One of the glories of the fintech revolution is that its turned boring transactions into something instantaneous and low cost. It’s hard to believe but in the bad old days before capital controls were abolished, you needed to get government approval to transfer large sums of money into a foreign currency – try telling that to the populists who say that we live in terrible times! Now with apps such as Revolut, you can literally transfer pounds into dollars in a second, at next to spot rates, with two or three swift clicks.
For most people, this has become almost pedestrian. Something they expect from normal life. But if Labour under Corbyn does come into power, that might all change. We’ve already heard rumours about the Marxist cabal behind the Labour leader talking openly about economic wargaming, but I think capital controls will be a requirement for a Hard-Left socialist government. There is no way that free, easy, virtually costless exchange of currency can survive a government intent on blowing through economic orthodoxy and reinstating a command and control economy based on state ownership. As a liberal (and Liberal) it simply won’t work and we’ll all pay the price.
Thus, the FinTech revolution suddenly takes on a much deeper, more profound meaning. It’s about enabling financial and investment freedom. It’s about embedding globalisation in every part of our life and it’s about individuals being able to manage their own finances without someone in government or the big banks telling them what they can – and cannot do.
All of which makes me sound a bit Austrian – in economics terms – which I am most certainly not, but on one thing I agree with our friends on the free market right. More competition is always better and what the fintech revolution promises to do is to enable the most savage competition possible – between currencies, between currency types and between platforms.
At the moment we can see this need for competition being articulated around digital currencies. ‘Old school’ Platforms such as Revolut are still tied, inexorably, to paper currency. I don’t have a problem with this but it’s clear that many do. They are worried about monetary debasement and they are seeking an alternative.
For most millennials – and those slightly older – this translates into a demand for bitcoin and beyond. But what about gold? It’s been around for as long as human civilisation and has a complex relationship to reserve currencies and money. Why invest in bitcoin when you can own a bit of a precious metal now?
All of which brings me nicely to a brand new platform, launched today in beta form called Glint. Founded by an old friend of mine, Ben Davies, this is the marriage of fintech with the greatest alternative currency of all, gold as a precious metal.
Of course, gold isn’t a new asset class for investors. We’ve long been able to buy physical gold in many shapes and guises. If you’re willing to pay the 5 to 10% premium you can buy gold coins. There’s also the huge array of exchange-traded products tracking the price of gold – ETF Securities, for instance, has built a very successful business model around structuring ETC products that give allocated physical ownership of the shiny stuff. And even in the retail private investor space, there are outfits such as Bullionvault which give very low-cost access to physical gold, held in safe vaults around the world. In sum, gold is already accessible – but only as an asset class
Another way of explaining this is that these existing gold options are two dimensional. You can own the asset and as a consequence benefit from any change in the price. You can even use this asset as a form of leverage, but that’s where the transactional value stops. Gold ETPs and Bullion vault are simply ways of expressing an asset class view.
Glint looks to do something more three dimensional – making gold an actual currency that can be used for payments. Glint has gone live in its Beta state today, and the inevitable PR blurb says that it is “re-introducing gold as the Global Currency.” Here’s the long preamble from Glint on what it’s all about:
“From today you can download the Glint app and create your Glint account, enabling you to spend gold as money anywhere in the world. We believe this new financial technology brings reliability and independence to money.
Glint’s platform makes gold instantly accessible as the Global Currency with unprecedented liquidity and will be available to everyone to store, send peer to peer, and spend anywhere in the world.
Glint’s iOS app is linked to the Mastercard global payment system and will allow its users to make day to day payments by debit card with multicurrency capabilities including, for the first time, in gold. Pricing is based on interbank exchange rates and there are no hidden fees or charges.
Glint is authorised and regulated by the UK’s FCA with clients’ money stored in segregated bank accounts. Physical gold holdings are legally allocated to each individual client and held in a London Bullion Market Association accredited Brink’s bank vault in Switzerland.
The Glint app is available on iOS in the App Store for download and registration today. Once your account has been approved you can use it to start buying gold and your Glint card will be with you within 5 working days.”
For me the big story here is reconnecting gold to millennials and the tech savvy as a proper currency of choice for transactions and commerce – and maybe shouldering aside the exaggerated and much disputed claims of digital currencies.
Physical gold in your pocket has an immediate value for transactional purposes – you can use it for payments and trading. Virtually everyone recognises its ‘value’ and ‘legitimacy’. But central bankers have gone out of their way to banish gold to the sidelines of international commerce. You sense that these central bankers are happy to have gold persist as a popular and easy to access asset class – they hold lots of the stuff in the vaults after all – but they’re nervous of its claims to currency status via commerce. It’s the same fear that will eventually prompt a regulatory backlash against digital currencies. Anything that smacks of a proper challenge to monetary fiat will not be tolerated. Central bankers need the autonomy to do what they need to the monetary base without interference from rival currencies.
I support that freedom for central bankers to manipulate the basis of money – but I can see that many might take a different view. I’m no bull when it comes to gold but even I can see that gold has increasing attractions as an asset class. It’s a great hedge against macro instability. It’s a classic hedge against inflation, which is allegedly lurking around the corner. Crucially gold as an asset class is also valuable in a world where investors are worried about the inevitable currency re-alignment.
Currently, we have one real reserve currency, the US dollar. Trump has simply served to remind everyone that a global order built on one currency beholden to one very volatile man, is a potentially risky exercise. The days of dollar exceptionalism are slowly but surely drawing to a close – and the Chinese will be the midwives of this change. They are currently forced to subscribe to dollar hegemony and it clearly rankles, which is why they are building an alternative global financial infrastructure. Sooner or later we will have to accept a multi-reserve currency reality, be it based on a basket of currencies or some new collective instrument similar to those proposed by Keynes.
When that day comes we’ll, all be faced with a tricky new reality which is that people will want an alternative currency for international commerce: Gold’s moment might come again. It’s an enormously more attractive instrument compared to digital currencies and in price terms has been fairly stable in a $1100 to $1350 trading range for the last few years.
The only challenge has been to integrate it into the fast-emerging digital financial infrastructure. Which is where outfits such as Glint come in – they’ve built a payments system that allows one to run virtually any transaction based on an underlying physical gold holding. Once it’s clear that this can work for gold, it could even be made to work for other reserve currencies and alternative assets. At that point, the genie is out of the bottle. Alternative reserve currencies can be integrated into the global payments system.
Obviously, Glint as it currently stands is just a startup with big ambitions and some interesting competitors not least Goldmoney. It’s also restricted to personal customers – the real change has to happen with business transactions, which are only now being integrated into existing platforms such as Revolut. But you can finally feel the smell of change. Of a new, more complex, financial order slowly taking shape. And if nothing else, if we do get a Red Labour government run by Marxists, we’ll all have access to a quick and easy way of safeguarding our personal wealth.