Recently, I had the honor of speaking to the Secret Service Service and offering my thoughts on the future of cybercrime for agents and others grappling with rapid changes in the financial system. My advice was pretty simple: Any strategic futurist looking to anticipate the future of not only finance, but also financial crime, can’t lose the forest for the trees. The many changes arising in today’s financial infrastructure — from cryptocurrencies and central bank digital currencies to mobile payments — invariably involve some conceptual and practical change in the meaning of “money.” In short, understanding what money will be, and how it will evolve, allows one to (at least begin to) anticipate how the financial system (and wrongdoers operating within it) will operate.
All too often, the idea of “money” is defined along strict canonical terms — as unit of payment, instrument of account and store of value. But nowadays this approach overlooks the fact that once information and value can be digitized, “money” takes on other potential features as well: money can become code, and programmable; money can comprise a digital bearer instrument; money can even become a social platform and ‘internet of value’ to itself. And my hunch is that’s here where future threats will lurk in the nooks and crannies of innovation, and where crime fighters will increasingly have to devote their attention.
These developments also, of course, introduce the prospect of a very different form of monetary competition arising among countries than the one long anticipated by economists. Traditionally, scholars have interpreted the rise of global currencies — think the rise of the Pound Sterling and later the US Dollar — as a battle reflecting the relative economic superiority of hegemonic powers, where network effects dominate the speed and adoption of any particular currency. Along this line of thinking, big countries with big GDPs will naturally corner the market on just what money people use.
But as money evolves, so will the means by which competition can at least theoretically take place. Countries that are early adopters of central bank digital currency could, for example, look to gain market share from the US dollar by offering an alternative e-money boasting greater ease of use, transferability, and adaptability to modern economic life. Similarly, a new private entrant or entity — think Facebook — could look to issue a money rivaling the US dollar by leveraging its preexisting customer base and offering consumers new user experiences and applications.
The interesting thing about it all is obviously that the same development — changes in what money is — will have ripple effects throughout national security strategy, from combatting illicit payments and terrorism financing to foundational geo-strategy. And governments will have to keep up. But it shouldn’t be a game of whack-a-mole. Instead, the government will need more strategic futurists thinking about not just financial infrastructure and intermediaries — that’s rather obvious — but also, more fundamentally, what firms are intermediating, and how it’s changing how people conceive of money, and commercial value itself.
Want more? Check out Chris Brummer’s popular Podcast, Fintech Beat, published by CQ Roll Call.