Tag: Fintech

Fintech and Financial Stability

A critical look at IMF recommendations on financial stability concerns from Fintech and DeFi

Decentralized Finance
Photo by Shubham Dhage on Unsplash

Fintech and financial stability

Fintech is technological innovation in financial activities, or in other words, financial innovation aided by technology. This by itself is not new. The ATMs which made their entry in the late 1960s was also in this sense, fintech. With the rapid growth in crypto assets in recent years, and that of decentralised ledger technology (DLT), fintech has evolved and grown rapidly in recent years to provide traditional banking functions, including deposit taking and lending. Referred to as Decentralized Finance, or DeFi for short, it threatens to disintermediate banks from savers and borrowers, transform the traditional banking landscape, and threaten financial stability. The IMF flagged its concerns in the third chapter of the April 2022 issue of its biannual Global Financial Stability Report (GFSR). Continue reading “Fintech and Financial Stability”

CBDC and the Future of Money

My review of Eswar Prasad’s new book on fintech, cryptos, and CBDC: Future of Money: How the Digital Revolution is Transforming Currencies and Finance

Contents

Introduction
Fintech
Crypto Mania
Regulatory Concerns
Central Bank Concerns
National Responses
Central Bank Digital Currency
Relevance of CBDC
Critique of CBDC
CBDC and EMEs
Whether CBDC and when
Designing CBDC
Current status of CBDC and lessons
Impact on cash
Impact on dollar
Global currency
CBDC in India
Conclusion
Postscript

Introduction

Future of Money

William Stanley Jevons started his career as an assayer in a mint in Sydney. In 1855, sending money to his father, Jevons wrote:

“I must say the money has given me very little satisfaction, except that of sending it home. Whether in the bank or in your pocket I find £100 like a very disagreeable weight on the mind, so I shall be very glad when it is off my hands, though I hope safe in yours.”

Harriet A. Jevons, ed., Letters and Journal of W. Stanley Jevons, p. 52

In 1875, as a professor of ‘political economy,’ Jevons laid down the functions of money in Money and the Mechanism of Exchange. These are unit of account, store of value, and medium of exchange. Money combined these functions performed earlier by different objects. Even today, it remains a useful framework for assessing currencies. Continue reading “CBDC and the Future of Money”

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