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“Programmable money”: utopia or reality?

“Programmable money”: utopia or reality?
Marco FORNERIS, Authoritative Italian IT expert

How do you consider cryptoeconomy regulation: dotted, structural, total or in any other form? Generally speaking, can cryptoeconomy be regulated?

- One cannot abstain from cryptoeconomy regulation in some way for it would mean to leave a free hand to any malefactor, tax cheat, mafioso or terrorist whoever they are. The problem is how. Globalization is creating cash and information flows that cross any border. National laws, as well as those European, would not be efficient. It is indispensable to involve such giants as Russia, India and China in the process of structural regulation, but it is difficult to put into practice.

Another aspect that must not be underestimated is that cryptocurrency regulation is against the interest of those who had invented and is using them. They are putting, and will put, into practice any countermeasure to block it.

Paradoxically, it could be facilitated by the fact that the focus point related to cryptocurrency is moving towards speculative aspects and therefore the scenarios could evolve in the direction of awareness that regulation is indispensable.

What functions will banks perform in case of large-scale use of blockchain? According to some expert opinion, blockchain technology will permit elimination of intermediaries in a lot of transactions. Could blockchain assume some banking functions and which ones?

- Exploiting blockchain solutions specifically devised for such purpose, the banks have excellent possibility to reduce costs and to simplify many interbanking communications thanks to elimination of intermediaries that have a cost and cause needless bottlenecks. Just take a look at the use of Ripple or R3 undertaken by some big banks.

Is realization of the following scenario conceivable in the future: there will be no more states to perform monetary emission and it will be made for example by miners? Will such a transformation be economically viable? Will the battle for decentralization be won?

- I don’t believe it, even though Central Banks will have to learn to employ blockchain technology in order to maintain their role in monetary policy governing. By creating new favourable conditions for interbank clearing/settlement, for example, enabling digitisation of their own currency, enriching digital transactions of implicit rules contained therein and thus transforming their own currency into “programmable money”.

On the other hand, it is true that now only a small percentage of currency in circulation has been emitted by Central Banks, whereas the overwhelming majority of “money in circulation” has been created by private banks, by hedge funds etc. A phenomenon that has reached vast dimensions in the latest years. In combination with the measures undertaken by the regulatory authorities that have removed all the limits, once existent, related to the possibility to make money, it is conceivable that cryptocurrencies could be another element of this process.

In your opinion,will blockchain be introduced in economy in the following 2 years? 5 years? 10 years? Will it become a mass product?

- Bitcoin has already been inserted in the economy, functioning as speculative instrument. There are already known sporadic cases of successful blockchain use in the interbank communications.

It will take however at least 10 years to reach the age of majority of blockchain technology exploitation in the field of economy (and in many other fields, such as Internet of Things), and in the meantime many bubbles will burst and many simpletons will get burned. I believe that, once the age of majority is reached, it would become a mass instrument as any other form of payment.

Will it penetrate in all fields/spheres of economy? Where, in what spheres it could fail or result utterly useless?

- Blockchain, by its very nature, does not bring value to all fields with a strong central role, either of the government or of the intermediation is requested. I hope that blockchain will fail in the field of money laundering and terrorism, but I am not too optimistic on the matter.

According to your estimates, how high is the interest of European banking system in the introduction of cryptocurrency and how do you explain it?

- Big European banks are very sensible to digital evolution. I would be surprised if the not invested in blockchain technologies. As for interest to cryptocurrencies, I believe that in general, for the time being, they are just observing the phenomenon, trying to understand whether it represents opportunity or high risks.

Is it possible to affirm that big European banks are investing in cryptocurrency development and, if it is true, what are their actual estimated cryptocurrency reserves?

- Probably some banks buy and re-sell cryptocurrencies in order to join bear transaction i.e. when a competitor turns up, generally in the field of commerce, so as to prevent his entry, the value of commodities is set at such a level so as to cause heavy losses to the late-comers. The big banks are generally in a position to play this game thanks to centuries old revenues originating from their advantageous position.

What are the trends of cryptocurrency reserve accumulation by the European banks in the short-term and mid-term perspective?

- If customers’ custody accounts are meant by reserves, then this data cannot be estimated, however if we mean bank reserves, then this data is unavailable. Anyway it is valid the concern over aleatory emitter and, in my opinion, they are using them as speculative instruments.

Do you believe that the European banking system has already made a choice in favor of Ethereum, actively invests in its development and, if so, what are the reasons behind this choice?

- Ethereum is strongly focalized on drafting “smart contract” that permits to lay down rules and regulations and to guarantee fulfilment of each transaction. It is quite logical that it is preferential to Bitcoin.

Bitcoin vs. Ethereum: will these two bears be able to share the same lair?

- There are more than 700 cryptocurrencies in circulation. Not necessarily one of these two will be the winner. It will depend upon many factors such as governance mechanism and transparency, rules, facility of token generating, ubiquity, usability, interchangeability, anti-money laundering, rapidity of transactions, required processing power…

In your opinion, can we expect in a long perspective that traditional currencies will be replaced by cryptocurrencies in the monetary circulation system?

- No. I refer to my answer to question No. 3. Moreover, we need to wait for the impact of the future fiscal regulations and for the application of Adequate Control in terms of anti-money-laundering.

Currently the overwhelming majority of cryptocurrency reserve is concentrated in the hands of individuals. In case of opening cryptocurrency bank accounts in the traditional banks, what would be the process of monetisation and legalization of capitals accumulated in cryptocurrency and what would be the taxation of legally declared capitals?

- It would be interesting to convert cryptocurrency model in a legal currency and corresponding to the relative constraints, i.e. a currency with nature/structure of economic and structural exchange and not of hidden and only financial type. As it seems to me, however it will be contradictory to cryptocurrency principles!

It’s not a secret that transnational organized crime shows considerable interest towards cryptocurrency due to its anonymous use. How high are the risks of legalization of illicit revenues, i.e. money laundering, in case of legalization and monetisation of cryptocurrencies?

- The highest. I refer to my answer to the question No. 1.

According to your estimates, what is the share of organized crime in cryptocurrency circulation?

- Sorry, but I am not a criminal and therefore I cannot answer your question.

Marco Forneris operates in the field of IT since the early ‘70s. Graduated in Turin, he started his brilliant career with Olivetti. Worked as Chief Information Officer at some of the most important Italian enterprises such as daily newspaper Il Sole 24 Ore, Assicurazioni Generali (the oldest and the largest Italian insurance company), Gucci, FIAT and Telecom Italia. His sphere of activity covers Merger&Acquisition and Business Development for business entities in the field of IT, Private Equity and Investment Banks. His first novel “Il nodo di seta” (Silk tie knot) edited in Italy by Sandro Teti Editore with preface by Evgenij Kaspersky.

Interviewed by Vsevolod GNETII
Photo by Claudia Pasquali

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Marco FORNERIS, Authoritative Italian IT expert