FinanceFeeds Podcast Ep.#22: DMALINK’s Manu Choudhary on CBDCs, BRICS, Monero
In the 22nd episode of the FinanceFeeds Podcast, listeners are in for a treat as they join host Nikolai Isayev, Editor-in-Chief at FinanceFeeds, in a captivating conversation with the accomplished trading industry expert Manu Choudhary.
Manu Choudhary wears multiple hats within the financial landscape, serving as the CEO of DMALINK, Co-Founder of DeFinity Markets, and Co-Founder of Crculus.
DMALINK is a renowned independent electronic price discovery and execution venue for professional FX traders streaming anonymous, proactively tailored, and sustainable pricing with a particular focus on non-G7 pairs.
DeFinity Markets is a data-centric institutional digital asset ECN, created to address the governance and conduct issues raised by regulators. The firm aggregates quotes from market makers on which qualified clients can transact digital assets.
Crculus is a multi-custody middleware infrastructure for Financial Institutions. The firm exists to address the structural imperfections of the institutional digital asset custody market.
This episode offers an insightful exploration of a wide array of financial themes and perspectives through Manu’s diverse expertise.
Retail CBDCs can disintermediate every single commercial bank
From the intricacies of retail and wholesale Central Bank Digital Currencies (CBDCs) to the transformative potential of the Federal Reserve’s FedNow system for instant payments, Manu provides astute insights into the impact of these developments on the financial sector.
“We spent a lot of time and effort building a full ECN on-chain (matching engine, etc) with the fastest Layer 1 in the world. Even with that, it took us probably to an internal latency of 500 microseconds. The problem is that our legacy system has internal latency of 300 microseconds. It’s not more efficient or effective. What we currently have today works a hell lot better. Same issue with CBDCs. They think it’s something new and advanced. In reality, it is not.
“We’ve had BDCs for over 50 years: when banks create credit […] The existing system is decentralized. With CBDCs, it is centralized. The other issue I have is the steep correlation between economic success and the number of banks an economy has. There’s a direct correlation.”
Manu Choudhary warned that retail CBDCs can disintermediate every single commercial bank and have them compete with central banks, in a scenario similar to a Football referee being able to score goals as well. “Why on earth would you want to destroy the banking sector?” Either way, the purpose of retail CBDCs doesn’t fit the needs of developed economies, unlike emerging economies which would benefit from its potential for financial inclusion.
What are retail CBDCs really about? Having the ability of real-time control and monetary and fiscal policy, he worries as there is a huge amount of potential for abuse. As the COVID-19 pandemic has shown us, “It doesn’t take a lot for a democracy to turn into a tyranny pretty damn quickly”.
Many Choudhary also explained how bank-issued stablecoins, like SocGen’s, are probably the future and praised Europe for embracing crypto as it is doing.
The “R” in BRICS is a bit of a problem
Manu Choudhary commented on the gold-backed currency to be launched by the BRICS countries.
“I’m a big fan of sound money”, he said, believing that only gold is money, everything else is credit. The “R” in BRICS, however, is a bit of a problem.
“I’d love nothing more for it to succeed but having Russia sponsoring that ecosystem is challenging for it to be adopted outside that jurisdiction. It’s also a bit naive about how governments currently work”, he said about the deficit spending trend in the world which goes against the use of a gold-backed currency.
Although he agrees there is an ongoing de-dollarization, Choudhary reminded us that the US is the only country in the world that never canceled its currency. “That’s why 75% of physical cash is held outside the US. It’s a hedge against risk. Unless the US government starts canceling its bills, you won’t see a flight. And where would it go to?” he asked, skeptical about INR or CNY taking over. “You can’t sell the INR or CNY. If they’re not convertible, they’re pretty useless as a means of payment”. As the old saying goes: “An emerging market is one which you cannot emerge from in a crisis”.
Most money is laundered with USD, not Bitcoin or Monero
The podcast conversation also takes a deep dive into the nuanced interplay between transparency and privacy in the realm of cryptocurrencies, with Bitcoin and Monero as focal points.
“Bitcoin isn’t anonymous”, Manu Choudhary warned, as he explained his LinkedIn post sharing concerns about operational security. While he does use Monero, which is likely to be the most private cryptocurrency today, he reminded that 40% of all money laundering in the world takes place inside the United States and the most used asset for such criminal endeavors is the USD. “I don’t see anyone banning the USD”.
The macroeconomic picture, with inflation, volatility, and high-interest rates is leading to an understated crisis as thousands of stores close in the United States despite the not-so-concerning GDP data, he said. “If the Fed’s objective is to destroy retail, then they’ve succeeded. Retail is dead.”
The spotlight then turned to bank bailouts earlier this year. “Just a coincidence that banks that collapsed were crypto-friendly”, he joked, adding that there is a huge gap, an unmet need for basic banking services for the digital asset sector as the war on crypto in the US rages on.
“War on crypto? Not quite. There’s a nuance. It’s a war on crypto native”, he clarified, as he observed that while the SEC sued Coinbase, Fidelity is now offering crypto. “Regulators want crypto to be run by the banks.”
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