Bitcoin lehman

10 years after Lehman: A reality check for the future

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The lawyers and consultants pulling apart this mammoth beast have earned several billion dollars in fees.

The Future of Money - 10 years after Lehman and Nakamoto

When Wirecard falls, a few Fintechs might go down for several days. Commerce halts, shoppers cannot pay, stores close down, and some players along the value chain will go bankrupt.

But when a significantly important financial institution, levered up 50x and high on financial engineering, fails or is forced to liquidate, there is an immense social cost. In this light, financial product APIs and the open-banking movement is an unrecognized systemic risk to the financial industry.

Our fintech and high tech champions have been paving the way for a financial system where the seller of the financial product is not the owner or the servicer. When SoFi delivers a payment card, it asks banking-as-a-service provider Galileo to generate a virtual card, which in turn triggers the public company Bancorp to create an accounting entry. This in turn would put pressure on the venture investors who have been sloshing money into B2C consumer fintech, like Ribbit or Andreessen Horowitz, which in turn would wipe out endowment and pensioner assets, and make it harder for new entrepreneurs hoping to change the world to raise capital.

All you have to do is look at SoftBank and its experience with WeWork, Uber, and the rest of the blitz-scaling portfolio.

We need good actors running our public financial infrastructure. One approach is principles-led regulation -- fiduciaries with the right incentives to protect users and encourage competition the UK FCA gets this right. The world has never been so interconnected in the ways capital is invested and risks are pooled. We should not use technology integration to align all our correlations to one, and be surprised when everything fails together. This would create transparency about the underlying transactions -- a Wirecard would never be able to get away with a fake account balance in a fake trustee, because you could effortlessly verify in real time large and complex financial structures.

But if you say this, then you have to be open to oversight and audit of public chain transactions , at least for companies that choose to be public in the traditional sense , to issue financial products in the traditional sense , and are therefore licensed and regulated. Others will say that we should throw the whole incumbent financial industry out the window, with its propensity to have multi-billion accounting frauds, pervasive money laundering, and various political entanglements.

Besides being unrealistic and unproductive, it is also flawed to have a blind spot for your own problems. The crypto sphere and decentralized finance are subject to these very same impulses. They are after all, populated by people governed by human nature and interested in financial engineering. The underlying protocol underwent 2 different security audits -- but the attack vector came from using a product i. The token project is blaming the protocol and the protocol is blaming the token project. Granted, in the Wirecard case, Wirecard's fraudulent activity created a situation that led to Wirecard shutting down and thereby impacting the industry.

In Balancer's case, it does not control who connects to the open protocol and how they do it. But they can still manage block-lists, reputational systems, and other systemic guard rails. Should users be protected? Whose responsibility is it to protect the user? What responsibilities does a smart contract auditor have? What responsibilities did Arthur Andersen have?

How does a protocol become systemically significant in a small system? How do responsibilities change when that system is large? These are the types of questions entrepreneurs trying to create new financial constructs must integrate from the start. Or it will all have been a fevered dream. Click the link we sent to , or click here to log in. Your history is incorrect about Accenture. Andersen Consulting split from Arthur A several years before Enron. It became Accenture and a public company. Arthur A was actually competing against Accenture on some consulting mandates before it tanked.

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Article is well done overall. Slicing and dicing of functions and services is confusing and will lead to numerous disputes in long run. Regulators are way behind the curve here. Worst is confusing consumers with too many options and setting stage for less savory firms to take advantage. I'm not advocating consolidation, but the lack of financial literacy in US is a big problem. Consumers are paying a price for it, witness travesty of Robinhood.

Informed consumers wouldn't have chased it. The Fintech Blueprint Subscribe. About Archive Help Sign in. Hi Fintech futurists -- This week, we consider the impact of financial infrastructure collapse and who really gets hurt through the lens of Wirecard, Enron, and Lehman Brothers. For exclusive analysis parsing over a dozen frontier technology developments every week, become a Blueprint member below.

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Create your profile Set photo. Only paying subscribers can comment on this post Subscribe. Having put together a large crypto-assets division, Fidelity Investments is encouraging its high net worth clients to plunge. Corporate treasuries are said to be looking into bitcoin. Take monetary policy.

Bitcoin was created in the wake of the Lehman Brothers bust to offer an alternative to fiat currencies whose stability appeared threatened by central bank money-printing. Yet fears of runaway inflation turned out to be premature. Last year, however, the central banks created a great deal more money than during the financial crisis. Rather than remaining trapped in the financial sector, as was the case with earlier quantitative easing, the new money has financed spending by governments and seeped into the broad economy.

Central bank-financed government deficits are here to stay. If inflation returns in the near future, as seems likely, investors will look for alternative stores of value to fiat currencies.

Do not give up on fundamental valuations

Gold, which has been around for many millennia, is an obvious contender. But a digital age demands digital gold, and bitcoin is in a prime position to fulfil that role. In fact, bitcoin has much in common with gold, not only as its supply is limited but since the crypto produces no income, it is impossible to value.

Value is in the eye of the beholder. As investment strategist Dylan Grice of Calderwood Capital Research points out, gold retained its value even after it was demonetised. Having survived several bubbles and busts over the past decade, bitcoin has shown itself to be remarkably durable. Bubbles are great marketing tools: just about everyone on earth now knows about the bitcoin brand. In a world where network effects are all-powerful, this free publicity gives the best-known crypto a huge advantage over rivals.

Institutional investors may be ramping bitcoin, but the arrival of the suits is making cryptos respectable. In its early years, bitcoin exchanges were notoriously unreliable, with massive thefts occurring at Mt. Gox and other dubious outfits. Today, cryptos can be stored safely at reputable operations, such as Coinbase.

The 2008 global meltdown and the birth of Bitcoin

Transactions in bitcoin have always been notoriously inefficient. But financial technology companies have come to the rescue. For a small fee, bitcoin held in fintech accounts can be converted into dollars for transaction purposes and turned back into cryptos on receipt. You will soon be able to pay for a morning Starbucks with a crypto.

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