ICOs and I Don't Knows

ICOs and ‘I Don’t Knows’

Reflections on the latest feeding frenzy

Change is one of life’s constants. However, we have not seen the current velocity and volume of change at SIBOS since the Financial Crisis of 2008-09. Just before the Financial Crisis, we were literally dancing in the ballrooms of Austrian emperors. Within months, some of the biggest names in our business were facing collapse.

The changes were sudden, fast and final. Many observers believe that the changes were self-created by a lack of controls in our very own industry. However, the industry changed and we changed with it.  Slowly businesses were rebuilt. It may be that we have not recovered the element of trust that banks enjoyed for so long, but we are no longer the butt of jokes. That marks real improvement.

Today as we meet at SIBOS, we again are faced with radical and dramatic changes coming to our industry.

Unlike in 2008-09, these changes are coming mainly from outside the financial community and are potentially a threat. That people can store value today outside of traditional financial institutions through crypto-currency is radically changing the public’s view of the usefulness of banking.

People can make payments today through their computer, tablet and, especially, their mobile phones. This is causing a shift in what retail customers need.

Meanwhile, companies and causes can be financed through crowdfunding. This is shifting the focus from bank lending.

The newest change in Venture Capital (VC) is the availability of seed funding through Initial Coin Offerings (ICOs). The crypto-currency world is creating a revolution – changing the ways, amounts and speed of money raising for new ventures which in some cases are no more than ideas on paper.

Most of us are ‘I Don’t Knows’

With change of this speed and magnitude, nearly all of us at SIBOS are ‘I Don’t Knows’.

Brutally disruptive changes are coming from outside banking as we know it, or knew it. Few of us can explain it or see the implications. Clearly, some of what is happening in the crypto-currency world is being fueled by a lack of regulation. The rules have yet to be written. The regulators are in the same boat as the rest of us.

The crypto-currency world is home to a feeding frenzy. ICOs are raising funds for any project or idea with a whitepaper. This is due to the quick rise of the market value of Bitcoin and Ether to around $65 billion and $27 billion respectively. Additionally, the quantity of the money on the sidelines and the velocity at which it is moving mean that those values could soar further before the end of 2017.

For many in the banking business, there is again the potential loss of payment and FX revenues due to these new products. The question I get from many of my industry friends is: how do we make up for this loss and take advantage of the potential opportunities that are present?

If ever there were a forum where the answers would appear, it is SIBOS in Toronto in mid-October 2017. The challenge for every ‘I don’t know’ is to come away from the conference knowing how to lead.