Simon Dingle - Beyond Bitcoin: Decentralised Finance and the End of Banks

A ny book that confidently proclaims the redefining and refurbishment of the global financial system and the many industries it supports will rightly attract some scepticism, even derision. But there is much afoot now, small explosions of startling economic innovation, burgeoning revolutions happening in myriad matters of technology and commerce, and sharp-toothed dogs snapping at the heels of the worlds global financial institutions.

It is called Decentralised Finance. DeFi is its cutesy but sticky nickname.

A reliable way of assessing the breathless predictions of any new technologys disruptive potential is to look at the presumed losers to see how they are reacting.

We did.

Jamie Dimon, CEO of JPMorgan Chase, one of the largest banks in the world, has warned his shareholders of enormous competitive threat from new financial technologies, including serious emerging issues around shadow banks, meaning unregulated lending institutions outside of the banking sector. They have to be dealt with quickly, he says. Bank of America muses publicly about the best defense of being disintermediated by DeFi. The Dutch multinational ING compares DeFi to cloud computing in the 1990s an interesting new innovation then, and the foundational deployment mechanism of the global Internet now. And most tellingly, more than 80 countries have digital currency projects underway at their central banks, all of them in response to a new technology xiv barely known outside a small tech-savvy clique. From banks to stock exchanges to insurance companies to investment giants, from New York to London to Moscow to Beijing, from the tech giants of Silicon Valley to halls of government power, similar pricklings of concern and anxiety are being heard, and defences are being mounted. No one who is looking to the future can ignore it.

And so we are comfortable in saying the following about the sudden appearance of this new financial technology, now just a few years old:

Great fortunes will be made and lost in its wake. Staid and storied institutions will have to shed warm skins in a painful shudder of reinvention.

It will make the startling trillion-dollar rise of Bitcoin look pedestrian by comparison.

It will disrupt and displace fine and respectable companies, if not entire industries, along with careers and skills.