As legislators tentatively prepare to adopt open banking, what are the opportunities and who are the beneficiaries of a new financial rulebook?
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Fintech Opinions
The Case for Open Banking: Benefiting The Underserved
Progressa | Philipp Postrehovsky | July 31, 2019
The Open Banking Opportunity
The consumer owns their financial data, not the bank.
B2B: Fintech companies are able to securely access a consumer’s financial information without having to use third party services like Decision Logic.
B2C: More options to shop and compare products, achieving the best products and rates. More educated and active financial service consumers.
Benefits
- In the open banking era, you’re linked into alternative sources of value and not being driven by a closed ecosystem/closed banking monopoly which restricts the consumer to access resources they need.
- Consumers can get the help they need in a streamlined manner when going through challenging financial times.
- Banks can migrate risk to fintech companies and fintechs can provide more diverse financial services and advice to better serve the consumers.
See: Open banking data tapped to speed up laundering checks
Risks & Mitigation
- To ensure the protection of customer data, stringent compliance standards need be implemented along with regular compliance verification.
- Any security breach or misuse of data could significantly harm the banks’ brand reputation and confidence they currently hold, which would instantly jeopardize the program.
- The Government needs to play a leadership role to mandate and enforce standards in order to create a unified vision.
Some Inspiration: The Airline Industry
Travellers historically were required to contact incumbent airline companies directly in order to book or manage reservations, check availability, check in, and check arrival times. Modern standards in our airline industry placed the customers in control and enabled customers to decide what, when, where, and how they wished to consume airline services. This amounted to expanded and improved services for the would-be travellers. The modernization of the travel industry allowed for open functionality through secure APIs. This re-visioning of the industry enabled customers and third-party apps to perform most, if not all of the travel functions, without the need to ever contact the airline through slow, analogue channels.
Open Banking has Already Arrived Overseas
Open banking would position us as a global leader alongside the European Union and UK. PSD2 (Payment Services Directive 2) arrived in Europe last January, forcing European banks’ to open up their API’s to fintech and other financial companies.
Our Stance
The democratization of personal banking data while maintaining the highest level of security means happier consumers. Progressa fully supports open banking, but companies need to be prepared to take on the responsibility of it. Canada’s current ecosystem is not prepared for open banking and it will take several years to become a reality.
Philipp Postrehovsky – SVP Marketing, Progressa
Philipp is a product visionary, brand builder and an award-winning marketer who has been involved in the Vancouver tech scene for over 15 years. In 2013 he co-founded RentMoola, which continues to be one of North America's leading fintech companies with the mission to eliminate the rent cheque and modernize rent collection for the enterprise. Before that, he was a brand leader for Mogo Technologies and Wonga Canada and began his career at Electronic Arts. He is the founder of Grind For Kids, a program that raised over $1 million for BC Children’s Hospital Foundation and sits on the Board of one of BC’s top independent schools.
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Open Banking: What’s Really at Stake
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Open banking in Canada – time to prepare for change
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Why Open Banking Represents a Seismic Shift for Fintech
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Open banking in Canada – time to prepare for change
The Sixty Percent | Dan Smith, Editor | July 30, 2019
As legislators tentatively prepare to adopt open banking, what are the opportunities and who are the beneficiaries of a new financial rulebook?
Open banking is on its way to Canada, representing a major opportunity for the region’s fintechs. In September 2018, the Department of Finance created a committee to advise on the pros and cons of opening up consumer financial services. Its report was published in January and, despite raising concerns around the privacy of consumers’ data, is largely receptive to the concept.
At iwoca, where we provide fast, flexible business loans for SMEs, open banking has been an important part of our growth. Canada’s fintechs should prepare for the opportunity.
So, what is open banking?
In Europe, the open banking regulation PSD2 (Revised Payment Service Directive) came into effect in 2015. This set of rules was designed to break the hegemony of the established European banks and welcome innovative new players to the industry, while making electronic payments safer and more secure.
Under this framework, in 2016 the UK forced its biggest banks (Allied Irish Bank, Bank of Ireland, Barclays, Danske Bank, HSBC, Lloyds, Nationwide, RBS and Santander) to allow fintech startups access to their customers’ data, when requested by the consumer.
What does this mean on the ground?
At iwoca open banking allows us to make better credit decisions for the benefit of our customers. We can now access several years of an applicant’s financial statements direct from their bank, and as a result make highly accurate credit decisions.
Elsewhere in the UK, newcomer banks, such as Monzo and Starling are thriving by offering slick apps that help people manage their money more easily. Financial planning platform Finimize is providing millenials with a low-cost alternative to a financial advisor. Investment platform Nutmeg is democratising wealth management, helping people invest with as little as £100.
For Canadian firms looking to benefit from any forthcoming rule changes, there are plenty of areas to explore. With greater access to transaction and statement data, fintechs have more information about their customers. This will make easier for them to offer tailored products for individual customers, manage risk with greater accuracy, identify customers to onboard, offer money management solutions, and collaborate with other players in the industry.
A word of warning
But that’s not to say the introduction of open banking will result in success for all of the industry’s players. Much of the opportunities available to tech firms are also available to incumbent banks, which are well respected by the Canadian public. The established giants have the advantage of strong brands and significant resources to throw at developing new tools and services. Taking them on won’t be easy.
See: Open Banking: What’s Really at Stake
In addition, any legislation would likely involve the loosening of red tape in some areas and tightening in others. Fintechs must therefore innovate with care. People’s money and financial data is a sensitive area, so accounting errors, data breaches and other lapses of trust can have a major impact on a fledgling company’s reputation.
Consumers will not stand by firms who are seen as irresponsible with their financial records.
What’s the score elsewhere?
Open banking is being roll-out around the world, with several other markets poised to implement it in some form. Hong Kong, Japan, Israel, Australia, Mexico and New Zealand are all researching the area, conducting pilot schemes and drafting potential rules to implement in coming years.
It’s an exciting time to be in financial technology, with amazing opportunities to innovate and build new products. At iwoca we aim to keep our customers at the centre of everything we do. Afterall, success in the open banking landscape depends on providing a valuable, high quality service – it’s what the initiative was designed to do.
Read more from iwoca at The Sixty Percent
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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5 Digital Policies Small Biz MUST Have
AiAuthority | | Jul 8 2019
It’s hard to overestimate the role of small businesses plays in the American economy:
- Businesses with fewer than 5 employees account for 62% of all businesses in the U.S.
- More than half of all Americans own or work for a small business.
- Small businesses are responsible for two-thirds of all new jobs created each year.
When you look at the magnitude of their economic impact, it would be easy to assume that small businesses know exactly what they’re doing and would be the obvious place to look for advice and best practices.
The truth, however, is that small businesses power the economy despite lacking the resources of larger organizations:
- 77% of small businesses rely on the owner’s personal savings for their original funding.
- Only 40% of small businesses are profitable.
- The vast majority of businesses that fail, do so because of cash flow problems.
- Employees of small businesses wear many hats, starting at the top. The owners or leaders of small businesses are typically responsible for three or more of the following functions: operations, finance, sales, marketing, HR, customer service, product development, or IT.
When you look at it that way, it’s not hard to understand why many small businesses regard digital policies -if they think about them at all -as something they’ll get to “someday”. But that’s very unwise when you consider that few small businesses have the resources to survive the fallout from a crisis involving their online activity.
See: When the Tide Goes Out: Big Questions for Crypto in 2019
Owning a small business myself, I understand what it’s like to have to make choices about where to spend your resources. I certainly wouldn’t give you the same advice I give to my global clients. Instead, I’ve narrowed digital policy development down to five things you absolutely must do to protect your business, your employees, and your customers.
5 Digital Policy Initiatives to Start Right Now
1. Take Privacy Seriously and Know Which Privacy Regulations You’re Required to Meet.
Laws and regulations regarding online privacy vary by country, state, and even industry as do the penalties, which tend to be significant. Here are just a few examples:
2. The General Data Privacy Regulation (GDPR)
The GDPR is an EU law that went into effect in May of 2018. It seeks to protect the private data of EU citizens by addressing how companies collect and use data as well as the security of how that data is stored.
What many U.S. companies don’t realize is that jurisdiction is determined by the citizenship of the individual, not the physical location of the company. So any American business that collects, processes, or stores data on customers with EU citizenship is obligated to comply with GDPR requirements.
See: Data is a 2-way street in a post-GDPR world
3. The California Consumer Privacy Act (CCPA)
The California legislature passed the CCPA in June of 2018, shortly after the GDPR went into effect. It’s quite similar in its bias toward consumer privacy and its potential impact on businesses. And, as the GDPR extends beyond the EU’s boundaries, the CCPA extends beyond California’s state lines. So you can’t assume you get a free pass just because you’re not physically located in California.
However, while there are many similarities between the two laws, there are also a number of technical differences. Resources like this can help you achieve compliance with both laws (if necessary) with a minimum of redundancy.
4. Brazil General Data Protection Law (LGPD)
The LGPD is Brazil’s data protection law, which will go into effect in 2020. The LGPD isn’t quite as comprehensive as the GDPR, but it does put similar emphasis on the concept that individuals, not businesses, own their data. It details both compliance requirements as well as penalties for noncompliance.
More companies are passing their own digital privacy laws all the time. In addition, certain industries, like finance and pharmaceuticals, have their own regulatory requirements.
5. Make a List of Action Steps
I recommend creating a spreadsheet that documents which laws/regulations apply to you, which countries they apply in, and what you need to do to become compliant.
One tip I like to share with my clients is to prioritize actions that satisfy more than one requirement at a time. (For example, both Russia and China prohibit transferring their citizens’ information outside of national borders, so deciding whether and how to establish a local service hub in those countries would take care of two things at once.)
See: Open banking data tapped to speed up laundering checks
Identify Your Priorities
If you’re starting from scratch, it would be almost impossible to do everything at once. Your best strategy would be to prioritize policy development based on:
- Your level of activity in a particular country, industry, etc.
- The current legal environment surrounding that policy: Is the government aggressively enforcing compliance? Are consumers filing class action lawsuits? In other words, how likely is it that your noncompliance will come to light?
- What are the penalties for noncompliance? If you do get caught, can you withstand the repercussions? Or would you be at risk of going out of business?
Assign Responsibility
Once you’ve prioritized the policies you need to address first, assign responsibility and a deadline by which you’ll follow up.
Secure Your Fort from the Barbarians at the Door
Think you’re too small to be hacked? Unfortunately, you’re wrong: 43% of cyber attacks target small businesses. And it’s a bigger deal than you might think:
- 60% of small businesses shut their doors within 6 months of a cyber attack.
- Cyber attacks cost these companies almost $900,000 in damages or theft of IT assets.
- Small businesses lost nearly $1 million due to the disruption of normal operations.
See: QuadrigaCX Aftermath: The Bigger Picture
Despite plenty of statistics that prove the barbarians are indeed at the door, barely half of the small businesses dedicate budget resources to risk mitigation. But increasing your security would probably cost less than you think, and it would certainly cost less than a major breach. Here are some effective, relatively low-cost steps you can take right now:
Develop Strict Policies for Internal Security
A whopping 87% of small business have no data security policies for their employees:
- Many small businesses don’t have an employee password policy that addresses things like the characteristics that make a password secure, how often it should be changed, the importance of not writing it down or sharing it with anyone, etc. And, of those that do have a password policy, only 35% strictly enforce it.
- Only 31% install regular software upgrades.
- Only 22% encrypt their databases.
Common practices like bring-your-own-device (BYOD) don’t help. And then you have “low-tech” risks, like not restricting physical access to servers that store sensitive information.
This is also an easy and relatively cheap problem to fix. There are plenty of online resources for best-practices regarding employee data security. Find the ones that make the most sense for your company, document them in a digital policy (including the consequences for not following the policy), and implement it. If employees don’t take the policy seriously at first, you may have to consistently enforce the consequences until they do.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Managing Finances in a New Startup
NCFA Guest Post | July 16, 2019
Every day, new startups are launched and another entrepreneur decides to begin building a business. One of the challenges that startups often face is managing their money effectively. Managing business finances can differ from personal finances as one mistake could trigger several issues in your business. Being as meticulous and accurate as possible is one of many ways to grow finances in a healthy way. It’s also imperative that you keep your expenses low which can be done in numerous ways. On that note, here is how you can manage your finances if you happen to have a new startup.
Create a Budget
Every business that wants to effectively manage its finances needs a budget. This will give you an accurate idea of what your income and expenses look like so that you’re able to spend wisely and plan effectively. Below, you’ll find a couple of tips for creating a budget.
Income: Firstly, you’ll need to write down every source of income that your business has. In the case that you don’t have any income yet, create a financial forecast and estimate how much you think you’ll make. Your goal will be to eventually make sure your income is higher than your output.
Expenses: During the incipient stages of starting a business, you are likely to spend more than you make. Separate your expenses into fixed costs, variable expenses and one-time spends. Fixed costs could be recurring bills while variable expenses may not be the same amount every month. It’s still important to make a note of such expenses because it will determine your profits at the end of the month. In regards to one-time expenses, when you finalize your budget, you’ll see how much you can afford to dedicate to such spends.
Bring it Together: The final step in creating a budget is to subtract your expenses from your income. This will tell you how much profit your business is making once all expenses are deducted. It could also give you hints regarding areas you need to cut costs or improve sales.
See: 5 Deal-Breaking Mistakes to Avoid When Pitching for Money
Educate Yourself
Education is a major part of managing your finances in a startup. You should know as much as possible about finances and how it works within a business setting. Think about getting an accounting masters as this could equip you with a competitive edge financially. Seeing as you’re likely going to be busy, the good news is that you can do the degree online with Suffolk University.
Aside from getting a higher education, you could also read quality content from credible sources online and take short finance courses.
Avoid Expensive Credit
It is normal for a business to take out credit, especially when using it as a means to scale up or grow. However, borrowing responsibly is essential if you don’t want to find yourself in debt and out of business. Avoid expensive credit meaning credit that has high interest rates or an unfavorable repayment plan. Overall, managing your business debt and having a strong repayment plan should help you keep your finances healthy.
Master Bargaining
Learning how to bargain could make a significant difference in how much your business saves. Seeing as you’re likely to be working with suppliers and contractors, being able to barter a good deal is a must. If you need a few tips on bargaining, see them below.
Be Discreet: When bargaining with a sales person, you should do so as discreetly as possible. This means not doing it in front of others so that there are no outside influences.
Provide an Incentive: Another tip would be to provide the supplier with an incentive. For example, you could offer to buy six months of supplies upfront or ensure them you’ll bring repeat business. If you give them a good reason to, they’re more likely to offer you a better deal.
Research: Doing your research is another useful tip for bargaining. You want to know what rate competitors are offering the same products or services at so you have a bargaining chip. It will also help you avoid asking for a price that is both too high or too low.
See: 4 Ways To Finance Your Business Venture
Get Insurance
Getting business insurance may seem like an unnecessary expense, but it could actually save you money in the long-term. You can never predict when an unexpected event could happen such as an accident or a lawsuit. However, when you’re covered with the right insurance you could save yourself from the financial implications of such events. Business liability insurance is ideal if you want coverage in case your property is damaged or something happens to your employees.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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What Trump’s Bitcoin Tweet Changes
Coindesk |Michael J Casey | Jul 15, 2019
Let’s be clear: It was not the substance of Donald Trump’s tweet that made his critique of bitcoin and Libra so important last week.
It should be of no surprise that this US President would declare himself “not a fan” of “highly volatile” cryptocurrencies “based on thin air” that “facilitate unlawful behavior” or that he much prefers a “dependable and reliable” currency “called the United States Dollar!”
(Anyone who assumed Trump would be a “drain-the-swamp” libertarian advocate for censorship-resistant money had an ill-informed view of a man whose government is stacked with former Wall Street execs, who opposes free trade and immigration, and takes a draconian approach to a variety of civil rights and social liberties.)
What matters is the very fact that a sitting president mentioned cryptocurrencies at all. Indeed, from a price perspective, Trump’s disparaging remarks are, on balance, positive for bitcoin. By Friday evening, the post-tweet price action reflected that.
See: Fintech Fridays Episode 32: Rallying behind Bitcoin with Frederick T. Pye
More importantly, the tweet marks a symbolic milestone in the gradual but ever-expanding presence that cryptocurrency occupies in the public conversation around money and policy.
It also marks the starting point in a titanic battle over the shape of our global money system.
Publicity you can’t buy
Why is a Trump tweet-shame positive for bitcoin’s price? Well, bitcoin must stay relevant to succeed, and this was, at the very least, an acknowledgement from the halls of power of its relevance.
By simply giving it the time of day, Trump revealed that people within the high levels of the U.S. power structure are noticing the challenge that cryptocurrency technology poses to it.
Also important: the tweet came shortly after Federal Reserve Chairman Jerome Powell, one of the U.S. President’s favorite punching bags, had described bitcoin, in Senate testimony, not as a payments vehicle but as “an alternative to gold…a store of value…a speculative store of value.”
Powell wasn’t saying that he saw bitcoin as gold-like per se; it was a reference to how most bitcoin’s users currently treat it and, in that sense, he was simply stating a fact. Still, it gave some legitimacy to bitcoin’s claim to be the digital-era replacement of that ancient store of value.
And if we think of how gold has been used during the fiat currency era – as protection against the political risks inherent in national currencies – then this one-two punch could hardly be better for those arguing that bitcoin should play that role in the 21st century.
See: Singapore topples United States as world’s most competitive economy
Think about it: they got the most powerful central banker in the world to describe bitcoin in such terms. Soon after, a self-interested politician who occupies the world’s most powerful government post demonstrated why you might want such protection.
Amplifying the Narrative
All of this comes within the context of the announcement last month of the Facebook-sponsored blockchain and cryptocurrency project, Libra.
As was inevitable when a powerful and contentious company launches a radical new idea, Libra’s arrival has massively amplified what I like to call the “narrative economy” in which cryptocurrencies thrive.
With its potential global clout drawing on Facebook’s 2.7 billion user base, Libra is forcing people – corporate leaders, bankers and, most importantly, government leaders – to think and talk about cryptocurrencies. It’s what prompted the question to Powell from Mike Chapo, Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and it was the main focus of the Fed Chairman’s reply. And it’s clearly what inspired Trump to take to Twitter, given that his three-tweet post included a line saying that Libra “will have little standing or dependability” and would need to seek a banking charter if it is to operate.
Let’s not forget, either, that this comes right before next week’s hearings on Libra called by House Financial Services Committee, called by its Chair, Maxine Waters, who has warned that Facebook’s project cannot be allowed to compete with the dollar.
That there’s alignment between Trump and Waters on an issue is itself historic. But it also hints at the power battle at play. The mounting conversation is about the structure of our financial system and about the dominance of the intermediaries that manage that system: banks, deeply integrated as they are into our system of government, money and power.
As gatekeepers of the dominant fiat currency system, banks – and, by extension, the political leaders who determine how to regulate them – can make it harder for people to use both decentralized cryptocurrencies like bitcoin and corporate-backed private currencies such as Libra. Trump’s tweet, with a high degree of specificity, looked suspiciously as if it had been drafted by someone with interests in the banking sector.
See: Blockstack wins first-ever SEC approval for a token offering under Reg A+ listing
But putting a lid on all this won’t be easy for governments. Most cryptocurrencies, whether bitcoin or Libra, are based on open-source software. Can those governments ban the software? Technically yes, but how will they globally coordinate around that effort, how would they stop it?
As it is, many central banks suddenly seem to be adopting the “if you can’t beat them, join them” strategy. The government-owned China Daily reported this week that China was accelerating its plans to produce a digital currency. That came a week after Agustin Carstens, chief of the Bank of International Settlements, said central banks would introduce digital currencies “sooner than we think.” It was a remarkable about-face from someone who had months earlier told cryptocurrency coders to “stop trying to create money,” and dismissed any value in central bank digital currencies.
Probably more important, right around the time of the Libra announcement last month, Bank of England governor Mark Carney dropped a bombshell, saying that the BOE would provide funds to tech companies, an apparent move to spearhead fintech development in London at a time when Brexit has threatened the banking industry. The opening poses a huge opportunity for Libra and other stablecoins to provide new “narrow banking” payment services.
Things are poised to get mighty confusing, in other words, with private corporate currencies, decentralized cryptocurrencies and government-run digital currencies all competing for primacy in the world of money. Thank to Libra – but really, thanks to bitcoin before it – the narrative economy around monetary innovation is getting seriously amplified.
See: Facebook gets more official pushback on Libra
Communities of stories
As the noise level rises, more and more people will inquire and explore alternatives to mainstream currencies such as bitcoin. They’ll also grapple with the opportunities, risks and the disruptive challenges such a choice poses.
Essentially, a giant, collective storytelling exercise has been pushed into overdrive. Stories have always driven the adoption of new ideas, building the connective emotional tissue upon which social networks and communities are formed around them. And that, in turn – the development of a community around a shared idea – is ultimately what underpins a currency.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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July 2019 Magazine: NCFA Fintech Confidential (Vol 1. Issue 2)
Welcome to the second issue Fintech Confidential, your essential guide to the global fintech and funding landscape. Brought to you by the National Crowdfunding & Fintech Association of Canada (NCFA) and our partners, each issue dives into the latest trends, innovations, and insights in the fintech world. From insider views to regulatory developments, we keep you informed and inspired. Enjoy the read and share the knowledge.
Visit 2019 Fintech & Funding Conference and Expo for Presentations, Interviews, Photo Gallery and more
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Stablecoins: Experience the Stability
3iQ and Mavennet | Fred Pye and Kesem Frank | June 18, 2019
Stablecoins are now a necessary step to mass adoption of cryptocurrencies, as proven by the way they’ve been used to hedge the massive volatility of the market over the past couple of years. Their simple premise enables the seamless pairing of crypto-to-fiat pegged cryptocurrency. It might sound overly simplistic, but this straightforward innovation has spurred the growth of a new crypto asset class that measures in billions of dollars in aggregate market cap (e.g. Tether, USD Coin, TrueUSD, Paxos and Gemini Dollar).
As much as this asset class is still gaining momentum driven by the current and common use case, the potential of stablecoins goes well beyond the tactical value of a trading tool.
Stablecoins are strategically important because they represent a bridge between legacy fiat-based systems and the new digital and decentralized currency underpinnings we collectively call “blockchain.”
The dream isn’t necessarily a prediction or extension of the purist’s vision
Bitcoin - blockchain’s earliest network - was born from tumultuous years in the traditional financial system. These were years defined by mistrust; not just towards the people at the helm of the financial system, but of the system itself. It’s no surprise that Bitcoin’s innovators and early adopters were driven by a vision of an extraneous system that completely rejected the legacy framework, giving birth to decentralization, immutability and deflationary currency to name a few.
See: FaceCoin: Here’s What Facebook Could Build In Blockchain And Cryptocurrency
Early blockchain advocates argue this is the only acceptable implementation for this technology, with any deviation being a compromise. However, it is the same purist vision of “utility backed value” that makes bitcoin (and other cryptocurrencies that follow similar design) incredibly susceptible to speculation and volatility.
Regardless of where you stand, it is important to clarify that this article is by no means meant to criticize the original blockchain. The questions we pose are not around bitcoin’s value, rather on its stability and ability effectively deliver the utility necessary for any currency.
Do stablecoins and “just” tokenizing fiat currencies deliver enough benefit?
The short answer is yes. Blockchain is an incredibly powerful architecture that provides significant benefits to the assets represented on it. There are many key benefits to blockchain based tokenized fiats, however speed, span and cost are worth a closer look.
A tokenized asset can be moved around the globe at an efficiency that user of current day systems could never dream of, let along compete with. A transaction between wallet holders on opposite sides of the globe would be settled in seconds (or minutes, depending on the network) not days or hours for an average fee totaling fractions of a dollar regardless if they are worth a few dollars or a few million dollars.
Blockchain architecture is vastly beneficial even when the assets it underpins aren’t “crypto-native.” Specifically, the transparency and immutability inherent to the architecture enable incredibly powerful new methods of bookkeeping and reporting such as Triple Entry Accounting (TEA) as well as Automated Audits. These pose a substantial improvement to current accounting tools, that eventually will change the risk profile inherent to every financial transaction.
See: Is This Behind The Latest $25 Billion Bitcoin And Crypto Price Rally?
Even the trivial action of checking on your assets involves logging-in or calling our bank and asking it to report back what and how much is owned – lacks a true, direct line of sight.
Let’s get really, boring.
Even the most adherent purist will admit that the power blockchain vastly increases with the growth of its userbase. So basically, it is in everyone’s
best interest, early adopter and newcomer alike, for the network to grow by appealing to the mainstream.
Thankfully, there is an army of people working to facilitate better, more palatable access to crypto for a wide array of audiences. Many of them have been educated by some of the most profound processes of digital transformation of recent decades, and are leaning on these insights to lean on applicable lessons for this particular opportunity.
For instance, let’s look at smartphone adoption. In just a decade the majority of the world’s population has been converted into devoted user of the technology. While there are multiple applicable takeaways and lessons to analyze, consider the name itself “Smart-Phone.” If you own one, it probably isn’t necessary to point out that most of the time the “phone” aspect of the device isn’t used at all. In fact, data shows that “calling people” isn’t even a top ten use for most users. Still, there is a very important reason that these pocket computers were named “phones”; to spur their adoption. Anchoring the terminology to something people widely understood, the phone, enabled it to be familiar and easily adoptable. It is much easier to have a meaningful conversation, when we have a common mental framework to base it on.
What’s next?
While they’re based on new and different technology, for stablecoins to go mainstream they must rely on an ideal, common framework that most people readily accept (or a simple formula such as one coin equals one dollar). If we can agree here, we can progress to having the more important conversation as to why the coin is actually a better dollar than a dollar, but we’ll be doing so standing on a solid and shared foundation.
See: Architecting a New World: Investment Crowdfunding and Digital Assets
Currently, we are in the process of an implementation that will inherit all the benefits covered above but will also comply with the applicable regulation/ legislation in place. In current markets dominated by USD based stablecoins, it is important to remember that we need to deliver efficiencies around foreign exchange for stablecoins to truly become strategic in importance. This will be possible through a Canadian Dollar backed crypto asset such as Qcad, that will unlock the next adoption stage of blockchain and will generate direct benefits for Canada.
Stablecoins will continue to play a major role in broader crypto adoption, and for our part; a CAD-backed crypto asset will be an important step in the evolution to mainstream adoption of blockchain. We are very excited to be engaged in architecting the future of financial systems; good things are coming.
Fred Pye, President and CEO, 3iQ
Fred kick-started his career as a precious metal and foreign exchange trader at Guardian Trust. He later joined Fidelity Investments, where he was part of a team that saw its assets rise from 85 million to over 7.5 billion. Next, Fred started his own firm, which worked diligently with Canadian regulatory bodies to establish the first mutual fund in Canada that was allowed to take short positions. Finally, as founder and CEO of 3iQ, he and his team have worked cooperatively with the OSC for the last 2 and a half years to launch the first regulated Bitcoin fund in Canada. This fund will be the first major exchange-traded cryptocurrency fund in North America.
Kesem Frank, Chief Maven, Mavennet
Kesem is a technology strategy expert specializing in blockchain powered enterprise architecture. Following a leadership position in Deloitte’s Blockchain practice, Kesem co-founded Nuco, one of the earliest enterprise blockchain platforms and a founding member of the Enterprise Ethereum Alliance. In his capacity as COO, Kesem led multiple projects, positioning blockchain at the core of future business platforms for fortune-1000 companies.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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