Snippings

The issue of social media accountability and anonymity continues front and centre. I was listening to the BBC’s popular radio show “Any Questions” recently when the panel was asked about the very serious topic of threats and abuse on social media that appears to be forcing some people out of politics and preventing worthy candidates from entering the public sphere. A couple of the panelists said that online anonymity needs to end. You can see their point. But requiring people to disclose their personally-identifiable information to unaccountable social media platforms is not the solution. It is , frankly, none of Twitter’s business who I actually am.

This sounds like a immovable object meeting an irresistible force, but it really isn’t. There is away through this, and it comes from understand how digital identity works (or, at least, should work). What we want is a system where people can have free speech (putting to one side what this really means for a moment) but where they cannot simply post hate speech in the best of cases and death threats etc in the worst of cases.

Here’s a tweet that illustrates the problem…

also cool how when hitler1488boy gets banned, twitter just lets the same person create hitler1488boy2 10 minutes later

— McVillain (@mcmillen)

October 27, 2019

https://platform.twitter.com/widgets.js

There are actually three problems here: the first is that nobody knows whether hitler1488boy is actually a real person or a bot operated by agents of a foreign power, the second is that if hitler1488boy is a real person nobody knows who that real person is and the third is that if hitler1488boy breaks the rules then nobody knows whether hitler1488boy2 is that same person as hitler1488boy. I think that, in the presence of a practical digital identity infrastructure, these are easy problems to solve.

How?

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On Friday (Oct. 18), the bank Credit Suisse said it was going to tack on a negative 0.75 percent interest rate for customers who have more than $2 million in the bank. For example, if a customer has a balance of $3 million for a year, that customer would get charged $7,600.

If a balance is above $10.1 million, the fee goes up to 0.85 percent. This starts for corporate bank members on Nov. 15 and for individual customers on Jan. 1 of next year.

Low Interest Rates Force Swiss Banks To Charge | PYMNTS.com:

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“The future in five years, if we don’t have a good answer, is basically China re-wiring [the rest of the world] with a digital renminbi running on their controlled blockchain,” Marcus said. This could mean the potential for “a whole part of the world completely blocked from U.S. sanctions and protected from U.S. sanctions and having a new digital reserve currency.”

Marcus: China Wins If Facebook’s Libra Fails | PYMNTS.com:

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There is an opportunity for digital currencies to support a transition away from the destabilising effects of US dollar dominance, Bank of England governor Mark Carney says.

In remarks on October 18, Carney called on policy-makers to consider whether they should be waiting for China’s renminbi to become a new reserve currency – “which doesn’t solve the problem” – or take matters into their own hands with the creation of a hegemonic digital currency.

‘Hegemonic digital currency’ could help fix global system – Carney – Central Banking:

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The Islamic State also demands a cut of the revenues earned by small businesses. “We either pay in olive oil or cash, it depends on the production,”

Predatory Islamic State Wrings Money From Those It Rules – The New York Times:

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Levchin said he first got comfortable with the regulations in the financial sector when he worked at PayPal. At Affirm, he has embraced them because they tend to discourage would-be rivals in the tech industry who don’t want to deal with the hassles of operating in a highly regulated industry, he said.

“I’m a big fan of regulation, actually,” Levchin said. “If you’re smart about it, it becomes a competitive advantage.”

Affirm’s Levchin Opposes Tech Breakup — The Information:

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“‘Assuming uptake is strong – and BPAY is a long game player – the new functionality is set to take a bite out of the credit card and direct debit segments of the payment industry that are ripe for disruption, especially on the domestic payments front”

From “BPAY Reveals API Push into Core Enterprise Software | PaymentsJournal”.

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“Central banks [are] chipping away at the dollar’s ‘exorbitant privilege’,” said Alan Ruskin, chief international strategist at Deutsche Bank in New York.

Why central banks are edging away from the dollar | Financial Times:

Now, economists are not the only people who are concerned about the dollar’s dominance and the consequent extension of American soft power. There are many other groups who think that it is time end the fiat dollar and it’s hegemonic power. Some people, such as Rand Paul and ISIS, think that it might be time to return to a new form of gold standard.

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The problem for ISIS was that all that trade was executed in U.S. dollars. So in spite of the group’s declared war on U.S. hegemony, its economy was actually facilitating U.S. dollar dominance.

Sharia Goldbugs: How ISIS Created a Currency for World Domination – CoinDesk:

 

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“So why the clamor for its return? Nostalgia, said economist Charles Wyplosz. ‘People long for a simpler age,’ when the U.S. ‘was the dominant economy and there were no financial markets to speak of.’”

From “Why Did the U.S. Abandon the Gold Standard? | Mental Floss”.

 

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Alex Benay is the chief client officer at MindBridge Ai in Ottawa and served as the chief information officer of Canada from 2017-19.

Opinion: Canada needs to assert its digital identity – The Globe and Mail:

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I went along to the Centre for the Study of Financial Information (CSFI) lunchtime roundtable on “Gold in the Internet Age” because I am fascinated by the link between gold, money and now (of course) digital money. I take my hat off to Andrew Hilton and his crew because the event was outstanding. The panel of experts was as impressive you would expect from the Institute and the audience were well-informed and just as interesting. The panel comprised Haruko Fukada (who used to the run the World Gold Council, WGC) and Jason Cozens of Glint (an electronic gold scheme), Harry Sanderson from the Financial Times, gold market expert Ross Norman and an Andre Voineau from HanETF who have just launched a gold exchange traded product (ETP) with the Royal Mint.

This is far from my field of expertise but what I learned, if I interpreted the comments correctly, was that it is low Treasury yields rather than the coronavirus or trade wars with China that are behind the rise in gold prices. The Economist made a similar point earlier in the year, noting that while investors typically rush into gold when geopolitical risk soars, the gold price has been rising for a while, climbing by more than 25% since November 2018. The reason is falling real. If inflation-adjusted interest rates rise, gold’s relative attractiveness falls; when they fall, it rises.

I also found out that central banks are buyers of gold at the moment (so you have to wonder what they know that we don’t!) and also that exchange traded funds (ETFs) have been successful at smoothing price fluctuations in the physical gold delivery market. ETFs in fact currently hold around 3,000 tons of gold, which is approximately one year’s worth of production.

I learned a couple more things that help me to refine my mental position on gold. The first was that the “preppers” (some of whom were at the roundtable, judging by some of the comments) don’t want ETFs, “smart” “contracts” or pieces of paper, they want physical metal and the physical metal only. The second was that while China is a massive importer of gold, potentially looking forward to the time when the US dollar is no longer the world’s reserve currency, the digital Renmibi will not be backed by gold and, as I mentioned in my invited closing comments, there has never been any indication of such from the People’s Bank of China.

Oh and I also learned some interesting things about the gold supply chain. For example I learned that with a gold price of $1640 per ounce, the refiners (the refining market suffers from gross overcapacity) make approximately $0.10 per ounce.

Then on to a couple of businesses working with “digital gold” of one form or another. Jason talked about how Glint is getting along. I remember going to see Jason and Haruko three or four years ago when Glint was just getting off the ground because I was at the time looking at a project (which in the end didn’t go anywhere) to create an Islamic payment product based on gold in the Dubai depository. It wasn’t a new idea then – here’s what I wrote about it in 2007: “Given the desire to transact with the convenience of a card but in a non-interest bearing currency, it would seem to be a straightforward proposition to offer a gold card that is actually denominated in gold.  An Islamic person tenders their chip & PIN gold card in Oxford Street to buy a pair of shoes: to the system it’s just another foreign currency transaction that is translated into grams of gold on the statement”.

 

Anyway Jason said that Glint is now live in 33 countries, including the USA, and is growing steadily. Essentially, you open a glint account and then you add money to this account which is used to buy actual gold and you have a claim over that gold. The gold backs a payment card so that you can spend your gold with ease. The Glint card is a prepaid MasterCard, issued by Sutton Bank, so that you can spend your gold anywhere that MasterCard is accepted. They are launching their peer-to-peer platform in a few weeks time.

I was reminiscing after the event with a couple of the people there because I remember some of the pioneering work in this space by James Turk of Goldmoney and Douglas Jackson of E-Gold, both of whom I spoke to many years ago about digital gold. Douglas was responsible for one of my all-time favourite quotes from the electronic money world when, a few years ago, I was chatting with him about the trajectory of the gold and he said, in answer to my questions, “it was all going very well, right up until I got indicted by the federal grand jury”. (Here’s a podcast I made with Douglas a few years ago.)

So, gold in the internet age? I think it will be a niche, for sure. But I doubt we’ll go back to a gold standard, digital or otherwise. Gold can serve as a unit of account, means of exchange, store of value and a mechanism for deferred payments. All well and good. However, the digital world is not an electronic version of the analogue world. It is different. It does not have the dynamics of the physical world, and this applies to money just as much as it applies to everything else. New technology unbundles those functions and allows us to implement each of them in the best way for the purposes demanded and even if gold may have been the best bundle of functions in the analogue past, it is not at all clear that digital gold is the best bundle for the digital future.

(After the roundtable, I began to wonder that if ETFs hold approximately one years worth production of gold and have helped to contribute to a functioning market, maybe ETFs holding a years worth of bitcoin production could have a similar impact on the crypto currency market. This led me, somewhat unproductively I have say to try, to start working out what a year’s worth of production of Bitcoin is before I abandoned the project on the grounds that the answer was irrelevant because cryptocurrency is a thin and opaque market this and ETFs would be trivial to manipulate.)