Cryptopia – The Movie

A quick plug for Torsten Hoffman‘s new documentary, Cryptopia: Bitcoin, Blockchains and the Future of the Internet. After a series of preview screenings around Australia and  New Zealand last last year, the film has its world premiere tonight in Melbourne.

Five years after producing Bitcoin: The End of Money As We Know it, the director has gone back and interviewed a number of key figures who appeared in the last film, to update their stories, and to dig deeper into the whole Blockchain, Bitcoin and crypto narrative.

I haven’t yet seen the latest film, but I first met Torsten when he was screening the previous documentary on the meetup circuit. He was kind enough to show me some early edits of Cryptopia, and I have to say the new content looks very promising.

Given the speed at which Blockchain and Bitcoin markets move (a week in crypto is often referred to as a year in any other asset class), it’s actually important that we stand back and take stock of where we are in this new paradigm for FinTech, decentralisation and distributed ledger technology.

Even if you can’t make it to the Melbourne premiere, look out for Cryptopia the movie as it tours globally.

Next week: Tarantino vs Ritchie

Notes from New York Blockchain Week

Courtesy of Techemy and Brave New Coin, I was fortunate to attend this month’s New York Blockchain Week. Here are some high-level observations from my personal notes (all views are my own):

First, depending on who you asked, attendance numbers for the headline event, Consensus (organised by Coindesk), were well down on last year. Certainly, compared to last year’s human zoo (based on feedback from people who were there), there was more breathing room in the conference venue, and less frantic activity in the crush to get to and from plenary sessions.

Second, the last time I attended a Consensus event, Consensus Invest in December 2017, Bitcoin hit a then record peak of US$10,000. And while we did not see new all-time highs this month, Bitcoin again obliged with a substantial rally – such that many delegates felt that the crypto winter had thawed. Certainly, it helped to buoy the mood of the whole week, and the organisers of the Magical Crypto Conference were confident enough to bring a live bull to their event. (And where my colleague, Josh Olszewicz moderated an excellent panel on Exchanges.)

Third, there were more corporate exhibitors at Consensus – a sign that the Blockchain and Digital Asset sector continues to mature. Some of the enterprise solutions on offer are still early stage (for example, one institutional custody provider I spoke to are only servicing their clients’ Bitcoin holdings), and we are yet to see some high-profile projects get beyond proof of concept stage. Meanwhile an important component in Smart Contract management, ChainLink, is about to launch on their main net, and there was a lot of discussion around scaling (such as the Lightning Network) and interoperability (such as Submarine Swaps).

Fourth, another recurring theme was Custody solutions. Pension funds and other institutional asset managers are demanding robust, industrial strength infrastructure before they will allocate any of their funds under management to the new crypto asset class, as they will not entrust assets to be stored on exchanges or in vulnerable wallets. Moreover, institutional players require segregated client accounts, full transaction records and holding reports, independent and fair-value pricing data for NAV calculations, in addition to clearing, settlement and custody services.

Fifth, and linked to the above, there were a number of projects talking about dark liquidity pools. Not for any nefarious reasons (and not to be confused with the dark net), but to replicate what happens in other asset classes. Parties may wish to trade with trusted counterparts, but they don’t necessarily want to know each other’s specific identity. When it comes to placing a particular buy or sell order they might not want to reveal a position.

Finally, while there were some frivolous and lunatic fringe elements to the week, in general it felt more “grown up”. There were fewer ICO’s being shilled, and a number of projects that I spoke to (exchanges, protocols, tokens) are going through a period of transition and restructure – across their management, organisation, finances, legal entity or business model. Another sign of growing up in public.

Next week: Postscript on the Federal Election

 

 

Crypto House Auction

Earlier this month, through my work with Brave New Coin, I was lucky enough to attend the first live property auction to be conducted in cryptocurrency. Although the property was passed in on the day, the event generated enough interest and PR value that it will surely be only a matter of time before more large ticket assets are transacted in this way.

Image sourced from LJ Hooker

Let’s not forget that it’s nearly 9 years since Laszlo Hanyecz paid 10,000 BTC for two pizzas (then valued at about US$41).

Although we may not yet be paying for our morning espresso with Bitcoin, a growing number of merchants are enabling customers to pay for goods and services with crypto, via payment platforms and intermediaries such as Living Room of Satoshi, and TravelbyBit. And services such as Coin Loft and CoinJar make it easier to buy and sell the most popular cryptocurrencies without having to set up accounts on multiple exchanges.

Meanwhile, the house in Casuarina, on the northern coast of New South Wales, was passed in at 457 BTC (A$3.4m). The property was listed by LJ Hooker, and the auction was facilitated by TrigonX and Nuyen, while Brave New Coin supplied real-time market data convert the crypto bids to Australian dollars.

Next week: Demo Day #1 – Startupbootcamp

 

The Future of Fintech

Predicting (or at least hypothesising upon) the Future of FinTech in 2019 at NextMoney last week were three brave souls from the Melbourne FinTech community: Alan Tsen, GM of Stone & Chalk and Chair of FinTech Australia; Christina Hobbs, CEO of Verve Super; and Paul Naphtali, Managing Partner at Rampersand. Referencing the latest CB Insights report on VC funding for Fintech, various regulatory developments in Australia (especially Open Banking), as well as the outcomes of the recent Royal Commission on Financial Services, the panel offered some useful insights on the local state of FinTech.For all the positive developments in the past 2-3 years (Open Banking, New Payments Platform, Comprehensive Credit Reporting, Equity Crowdfunding, ASIC’s Regulatory Sandbox, Restricted ADIs etc.) the fact is that innovation by Australian FinTechs is hampered by:

1) fallout from the Royal Commission (although this should actually present an opportunity for FinTech);

2) the proposed extensions to the Sandbox provisions (which are stuck at the Federal level); and

3) lack of regularity clarity on the new class of digital assets made possible by Blockchain and cryptocurrencies (cf Treasury Consultation on ICOs).

Overall, the panel agreed that the channels of distribution have been locked up in an oligopolistic market and economic structure, especially among B2B services. But things are changing in B2C, with the rise of P2P payment platforms, market places, mobile and digital solutions, and challenger brands (e.g., neo-banks).

However, there are under-serviced segments especially among the SME sector, and products and services for part-time employees, contractors and freelancers. For example, meeting the superannuation and insurance needs of the “gig economy”? (Maybe something will come out of the recent Productivity Commission review on Superannuation.)

A number of areas have already benefited from FinTech innovation and disruption – lending (origination, funding, distribution), robo-advice (at scale but not yet offering truly tailored solutions), and P2P payments (and which largely happened outside of the NPP).

When it comes to disrupting and innovating wealth management and financial advice, there is still a distribution challenge. Whatever your views are on the Royal Commission findings and recommendations, there is clearly a problem with the status quo. But is the appropriate response to “smash the banks” or to enable them?

One view is that we are going through a period of un-bundling of financial services. Personally, I think customers want ease of use and interoperability, not only standalone products that are best in breed. For example, if I have established sufficient identification to open and maintain a bank account with one ADI, shouldn’t I be able to use that same status to open a deposit, savings or transaction account with another ADI, without having to resubmit 100 points of ID? And even use that same ID status with an equivalent ADI overseas?

There is often a tension between incumbents and startups. Whether it’s procurement processes, long-term sales cycles, stringent payment policies (notwithstanding the BCA’s Supplier Payment Code) or simple risk aversion, it is very difficult for new FinTech companies to secure commercial supply contracts with enterprise clients. Even though a Blockchain platform like Ripples is working with major financial institutions, most times the latter don’t readily engage with FinTech startups.

Then there is the problem with “tech for tech’s sake”. For example, don’t offer “smart” solutions that actually make it harder or more complex. And don’t build great tech products that offer lousy UX/UI.

A key issue is defining “trust” – whether at the sector level (on the back of the Royal Commission); or at the individual level (the current environment of personal privacy, data protection, identity theft): or at the product level (e.g., decentralised and “trustless” platforms). As one panelist commented, despite the news, “headlines don’t change behaviours”. We love to bash our banks, but we rarely switch providers (mainly because it is far more difficult than it actually needs to be…) And the backlash against social media companies has not resulted in any major movement to unfriend them (witness the response to campaigns like QuitFacebookDay…).

So what are some of the predictions for the next few years (if not the next few months)?

  1. Within 5 years, the 5th pillar will be a challenger bank.
  2. A period of un-bundling followed by re-bundling
  3. A trend for “Financial Wellness” (especially financial education and literacy, not just wealth management and accumulation)
  4. A switch in personal asset allocation/accumulation from mortgages to superannuation – (i.e., new brands like Verve want to be your lifetime financial partner, so that “we invest together”)
  5. Superannuation funds will obtain banking licenses (or maybe one of the FAANGs will?)
  6. Personal Statements of Advice vs ASIC’s MoneySmart – who’s going to be paying for financial planning, advice, products and distributions?
  7. Capitalizing on the lack of trust among incumbents and centralised platforms
  8. More diversity and inclusivity in access to products and services
  9. Payments FinTechs that will disrupt lending (if they can solve the problem of
    going international)
  10. The growth of RegTech – a model of agile governance supported by great UX
  11. The equivalent of open banking for Personal Financial Management services
  12. Banks as data fiduciaries

Next week: An open letter to American Express