Anarchy in the financial services

Punk stuck a safety pin into progressive rock in the 1970s. Will crypto do the same to the financial services in the 2020s?

Back in the mid-nineteen seventies, pop music in Western Europe and North America had evolved far beyond its roots. Fully orchestrated double-concept albums ruled the charts, delivering elegant, intricate, exquisitely crafted songs featuring eight-minute keyboard solos, eight point zero one-minute guitar solos and a plethora of assorted cleverness. The ambition of the musicians was to create quasi-religious cathedrals of sound that soared on astral breezes… Then along came the punks.

The progressive (prog) rock movement boasted musicians of exceptional technical skill who challenged themselves to make each album more intellectually adroit than the last. Songs became ever longer, telling stories that were deeply woven around self-referencing philosophies, often involving wizards and dragons and elves and unicorns. Two minutes eighteen seconds of She Loves You (Yeah, Yeah, Yeah) had morphed into 31 minutes of The Cosmic Ponderings of the Celestial Eye at the Centre of the City at the Edge of the Universe at the Dawn of Time (Act IV).

Some people really enjoyed this. They had the patience to sit down and appreciate the intricacies of a piece of music, listen closely and try to interpret the artist’s deep message.

Most people however just wanted something that they could dance to for a few minutes. Something that put a smile on their face while they flirted with each other.

The balloon of progressive-pretension got bigger and bigger, until the mid-to-late seventies, when a few groups of people in different parts of the world decided to take a safety-pin to it. The punks revolted. Prog deflated.

People from older generations hated the punks, and the musical establishment was deeply disdainful. But underneath the filth and the fury there were some superb ideas and punk let pop get back to what it was supposed to be doing in the first place: delivering little slices of simple fun.

Rise Above (US$50k)

It could be that four decades later, crypto is doing to the financial services what punk did to prog.

Over the last thirty years, technology, maths and more than a little psychology have enabled the financial system to become more and more intricate. But some might say that in the process it’s moved a long way from what it was supposed to be doing in the first place: delivering a relatively safe way for society to pay transaction partners, manage financial risk and grow its wealth.

If you understand the complexity of the wholesale financial markets, you might have been able to enjoy the benefits. Many fortunes have been made over the last thirty years. But many people and businesses have been excluded. There are some that suggest that, like prog rock in the mid-seventies, the financial system has become cumbersome, exclusive and long-winded. And, as we saw in 2008, its exceptional complexity can threaten the entire system.

I didn’t fight the law (and the consumer won)

The crypto sector has started the process of stripping away some of the financial services’ over-clever embellishments. Governments and regulators seem to hate it, the professional banking establishment has often treated it with distain, and its unregulated nature means can be dangerous. But with the right support, the technology that crypto is built on could transform the financial services, making them quicker, cheaper, more accurate and more fit for purpose.

There are many challenges of course. Regulatory frameworks need to be developed without sacrificing simplicity, speed or transparency. There needs to be an acceptance on the part of some crypto purists that oversight is necessary. The old guard needs to see that financial instruments can do more than just get bigger and more complex. The consumer, and the global economic system, will be better and safer for it.

They might also be more likely to invest.

This town was big enough for the both of us

Punk was brash. It was frequently rude about everything came before it. But it matured, became less defensive and pop music is better for its existence. Crypto is hopefully on the same trajectory, becoming more open, accepting moderation and gaining acceptance as it grows.

You can’t beat a 23-minute opus about wizards and dragons and elves and unicorns when the mood hits, but sometimes the only thing that will hit the spot is abrasive, guitar-driven and lasts two minutes. Sometimes it’s a spot trade, and sometimes only a complex reverse iron butterfly option will do, and sometimes you just want to be able to pay someone for their goods or services quickly and without heavy significant transaction costs. Ultimately, the financial markets should be big enough and robust enough, to accommodate it all.

Magnus Allan is a freelance communications specialist. Follow me on Twitter at @zatag1234.