Podcast Transcript: Marion Laboure on Democratising Finance, Bitcoin as Digital Diamond and Central Bank Digital Currency  

This episode is sponsored by Amber Group

This is an edited transcript of our podcast episode with Marion Laboure, published 1 July 2022. Marion is a senior economist at Deutsche Bank in London and a lecturer at Harvard University. She has extensive private sector, public policy, and monetary policy experience, including at the European Commission, the International Monetary Fund, the Luxembourg Central Bank, and Barclays. In the podcast, we discuss, why crypto markets are so volatile, whether CBDC will displace banks, whether crypto can displace the fiat financial system, and much more. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

Introduction

Welcome to Macro Hive Conversations with Bilal Hafeez. Macro Hive helps educate investors and provide investment insights for all markets from crypto, to equities, to bonds. For our latest views, visit macrohive.com.

Markets are in full recession mode, bond yields are falling, equities are falling, and crypto is falling. We’ve been talking about recession risk for months now, we even built a recession probability model. But now, with markets catching up to the scene, what should investors do? This week we released an update of our favourite investment ideas to benefit from this current macro backdrop. On top of that, we look at how a key segment of the economy is holding up, housing. We also look at how large investor flows are impacting markets. And as usual, we provide an unusual take by looking at how weather impacts market returns. This is all great analysis that should help investors of all levels of experience. And if you’re not already in the Macro Hive universe, you can sign up for our new free weekly newsletter, it’s super popular, and it contains charts, explainers, and unlocked content. It’s your weekly dose of sanity in an uncertain investing world. To get the newsletter, just go to macrohive.com/free and sign up for the letter.

And if you’re a professional or institutional investor, we have a more high-octane product that features all of my and the Macro Hive researcher team’s views, our model portfolio, trade ideas, machine learning models, and much, much more. Many of the world’s top investors subscribe to this product. To get more details, email me at bilal@microhive.com or hit me up on Bloomberg.

And I also wanted to thank the sponsors of this episode, the Amber Group. The Amber Group is a global leader in digital asset products and infrastructure, with a presence in Asia, Europe, and the Americas. To date, the company has served over 1000 institutional investors, providing services ranging from electronic and OTC market making, trading, execution services, lending, and structured products. Over the past five years, the Amber Group, together with its clients, have experienced multiple market cycles. And Amber Group’s focus has and continues to remain the same, delivering an industry-leading service for trading, storing, hedging, and managing digital assets, with a key focus on security, compliance, and risk management. With a strong capital base, industry leading investor backing, and deep liquidity, Amber looks forward to continuing to service investors while holding themselves to the highest standards. Visit ambergroup.io for more details.

Now, onto this episode’s guest, Marion Laboure. Marion is a senior economist at Deutsche Bank in London, and a lecturer at Harvard University. She has extensive private sector, public policy, and monetary policy experience, including at the European Commission, the IMF, the Luxembourg Central Bank, and Barclays. She received first prize from the American Society of Actuaries. Revue Banque nominated her as a rising star in finance, and Business Insider named her a cryptocurrency mastermind. Marion holds a bachelor’s degree from Université De Paris-Dauphine, a master’s from the LSE, and a Doctor of Philosophy from the Ecole normale supérieure in Paris, onto our conversation.

So welcome, Marion, to the podcast, I’ve been really looking forward to our conversation.

Marion Laboure (03:19):

Thank you very much, Bilal, for having me. Always a pleasure to see you.

Bilal Hafeez (03:23):

As you may know from previous podcast shows you may have listened to, I always ask our guests something about their origin story. So, where did you go to university? What did you study? Was it inevitable you’d end up focusing on finance? And, yeah, what’s your journey until now?

Marion Laboure (03:38):

So, actually, it was kind of unexpected, to be honest, I’m from the countryside. My parents live very close to Lyon, but in the countryside, very small city. And, when you are from a small city, my personal dream was to go and study in Paris. So, I moved to Paris when I was 18. I did my undergraduate degree in quantitative mathematics and econometrics at the University Paris-Dauphine. And, the last year I did my master in European politics and international relation at the London School of Economics. And after having completed my master, my professional journey started at the Bureau of European Policy Advisers, which basically advised the president of the European commission directly.

So, I worked there for six months, and then I joined as an economist, Barclays, and then I decided to do a PhD in economics, and I got funding from the Central Bank of Luxembourg. So, I spent two years in Luxembourg working as an economist, and it’s there where I have actually discovered digital assets.

And after my PhD, I ended up lecturing in the economic department at Harvard, and while working at Harvard was, I would say an unplanned way to further my path in the U.S. It ended up actually being one of the most interesting years on the grid platform to group. I ended authoring three books. I won a few awards for my research, but I was really missing the fast-paced, collaborative and real world-focus of investment banking. And that’s why I’m now back in London working at Deutsche Bank.

Experience in Working for the European Commission

Bilal Hafeez (05:12):

Okay, great. That’s quite a varied set of experiences there. So you worked for the European Commission early on, just out of my sort of personal interest. What was it like working with the European Commission? From the outside, it seems like this huge bureaucracy that’s very slow-moving and nothing ever happens, but what’s your perspective as somebody who worked there?

Marion Laboure (05:33):

Exactly the opposite. Many things did happen. Actually, when I joined this was just after Lehmann crashed, so big financial crisis.

Bilal Hafeez (05:41):

Okay. In 2008, just around the financial crisis. Yes.

Marion Laboure (05:44):

Absolutely. So actually, I was closely monitoring the financial situation. I was looking at the financial situation, the Greek, Portuguese, Italian, France, Ireland…

Bilal Hafeez (05:56):

Oh, so the whole European sovereign crisis, you were looking at all the vulnerable countries?

Marion Laboure (06:00):

Absolutely. So many things did happen, it was very interesting because it was a fast-moving environment as well. We were actually interested in the level of debt and deficit these days and reaching the 60% debt and 3% deficit level was high at this time. So I was looking at debt sustainability and the potential of speed effects on other countries.

Bilal Hafeez (06:22):

Okay. Okay. That’s interesting. I guess you joined the Commission at a time of crisis where things did actually happen, kind of had to happen. Then also you’ve been a number of quite prestigious academic institutions, Dauphine, LSE, and Harvard. Again, my sort of curiosity. How would you compare the three?

Marion Laboure (06:40):

I think it’s very different. And the thing is I study different topics in each university. So actually, I study mathematics. I was young when I did study at LSE. I was obviously a little bit older because I started my PhD in economics at the London school of economics and I finished at Ecole normal superieure. In Paris. So, I did study economics there. I have to say that going back to study at the age of 27 was pretty hard, especially when you have to study maths again and things are not very fresh in your memory. So very challenging years. I did spend more times at the library than I was planning to.

And for Harvard, again, it was very different because I was teaching there, I was doing research. So, I had a job there, very different than being a student. And it was again, extremely different. It was an American context, environment as well. And the first thing that I realised it’s like the way of working was extremely different. So as a French person, when I used to say that I was moving back to the U.S., many people said, “Oh, Marion, be careful. You need to eat healthy. You need to do sport, and so on.” And when I arrive at Harvard, I met my colleague. The first thing that they told me is, “Yes. The best way to be productive is to start with sport at 5:30 in the morning and to finish with sport.” So when you go to bed, you sleep very, very well.

Bilal Hafeez (07:52):

Okay. Quite well, balanced then in some ways. And you also mentioned you wrote three books while you were at Harvard, is that correct?

Marion Laboure (07:58):

Yeah, the first year I had colleague of, and friend of mine was writing a book on capital market and asked me to join if I was interested in co-authorship. So, we did write this book, it’s a French book. It has been published in French. The second one was two years later, on FinTech. So, we published the French edition three years ago. And the last one has just been published in April, it’s book about financial inclusion and how financial technology can help to improve financial inclusion.

Bilal Hafeez (08:29):

But I’m just intrigued by how you write so many books in such a short space of time and what’s your secret?

Marion Laboure (08:35):

I don’t think I have a lot of secret, Bilal, unfortunately. It takes a while actually. And especially the last book, because it’s an academic book and basically when you publish academic book, it works very differently than publishing, like I would say, a mainstream book, in the sense that it takes more time. So first of all, you need to write a proposal, it needs to go through the board and when the board approve, your editor is going to review each chapter, and then it goes to one or several rounds of what we call peer review. So, it means that basically your peers are reading, commenting, making suggestions, edits for you in the book. So, you have like the peer review, which is a process with back and forth basically. And then you need to take all the comments into consideration to edit the book, and then it goes back to the peer review process and then it comes back.

So, it takes much, much, much more time. And it’s also much, much more painful, I would say. And at the end, your book is approved in the best case scenario, or not approved by the board and then it’s released. So obviously the process is not very straightforward, but when you have a COVID pandemic in the middle, and when you write on a fast-evolving topic, such as FinTech, you have a lot to update, I would say.

How Fintech is Impacting Developing and Emerging Countries

Bilal Hafeez (09:45):

Yeah. Yeah. And that book, the most recent one is Democratising Finance: The Radical Promise of FinTech, I’ve read it. It’s a very good book. In FinTech, and in business you often hear, everybody says they’re democratising finance. It’s kind of this buzzword that people use to explain what the business is doing and to kind of give this kind positive social aspect of it all. From your perspective, what do you mean by democratising finance?

Marion Laboure (10:08):

Yeah. I’m especially interested in the topic of inequality and democratising of finance and the book is about financial technology and how financial technology can reduce inequality. So I think it’s fascinating how technology can help people to overcome the poverty trap and especially in emerging economies. So if you look at what is happening in Africa, in India, in Asia, overall, even in Latin America, it’s just spectacular.

So, what we did actually, we split the book in two different parts. First part is about developing countries, the second part is about advanced economies. And if you look at specifically developing countries, FinTech provide access to basic banking, payment and insurance services, which are essential for helping people to escape the poverty traps. And if you look at advanced countries, that’s very different. So FinTech can also have an equalising impact, but by offering new investment tools to the middle class and the alternative loan solution to the underserved population.

Bilal Hafeez (11:04):

Okay. So, in emerging markets, it’s more about segments of the population that don’t have access to a regular bank, and so by not having access to a regular bank, it prevents them from just interacting with the economy in different ways. Whereas FinTech comes in and then they have access to the banking services, and they can then engage with the economy?

Marion Laboure (11:22):

Absolutely. And we tend to forget, actually that we have over 1.7 billion inhabitants who don’t have access to banks, which are financially excluded or unbanked, and half of them have access to a smartphone, to internet. So, by just providing smartphone and internet, it’s already a big plus.

Bilal Hafeez (11:40):

And then in the advanced economy, it seems like a lot of what FinTech is doing is more on the investment and borrowing side. So, most people, presumably in the advanced economies have access to banks, so it’s more about giving them access to services, which previously would only be available to richer people, I assume?

Marion Laboure (11:57):

Absolutely. So that’s why we split the book into two different parts because actually the issues facing emerging economies and faced by advanced economies are completely different. So, for example, you mentioned advanced economies and we looked at the technological revolution on workers and government taxation. So for, for example, we look at how the freelancing economy is challenging policy makers around the world to adapt fiscal policy related to income taxes, healthcare and retirement, and the gig economy is forcing leaders to consider new laws related to large scale tax optimization as can be seen in the European Union’s efforts to rain in Amazon’s tactic of selling products everywhere in Europe, for example, which is a low VAT country.

Bilal Hafeez (12:38):

Okay. So, I guess if you’re a gig economy worker, you may not be taxed in the same way as like a regular employee, plus also the benefits you get wouldn’t necessarily be the same, so policy makers have to grapple with this in some way?

Marion Laboure (12:48):

Absolutely. And again, the issues are different for advanced economies and emerging economies, but it’s also different inside advanced economies and inside emerging countries as well.

The Financial Challenges of Millennials and the Problem of Financial Literacy Amongst Retail Investors

Bilal Hafeez (12:59):

Yeah. And I notice in your book, you have this sort of section where you talk about millennials and the “subprime generation,” I think you called millennials, or something like that, about how they’ve been particularly impacted by the global financial crisis. Can you talk a bit more about that?

Marion Laboure (13:14):

Yeah, absolutely. So basically, what we propose is like two generations. The older generation has been kind of lucky experimenting high growth, low unemployment rate and many social benefits. And the millennials, I mean are a bit less lucky given that they have already been facing like two crises. The 2007, eight financial crisis and this pandemic, now.

We are also living in an area where economic growth is lower, unemployment is higher than our parents and grandparents. So that’s why we are referring. And what we mention as well in this part is financial literacy. And I want to go back to that because I think it’s important and it’s a problem everywhere, including in the advanced economies and even more in emerging economies. And if we look at financial literacy, we have like only one part of all adults in OECD countries who are able to respond correctly to questions about simple and component interest. Right. And we have only half of all surveyed adults who managed to achieve the minimum target score.

Bilal Hafeez (14:15):

So that means the majority half, if not more, just don’t have basic financial literacy in advanced economies?

Marion Laboure (14:23):

In advanced economies. So, it’s even higher in emerging economies, which is actually very, very high. Yes.

Bilal Hafeez (14:28):

And what do you think is the best ways for people to improve financial literacy? I guess it sounds almost like it has to be a policy in response because the numbers are so big?

Marion Laboure (14:38):

Yeah, no, the numbers are so big. And the way I’m seeing how to serve this issue is probably like financially literacy should be part of the Maths curriculum or, some curriculum at school. And when you learn maths, personally, I learned a lot of maths. I did study maths. I never learned how to do like interest rate compounding, what a mortgage is exactly. And financial literacy, in most countries that I know it’s not part of the school curriculum.

Bilal Hafeez (15:04):

Yeah. Correct. Yeah. And going back to millennials who are the generation that lost out, to some extent, as you mentioned in terms of not have as fortunate economic circumstances, in what way can FinTech help them?

Marion Laboure (15:17):

So FinTech again, I think it’s kind of democratising finance in the sense that it makes finance much more accessible to every people. So again, you need to have financially literacy, you need to be financially educated to make sure, you know how to use this financial products, but it makes finance much more accessible. So, for example, if you took like Robo-Advisor, wealth managers are not accessible for people who don’t have enough saving. And if you look at Algorithmics, it’s much easier actually to access like an algorithm online.

Bilal Hafeez (15:50):

And on something like Robo-Advisors, do you find it’s more prevalent in the U.S., than say Europe? What’s kind of the geographical kind of distribution of this type of technology?

Marion Laboure (15:59):

Yeah. So that’s a great question actually. And what we realise is Robo-Advisor registered better performance in the U.S. better than in Europe. And some of the reasons why, it’s because we have a fragmented European market with fragmented regulations, national regulation. So it’s easier actually to scale something in the U.S., given that the population is much bigger, it’s also much more competitive and it has been set up probably earlier than in Europe as well.

Having said that what you realise is they have turned to invest much more in equity, that’s why, very similar to an asset manager, but recently given that equity performed not as good as it used to be the return tends to be like slightly lower these days.

Bilal Hafeez (16:40):

Okay. Yeah. So, there’s a skew toward equities in the U.S., and that lends itself more to Robo-Advisors?

Marion Laboure (16:45):

Absolutely.

Why Crypto Markets Are So Volatile

Bilal Hafeez (16:46):

Yeah. And you also do talk about decentralised finance in crypto, which obviously has been a big story, especially since COVID where it’s really sort of taken off. Obviously, this year, crypto hasn’t done so well. In general, what are your thoughts on crypto? It seems quite polarising the topic, some people think it’s a complete Ponzi sort of scheme, fraud and everything, and then there’s on the other side, people think it’s going to change the world and disrupt conventional finance. Where do you stand on this?

Marion Laboure (17:11):

I would say in between. I’m an academic by training, so I’m not like hyper pro crypto hyper against crypto. But I think it’s necessary to put things into perspective. And if you look at the trend in 2017, so five years ago, the value one Bitcoin was $1,000. In 2021 at the peak, the value was around like $68,000 and today, of course it fluctuates quite a lot, but it’s around, let’s say $20,000. So there is a lot of volatility and this volatility is not going to disappear anytime soon.

And why we have a lot of volatility, it’s not very a liquid market. Few people hold actually a lot of Bitcoin, so they have a market power. And when you have a big country making announcement, like China buying in crypto, you can feel it. When you have people tweeting, you can also feel it on the price and you feel basically this kind of liquidity, which is quite low, I would say.

Bilal Hafeez (18:06):

Yeah. I find it quite ironic as well about crypto, because one of the things about crypto was it’s supposed to be democratising finance in some ways, it’s supposed to be for the masses and everything yet at the same time, it’s a very illiquid market. And as you said, few players dominate the overall market. So it’s kind of a paradox there don’t you find?

Marion Laboure (18:24):

No, I agree. And actually, there was the initial objective when it was set up, and now how it is, and it’s like when it has been set up, actually it was under the radar. There was no regulation. These days is becoming more and more regulated. You have more and more exchanges. You have more and more players making a move in that market. And actually, that’s very interesting as well, but you can see that before, when it was created there was no correlation with more traditional asset classes and these days the correlation between the SP500 and the NASDAQ, is extremely high. It peaked at 80% in terms of correlation. Now it’s little bit lower, but I would say that the crypto is moving towards a more traditional asset classes.

And the surge in price that we have seen last year was partly fuel by the liquidity that we have seen in the market. And these days we can clearly see the crypto market is clearly impacted by Fed hikes and Central Bank’s hike, all over the world.

Bilal Hafeez (19:18):

And in terms of, just at the more fundamental level, what does crypto offer that traditional finance doesn’t offer? What is it that’s so special about crypto?

Marion Laboure (19:27):

So, I wouldn’t say that crypto has a very high competitive advantage compared to what finance is offering. The main difference is like with issuing the money. When you talk about fiat currencies, it’s issued by your central bank, where with crypto it’s decentralised. But apart from that, I wouldn’t consider crypto as a mean of payment. I think it could be one on the side. Number of transactions is much higher, we have the lightning network. The transaction fees is lower these days as well. So we are moving probably into that direction, but I don’t think it’s still a mean of payment.

Bilal Hafeez (19:58):

But if the speed does pick up and it can process more payments, then that potentially could become a viable means of payment, I guess, is what you’re suggesting there?

Marion Laboure (20:08):

I think on the side, yeah. We have actually some countries accepting Bitcoin as legal tender too in the world these days, but yeah, we have the lightning network, which is pretty competitive these days in terms of number of transactions that can be processed on a daily basis. So, it’s making a move, but I wouldn’t consider it as a proper amount of payment competing with fiat currencies.

The Impact of Central Bank Liquidity on Crypto

Bilal Hafeez (20:26):

And then in terms of it being a store of value, it was often sort of presented as Fiat or the traditional finance system is inflationary, and it’s been devalued all the time, whereas crypto is like a digital gold or something like that?

Marion Laboure (20:40):

Yeah. I think it could have been posted as digital gold last year. And actually, it was a good hedge against inflation last year. It might be no longer the case and cryptocurrency did surprise increase as inflation picked up last year, but my explanation, because it was due to excess liquidity that also drove tech tax much, much higher. So, when the Fed turn hawkish on the prospect of higher rates, deflate evaluations, cryptocurrency retreat, and it’s exactly at what we saw in May and despite the latest 8.3% gain in the U.S. CPI. So, I would say, Bilal, basically we moved, or we are moving, or we moved from digital gold to probably digital diamond.

Bilal Hafeez (21:17):

Okay. I like that, “digital diamond.” Yeah.

Marion Laboure (21:20):

And I would consider crypto closer to digital diamonds these days rather than digital gold.

Bilal Hafeez (21:25):

Yeah. And do you think something like decentralised finance or DeFi that we have in crypto is a potential sort of challenger to traditional banking? Because it seems like there’s this whole sort of system of being able to borrow and lend that’s been built up in decentralised world. Is that like an alternative to traditional finance? Or is it like a regulatory sort of arbitrage, that’s not really regulated so it’s kind of popped up in a way that if it had to conform to traditional regulation, it wouldn’t exist?

Marion Laboure (21:51):

Yeah. I think again, you have a lot of technology innovation these days, some of them are good, some of them are less good. And we need to be careful about financial literacy. We need to be careful about regulation and DeFi, actually was not there in regulation a few months ago, now it’s becoming clear that DeFi is going to be regulated. But we need a regulation, and actually we are, again, back to financial literacy, I think we tend to overestimate a number of people financially literate, who financially understand what they are doing and cryptocurrencies and FTs, digital assets are risky assets these days and should be regulated.

The Rise of Central Bank Digital Currencies (CBDCs)

Bilal Hafeez (22:28):

And in parallel to decentralised finance or crypto, you also have the emergence of CBDC, Central Bank Digital Currencies. So that’s, in some ways, almost like a challenger to that, it kind of uses some similar technology, but obviously it’s highly centralised. It’s the central bank that’s doing this, which in some way is the antithesis of crypto, which was trying to move away from Fiat and central bank control. What are your thoughts on CBDC?

Marion Laboure (22:54):

So, thoughts about CBDC. So, first, it’s not a new topic. If you look at the Chinese central bank, the PBOC, they started looking at this topic in 2014, but until 2019 central banks had a very negative view on digital assets overall. And Facebook actually spooked the world’s central banks into a reaction. We had the pandemic, we had the war, the conflict between U.S. And China, the trade war. And all of them has sped up central bank digital currencies exploration.

So today we have around 90% of central banks, which are looking at these topics. When I say looking, I mean piloting, researching, launching central bank digital currencies. We have three countries in the world, Bahamas, Eastern Caribbean and Nigeria which are already live actually, in terms of CBDC. China, for me, it’s already live. I would consider it as live, given that pilot is now national and even accessible for foreigners and why they have decided actually to look at this topic, there are obviously several reasons. All the reasons are different for each central banks. If I look at China, the PBOC, it’s from a financial inclusion perspective and probably to decrease cash in circulation as well.

But most countries actually, if you look at the long-term front, most countries have experienced a decline of cash as a mean of payment. One key example is Sweden, where cash in circulation represents less than one personal GDP and they are exploring, I would say digital cash.

Bilal Hafeez (24:17):

And so CBDC in essence, is digital cash, but I guess when you hold that digital cash, you are kind of facing the central bank rather than a bank, like a conventional bank so that’s the innovation. And it could potentially just replace cash completely, so what’s the benefit of that, why replace cash, like paper cash?

Marion Laboure (24:34):

So, it’s not aimed to completely replace cash and most central banks made it clear that cash, physical cash and CBDC will coexist in parallel. So, I don’t think there is any idea to replace cash suddenly, but obviously the use of bank notes has decreased on the long-term basis, but the pandemic has really accelerated the decline of cash as a mean of payment.

This has been, yeah, seen in probably most countries in the world. And what is interesting as well. It’s like most people actually, if you look at Europe are using cards, plastic cards, so visa, MasterCard, and all kind of credit cards, so relying on American players and private bank.

Whether CBDC Will Displace Banks

Bilal Hafeez (25:13):

But if we do get central bank digital currencies, could that potentially affect banks? So people just hold CBDCs and they don’t need to have a bank account anymore?

Marion Laboure (25:22):

I wouldn’t say so. So basically you have the long-term view and the short-term view. In terms of the short-term view and what central banks have been mentioning, and most of them, all of them, from what I know, it’s like you have different kind of system, you have three ways to issue a CBDC to consumers. So what commercial bank and central banks are doing currently say, the consumers have the bank account directly at the commercial bank and the commercial bank is liaising with the central bank. So this is what we have currently, what they are planning to do in case of a CBDC, it’s the consumers will hold the bank account at the central banks, but the relationship will be intermediate by commercial bank.

Bilal Hafeez (25:58):

Oh, okay. Okay. So the commercial bank will still be there in the middle?

Marion Laboure (26:01):

Absolutely. So everything will be seen intermediate by the commercial bank and actually it’s not going to change much. And I don’t think consumers will realise the change actually at the end.

Bilal Hafeez (26:10):

Okay. Yeah. And even from a political or social sort of perspective, there is one concern about CBDC which is that, that will give the central bank or the state much more control over people’s finances because, at least with physical cash, you can hoard it yourself and there’s nobody tracking and tracing you. But with CBDC, if at the extreme it replaces cash, then there’s no way to escape the state in some ways. Do you have any thoughts on that?

Marion Laboure (26:38):

Yeah, no. I mean, that’s a fair point actually. And it’s what you realise, there is always a trade off between convenience and anonymous. My personal view is convenience is always dominating actually privacy. And we are seeing that. Most people, I think everyone I know, has a mobile phone. Most people have some apps on their mobile phone, actually the apps are tracking where you are, what you’re doing, who you are calling exactly and so on. And actually, we are still using these apps because convenience dominating over privacy.

So, I fully agree that yes, digital currencies are leaving a digital footprint. My personal view again, is convenience is always superior to privacy for consumers. I’m not saying it’s a good thing by the way, but we know from previous experiences.

Bilal Hafeez (27:23):

Yeah. And do you think crypto is a way to anonymize your transactions or not? Or do you think that’s overstated, the privacy side of crypto?

Marion Laboure (27:33):

That’s probably overstated, and it depends, again, I think you have a lot of cryptocurrencies these days. So, I mean, depending which source you’re taking between 10,000 and 20,000. Of course, many are different. It’s like comparing… that possible to compare Bitcoin with Zcash, or Monero with Bitcoin. Yes. I wouldn’t say it’s anonymous because you can trace transactions or transactions have a number.

While if you take other cryptocurrency like Monero, or Zcash are much more anonymous than Bitcoin. So I don’t think they’re all equal. The way I’m seeing that, personally is, yes, cash, you absolutely right. You don’t have any footprint. You don’t have any, obviously, digital footprints. And I would say the 21st century cash could take two different forms.

Basically, one is cryptocurrency, but cryptocurrency it’s more or less anonymous depending again, which cryptocurrencies and so on. But doesn’t leave a footprint, or not very easy footprint, but it’s not issued by a central bank. And on the other side, you have central bank digital currency which are issued by central banks, but yeah, it might leave a footprint. Not necessarily, again, and actually that’s a big issue. That’s something that’s a big topic for the ECB these days, they are talking about having this kind of a threshold where lower amount of transactions are not monitored and they are tracing and tracking only transactions which are superior to 100 euros or something around.

Whether Crypto Can Displace the Fiat Financial System

Bilal Hafeez (29:03):

Okay. Yeah. And more generally, some people have talked about how crypto could potentially challenge the dollar, the dollar system. Do you think that’s possible or not?

Marion Laboure (29:12):

Again, I don’t think so at all, to be honest. I truly believe in central banks, and again, I’m an academic by training. I did my PhD on monetary policy. I worked in central bank before, so I will probably be biassed, but I don’t think so. And what we are seeing is central bank, actually, have the last word. They are the institutional rescuing actually many institutions when you have a crisis. So yeah. Monetary policy should remain in the hand of central banks. And actually, yes, cryptocurrencies is again, should be, and there is really a need for regulation, much, much stronger than what we are seeing because you can have systemic risk given that they are global as well.

Bilal Hafeez (29:49):

And speaking of systemic risk, recently we’ve had, obviously crypto weakness in general, but more specifically we’ve had some weaknesses, stablecoins in particular, the whole Luna, Terra blow up. What are your thoughts on those recent developments?

Marion Laboure (30:01):

Yeah, I think when you’re following the space very closely, I was not that surprised because many people had some doubt, but Terra, Luna and few others. So, I wouldn’t say it was extremely surprising. What I found interesting is a stablecoin actually might not be as stable as people think. And again, it highlights the fact that some crypto or stablecoin are very new and we shouldn’t mix all cryptocurrencies in the same basket. Some of them are very new, they have different characteristics. And I think it was the main key learning that we are seeing.

In terms of stablecoin itself or pegged currency, to be honest, what we are seeing with history, especially in Latin American and Asia is that peg rarely lasts forever. And when we have macro liquidity with their oil and rate hikes by key central banks, it adds pressure on them. So, we will see what is going to happen over the next month, given that the Fed is continued due to hike. Same for the ECB, but it will probably test confidence in the main issuers of stablecoins and the value of those coins as well.

Bilal Hafeez (31:02):

And it seems from regulated perspective, they seem to focus a lot on stablecoins more than other parts of crypto world. Is that a fair characterization?

Marion Laboure (31:10):

I’m not sure. I understand why because actually you have a couple of issues with cryptocurrencies. They are very volatile, and they are not regulated. So, regulation is coming, volatility, I don’t think it’s going to end anytime soon. Even though, my view on regulation, it’s going to bring more liquidity in the market, higher adoption, and if you have more liquidity, more adoption, it’s likely to reduce volatility. For stablecoin, I think it’s stable. Not every cryptocurrency is a stablecoin are stable again, but yeah, it should be stable. We are going to our regulation so it might take off as well.

Bilal Hafeez (31:45):

Yeah. And so just to round this conversation off, say in the next 10 to 20 years, do you think crypto will still be around? It’s not just a fad?

Marion Laboure (31:52):

So, I think you have a good reason to think that cryptocurrencies will still be around. Again, I think there are a lot of cryptocurrencies, not all of them are going to be around. You have real use case for Ethereum, you have real use case for, Shivers. But again, I don’t think all of them are going to be around. If you ask me about Bitcoin and Ethereum, yes, I think they will be around in couple of years. But, the way I’m seeing that with CBDC, so CBDC are there in China and the Bahamas, Eastern Caribbean, but we are far from being there in Europe or in the U.S. So, I would see like coexistent between CBDC and cryptocurrencies, and if cryptocurrencies are becoming to be too successful, I still see shared currencies dominating cryptocurrencies.

Bilal Hafeez (32:33):

Yeah. Yeah. So, we’ll have kind of a future with CBDC, probably Bitcoin Ethereum, and probably some other new sort of crypto type currencies, but still the dominant currencies, so to speak, will be the traditional currencies, the central bank, fiat currencies will…?

Marion Laboure (32:47):

I have no doubt about that. And if it’s not the case, we have regulation to make sure it will happen.

Bilal Hafeez (32:52):

Okay. Yeah.So ultimately, yeah. If the market doesn’t lead to that, it’ll be regulation that will change it. Yeah.

Marion Laboure (32:58):

Yeah. It’s what we have seen in China, actually. The Chinese government was launching its CBDC in January this year, and actually, they kept repeating that they were not happy with cryptocurrencies and at the end, in September, they ban it.

Bilal Hafeez (33:12):

Yeah, no, no. That’s a sort of fair point. In the end, yeah, the state has a lot of power when it comes to these sorts of things.

Marion Laboure (33:17):

And actually, Bilal, we also saw it with Facebook Libra, Diem, the stablecoin. And I think Facebook was pretty positive for launching its own stablecoin. At the end, Facebook is like a third of the population in the world with a real systemic issue, if something is going on, and at the end, I mean the project will go nowhere.

Bilal Hafeez (33:36):

Yeah. Great. Now I wanted to round off our conversation with a couple of personal questions again. Now, one was, and this, I asked all my guests, what’s the best investment advice you’ve ever received from anyone?

Marion Laboure (33:46):

I like this quote and it’s what I’m telling all my students from, Nelson Mandela, saying that, “Education is the most powerful weapon, which you can use to change the world.” And I think education is key. Yeah, definitely. I would say that education, please invest in yourself. Make sure that you keep learning. The world is changing very quickly, constantly these days, so keep it up. I like as well this quote from Warren Buffet, and it’s basically saying the best investment you can make is an investment in yourself. The more you learn, the more you will earn.

Bilal Hafeez (34:13):

Yeah. That’s good. That’s a good saying, I like that. When speaking of education, many people are leaving university to look for jobs and so on and you have students at Harvard, what advice do you give to people who are graduating as they enter the job market? What sort of general advice would you give them?

Marion Laboure (34:28):

Yeah, actually. I have many students asking this question and the thing that I’m always saying is, you should keep applying even if you are rejected because the truth is that everyone gets rejected and rejection don’t necessarily mean failure. Perhaps if you interviewed on another day or with someone different, you would’ve gotten a different answer. So you may have gotten maybe a different topic as well and different answer. So don’t be shy to apply to the same company again. If you don’t get the position this time, you may get it later. You will get your dream job if you keep applying. So continue to hope and to believe in yourself.

Bilal Hafeez (35:00):

Yeah, no, that’s great. And then another one on your personal productivity sort of hacks, if you have any. You’ve obviously written a bunch of books, you teach, you work at a bank, you do lots of stuff. How do you manage kind of information overload, and do you have a process for doing the research?

Marion Laboure (35:17):

Yeah. So, I might be biased because the way I’ve been taught actually to make research is the academic way, to trust your data source. Make sure actually, when you look an article, you can check the data, look at the primary source, so don’t look at unnecessary newspaper with opinions, but just make sure you have your own opinion to take the data source, a primary data source. And I’m also a data scientist so I tend to believe what I can verify, what I can check, what I can believe actually. And to be over the top of all the news, it’s not easy, again, I’m reading a lot. And I’m kind of lucky to be in across like different people. So, I still have my academic colleagues, I have my banking colleagues and I have some central bank friends as well. So, it’s easy as well to have conversation with different people working in different institutions.

Books That Influenced Marion

The Curse of Cash (Rogoff), The End of Alchemy (King)

Bilal Hafeez (36:02):

Yeah. And speaking of reading, have there been any books that really influenced you over your career?

Marion Laboure (36:06):

I really like, The Curse of Cash, published by Ken Rogoff. I think it gives very nice macroeconomic view and it talks about cryptocurrencies, central bank digital currencies, regulation. Pretty interesting one. I really enjoyed, The End of Alchemy, written by Mervyn King. And I think in terms of historical perspective on central banks and then macroeconomic impact it the best book I have read.

Bilal Hafeez (36:29):

Okay. That’s great. Yeah. We had Mervyn King as a guest, a year or so ago. No, he’s a very impressive character, very impressive intellect. And then, so just to round off, if people wanted to follow you, obviously you’ve got your book out, “Democratising Finance,” which I’ll include the link in our show notes for, and if people in general wanted to follow you somehow, is there a way they can do that?

Marion Laboure (36:45):

Obviously, yeah. Of course. I would be more than happy to. So, I’m on LinkedIn, I’m on Twitter. Please feel free to connect, reach out, and to send me a message as well.

Bilal Hafeez (36:54):

Okay, great. And I’ll include the handles for all of that as well. So with that, thanks a lot for this conversation. I’ve really enjoyed it a lot and good luck with everything that you are working on at the moment.

Marion Laboure (37:03):

Thank you very much. It was a pleasure to be there.

Bilal Hafeez (37:07):

Once again, I’d like to thank the sponsors of this episode, the Amber group. The Amber group is a global leader in digital asset products and infrastructure with a presence in Asia, Europe, and the Americas. To date, the company has served over 1000 institutional investors, providing services ranging from electronic and OTC market making, trading execution services, lending, and structured products. Over the past five years, the Amber group together with its clients have experienced multiple market cycles and Amber group’s focus has and continues to remain the same, delivering an industry-leading service for trading, storing hedging and managing digital assets with a key focus on security compliance and risk management. With the strong capital base, industry-leading investor backing and deep liquidity, Amber looks forward to continuing to service investors while holding themselves to the highest standards. Visit ambergroup.io for more details.

Thanks for listening to this episode. Please subscribe to the podcast show on Apple, Spotify, or wherever you listen to podcasts, leave a five-star rating, nice comment, and let other people know about the show, we’d be really grateful. Also, sign up for our free newsletter at macrohive.com/free. We’ll be back soon. So, tune in then.

Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)