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Banks Should Worry About Innovation, Not Cryptos

Cryptos are a failure on many levels, says a senior advisor tasked with addressing the U.K.'s approach to financial technology.

Cryptocurrencies aren't going to be keeping any central bankers up at night, said Huw van Steenis, a senior adviser at the Bank of England who is helping to review the future of finance at the U.K.'s central bank. His criticisms of cryptos came up at the 2019 World Economic Forum in Davos, Switzerland, in an interview with Bloomberg TV. Last year, cryptocurrencies were an important topic at the forum.

"I'm not so worried about cryptocurrencies," said van Steenis. "They fail the basic tests of financial services. They’re not a great unit of exchange, they don’t hold value, and they’re slower." Complaints about virtual currencies have risen over the past two years in the U.S., according to data tracked by the Consumer Financial Protection Bureau and compiled by LendEDU. Nevertheless, banking is on a path toward technology, he said. As banking becomes more dispersed and unbanked individuals become effectively banked via technology companies, ensuring the proper oversight of the dispersed ecosystem will be more important for financial services than worrying about cryptocurrencies.

Fintech companies are making their presence felt in the banking industry, said van Steenis. "The No. 1 topic is how can [bank CEOs] invest in technology to make their services better and fend off the threats from these big platforms," he said.

It's too early to predict who will eventually win in the free-for-all of banking institutions and fintechs, said van Steenis, demurring when asked which banks and fintech services millennials will be using in the future. Large institutions have obvious size advantages but are slow to innovate, he said, while newcomers need to rapidly scale their distribution.

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