Digital currency: breaking free from the shackles of financial monopoly

Note: The author of this article is Demian Brener, CEO of Smart Contract Solutions.

Last week, I had the pleasure of speaking with the Deputy Governor of Argentina’s Central Bank about digital currencies and financial innovation. He was very skeptical of Bitcoin, and to be fair, most of his arguments were correct. However, the conversation shifted when I talked about Bitcoin as the first chapter of a much larger story.

Before the talk, the deputy governor shared a series of new measures introduced by the Central Bank of Argentina to promote financial innovation. Today, Argentina's fintech industry is not well developed. Large banks and payment processors monopolize financial products and services. It is difficult for new companies to enter the financial market and provide new innovative solutions. As a result, Argentines cannot access products such as Paypal or Stripe (nor can they build their own similar products in Argentina). Monopoly is deeply rooted, and Uber's experience in Argentina is a good example.

Now, the Argentine central bank is seeking to break this monopoly and open the door to new entrants, which is undoubtedly good news.

Today, in order to participate in the financial industry, you either have a strong relationship with a bank or you rely on the good will of regulators (or lobbyists) to open the door for you. Today, 95% of money is recorded in computer servers, but only a small group of people have access to these digital products and can interact with them.

The real potential of digital currencies is this: they are the foundation of an open financial system. Because they are not controlled by any country or company, anyone can freely participate and build financial products and services. It doesn't matter if you are a senior executive from a bank, a hot startup from Silicon Valley, or a 20-year-old Argentinian entrepreneur. If you have an idea, you can build it and make it available to anyone in the world without any permission.

As we have witnessed with the Internet, more and more people will join the game, and in the financial industry, we will see more products and innovations. Similarly, digital currency is global in nature. Anyone can access and build new products and services, no matter where they are. This also creates opportunities for anyone in the world.

The central bank deputy governor's disapproval of digital currencies is mainly focused on Bitcoin's anonymity, high volatility, fixed monetary policy (fixed total amount) and low adoption. He pointed out that these may hinder Bitcoin's widespread adoption. However, it is these characteristics that made Bitcoin popular with its early adopters and promoted its growth.

The bigger story is that Bitcoin and its underlying blockchain technology paved the way for a better record of who owns what. Today, there are multiple digital currencies that use Bitcoin's core technology, but each has its own custom rules and features. They serve as open financial platforms that enable new products and services that were previously impossible or too expensive.

Over the past few years, digital currencies have seen a variety of applications. From investment funds to storage networks, entrepreneurs are designing new innovative products and business models. To date, more than $1.3 billion has been invested in the digital currency field from VCs, institutional investors, and crowdfunding. We are witnessing the birth of new and awesome ideas, and this is just the beginning.