Disrupting the Dollar, Gold vs Bitcoin, Marvelous Montauk—The Ledger
On the shores of foggy Montauk, tech and finance executives gathered last week at Fortune’s Brainstorm Finance to talk about big ideas. Notably, they explored how the ethos of Silicon Valley is seeping into Wall Street, and asked whether big banks will be displaced—or if the old guard of the financial world will simply appropriate new tech tools to stay in control for decades to come. One of many delightful surprises: Citi CEO Michael Corbat took up the counter-cultural mantle, labeling himself a “true believer” in cryptocurrency.
Meanwhile, some currents of the conversation raised an even deeper question: Will new technology, notably cryptocurrency, end the dominance of the U.S. dollar? At a breakfast panel, TrustToken co-founder Tory Reiss noted how merchants in China and Ukraine are using digital money called Tether to arrange import deals, while thousands of brokers in Hong Kong are using WhatsApp and Bitcoin to subvert currency controls. In the past, it would have been U.S. dollars—namely suitcases full of cash—enabling such transactions.
Others predicted that the next phase of finance will see nation states issuing cryptocurrencies of their own. For Alex Mashinsky of Celsius Network, this will further hasten the decline of the dollar as the world’s reserve currency, and cause America to lose one of its most powerful geopolitical assets. “The monopoly of the U.S. dollar will be disrupted like AT&T before it,” he said, referring to the 1980s breakup of what was once America’s most powerful communications monopoly.
It’s not just countries, of course, getting into the digital currency game. On the Brainstorm Finance main stage, Kathryn Haun of Silicon Valley venture capital firm Andreessen Horowitz discussed Project Libra, the Facebook-led initiative to create a new type of money for billions of users. As Haun explained it, her firm is just one of dozens that will hammer out the details of Libra, likening the process to a “Constitutional convention…you have all these different states coming in trying to form this union.”
Not everyone is cheering on this process—and some are downright hostile. Ledger reader Michele Clarke sent us an acerbic email to say, “So a quick fact check – these are corporations, not ‘states’. And wouldn’t holding a ‘Constitutional convention’ fall under the literal definition of treason?”
Meanwhile, others questioned if the financial future we are creating is part of the larger surveillance state arising all around us. In the words of Amber Baldet, Clovyr CEO and former JPMorgan Chase executive, there is a real risk of a “William Gibsonian corporate dystopia” if we turn away from decentralization, which was the original promise of blockchain technology. Finally, Gem CEO Micah Winkelspecht—a long time blockchain builder—made an impassioned plea to treat the ability to tinker with new financial technologies as a human right. As I said, lots of big ideas on the shores of Montauk.
If Ledger readers will indulge us in a victory lap, we were absolutely thrilled with the inaugural edition of Brainstorm Finance. We received rave reviews—including one delegate who described it as a “conference without annoying conference people.” Jen, Robert, Adam, and I want to thank everyone who came, read our coverage, and contributed to the discussions. We can’t wait to do it all over again next year.
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To the Moon… Bitcoin is at $11,000 and climbing. Project Libra will turbo-charge Facebook's ad empire. France creates G7 task force to study cryptocurrency and central banks. Fin-tech startup Tally raises $50 million to automate personal finance. Mike Novogratz's Galaxy Digital unveils option trading for hedgies. IBM Blockchain offers "pay as you grow" pricing.
…Rekt. Fintech startup says Facebook lifted its logo for Libra. Amazon has no plans to take on the big banks. E&Y says dead Quadriga founder dipped into clients' crypto funds. Western Union CEO says "cashless is classist—and bad for business." Coinbase rebuffs zero-day attack, "burn[s] down attacker's infrastructure." Israeli busted for mass Bitfinex hack tells court "I'm a good boy." Hey Facebook, the Senate Bank Committee would like to talk to you about Libra on July 16. And Maxine will see you the next day.
BALANCING THE LEDGER
A personal highlight of Brainstorm Finance was hosting what Robert called "crypto firepower"—DCG's Barry Silbert, Circle's Jeremy Allaire and Clovyr's Amber Baldet—on the same panel. Needless to say, a lively chat ensued. Bonus tidbit: at the outset, I asked the room if they would invest their last $10,000 in Bitcoin or gold—the poll was about a 50-50 split.
Bitcoin is going up, up, up of late. But despite crossing the $11,000 mark, it has much more ground to cover before it reaches its all-time 2017 high of nearly $20,000. This seems a good time, then, to dig out a recent survey by a UBS analyst of other spectacular bubbles (i.e. the NASDAQ in 2000, oil in 2008) and the path from trough to recovery. In the worst case—the Dow Jones crash of 1929—the road back took 22 years. Here's betting we'll see $20K Bitcoin before the year 2039.
MEMES AND MUMBLES
Gold is for dinosaurs? Maybe. But the gold bugs had the retort of the week to crypto kingpin Barry Silbert and others who are urging investors to drop the yellow metal in favor of Bitcoin. Check out this clever tweet, which uses a chart of gold's recent uptick to draw a very happy brontosaurus:
Your move, Barry.