Mexico’s most famous financial expert, Agustín Carstens, signed and published a document this month. The General Manager of the Bank for International Settlements entitled your text So: “Internet: the financial system for the future”.
Coincidentally, he launched it in these days when Mexico celebrates its National Banking Convention in Acapulco, the annual meeting in which the country’s bankers only need to dance holding hands.
This 44-page document includes an introduction that mentions a ‘mea culpa‘.
“Large sectors of the financial system are stuck in the past. Many transactions still take days to complete and rely on clearing, messaging and settlement systems.
“Some even involve physical paper trails. Even within countries, the lack of adaptive interconnectedness means that different parts of the financial system often do not communicate with each other,” warns Carstens along with the paper’s co-author, Nandan Nilekani, a great Indian entrepreneur who is an expert in technology.
Both recognize that advances in digital technology have transformed how we shop and consume news. Tasks that were previously expensive, such as making a phone call abroad or booking a hotel, now only require a “smartphone” with balance and a card.
The widespread deployment of fast and mobile payment systems has made shopping easier, cheaper and safer.
The banks have not kept pace. They have not given control to the people. Maybe they don’t do it because they don’t feel the urge to do so. Banks have net profit margins above 20 percent. A sharp comparison is worth it: car producers such as Ford or GM celebrate a net margin that is even close to 10 percent.
Americans say: Don’t fix it if it’s not broken. Don’t fix it if it didn’t break down.
But competition arrived that offered low-cost services, like Nubank does, and gained market share in the field of credit cards, or the blockchainthat technology they use to exchange Bitcoin or Ethereum to send money around the world at a low cost.
Most importantly: Carstens mentions ‘tokenization’!
What the former Secretary of the Treasury, now the world’s leading banking authority, proposes is the following: “A vision for the Internet: multiple financial ecosystems interconnected with each othervery similar to the Internet, designed to empower individuals and companies by placing them at the center of their financial lives.”
One way to achieve this is through “tokenization,” which Carstens mentions 97 times in his text. Taken to a maximum simplification, it is like putting an inviolable medal on your pet so that everyone knows who the owner is and where he lives.
Those who were born this century do not understand the hardships our parents went through just to transfer money from one bank to another. It was almost as complicated as it is today to do the paperwork to sell a house.
Imagine that now you could “put” an inviolable digital label on each house so that it can be marketed like today they buy shoes online. Technically it is already possible through blockchain of Ethereum, but first it must go through regulatory changes. Carstens proposes:
“The “Unified Ledgers” or “unified ledgers,” an important component of the Internet, are a promising vehicle to realize our vision of an efficient future financial system. These are digital platforms that bring together multiple markets for financial assets, such as wholesale tokenized central bank money, tokenized commercial bank deposits, and other tokenized assets, including company shares, corporate or government bonds, and real estate, to name just a few. ”.
Agustín Carstens does not mention at all blockchain, but only that was missing. It is the technology that would make all of the above possible, but of course, that would mean attacking the banks, because it could take away part of the control of the system and a good part of what makes them profitable.
