Democratizing the Money Market

IMF Blog, May 26, 2017

Source details

Publication: The Editors, May 26, 2017
Theme: How financial technology (fintech) is changing the creation, administration, and accessibility of money markets.
Key voice: Patrick Murck, lawyer and bitcoin expert of Harvard University (podcast interview).

“The real story of fintech is that we are democratizing the creation and the administration of markets."
Examples of democratizing mechanisms cited:
- Lending marketplaces.
- “Robo advisors” allowing broader participation in markets.
Broader claim: “These transformations tend to be democratizing and wealth-building for societies over time.”

Permission-less transactions: “If money moves around the world the way email moves around the world, that would be a huge disruptive force throughout the financial sector,” and “There is no gatekeeper, nobody saying you can't do this.”
Privacy concerns from transparent, accessible financial databases.
Trade-off emphasized: the need for caution and regulations should be weighed against the need for broader access and innovation.

Current state: “So far there’s no clear road map for policymakers to manage this digital transition.”
Principle-based regulation recommended: “From a regulatory perspective, if you can clearly articulate the principles that you are trying to achieve, maybe you can give some of the innovators a chance to meet your policy goals, without your having to go and write very technology-specific rules around them.”
Concern about stifling innovation: “There’s certainly risks involved in trying to contain innovation—history has been unkind to those who have supported restraining innovation rather than harnessing it.”

Proportionality argument: small fintech firms should not face the same regulatory burden as large financial corporations.
Exact illustrative thresholds used by Murck:
- Customer base of only 10,000 people.
- Assets of roughly $10 million.
Warning: “No one will ever have a fintech startup if regulatory requirements demand an asset management base of trillions of dollars.”
Recommended regulatory stance: “If regulators are not willing to take a patient, technology-neutral approach, it will keep people from creating new companies—and that’s a shame.”

IMF staff plan: new analysis on fintech from IMF staff to be written about in June.
Call to readers: “Our IMFBlog readers should also stay tuned for new analysis on fintech from IMF staff, that we plan to write about in June.”

Source: IMF IMFBlog — "Democratizing the Money Market", The Editors, May 26, 2017.