Video - Bitcoin Beyond National Money - Zurich March 2016 - Fintech2016 Conference

In this talk, presented at the Fintech2016 conference to an audience of Swiss bank executives, journalists and financial professionals, Andreas examines the future of non-national money, network-centric money and the impact on financial privacy and empowerment.


ANDREAS ANTONOPOULOS: Now, the topic of this conference is fintech but Bitcoin is not fintech and that may surprise many of you and I hope as you learn more about Bitcoin you continue to be surprised.

I’ll start with what Bitcoin isn’t. Bitcoin isn’t a company. Bitcoin isn’t an application. Bitcoin isn’t fintech. Bitcoin isn’t banking. Bitcoin is a protocol, it’s an internet system and it doesn’t belong to any company, it doesn’t belong to any organization just like the internet doesn’t belong to any company or any organization. It is a system that allows us to use trust on a global basis to conduct transactions and commerce and finance and many other trusted applications. Bitcoin isn’t what you expect.

Now, the funny thing is that what Bitcoin does is it changes our expectation of what money is because it changes the very foundation of how money and payment systems work. This isn’t just a little thing that will affect a few companies, this is a very big thing. It’s as big as the internet and perhaps in some ways even bigger and it’s not just going to affect finance. It’s also going to affect politics and governance. It’s going to affect societies as a whole.

I am a technical person and I’m interested in how Bitcoin works and after five years I’m still discovering new things about how Bitcoin works and understanding it in even greater depth. So, let me start first with something that happened two weeks ago.

Two weeks ago President Barrack Obama stood up on the stage of south by southwest and talked about surveillance and he said “If we can’t unlock the phone that’s as if every person is carrying a Swiss bank account in their pocket.” This was supposed to be a way to provide this view of a terrifying future where everyone has privacy.

Now, I’m sure some people in this room think it might not be such a bad for everybody to have a Swiss bank account in their pocket. But you see the thing is our president was wrong because it won’t be a future in which everyone has a Swiss bank account in their pocket. It is a present in which everyone has a Swiss bank in their pocket, an entire Swiss bank.

I have a system in my back pocket that can generate two billion account numbers that can interact and wire money anywhere in the world in seconds that can be the point of origination for loans and mortgages, for international finance and trade, for an import-export business, for remittance business, I can build novel financial applications and trading instruments that I can install on my phone. I now have mobile banking not as a customer but as a banker in my phone and even if you unlock my phone my Swiss bank account in the pocket is still secure. So, the terrifying future that President Obama sees of privacy is actually part of our present.

On January 3, 2009 the world changed and few people noticed. We invented a system of money that allows everyone in the world to have the same level of privacy, the same of security, and more importantly the same power of financial capability as everybody else in the world and that will have very important implications throughout history.

People asked me will Bitcoin one day become the currency of a country or be adopted by banks and to ask that question is to miss the point because Bitcoin is not a national currency. Bitcoin is now the de facto currency of the internet and we have already seen more than a thousand other similar currencies. What has been introduced is not just a new system of currency but a network-centric system of money.

The major and important change of Bitcoin is not simply that we can e-mail money across the world but that we changed the organizational structure behind money from hierarchical organizations to a flat, a network-centric model. This is the exact same model that we saw changing central newspaper publishing and central television broadcasting in a flat, a network-centric communication systems through the internet that brought us social media and now we will have social banking one day. A system of banking that is directly from person to person.

The major change is the need for disintermediation. There will be no need for financial intermediaries. And the very rule of financial intermediaries in most transactions is not necessary when you can transact directly. Now that doesn’t mean the people who use Bitcoin won’t have intermediaries.

It means simply that they don’t have to have intermediaries. They can choose to add a third-party into their transactions or they can choose not to and this is the choice that comes. When you have this currency that becomes the currency of the internet it brings with it many implications.

On my flight into Zurich I flew on Swiss Air and once again I was in an aircraft that had flag painted on its tail and what an anachronism that is. Of course, Swiss Air is now owned by Lufthansa and is no longer a national carrier but I remember a time when every airline had a flag on its tail when every airline was a national airline and had exclusive and monopoly access to the skies and the airports of a country. I remember a time when phone companies had flags and belonged exclusively to countries.

Those anachronisms are gone and the idea in the near future in a few decades of money that has a flag or a queen on it that belongs exclusively to a single nation will seem like a silly anachronism. It won’t go away, of course. They will still be national money but there will also be many, hundreds, possibly thousands of international monies – monies that have no flag, monies that have no allegiance to any country and more importantly monies that are neutral to geo-politics.

There is enormous power to a system of money that is neutral to geo-politics. A system of money that depends on mathematical functions that can be inspected by everyone, that doesn’t change its nature according to the latest alliances and hostilities between nations, that remains a stable and neutral backdrop to all trade globally.

A money of the internet, for the internet and by the internet. And that kind of thing can sound quite terrifying honestly. And if you’re terrified by that you’re probably also a bit worried about how the internet allowed free expression for everyone but I can tell you there is a generation of people who are growing up right now who when they hear the idea of money of the internet, by the internet and for the internet think that this is the most natural thing, that this is how it should be because the internet has been something that has given them freedom for as long as they remember.

Ironically, by the time the next generation reaches the age of 16 and acquires finally the right to open a bank account they may have already been using digital network-centric currencies like Bitcoin for a decade because six-year olds can open a Bitcoin account, two-year olds can open a Bitcoin account because you don’t open account, you just download an app.

So, what happens if after a decade of using digital money on the internet that is instantaneous and global you go and open your first bank account and you have a conversation that involves an explanation of why the system operates only from Monday to Friday, nine to five. Why it takes three to five business days to execute an international transaction and why for the privilege of having given a loan to the bank of your own money you will be charged five Swiss francs a month and given no interest. And when you explain that to a 16-year-old they’ll look at you as if you’ve just asked them to send a fax. The world has changed. But this is not something to be afraid of. This is a tremendous opportunity.

There are two and a half billion people in the world who have no economic access to banking according to the World Bank which is a very conservative estimate because they’re only counting the heads of household and they’re only counting the circumstances in which no banking is available whatsoever. Those who are based entirely in cash base societies with zero access to banking. That’s a very conservative estimate.

I look at it from a different perspective. I belonged to the privilege elite, I can open a brokerage account within 24 hours online and tomorrow morning I can be trading in yen on the Tokyo Stock Exchange. I can wire money anywhere in the world in any currency I want. I have the full capability of international liquid, multicurrency banking with no controls.

And how many people have that? Maybe a billion and a half and then there’s the other six billion. Many of them completely unbanked, most of them underbanked. And the possibility of giving them economic inclusion is now within our reach from a technological perspective. But what we lack is the political capability to do that.

And one of the reasons we lack the political capability to do that is because we have decided that it is important to live in a world where every financial transaction from anywhere to anywhere both sides are fully identified. We’ve created a system where individuals have no privacy, where every financial transaction is subject to total surveillance where you have to identify yourself in order to transact and this has never existed in history before.

The fundamental advantages of cash in societies is the fact that you don’t need to a credit check when you exchange cash. If you give me 10 Swiss francs the money itself is Thank you bearer value. It is completely independent of your ability to have credit or your identity. I do not care nor do I want to know who you are.

I can simply transact and that is a very fundamental thing that allows everyone to participate in the cash economy. We are trying to change that into a system where every end point is controlled and identity is part of every financial transaction. That is not a good future. That is a future that worsens economic access and economic equality, that is a future in which we no longer just cut off people because they don’t have sufficient documentation, we now cut off entire countries.

In the era of the internet economic inclusion is declining and Bitcoin brings a new model, a model of digital cash where identity is irrelevant, where identity is unnecessary, where privacy is the default. And in that model security lies in the network-centric money. The instrument itself bears value and that value is unassailable and unforgeable. So it doesn’t require identity and with that we break down the biggest barrier to economic inclusion.

We can now have a simple text messaging phone in the middle of Sub-Saharan Africa connected to a solar cell, have the same capabilities as a Swiss bank, be an originating point and destination point for international wire transfers, remittances, credit liquidity with a bearer instrument of value that is cash in an electronic medium without any concern as to identity. And that is the vision I have because to me it is very important to rediscover the value of individual privacy. Individual privacy is economic inclusion.

That is how we have always operated as a society. The dream of creating a completely controlled and closed system of finance where everything is understand surveillance started in the 1970s and it died on January 3, 2009 with the invention of Bitcoin and it will never happen because now every person in the world has the option to trade in digital cash and with that we can not bank the other six billion. We can debank all of us because banking is now an app.

And that doesn’t mean that there is no room for banks in this. Quite the contrary. In fact, the ability to coordinate lending, to deliver security services, to offer other financial services becomes even greater. The opportunity now is to encompass the other six billion into this new world of application based banking and to create a world in which borders are meaningless just like they are on the internet.

This will require some very brave bankers because you will have to go against an edifice of borders that has been built over the last 50–70 years that has segmented the world into isolated islands of finance that cannot connect to each other but the promise at the end of this is billions of new customers and billions of new people who have access to global financial system. The era of currencies with flags is as obsolete as the era of airlines with flags and we must not fear this. We must welcome the fact that this has now happen. It cannot be turned back. It cannot be stopped. It is happening already and those who embrace it have the opportunity to enter into this new world and create financial opportunity for many.

There’s a fundamental difference between banking as it is executed in America and banking as it is a culture in this country and I am very hopeful that I can bring that message here.

In America investment banking is where your banker is smiling to your face and helping through the IPO while they’re front-running transactions behind your back and picking your pocket. That is the truth. Switzerland has centuries old tradition of banking as a multigenerational relationship of trust. A relationship that is as sacred as a relationship with your doctor, your lawyer or your priest. It is a relationship that aims to give individual power, wealth control and privacy to every customer.

And if you really believe in that culture and you really feel the ethos of banking as that power of service to your customers then you can see perhaps that Bitcoin is simply a new means of delivering that relationship. That these new digital currencies with their network-centric capabilities that deliver unassailable privacy and security are a way for you to re-establish that ethos of private banking but now not just for the few, but for everyone and that is really what I hope you see in this new post-national, international network-centric of money. The money of the internet. Thank you.

Written by Andreas M. Antonopoulos on May 16, 2016.