Wherever you look the authorities seem to be picking a fight, but sometimes it’s not so much about rule breaking but a front for underlying motivations – or so they say. Talking about motivations, a completely different question that gets discussed across the financial industry is the future of the office. This and a little bit more in the latest edition of the FinTechnologist Weekly:
Important Questions, Insights and The Road Ahead
Down Comes The Hammer
We promised you action, here we go: the FT first reported that Chinese regulators are looking to break up Ant Group’s Alipay demanding a separate app for loan business as part of anti-monopoly crackdown. Jack Ma’s Ant Group had been in the spotlight of the authorities for a while and the latest move against the payment app would mean that Alipay was to create a separate app for its loan business, and turn over user data for a new credit-scoring joint venture, in which Chinese state-owned business will have a significant stake. It’s another move by the mighty Chinese regulators against one of their bright tech stars, but as Canghao Chen writes for The Diplomat things are not always as clear cut as they might appear. An inside look into the politics behind these moves, the article explains how Alibaba and its founder Jack Ma had been continuously under enormous political pressure. The latest actions do not specify how Alibaba and its mobile payment system, Alipay, might generate financial risks, and what specific problems they create for the regulators. The author therefore looks into the issue and provides an own, stunning explanation that highlights the underlying monetary issues that could result from the setup of Alipay. Apparently, all funds paid into the accounts used within the app are transferred from renminbi (RMB) to Alipay’s own currency, practically creating a shadow currency, which could create immense problems if things were to turn sour. No wonder the PBOC got a bit itchy and I’d recommend reading the entire piece if you want to know more about the mechanics.
That’s not all though on the regulatory end of things as the U.S. Securities and Exchange Commission has threatened to take legal action against cryptocurrency trading platform Coinbase if it follows through with plans to launch a crypto lending product. That has caused a bit of a stir at the company who claims that the SEC’s represented a decision to “skip basic regulatory steps” and jump straight to litigation without providing guidance to the industry. The regulator issued Coinbase with a a formal warning that the agency intends to sue if Coinbase was not to comply. Again, it’s just another block in the chain made of regulatory trouble, so it’s interesting to read further on Forbes that “the risk in crypto is not in products, it’s in people”. While there is certainly a point to the observation that regulators ought to take more notice of the wrongdoings of single individuals that apply disingenuous strategies that elsewhere in financial services would be persecuted under market abuse rules. I am just not entirely sure whether absolving products such as ICOs straight away since it is only the people behind them that cause the risk of such instruments.
Power Games in Election Times
Talking about authorities laying the smackdown, here is an interesting one from Germany: With only a few weeks left until the country has to choose a new chancellor, the Social Democrats Olaf Scholz appears to have taken a lead in the polls.
Now, police raided Germany’s Finance and Justice ministries last Thursday, as part of an investigation into whether the Finance Intelligence Unit (FIU) obstructed justice by failing to pass on reports to the police and the judiciary about banks laundering money, according to Deutsche Welle.
Prosecutors in the city of Osnabrück, whose remit for corruption cases includes jurisdiction over the FIU, said in a statement that “an evaluation of documents secured during previous searches of the FIU has revealed that there was extensive communication between the FIU and the ministries now being searched”. Naturally, the Finance Ministry said it was to fully support the raids, but what is really interesting is that it is headed up by no other than Olaf Scholz who currently serves as finance minister in the coalition with the election rivals Christian Democratic Union of chancellor Merkel. Both have already been criticized heavily during the Wirecard affair and the news set the Internet alight with conspiracy theories that the whole affair was just a means to derail Scholz’s ambitions to become Germany’s next chancellor. Certainly an interesting story, wouldn’t you agree?
Life in the Times of Covid and Beyond
For years, I have been wondering whether the traditional office setup you’d find so often in the City of London and elsewhere across the financial services industry really made sense. I wasn’t alone in supporting the transition of more responsibility of staff for their own action especially since digitalization made it possible. Just consider the amount of money and time that goes into the daily commute of most workers and you’ll understand what I mean. Fast forward and thanks to the Covid pandemic, smart working now all of a sudden has become possible. Has it become acceptable to create a more flexible approach to when and where we work? That is the big question that is currently debated in many offices or on video call among decision makers and office workers and sometimes even between representatives of both parties, I would assume. Denis Gada has written an interesting piece supporting the theory that banking’s back-to-office fight does not need to happen. It states that there is a future for a combination of working from home and in the office and while that may be true, there are many managers that would like to see their staff back in the office rather sooner than later. Just as I do not believe in the claim that workers can be controlled better in an office environment and are therefore more productive, I have my doubts about whether we will really see a long-lasting change in the view of executives, but who knows, it’s always good to dream big, isn’t it?
Well, that’s all for this week but if you have an interesting story, please connect on Twitter. And if you would like to join me on the new FinTechnologist podcast, the same applies, of course. So, make sure you get in touch and in the meantime, have a good week!
Disclaimer: As always, I’m trying to be completely transparent about affiliations, conflicts of interest, my expressed views and liability: Like anywhere else on this website, the views and opinions expressed are solely those of the authors and other contributors. The material information contained on this website is for general information purposes only. I endeavor to keep this information correct and up-to-date, I do not accept any liability for any falls in accurate or incomplete information or damages arising from technical issues as well as damages arising from clicking on or relying on third-party links. I am not responsible for outside links and information is contained in this article nor does it contain any referrals or affiliations with any of the producers or companies mentioned. As I said, the opinions my own, no liability, just thought it would be important to make this clear. Thanks!