Ganesh: Hello viewers. Now that you know we’ve been speaking to a series of leaders in blockchain and crypto space. And today we’ve got Mr. Ben Banerjee who is the President and Co-founder of SIIA. He will be sharing the challenges and opportunities that exist in the industry.
Ganesh: Can you help us walkthrough, how you got into this space and how your journey has been so far?
Ben: I’m an engineer, but I have been in the field of the sector of impact investment and I’ve been in the investment & financial sector for more than two decades. So I advise some governments on the theme of Blockchain and cryptocurrencies. I mainly look at it from macroeconomics and investment point of view. Living in Zug in Switzerland, it’s very difficult to avoid cryptocurrency and blockchain because Zug is one of the centers. You must have heard of Crypto Valley Association, which I’m also very directly involved with. It’s one of the centers where we have been looking mainly from a financial point of view. As an investor and on the macroeconomic level. Supporting and advising governments on changing the laws and regulations.
Ganesh: In countries where cryptocurrencies are widespread, do you foresee untoward incidents like inflation or recession arising due to the digital coin?
Ben: No, of course not. Cryptocurrency is here to stay and it will get more and more important as time passes by. Especially due to its decentralized character. Because if you look at the historically and internationally. Most of the inflation and recessions have been caused by the policies of the central banks, governments or large financial institutions. Often Either by massive use or maybe misuse of financial products like derivatives, ETFs, etc. In-country wise, if you look at Greece, Venezuela, and Argentina; these all have been hit by what I call the general law, “upside for few and downside for the society”. So for the first time, we are seeing a kind of democratic movement in asset valuation and in the distribution of wealth and this is coming from the bottom up. Mainly because more and more economical players are coming into economical circles, which is adding more to prosperity. Which I sincerely hope will counteract destabilizing market movements and balance out the power centers. So yes, it will stay.
Ganesh: Do digital coins and security tokens in any way contribute to the gross domestic product (GDP) of a country. Are most countries aware of this gain?
Ben: Let me break the question in two parts. So in the first part, it does contribute to the GDP because like I mentioned earlier, it is bringing more and more economic players into the economical circle. Plus what is another very important part. I have been advising many, is that it is bringing a lot of frozen assets like paintings, real estate, natural assets like forestry, and minerals into the economic circle. And since we are also talking about including more than 2 billion-plus world population who are outside of the economical circle or who do not have banking facilities or who are not financially included in our world.
And since cryptocurrency has the potential to bring them into the economical circles, so of course this adds to the GDP. So yes.
One example is about remittance, it is the biggest movement of financial assets around the world. And cryptocurrency has already started contributing. Like in Indonesia and in a couple of countries, it has started contributing significantly by taking off intermediaries, decreasing the number of people and decreasing the commission, and increasing the speed of the transaction. So Of course, it is adding for the GDP.
And now the second part of the question, I have been talking about this since a long time; I split the countries into three groups; Group one: countries like Switzerland, Lichtenstein, Malta, which are far ahead, and which are openly advocating the use and they’re working at the legislations, regulations, etc.
Then you have Group 2 countries like the European Union, US, who are promoting it but also preaching caution.
And then you have the Group 3, which are countries like China, India, which are trying to openly ban it. I could not go very deep into it, but I would say if you look into. I’m just giving my opinion here, the free, democratic and technically advanced or rich countries are openly going forward while countries which are facing massive currency outflow are trying to ban it.
So I think that it says a lot by itself of the contributions this cryptocurrency is doing or what kind of impact it’s having. And lastly, if you look into few countries like Georgia, Armenia, Russia, Estonia. There are small and big countries that are trying to find their own place in this sector. So it is a virgin economic sector where more and more countries are coming in.
Ganesh: So when you say that new digital currencies are going to add to the GDP, why do these third world countries are concerned about allowing or enforcing or regulating the adoption of cryptocurrencies. Wouldn’t they benefit out of this?
Ben: That’s what I would have said about the regulations is that the country should work to improve its regulations of it. And that’s what I have been advising because if you’ve been looking at countries like Armenia who are quite very poor, but they have a very highly educated civil population, which are very technically educated. For them, this gives them greater access to the international market and access to development and to fund economics of large scale. And that’s why they’re working at it. And yes, they have to regulate. I am not in favor of deregulating, regulation has to stay and it has to be strong. Regulations are generally there to protect investors. And maybe learn from rich countries like Switzerland or invent this thing.
Ganesh: What is your opinion on a country becoming totally cash-free? Do you feel cryptocurrencies would fully digitize a nation or would cash still remain?
Ben: Cash-free and cryptocurrency, these are two different terms. More and more countries are becoming cash-free. In fact, few are going through what I call leapfrog effect. For example, countries which are highly advanced financially like Switzerland or West Europe are being taken over by countries like Estonia, Russia. For example, I was in Moscow two weeks backs speaking at one of the international conferences and I had to take a taxi. I couldn’t pay in the taxi by credit card. Because there they only use phone payments. And me coming from Switzerland, we don’t have it there. This, in my opinion, is leapfrog development.
And now about the second part of your question whether a cryptocurrency will take over the complete role of FIAT currencies. I don’t believe in that.
For example, if you look when the email came, everybody thought it would take over the post. It didn’t happen. It just took over a massive part of the communication.
And cryptocurrencies basically fill in the parts, which using normal finances would have been either been too expensive or too inaccessible for normal people. So I believe they will both stay. And another very funny thing which is coming up is hybrid currencies. For example, you have the Crypto Rubel. These are cryptocurrencies coming in, introduced by governments, which are very strongly connected to their national currency. So I think they will stay, only they will take each other’s spots. They will maybe kind of complement each other in different sectors, but they are here to stay.
Ganesh: With the legal tussle between Kik and SEC reaching new heights. Do you feel Kik should win and a new definition for Howey Test should arise?
Ben: This is a very good example because it’s being not only reflected in the US but in many other countries, and jurisdictions. And in Switzerland, they started working at these jurisdictions more than three or four years ago. So I think winning or losing this case is not the issue here. Maybe it works, I want to say is that they will not really solve the issue.
To start with one of the major points you have here is, Is cryptocurrency a currency? And then you have the issues with security and utility tokens and everything. Every country, every jurisdiction is looking at it in different ways. For countries like Switzerland, you can even pay your taxes or part of your taxes in cryptocurrency. So that does say that cryptocurrency has value.
The authorities are catching up, in this case, small countries like Switzerland move faster than big countries like the US and these cases are fought on many fronts and in many places, but the authorities are catching up. So, it doesn’t matter how this case ruling goes. I think what it will not solve the issue fully on one way or another. It is just one of the first rulings. So about the Howey test, as they do similarly also in Switzerland it will have to be upgraded or updated or this new laws or new regulations will have to be included or attached to it. Also, I often advise the government not to cut and paste present financial laws and regulations on cryptos because that doesn’t make sense.
For example, if you look at the authenticity of your ID. The only organization who can give a person an identity card is the government. But anybody going into the US knows that every teenager knows how to make a fake id. So it doesn’t work. And now we are talking about international transactions ande talking about organizing trust, of course, it has to be a completely different set of laws and a different set of structures. But the regulators I’m working together with and we are working, they are catching up. So yes, there will be more regularities coming up under Howey Test will, maybe not today, maybe not tomorrow, maybe ins three years from now. It will have to be updated. I mean look how much time it took to accept the US dollar as a US currency because the United States in the board process took a lot of time. So it’s there. But it will catch up.
Ganesh: Washington DC is bashing out on cryptocurrencies and Libra. What is your take on the sequence of events and where we may be heading to?
Ben: Speaking as a macroeconomist I always look at the long term. I would just say give it some time because, of course, the power centers and interest groups would fight back because they always fight back when there’s a change or when they see a threat to their base. But they aren’t understanding and I don’t underestimate them. They are understanding, they’re moving fast, they’re adapting, and those who will not adapt will end up like Encyclopedia Britannica. I don’t think you remember that. They were once upon a time when I grew up, they would the encyclopedia of the world. You have to spend a lot of money to buy them. And then Microsoft came up with this cheap version of encyclopedia on a CD ROM. I remember those days and within a year or two, they replaced Encyclopedia Britannica, which was more than 200 years old.
On the other hand, if you look at mature financial institutions like Bank of America or Facebook or JP Morgan, they are all slowly adopting it and participating into the second full circle, and these financial institutions have a very major say and influence on the policies of Washington DC. I know because I’ve worked together so they will influence it. If you looked at very strongly autocratic country like China, after banning it is seriously reconsidering its policy, what do you think the normal companies have a chance of any? I don’t, I mean rationally thinking. I don’t see them taking big steps against it.
Ganesh: But if you see the US stand on two different cases like Kik and Libra. In the case of Kik, they allowed them to function then they find a violation and then going after it. Whereas Libra is not even launched. So why in a hurry that US is so concern and also obsessed about Libra. So why the product even before its launch.
Ben: I think we are in a different time when Kik was there and now Libra, now we have different Presidents. I mean if you’re looking at Switzerland, I don’t know if you are aware of Ethereum, it is one of the currencies or one of the old ones, one of their biggest funds and it was launched here in Zug. If it, and this happened, I am not sure very much. I think about like four, five years back or something. But if under the present rule somebody would try to launch such things, it won’t be possible. You can’t. So it’s the same thing. It is a matter of timing, Kik is from a different time and Libra is from different. So we have to keep that under conservation before we throw them in the same box because Ethereum today is one of the world’s biggest cryptocurrency. But it would not have been allowed to be launched today in today’s jurisdiction or regulation. So it’s stuff, different timings.
Ganesh: Had Libra came into existence a couple of years ago would it have built through this chaos?
Ben: I seriously think so because the points on which they are trying to block it did not exist t. The regulations are catching on in many countries quite very fast. So, looking at it from the government’s point of view. I agree with it. I agree that the regulations should catch up, especially if we are not talking about companies like Facebook, which at this moment has some major other issues going on. So of course, if I look at from the macroeconomic point of view, it’s good for the economy and it is good for the small companies that the authority should make a strong stand on this point.