We got David Barrett, CEO of EBC Financial Group, into the studio to discuss the impact of rising interest rates on liquidity and on the derivatives market – but in our pre-interview chat, we asked about an issue the company had experienced when it had been incorrectly associated with a crypto trading platform. That’s how we found out what David really thinks about tokens and coins, why EBC doesn’t touch crypto – yet – and how stablecoins could transform transaction settlement.
World Finance: Now David, before we started filming, we were discussing crypto and you said, ‘All coins are the best marketing scam that’s ever been invented’ – I wonder if you could expand on that view a little bit?
David Barrett: I don’t think crypto as a sector is all bad – I think there are parts of it that are going to be very influential on the way that markets develop.
Tokens and coins – I just don’t get.
I’ve read the white papers, I’ve been to seminars, I’ve listened to people that are converts, and I don’t understand it.
Buffett calls them gambling tokens, and I really think that’s a pretty good summary of what they are. I think if you look at how the crypto market developed, it came to the fore at a time when we’ve got more polarised politics that we’ve ever had, we have a greater wealth gap than we’ve ever had, we have more people that are disenfranchised from the system than we’ve ever had. So selling something new that’s going to solve all those problems?
Crypto coins and tokens, NFTs, are a fantastic example of how to sell something. But I think the quality of what they’re selling – personally I don’t think has enough of a real world impact that they’re anything other than just a gambling token.
World Finance: EBC itself doesn’t touch crypto at all – is it purely because of this view?
David Barrett: No no, not at all! EBC is there to provide products for its clients, and client demand – and regulatory acceptance! – will obviously allow that.
The problem with crypto as a UK-based broker – the first one is the regulatory side. So the FCA, I kind of feel has been hampered by the government in terms of how they regulate it, and formulating a good regulatory environment.
That will come, but at the moment I think it’s kind of piecemeal.
I think the actual volumes that brokerages are seeing in crypto – the tokens and the coins – is much less than anybody would like to admit.
And I think probably the most important thing for us – outside of regulation – is banking. Banks don’t like it! We are lucky enough to bank with a tier one banking institution, we have full corporate banking, and we are very, very aware of what they do and don’t like. And being involved in crypto, being involved in the exchanges, paying, receiving from them – they’re very, very sensitive to. And that makes it very difficult for us as a regulated broker to jump in with both feet without thinking.
World Finance: But putting coins and tokens aside, you do see potential in crypto?
David Barrett: I’m a massive believer that the true gift of the crypto market is stablecoins. Their ability to impact things like settlement, credit risk, on the ledger custodial type businesses, can be immense.
Rather than when we say T+2, that’s trade date plus two days, which is the normal settlement period in something like FX – there’s no reason with the application of ledger and stablecoins and instant transfer that you can’t bring that down to what we would call T+0, which means it’s near instant.
We probably need the central banks to come up with central bank digital coins, because the legitimacy that they bring will help a lot. But I think as soon as you get those digital coins from the central banks in place, what you should be able to do is evolve a system where it’s almost instantaneous.
And the beauty of doing that is that you significantly reduce your credit exposure to other institutions, to your clients. But also the ability to make that market more efficient by making it more fluid and safer is a much better place for everybody to be.
World Finance: David Barrett, thank you very much.
David Barrett: You’re welcome.