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Who do we trust, how and why?

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It intrigues me how quickly our world of money is changing from crypto to fintech to BaaS to infinity and beyond. The question that constantly sits in the back of my mind is how to regulate all this stuff to maintain trust? From Synapse to FTX to Beenz to Boo, how can the regulator keep up and, more importantly, can they?

This is something that sits at the heart of the financial system: who do we trust, how and why?

Let’s start with that first question: who do we trust?

Many of us, even though it is our hard-earned money, trust too easily. Just look at romance fraud and the like. In fact, there’s a great podcast about a romance fraud that went on for years. It’s called Sweet Bobby: My Catfish Nightmare (also now a Netflix documentary).

The documentary introduces us to Kirat Assi, who was the victim of an elaborate catfishing scam carried out on Facebook, between 2009 and 2018.

The fraud involved around sixty people who all corroborated the story of Bobby Jandu, a handsome cardiologist from Kirat’s west London Sikh community. The thing is that, it runs out, the sixty people each had their own fake profiles, and only existed in the scammer’s twisted imagination. At the centre of them all was Bobby was a real person, but he wasn’t really the one talking to Kirat; it was her cousin, Simran Bhogal.

This is not an unusual story – although keeping up a scam for a decade is – but all of our financial system is digitising and opening up massive opportunities for fraud from APP (Authorised Push Payments) to romance scams to business email compromise (the CEO email scam) to deep fakes and more.

The whole criminal fraternities, bad actors, haters and trawlers, have been unleashed en masse on the network and, when it comes to financial scams and fraud, we always say that our only protection is governance. But governance by whom? In cryptocurrencies, it’s the governance of the network of the people. It is clear that this does not work, as there have been too many failures over the past twenty years from MtGox to Quadriga to FTX and more.

So who regulates? Who governs? Who do we trust?

In my position, I trust those who can carry the weight and promise to reimburse and respond. That typically means a regulated financial institution backed by a government license. That does not make me a statist. It just means I’m logical.

Having said that, I have bitcoin stored in a cold wallet. Got them ten years ago and still have them today. They are tradeable and valid, although I have them in a physical store which, after three house moves, thought they were lost. Luckily they were not.

This core question therefore really comes down to we trust ourselves or we trust the system. Libertarians vote for the former; the general public probably go for the latter. Eitehr way you go, it is your choice. Just remember that this choice is not necessarily a simple one.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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