reserve has been “experimenting” in the space.
On their website the Fed says they are “studying how a CBDC could improve an already safe and efficient U.S. domestic payments system.”
But that’s not the real story. A Fed issued CBDC wouldn’t just be about domestic payments, it will have to go, and fairly quickly, from experimental to implementation because most of America’s largest international trading partners, with the exception of Canada and Mexico, are pushing new global payments systems that don’t rely on the U.S. dollar as its base cross-currency interchange mechanism.
Of course, that future is digital, as in CBDCs, cryptocurrencies, and the tokenization of e3ventually all aspects of all financial systems.
Domestically, here in the U.S., big banks and their trading partners are exploring and, in some cases, already dabbling in tokenized payments systems to trade everything from blockchain-based smart contract derivatives to fed funds repo and reverse repo transactions.
Artificial intelligence is the great accelerator these experiments have been waiting for to go from theory and early adoption to mainstream practice.
A.I. affords CBDCs new ways of securing issued currencies, tracking them, identifying users and use applications and innumerable other “features” central bank issuers want to be able to avail themselves of.
As far as fintech companies working with banks to create and implement digital “devices” like smart contracts and tokenizing collateral crediting and debiting mechanisms, it’s happening already.
This time next year it wouldn’t surprise me if the Fed is asking Congress for the right to create a digital dollar, or to see the biggest banks in America’s inter-trading of fed funds all done via tokenization.
Because A.I. will within a year give fintech providers and theorists a new platform to re-make our financial futures.
One company already partnering with JPMorgan Chase and other giants making this future happen now is Broadridge Financial Solutions (BR), whose stock has recently taken off.
All you have to do is go to their website to see what they’re already doing to change our financial future; it will amaze you how much has already changed that you didn’t know. But I know, because I’ve been following BR and their innovations and who’s partnering with them and where they’re taking us.
Now that you see a glimpse of the world’s financial future, grab some BR stock and go along for the ride. And if you haven’t yet checked out my full briefing on the best ways to invest in AI now – as in, before we get hit by the massive changes its going to bring – you definitely want to grab that here.