•There is need for new regulation in this age of Fintech
Brace up for a journey, it’s a flight into the unknown, swathes of uncharted territory and horizons unknown. But that is the way to the future, or so it is said. And the journey is lined with turbulence foretold; what is fancifully called creative disruption. It is the new notion that we must disrupt or destroy even the present order to create a brand new future.
And this new wave is most prevalent in the world of financial services – let us call it the world of money preferably, in order to capture the essence and import of it. And if you understand that finance, nay, money rules the world; you would begin to understand the shape of the world to come.
Consider that man had first conceptualised money as goods for barter – in the marketplace, you give me a bit of salt and get a bit of pepper in return. You have a tuber of yam and get some pasta. It was transaction by barter.
Then there were cowries, shekels, silver, gold and several other precious metals serving as means of exchange; and finally, the currencies in use today with national central banks as bastions of currency control and management across the world.
All of these are about to change again. Money and finance as we know it today – currency notes and coins; central banks and minting houses and even banks may soon become extinct or virtual by the turn of the next decade. A germ of an idea that was sown about a decade ago is already fruiting into what the world calls virtual currency; supported by new technology.
Innovations in Financial Technology (Fintech) are poised to pull down the entire superstructure of money, finance, commerce and investment as the world knows it today. Already, the new technological applications to financial and trading outfits have made vast differences so far. From the commonly known ones like the cashless and transfer applications, to improved backroom computer technology, to the more sophisticated virtual money, crypto-currencies and block chain inventions.
For instance, crypto-currencies like bitcoins have already gained wide usage online for nearly all forms of financial transactions. Perhaps the only hindrance to its universal adoption are security concerns and lack of sovereign buy in of countries across the world yet.
It is the same for blockchain which, simply put, is a form of distributed ledger technology (DLT) in which all transactions in crypto-currencies are recorded. It allows all participants to keep record of transactions without a third party or central record keeping (like a central bank). Every completed individual transaction is like a block added to the chain, and every computer connected to the chain gets a copy of the blockchain which is downloaded automatically.
It is a virtual and complicated new world. In fact, one of the impediments to the universal application of these new and epoch-making financial applications is the fact that the vast majority of people are yet to quite understand them – they are indeed virtual, abstract and complex. While everyone can count his currencies and in fact touch them, the emerging virtual and digital monies have neither shape, colour nor size.
It is for this and many more reasons that the Securities and Exchange Commission’s (SEC) move to introduce regulation to Fintech is quite salutary. Ms. Mary Uduk, Acting Director-General of SEC, speaking at a parley of Fintech Association of Nigeria said: “If we will regulate this market and understand what is happening, we need our staff to understand the rudiments of Fintech… We are so much interested in some of the most active areas of Fintech innovation like blockchain technology, crypto-currencies and how they affect investors”
One truism the world has come to learn about today’s technology is that you either embrace it or it sweeps you in its tide willy-nilly. The central banks of many advanced countries have set up study groups and are doing test runs and simulations on the new technology.
We hope that apart from SEC, the CBN and other concerned agencies would rise to the moment with a view to leading the thought in the making of the new universal currencies. Nigeria must not be caught unawares or left behind. Fintech is too important to be ignored.