The World Economic Forum (WEF), which took place on January 22 to 25 in Swiss Davos, left different impressions. On January 28, the British Financial Times wrote that if at the event a year ago, blockchain and Bitcoin were the favorite words of the participants, then this year, they have been forgotten. This, however, is not the case.
Davos Intends to Create Standards for the Cryptocurrency Industry
At the WEF, or Davos Forum, a new co-chair of the influential Global Blockchain Council was elected. It is now an entrepreneur who founded BitPesa cryptocurrency payment startup in Kenya, Elizabeth Rossiello. The WEF leadership, under which the Council exists, expects further promotion of the cryptocurrency agenda from the organization that brings together ministers, regulators, and businesspersons working with blockchain and digital assets. This will be discussed in more detail in May, in San Francisco, at the next meeting of the organization. At the same time, it is worth noting that WEF participants recognized the importance of blockchain for the ongoing technological transformation of human life in 2016, as Fulvia Montresor, Head of Technology Pioneers at the Davos Forum, said. Head of Blockchain and Distributed Ledger Technology at World Economic Forum, Sheila Warren, is convinced that Rossiello will be able to promote the work of the Council as a single voice of the cryptocurrency industry. According to the ideas of the WEF, the Council can turn into a “trendsetter” and become for participants of the financial technology sector what the Bank for International Settlements for the global banking system is, a developer of standards and norms.
In general, at this year’s forum, it became fashionable to say that “the topic of cryptocurrency has faded” or something like that and yet continue to discuss pressing issues of the crypto market and share thoughts about projects in a no less exciting and rich way than a year ago. Huw van Steenis, Bank of England Senior Adviser to the Governor, stated that cryptocurrencies weren’t high on his worry list. But he immediately added that he was actively working on a state project related to how the financial system would look like in the future—in particular, the payment services sector, which, as we know, is adopting cryptocurrency solutions.
Cryptocurrency Skeptics Still Ignorant
There were also critical comments, which, however, left doubt that they correlated with reality. PayPal head Dan Schulman said, “We’re not seeing many retailers at all accept any of the cryptocurrencies.” For example, in Japan, the largest household appliances networks Bic Camera and Rakuten do accept payments in cryptos.
The crypto skeptic Nouriel Roubini, speaking on the second day of the Davos forum, repeated the same “arguments” against blockchain and cryptocurrencies, including that the distributed ledger technology is nothing better than an Excel spreadsheet. New financial technologies put many before a dead end. For example, the head of the Hong Kong Stock Exchange, Charles Li Xiaojia, said that until he thoroughly figures out how mining companies are counting on implementing their future activity plans, he does not intend to approve the listing of their securities on his platform.
MasterCard vice chair Ann Cairns stated that “Bitcoin behaves like a commodity; it’s unsuited right now to be a currency,” ignoring the fact that cryptocurrencies are already being used in various financial transactions and fulfilling the functions of money, and one can only talk about the scale of this phenomenon, but there is no doubt that it exists. At the same time, the top manager said that MasterCard is carrying out a project to create its own blockchain with one of the banks.
Cryptocurrency Is the Only Way
There were, however, more positives than negatives. Jeremy Allaire, head of Circle, a company that received funding from the investment bank Goldman Sachs, expressed a point of view which, obviously, to some extent reflects the opinion of those who support the work of this cryptocurrency organization: “Crypto is fundamental to the future. [...] We need tamper-proof, resilient, decentralized infrastructure if we want society to survive the digital age.” At the same time, Allaire positively relates to such a phenomenon as stablecoins. He believes that the central banks will be second on this issue after private companies and groups of individuals that are already launching such fiat-secured cryptocurrencies. Meltem Demirors, a top manager at CoinShares, confirmed in her speech the conclusions reached by DeCenter. The generation of millennials, which has little confidence in banks, is becoming the main driver of mass adoption of cryptocurrencies.
On the negative side, Bermuda’s Prime Minister Edward David Burt has announced a bank that will actively support the work of the blockchain and cryptocurrency companies with its services, the number of which, according to official’s forecast, will double in this state in 2019. By the way, Burt is one of the 40 members of the Global Blockchain Council, which also indicates that his ideas have a positive response in the leadership of the WEF.
A further reversal toward cryptocurrencies was demonstrated by the head of the IMF, Christine Lagarde. In many ways, her statements in favor of new financial technologies are a recognition of the inevitable: progress cannot be stopped. Therefore, in Davos, Lagarde recognized that the central banks of the world hardly perform the functions of balancing financial systems during crises and that more and more hopes are being placed on new technologies, which will seriously change the way the modern economy functions.
Political Issues Will Be Resolved Using Blockchain
Nothing goes without politics, which eventually turned to the topic of economics. For example, Polish Prime Minister Mateusz Morawiecki said that the Russian project on the transportation of natural gas to Europe, Nord Stream 2, is undesirable. But the main thing that the experts were talking about in this connection was how to make the alternative to Russian natural gas affordable for European consumers. The experience of a number of U.S. and European companies already shows that this idea is becoming ever more realistic, and Russia may lose the European gas market if it fails to join this technological race to reduce the cost of extraction and production.
It was also discussed how the countries that are faced with financial constraints from the United States would behave. Harvard University Professor Kenneth Rogoff shared the opinion that Russia “has no incentive to play by the rules,” and his statement that “cryptocurrencies will never replace fiat,” in this case, is not completely true and that in some countries, this can happen. Indeed, January of this year brought a lot of evidence that the Russian authorities have accelerated work on the possible implementation of cryptocurrencies, even at the level of individual regions. Moreover, Russia sees risks not only associated with sanctions but also with negative trends starting to prevail in the global economy.
Progress Is for the Regulators
The general mood of the forum turned out to be positive with respect to cryptocurrencies, as everyone saw the benefit from them, even critics such as Nouriel Roubini, who was able to visit Davos to repeat once again his list of arguments in favor of the collapse of blockchain and cryptocurrencies, which was ironically noted by Weiss Ratings. The crypto market is set to work productively with regulators, and this was stated by the head of ConsenSys, Joseph Lubin, who is waiting for some more regulatory clarity. But there is no certainty that the authorities in some countries will not try to stop the progress by creating favorable conditions for banks and other financial market institutions that are already facing competition from cryptocurrencies. In this case, the mistakes of the regulators can only accelerate the transformations in the financial systems of the world, and not slow them down.