digital currencies, remittances & financial inclusion - mfcny event hosted by morgan stanley
DESCRIPTION
Opportunities and challenges for the financial inclusion of the other 2/3 of the world. World Bank estimates are staggering. Infrastructural and competitive obstacles are real both on the pay-in and pay-out sides, but could be surmounted by digital technologies and mobile penetration. Hint: shortening the long and inefficient supply chain for both cash- and prepaid card-based remittances. Biggest opportunity: using cryptography-based distributed ledger technology to unearth the $10 trillion of value hidden in the world's underground economies and thus solve Hernando de Soto's mystery of capital. Now THAT is financial inclusion.TRANSCRIPT
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Of the 7 bi l l ion people al ive on the planet, 1.1 BILLION subsist below the
internati onal ly accepted extreme-poverty l ine of $1.25 A DAY .
The Economist
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Adult population with NO USE OF formal or semiformal FINANCIAL SERVICES
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Official Development Assistance
Foreign Development Aid
Remittance flows are LARGE and GROWING
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• Average total cost of sending money to Africa in 2013-Q2 11.79 %
• Cost of sending money to Africa in 2013-Q2 2.94 % more expensive than the global average of 8.85%.
• 10 most expensive corridors all intra-African, with 6 of them originating in South Africa.
• Most expensive countries to send money to are those receiving mainly
• from other African countries –Malawi, Mozambique, and Botswana.
• Cheapest markets to send money to Egypt, Liberia, and Somalia.
• Commercial banks continue to be the most expensive type of provider.
• Bank account services are the most expensive method of transfer.
Send Money Africa – July 2013 (The World Bank)
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Underdeveloped infrastructure Limited competitionRegulatory obstacles
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Current Supply Chain
Cost incurred
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Next Generation Supply Chain (digital treasury & settlement)
Cost incurred
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Last Generation Supply Chain P2P Transfers (already possible today)
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Prepaid Card Supply Chain
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“Virtual currencies promise to benefi t commerce on many levels, from serving
the unbanked to new fi nancial products . I chal lenge our innovators:
devise c r e a ti v e s o l u ti o n s to prevent virtual currency abuse.”
FinCEN Director Jennifer Shasky Calvery
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Financial Acti on Task Force Groupe d’Acti on Financière
(FATF-GAFI)Special Recommendation VI
Each country should take measures to ensure that persons or legal entities, including agents, that provide a service for t h e t r a n s m i s s i o n o f m o n e y o r v a l u e , including transmission through an informal money or value transfer system or network, s h o u l d b e l i c e n s e d o r r e g i s t e r e d and subject to all the FATF Recommendations that apply to banks and non-bank financial institutions. Each country should ensure that persons or legal entities that carry out this service illegally are subject to administrative, civil or criminal sanctions.
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[x] ANONYMITY product has to dissuade the bad element, never attract it.
[y] COMPLIANCE product and operations cannot be in violation of any applicable laws and regulations (the “form” or “paper” side of compliance).
[z] SUBSTANCE what is written in their policy must actually be implemented. Businesses must be run with integrity, responsibility and control.
Anonymity = AnathemaAnonymous identification No value limits Anonymous funding
No transaction records Wide geographical use No usage limits
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Underground economy
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• The Shadow Superpower (Robert Neuwirth, Foreign Policy) System D (“Debruillards”)
• Informal (“extra legal,” “black”) economies $10 trillion in aggregate
• The Mystery of Capital (Hernando de Soto, 2000)
• Mystery failure of assets to serve as capital
• Problem credibility of rights transfer at a distance (i.e., ability to engage in binding contracts)
• Smart contracts jurisdiction-free contracting mechanism
• Distributed asset ledger for everyone, EVERYONE, around the globe
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@JuanLlanos
Thank you!