David Birch, an author, advisor and commentator on digital financial services, gave an exclusive interview to the magazine Invest Foresight. David Birch was named one of the three most influential people in the FinTech community according to the PR Daily rating, he was found to be one of the TOP-10 Twitter profiles followed by innovators, along with Bill Gates and Richard Branson. David Birch was rated one of TOP-40 person from the field of financial services, and in Europe he was considered the most eminent commentator in the field of payments of a new generation. In The Telegraph he is described as “one of the world’s leading experts in the field of digital currencies.
– The year 2017 could be called the year of cryptocurrencies, everybody was talking about it. How do you expect this situation to develop?
– I think that there are many businesses thinking that it is tokens rather than cryptocurrencies that are most interesting in the mainstream financial services world. So I expect to see new regulations in that space because obviously they are broken and I see all market places being crazy, lots of people going to jail but when they are regulated, token market emerges, I expect that becomes a big deal.
You currently see some regulation, Switzerland, for example, beginning to develop structures for token regulation and it is a very interesting area. I am more interested in the tokens than crypto currencies at the moment.
– In the course of money development, the same situation has repeated itself: the costs of money production have been decreasing over the time. In the case of crypto money the opposite has happened – the costs keep increasing with time. Would you call it a pattern irregularity?
– No, I think when the cost is going up, what you mean, the cost of creating a new currency, because it seems to me that the costs of creating a new currency is going down, anybody can create a new currency. The famous economist Simmons Matthew has said that anybody can create money. The hard part is to get it accepted, and this is the rule. There are thousands of cryptocurrencies, the most of them are not accepted by anybody. So the cost of that is going down. So the question is what could we do to make cryptocurrencies acceptable to people. And the answer is, I think that it’s hard to make cryptocurrencies acceptable if or while they have no underlying assets, they have no external reccurency beyond the ledger …. whereas by using the ledgers to construct it becomes connected to the world, to real world assets and then we have stability. And we have desirability for quite different reasons that people would want to use these things.
– Complementary money has existed rather long. Jerome Blanc called it parallel money. These days we see a new trend: practically every shop, restaurant, or an airline issue their own money instead of loyalty cards with bonuses. Some regions are doing the same: for example, even in a Parisian suburb one can find local money. How do you see the future, the development of this process? Will we end up with many kinds of, so to say, ‘private money’, or the smaller systems will be taken over by the larger ones?
– I think that the situation you describe is correct. I think that the idea that we have one money for everybody, I think that this is idea, which is finishing, this is no longer optimal and we need the money which serves the different purposes in different ways. I think that you are right that there are going to be lots of private moneys and that sounds that it will be a complex situation but I think it is not a complex situation. Those many different kind of money would be notes that you are carrying in your purse and you have the money that will be managed by your platform, by your artificial intelligence, by your robots. The idea that we can have a lot of different kinds of money is great, better and desirable. And those different types of money will be managed effectively for people on their behalf. It seems to be very realistic in near future. So, yes, I would agree with that.
– But how is it going to work around the global world? How will we use it? Would I have to buy another type of money before going to a Parisian suburb? Are we leaving the global community for a small and private one?
– These currencies are much more closely connected to communities. In the old world these communities were geographically limited. In the modern world we all belong to many different communities in the same geographic limit. And in cities there are very interesting things that the client community that can benefit from their own money. And somewhere in the Globe you can easily imagine, for example, the Islamic community wants to use some form of Islamic money. … Or you may pay local taxes in your Paris money but you save Islamic money for your retirement and, may be, you use it in another way, some other money for something else. So I think that this is a very positive way how the money works for the communities. For many people in Paris there may be different currencies in different circumstances such as required. So ideally you would have one money for the whole world, it is possible, it may happen.
– You are speaking a lot about the security, for instance, identity security, and at the same time you trust blockchains. However, there have already been lots of hacking attacks against blockchains How can we trust these technologies?
– I have not seen hackers’ attacks against the blockchains, it is not correct, we have the security with the blockchain. I think that it works and we don’t have to change it.
– Once, you have proposed to make a blockchain that can show us the prices of the clothes on the people around, and it was a joke, it is funny. However, as a customer I want to know what I am eating and what the costs of the production are. As for the food, I want to know what I am buying at the supermarket, such as the origin of the product and a lot other things. I think that I am not the only one who wants to know all these things. Why don’t I find such a program on the market? Is there a conflict of interests?
– That’s right, I wouldn’t say it’s a conflict of interests, I think coordinating the global supply chain is a very complex issue. Will the blockchain help with that? Well, if the blockchain stimulates work on standards and interconnectivity, and you know global perspectives, then it can be very helpful. The blockchains are not a magic solution to these things, the blockchain can only help stimulate some change.
– However, you are sure that one day we will have an application for the supermarkets to know what exactly we are buying.
– Yes, I think we will have it.
– Will it be in 2 years, 5 years, or 10 years?
– That’s very hard to say, but you know, many people are talking about working in this area, so I don’t think it is surprising. You think, if there was such an application of this, you would use it, but I think that millions of people would use this. I am sure someone already put this together and you’ll see the first experiments in that space. People like profitable units and looking for tuna fishing and things like that. So people are already working for this kind of thing.
– An artificial intelligence can do a lot of things instead of a man What will happen with the human beings? Don’t you think that technologies make a human being more and more stupid?
– Human beings are definitely becoming more stupid, whether it is because of technology, I am not sure I can say that. My hope is that technology will do all the boring things for us and we can be released to spend that time on more creative things, but in order for this to happen people have to become more educated and this is a long term project. I can’t say I have any quick fix solutions for that, no quickly exits, but you see my point.
– So, you are optimistic about the human beings’ future.
– Yes, I can say I am a technological optimist, so I assume the technology is going to help us. You, Russians, you are naturally pessimists so you assume the technologies will throw us out of work, right?
– We don’t have so much technology in Russia.
– But you would not stop it. In time, I would hope that technology will do the boring jobs or the hard work and we will be free to pursue more artistic and more enjoyable pastimes.
– In one of your books you are writing about the interconnectivity of the human identity and money. Can a human identity be separated from money or not? What keeps them together?
– Well, money in many ways is a substitute for reputation and when we used to live in a small Stone Age clan we all knew each other we all knew each other’s reputations. And if I owed you a cow or some work and you were going to help with my house, with my roof, we remembered all these things. It is only when we created larger societies, we had to create money as a substitute for that kind of memory, and in a strange way in the future the Internet and interconnection will take such a place where we go back to that, and, perhaps, we would not need money as inter media any more, perhaps, will remember all our obligations in that kind of reputation economy, you see, people talking about reputation economy.
– Recently I have heard that China is planning to rate every citizen. Aren’t we on the way to the world where each citizen will have their own credit rating like major banks have today?
– Well, I mean I can see some positives to this, to encourage people to behave themselves, but it must be very carefully regulated, don’t you think? Otherwise, it must be crazy and we could find ourselves in a very dainty kind of society. So I could see some benefits but it would have to be regulated very carefully, would not it? But also you would not want a system when the people could guide the system, people could destroy your reputation and then all of a sudden you find you can’t get into an airplane, or you can’t rent a house or something like that, so it will need a careful regulation.
– Doesn’t this act against our liberty?
– Well, it could be, that’s why it will have to be regulated carefully. Otherwise, you end up in a crazy kind of type of totalitarian situation that none of us would like.
– You keep saying that only criminals need to know one’s name on a bank card.
– Yes, it is correct. One of my reasons for optimism is the new technologies if they are used properly. The cryptography can do some very clever things, so the ability of cryptography to prove things about you, that you are allowed to buy these goods, you are about a certain age, you live in a certain place without giving away all of your personal information, the ability to do that, is a very positive thing, this can be utilized very well. So I have optimism about that. We don’t have to use cryptography in bad ways.
– You have said that if you drop your card some criminals can use the information to steal your identity. I almost agree with you that I do not need to have my name on my card. On the other hand, if I have dropped my card in a shop and then picked it up, how can I prove it is mine without my name on it?
– How do you prove that your phone is your phone? You use your fingerprints, right?
– However, there are phones without a fingerprint. May it rather be the contents of the phone: my photos, applications, etc?
– If you pick up your phone, you are the only person that can use it because it needs your fingerprints and this sounds like a good solution to me.
– Still there are people who don’t like impersonal transactions, while payment without contact is very widely used now. Why don’t I buy a cash terminal and walk through a metro train to collect 20-30 euros per person, which is the official limit? Bim bim and I am a millionaire!
– That is not a very good crime, is it? Because the only place you can send that money is into a merchant acquiring an account into a bank. Even if you did that, by the way, it is very impractical, it is a very impractical kind of service, but even if you could do it, how could you get away with the money?
– However, you are sure that banks will cancel all these transactions? We don’t receive a paper statement any more. How many people will spot these small transactions of 20-30 euros and protest them?
– Well, these transactions are made more secure, because they need you, I will use this example with the phone, you wouldn’t have this problem because if somebody stole your phone or certain things they wouldn’t be able to use it. I agree that there is an issue with those contactless cards being stolen, that is a temporary thing, fairly soon you will be in a situation like with Amazon experimental store in America, where you just walk in and buy things and walk out, and the system has high security, it checks your phone, it checks whether your face matches the face of your phone. I think that we can be optimistic about technology in this direction.
– In your opinion, what will be the most important monetary development in the next 10 years?
– In the next 10 years, I am sure that it is tokens. I think that token economy is going to make big changes to the financial markets. Yes, I am pretty sure, it is tokens for next big things…
– Tokens and that is all? No other new technologies?
– Well, I think that the key technologies which are biometrics, blockhains we already have, so, maybe, in 15-20 years quantum computers will come along to make any changes, but no, right now I think that we have technologies what we need to the next revolution.