Europe sounds warning on cryptocurrencies as EMs rush to digital payments
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Europe sounds warning on cryptocurrencies as EMs rush to digital payments

Echavarría 100

Bankers and policymakers have sounded the alarm over the impact that cryptocurrencies could have an areas as wide-ranging as anti-terrorism, anti-money laundering and tax evasion even as they embrace the potential of fintech

Echavarria
Echavarría: fintech can change the world

“I have my doubts about cryptocurrencies, in a world where there’s so much focus on tracking all transactions to provide security in terms of anti-terrorism, anti-money laundering and tax evasion,”

Frédéric Oudéa, Société Générale chief executive, said. “I don’t believe in the future of systems which provide as a main advantage the anonymity of individual transactions. And for government, the sovereignty of their control of the currency is very important.”

Bundesbank executive board member Andreas Dombret also questioned the relevance of such assets.

“Cryptocurrencies are an interesting phenomenon, but in terms of economic significance of minor importance,” he told GlobalMarkets. “They currently mainly serve as speculative investment playing almost no role as a means of payment.”

But as caution continues to reign over digital currencies per se, officials — especially those in emerging markets — are keen to see an end to a cash-based economy. Financial inclusion has leaped from 26% to 75% of the Kenyan population in a decade thanks to mobile payments services such as M-Pesa. “Fintech is not just for people at the top, it’s for everybody,”

Patrick Njoroge, governor of the Central Bank of Kenya, told GlobalMarkets.“The next step for fintech is expanding usage and expanding services,” he added, pointing to a new digital savings product the government is launching.



‘Still learning’

In Chile, around half the population has signed up for simplified online accounts since state-owned lender BancoEstado allowed people to do so with just their national ID number a few years ago, said central bank governor Mario Marcel. Additionally, new regulations open the way for non-account payments, he said. “If you put the two things together, I think in the very near future we’ll have a well developed and stable system of digital transfers and payments that can cover basically all of the population,” said Marcel.

The bank is also hoping that the financial services sector can speed up clearing and transfer architecture. “There are some promising developments with distributed ledger, blockchains, that over time may replace the financial infrastructures that deal with payments, settlements, clearing of transactions, that today involve a number of actors in the process of transfer or settlement, a certain cost and a certain risk,” said Marcel.

But the path ahead for the central bank is not clear, Marcel added. The authority is working on a five-year strategy in which “tech takes a very central role”, and said that the bank is considering joining the R3 consortium, a software firm working with banks and regulators globally to develop a distributed ledger platform for financial services, to learn more about the uses of blockchain.

Juan José Echavarría, governor of Colombia’s central bank, also championed the role of new technology in the financial system, saying that cutting the cost of lending transactions can “change the world”. “If we want to avoid cash and to restrict cash, we need a new infrastructure. We need banks allowing that. We need to

reduce tariffs for that. What you cannot do is prohibit cash with no alternatives.”

But Echavarría admits that the central bank is “still learning” when it comes to new technology to facilitate a cashless economy. “We have all these issues that nobody knows very well,” he said. “You know they

are important, you know they are there, but you don’t know how to handle them.”

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