Davos 2020 – 10 Key Takeaways for Crypto

Once a year, members of the rich and elite will make an annual trip down to a small resort town in Switzerland. This is not a leisurely excursion so that they can go skiing, however. The reason they take this trip is so that they can partake in an important event. Learn more about this annual event and what went down at Davos 2020.

Instead of a vacation, the rich folk attends the annual meeting of the World Economic Forum (WEF). This event is easier to recognize under the name of its host city, ‘Davos’. This is an exclusive four-day event that serves as an opportunity for the most influential people in the world to mingle. They use this trip to do two things. One is to discuss the world’s economic and political challenges. The other is the most important one – to network.

At the annual Davos meeting, global elites work together to determine how to manage the world’s affairs. This year’s edition of the WEF took place back in January. As a result, they would see a smattering of blockchain conferences and panels. One of these is ‘Crypto Mountain’ and it would captivate the attention of many. The powerful, the up-and-comers, and those mad with power attending the main show had their eyes and ears on this subject.

More details about Davos

We need to start by describing the World Economic Forum (WEF). This is an NGO (non-governmental organization) operating in Cologny-Geneva, Switzerland that was founded in 1971. It is an organization that requires a membership to be part of it. Membership usually consists of the world’s largest corporations. The core intent of the WEF, according to their website, is the following:

“…improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas.”

Every year, business leaders and heads of state conduct lectures and speak on panels about a range of topics. From gender equality and venture capital to mental health and climate change, the discussions are diverse and abundant. What happens behind closed doors is the driving force. The elite members use the event as a way to network and hash out their differences. And they do so outside of the public eye.

There was a prediction that roughly 3,000 business and political leaders would attend this year’s Davos event. Attendees from previous meetings have included the likes of Bill Gates, Prince William, Marc Benioff, and George Soros. Other attendees were celebrities like singer-songwriter Shakira, and actors Forest Whitaker and Matt Damon. JP Morgan Chase CEO, Jamie Dimon, and former Alibaba chairman, Jack Ma, were also Davos attendants in the past.

The WEF is not without criticisms, though. Its prominence as an international community of leaders from business, politics, arts, and media is partially to blame. The WEF – especially its annual Davos meeting – is on the receiving end of criticism concerning various factors. These include the public cost of security and the formation of the elite without attachment points to the broader societies. Moreover, there are undemocratic decision processes, gender issues, and little financial transparency.

Digital currency discussions

There was one notable discussion at the World Economic Forum in Davos concerning digital currency. The title of this topic was “Creating a Credible and Trusted Digital Currency.” The meeting was collecting insight from various policymakers and leaders in the digital currency field. Digital fiat, or even central bank digital currency (CBDC), was the main theme.

The panel came to an agreement that innovation needs proper encouragement in order for it to flourish. However, regulatory rules must also enforce it. The group states that stablecoin competition and proliferation is a serious risk. Public usage typically requires new regulations and comparatively faster systems of payment. The general feeling among the speakers is that studies and innovations need support. At the same time, they caution against unknown consequences.

The members of this assembly represent an array of different groups. Some of these members have a profit motive while others are from a policy and regulatory duty. The moderator of this talk was Sheila Warren, the Blockchain Lead for the World Economic Forum. Those in the speaker panel included the following:

  • Tharman Shanmugaratnam: Senior Minister and Chairman of the Monetary Authority of Singapore
  • David Marcus: Head, Calibra, Facebook Inc.
  • Valdis Dombrovskis: Executive Vice-President for the European Commission)
    Benoît Coeuré: Bank for International Settlements (BIS)
  • Neha Narula: Director, Digital Currency Initiative, Massachusetts Institute of Technology (MIT)

Blockchain was a hot topic, as well

There is a stark contrast between last year’s Davos and the one from this year. Davos 2019 was strictly ‘blockchain, not Bitcoin’. Davos 2020, however, took a different direction. There was an interest in the potential of cryptocurrency, especially when under regulations.

Blockchain technology is a more prominent subject on the WEF agenda than in previous years. In spite of this significance, that does not mean that it will have a big role in the Congress Centre. Something important to remember about Davos is that there are two parts. One is the WEF’s main stage, which according to the WEF, there are 53 heads of state this year. The other part consists of dozens of side events.

image of gears and bitcoin to depicte cryptocurrency topics at Davos 2020

1 – Concrete framework for central bank digital currencies

The WEF would release a toolkit for CBDCs during Davos 2020; in simpler terms, state-rolled cryptos. You could be running a rich or poor country. You could have a desire to distribute to regular consumers or reserve it for bank-to-bank cross-border transactions. In fact, you could be someone who wants something to do on a rainy afternoon. Regardless of your reasoning, the WEF is covering you.

The creation of this toolkit was with consultation from dozens of central banks. Moreover, they had help from a host of financial institutions and academics, as well as other international organizations. According to WEF, the Bank of Thailand and the Central Bank of Bahrain are two institutions that are using it. Furthermore, an announcement from the Bank of Thailand mentions finalized trials with Hong Kong concerning a prototype.

2 – Huobi’s announcement of a crypto brokerage platform

Also at Davos 2020, the crypto exchange from Singapore, Huobi, made its own announcement. They came out with a brand new crypto brokerage platform. One that intends on bringing traditional institutional investors into cryptocurrency. Huobi’s pitch is that it will offer them zero transaction fees and the lowest prices possible.

Huobi Brokerage will leverage the strategy of “Smart Order Routing.” This basically means that it will connect with other exchanges and OTC desks to give them cheap prices.

In a statement, Ciara Sun, vice president of global business at Huobi Group, says:

Institutional investors and HNWIs will be the major contributors of growth for the crypto economy in 2020 and beyond, but barriers like low liquidity and a lack of asset enhancement products are stalling widespread adoption.”

3 – Additional details pertaining to Bakkt’s new app for consumers

Bakkt is a Bitcoin futures contracts exchange that is run by the Intercontinental Exchange. It is also releasing a consumer app. This news isn’t exactly – for lack of a better word – new, but a few more details came out at Davos. Specifically, at an event with The Block as the host.

At the event, Bakkt president, Adam White, states that the app will support digital assets. This includes cryptocurrencies, as well as other things such as loyalty card points. They also said that it will appear like a regular fintech product rather than a crypto fintech product. Think more like PayPal and less like Binance and Coinbase.

4 – Ray Dalio trashes Bitcoin and leans more towards Libra

The best piece of Davos 2020 gossip was from Ray Dalio, billionaire investor and CEO of Bridgewater. According to him, Bitcoin is too volatile to invest in. Instead, everyone should hold a small amount of gold. He said in an interview with CNBC at Davos:

There are two purposes of money; a medium of exchange and a storeholder of wealth. And Bitcoin is not effective in either of those cases now.”

Dalio adds that “cash is trash” and makes a prediction:

There’s a good probability in the next [presidential] term you’ll get a downturn—and you don’t have effective monetary policy and you have people at each other’s throats, I’m worried about that.”

Dalio considers himself to be more of a Libra man. He entertains the idea of a stablecoin pegged to a basket of fiats as being a better option than Bitcoin. Call it a conspiracy theory, but he must know something we don’t. The President of Switzerland (the ruler of Davos) and the country the Libra Association is from, however, sees Libra as a failure.

5 – “Crypto Dad” discusses the digital dollar

Christopher Giancarlo (aka “Crypto Dad”) is the former chairman of the Commodity Futures Exchange Commission. In the middle of January, he would launch the Digital Dollar Project, a non-profit project. Its core intent is to send the dollar to cyberspace.

At The Block’s event at Davos 2020, Giancarlo gave clarity on how his crazy idea would work:

We seek to encourage the next major innovation in the US currency: a tokenized fiat currency issued by the Federal Reserve System.”

6 – Root out and cut down on unlawful finance

If tokens have the proper regulations, then technology could help with reducing an array of problems. One such issue is money laundering. Regulated CBDCs have the capacity to diminish illegitimate transactions.

7 – Provide access to the modern economy

There could be additional access methods to the modern economy. Some examples include the ideal opportunity for farmers to utilize mobile wallets for most payments. Of course, this proves to be quite useful for all enterprises. For emerging market economies, however, it is especially advantageous.  

8 – Davos 2020 reveals preference for CBDC initiatives over stablecoins

CBDCs will potentially take the form of digital fiat currency. Stablecoins, on the other hand, reference an underlying asset or currency: represent collateralized tokens. There is an increasing number of collateralized coins that are entering the marketplace. Libra is among the more famous examples, but has yet to launch.

Neha Narula points out a new market in which participants compete and try out different ideas. Narula states that CBDCs are the answer due to the fact that they reduce risk. Moreover, they effectively provide a public option pertaining to cash. She believes that CBDCs are a better choice in comparison to stablecoins.

9 – Stablecoins vs. CBDC initiatives: a counterargument

David Marcus, Calibra’s Head, disagrees with Narula’s mindset. According to him:

It would be unfortunate if you had a proliferation of fragmented networks that don’t interoperate and communicate with one another.”

In this particular context, the national currency is separate from other economies. Stablecoins have the potential to be useful across an array of economies. Marcus feels that interoperability is vital for communication between different groups. This begs the question of what is the right network to host CBDCs. Well, assets and a trading network for those specific assets are different issues.

At Davos 2020, it was clear that Marcus felt if digital money transfer standards come to an agreement, then “people win.”

10 – The WEF Global Digital Currency Consortium

The WEF revealed its Global Consortium for Digital Currency Governance. The Consortium plans to concentrate on the development of an approach to digital currency regulations. This approach will be transparent, interoperable, and above all else, inclusive.

It is very easy to see the demand for this particular consortium. From the popular Bitcoin to Facebook’s Libra deployment failure, there is a clear requirement for better standards and regulations. And this is especially within the world of crypto. The Consortium aims to support governance in crypto. Not only that but it also plans on fostering a multi-stakeholder approach. It intends on incorporating both the private and public sectors.