Chris Skinner

The libertarian idea of decentralisation and using the power of the internet to create a better financial system may be gaining traction, but will it solve the crises inherent in economic cycles?

I did an internet search on Chase CEO ‘Jamie Dimon’ the other day, and was intrigued by the results it threw up. They spanned everything from how cryptocurrencies are dangerous, to alleged links with Jeffrey Epstein — the late financier and convicted sex offender connected to everyone from Prince Andrew to Jes Staley, formerly at JPMorgan and ex-CEO of Barclays.

The search made me think about how much a bank CEO must deal with these days. Banks are collapsing — Credit Suisse, Silicon Valley Bank (SVB), Silvergate Bank and more. We are experiencing what I call a “crypto winter and fintech bloodbath”. Small and large banks are going under due to interest rates, and huge swathes of the global fintech ecosystem face a desert of funding. We are in hard times.

JPMorgan Chase, however, has stood firm and remained reliable, which is a testament to Mr Dimon’s steerage. Officially named CEO of the company in 2006, he’s seen the bank survive crisis after crisis. As he says: “My daughter asked me when she came home from school, ‘What’s the financial crisis?’ and I said, ‘It’s something that happens every five to seven years’.”

huge swathes of the global fintech ecosystem face a desert of funding. We are in hard times

As I sit and mull over Mr Dimon’s amusing quip to his daughter — which is pretty much true — I wonder why this is the case. We are meant to be in a strong and stable industry; one that is resilient and reliable, so why do we see a crisis every five to seven years? If another sector imploded every five to seven years, where would they be? Out of business, most likely.

Strange tolerance

I find the situation incredible. We claim the industry is regulated, formalised, strong and stable, and yet we presume it will crash and burn at least once per decade. Today, it’s Credit Suisse and SVB’s turn. Before that, it was a sovereign debt crisis in Europe. And that was after the end of Bear Stearns and Lehman Brothers. Before that, the internet boom and bust. Crisis after crisis.

We take all of this on the chin but  from a non-banker perspective, you have to ask: what is wrong with this industry? It’s little wonder there is a rising movement of libertarians who believe the internet can create a better way. They believe that bitcoin, cryptocurrencies, altcoins and others can provide a new financial system that doesn’t fail as often.

Now, The Banker's readership may well be decrying this idea — after all, what is backing the crypto system, beyond the bits and bytes that make it up? The thing missing from this position is that the people who believe in cryptocurrencies believe in the power of the network. They believe in the power of the people.

Constant rescues

This is when it gets interesting. Governments and banks think they control the world through strong and stable economies, backed by strong and stable currencies, and strong and stable companies — namely banks. Yet banks accept that once every economic cycle, they will be in crisis and have issues that might devastate the financial system. We then try to provide emergency care to keep the system alive.

The libertarian experiment, based on the idea of decentralising finance and placing financial services regulation and control in the hands of the people, is not madness. It has and gains traction every single day. Should we, as bankers, be worried? Not really, but we need to embrace the fact that banking now has dual governance: the governance of the regulators and the governance of the people.

I guess the issue is that if you ignore the latter, you become a pawn of the state. My argument is that we, as bankers, need to be a servant of the state and of the people. Can we build a model that meets both such needs?


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