Sunday, 19 September 2021

Background notes on Interview with Richard Byworth, CEO, Diginex

Background notes on Interview with Richard Byworth, CEO, Diginex

Host: Emmanuel Daniel, Chairman, The Asian Banker

Guests: Richard Byworth, CEO, Diginex

The discussion will focus on these topics:

 

The recent listing of Diginex

 

Source: (2020, September 16). Diginex Receives Approval on Business Combination from 8i Shareholders, Representing Another Important Milestone Prior to Diginex’s Nasdaq Listing. Retrieved November, 2020, from www.diginex.com

 

The future of the markets for digital assets:

 

Source: (2020, April 29). The Journey Toward Digital Assets Institutionalization. Retrieved November, 2020, from nasdaq.com

 

Views on the future markets in a networked world

 

Source: (2020, April 29). The Journey Toward Digital Assets Institutionalization. Retrieved November, 2020, from nasdaq.com

 

Richard Byworth’s Profile:

Richard is CEO of Diginex, based in Hong Kong. He has over 20 years of experience spanning finance, start-ups, investment, and fintech sectors.

Previously Managing Director at Nomura, the Japanese Investment Bank, Richard was running Derivative and Equity Linked product Sales for Asia Pacific product globally. The youngest Managing Director in the firm’s history, Richard led the build of the #1 franchise for Convertible Bonds in Asia from 2005. In both 2008 and 2009 he was the firm’s largest producing salesperson across Nomura’s global wholesale investment banking franchise. Richard led the syndication and distribution of some of Asia’s largest convertible bond deals in the last 15 years including China Unicom and Softbank.

In business, Richard has founded several companies and is an active investor, having started his first trading company in 1990. He is a board member of Bletchley Park Asset Management, Jersey, Diginex, and sits on the advisory board to PrivateMarket.io, a private equity fund marketplace.

Richard is Hong Kong Regional Ambassador for the Global Blockchain Business Council (GBBC), and has spoken extensively around the merits of blockchain for business and finance at WEF (Davos) and the United Nations (Geneva).

Initially dismissive of bitcoin, he started to question that position after reading the book Sapiens by Yuval Noah Hariri, who discussed bitcoin as a logical progression in societal belief systems around money.

As an early stage investor, he supported Diginex founder Miles Pelham in the early development of the business. Miles approached Richard following his departure from banking to help build the strategy for the future of digital investment banking. What came next was a very deliberate design of a full suite financial services firm addressing the emerging and growing opportunities presented by digital assets.

Byworth has written a playbook that looks as if it will serve as a masterclass for smart capital focused on penetrating and growing the burgeoning future digital assets market. It seeks to occupy everything from the traditional payments space, to equity and debt assets, currencies and derivatives.

 

Source: Richard Byworth. Retrieved November, 2020, from diginex.com

 

 

Byworth's comments on central bank digital currency (CBDC): 

How the pandemic has accelerated central banks to issue CBDCs

Prior to the pandemic, the implementation of a CBDC was generally perceived as something interesting to explore with much theoretical potential, as opposed to an urgent policy issue. The concept of a central bank issued digital currency (CBDC) had been developing within the walls of central banks across the globe over the past year, and while Libra of course catalysed a more proactive response, the economic crisis being faced as a result of COVID-19 really kicked deliberations into high gear, and cemented CBDCs on the mainstream policy agenda for central bankers globally.

While the rush to implement ultimately superseded exploration of CBDC archetypes as conduits for the disbursement of stimulus packages, the renewed interest by policymakers is fast tracking the advance of this space.

In the broader context of a post-pandemic future, CBDC’s could offer central banks a more efficient and reflexive apparatus for implementing monetary policy, which will be all the more critical in the coming years as we seek to restore global growth. They could additionally be of massive benefit to treasury’s in the streamlining of tax collection, enabling individuals to settle dues directly from their digital wallet.

What is also interesting is the parallel trend in digital asset investing. Cryptocurrencies such as Bitcoin have been heralded as both uncorrelated assets against traditional asset markets equities backdrop, and as a hedge against currency devaluation as a result of quantitative easing (QE) due to its absolute scarcity.  With watershed fiat printing undermining confidence in conventional monetary instruments, the digital asset class is increasingly being contemplated as a portfolio hedge to counter recurrent market volatility and inflation. This becomes all the more prescient during periods in which markets are particularly exposed to politics in the form of crisis-related protectionism, stimulus policy interventions and geopolitical hostilities.

 

An all-inclusive participation of commercial banks in case of an interest-bearing CBDC

Prior to the advance of COVID, incumbent banking and monetary models were already being confronted with the pressures of persistently low interest rates, surging competition from digital and shadow banks, mounting compliance burdens, Brexit, as well as the rising popularity of cryptocurrencies. While enhanced liquidity may offer some temporary respite, COVID-era economics will likely compound these pressures with further subdued interest rates and the threat of insolvencies and non-performing loans.

However, crypto markets are actually already starting to hint at how easily transferable currency within trusted and regulated platforms could lead to an opening up of peer to peer lending markets leading to far higher rates of interest for savers than we are witnessing in the traditional banking. USD stablecoin rates for savers on the Celsius crypto borrowing platform are currently north of 8% annually.

We are at the early point of phased adoption of cryptocurrencies like Bitcoin, but the next phase is likely to see very steep growth. Indications of this are being seen in recent newsflow with Diginex integrating now with ITIVIT as well as FIS to accommodate new institutional participants, JPMorgan has opened up its banking services to U.S.-based crypto exchanges Coinbase and Gemini, and the announcement from the Office of the Comptroller of the Currency (OCC), that all nationally chartered banks in the U.S. are permitted to provide custody services for crypto.

 

To what extent can the CBDC’s overcome the shortcoming of cryptocurrencies

The biggest issue that cryptocurrencies have versus fiat currency right now is instability of price. Speculation and leverage lead to some violent price moves, and so the usage of blockchain technology to deliver fiat currencies in digital form will likely lead to far greater adoption of the technology.

The other key factor is trust. Whether it fits with your political view or not, governments and their money are generally more trusted than the current landscape of cryptocurrencies, and in the majority of cases this is for very good reason. Trust in the federal reserve and a digital dollar that they may issue could again lead to rapid adoption of the technology.

 

Progress of BoE in terms of the design and implementation of its CBDC

Virtually all Central Banks are actively looking in some way at creating their own digital currencies, whether that is for retail use or for wholesale settlement between banks, which has put this burgeoning asset class at the forefront of banking policy agenda.

The Bank of England is keeping central bank digital currency research high on its 2020 agenda. This was evidenced as recently as this week with their active participation in a roundtable discussion hosted by global central banking think tank, the Official Monetary and Financial Institutions Forum (OMFIF) to discuss potential infrastructural designs for CBDCs.

It is encouraging to see that the recently appointed Bank of England Governor Andrew Bailey, much like his predecessor Mark Carney, has come out as a proponent of CBDCs - acknowledging that in a few years’ time the UK will likely be heading towards some sort of digital currency solution.

Governor Bailey recognises that the future of the banking sector is under increasing threat, and that COVID has only accelerated the shift towards disruptive alternatives, with these digital-first players having the optimal set-up to thrive in such an environment. His statements are an acknowledgment that innovation must also come from the top-down.

While England is of course exiting the Eurozone, it’s closest neighbours are also closely engaged in this space, and Governor Bailey will be watching developments across the water closely. France is so far the highest-profile Eurozone member to launch a CBDC RFP and a Eurozone-wide CBDC solution may not be too much of a remote possibility, with Christine Lagarde, an advocate for CBDC exploration taking the helm as head of the European Central Bank in November of last year.

 

Byworth’s comments on technology and rising marketin during a pandemic

Source: (2020, October 02). Technology itself is deflationary, Diginex CEO says. Retrieved November, 2020, from cointelegraph.com

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