This has led to Deutsche Bank cutting 18,000 jobs.

In April 2019, Christine Lagarde, Managing Director of the International Monetary Fund, told CNBC that cryptocurrencies and financial technology developments are “clearly shaking” the banking system. She also added, “We do not want innovation that would shake the system so much that we would lose the stability that is needed.”

However, like the story of the emperor who wore no clothes, the real problem is DEBT at a personal, corporate, and national level - and it is a global problem. Furthermore, with historically low-interest rates, the options available to central banks to stimulate economic growth in the event of an external crisis are extremely limited.

To give you a feel for the truly horrific state of affairs of how utterly out of control the debt in most major countries is, look at the US Debt Clock which illustrates in “real-time” how debt mountains are piling up in a selection of the very biggest countries in the world.

While the national debt numbers are a cause for concern, what is truly alarming is the foreign debt - otherwise referred to as the external debt as a percentage of Gross Domestic Product (GDP). This is the ratio between the debt a country owes to non-resident creditors and its GDP. External debt is the part of a country’s total debt which was borrowed from foreign lenders and is, therefore, vulnerable to the confidence foreign investors have in the ability of another country to keep paying its own debts.

The amount of debt owed to foreigners as a % of GDP for different countries has to be of concern - France 201%, Germany 145%, Italy 136%, Japan 105%, USA 87% and Holland with a massive 457 %. Asking for your money back, or not lending an indebted nation any further capital, potentially is one of the levers that foreign investors have in the event of the escalation of trade wars, disputes, and disagreements.

As we have seen, geo-political uncertainties can also trigger an enormous financial crisis e.g. the financial crash in 2008, and was also demonstrated by the spike in the price of oil in the 1970’s and the Wall Street crash in 1929 (which led to the global depression in the 1930s and was arguably the precursor to World War II).

Deutsche Bank estimates that the impact of the U.S - China trade wars has already resulted in over USD 5 trillion from the financial market, and the two largest economies in the world have yet to agree on terms. Given the uncertainty in Europe over Brexit, Greece has just voted-in a government that is going to reverse the spending cuts and tax hikes that it agreed to, as part of its financial bailout. If this leads to Greece getting back into financial trouble, will the Germans agree to bail it out again? Meanwhile, Italy looks to be headed for a confrontation with the European Union as its national debt spirals out of control to over $2.3 trillion (which is the third-largest after USA and Japan!)

It is tragic for the 18,000 Deutsche Bank staff who have just lost their jobs, but already they are looking for new opportunities. Indeed, in the last week, I have personally spoken to a number of banking staff at Deutsche Bank and elsewhere because, as one of them said to me “The writing is on the wall, technology is replacing jobs”, and they are worried about their long terms job prospects. One former Deutsche Bank employee, Medio Demarco, was astute enough to see this ‘writing on the wall’, saying on Twitter that he left his former employer a year ago for crypto. According to his LinkedIn profile, Demarco was employed by the Wall Street bank for two years. Now Demarco is the co-founder of Delphi Digital, which provides research and analysis on crypto.

With the new Fintech start-ups and business that are setting up all over the world, whilst they are creating jobs, they are also exposing the weaknesses of many of the traditional banks and forcing change upon them. These FinTech firms are using technology like Blockchain, AI and Big Data to usher-in new systems and procedures but, in turn, are forcing many of the traditional financial services companies to shed staff in order to try and keep up.

Cryptocurrencies, as Christian Lagarde has mentioned, are a threat to banks. However, one wonders as we see the likes of Facebook with $41 billion (and growing) in cash and short-term investments, talk about Libra being used to help the unbanked, is their real target the broader financial services sector? Indeed, how long will it be before we see other global brands following Facebook and issuing their own digital currency, and so further undermining the need for banks?

The general stance in Russia towards Digital Currencies seems to be softening, as it had been very anti these assets. It was only just last week in Russia the Central Bank admitted that it would consider using a Cryptocurrency, backed by gold, for international settlements. Russia currently holds over $492 billion of gold which, if Digitised, some could be used to settle outstanding international debts and be a way around the economic sanctions Russia is subject to.

More and more governments are looking at Digital Currencies as a way to create more transparency, so minimising their “black economy” and, by using Smart Contracts, they could offer the potential to introduce an automatic collection of taxes - which would be faster and potentially more efficient for revenue authorities. 

Interestingly, Russia has a lot to gain from embracing Digital Assets as it is a big producer of commodities. These assets typically only trade for a few hours a day and only 5 days a week. A Digital Asset pegged to different commodities could help reduce the volatility of these commodities, and provide an alternative way for Russian companies to raise capital, so getting around the aforementioned sanctions. In Germany, BSAF’s new electric car battery factory, which has been built to use commodities such as palladium and produced by Nornickel (the huge Russian commodity miner), would potentially benefit from Digital Assets. This has not been lost on Nornickel as it has been discussing with Swiss regulators the idea of establishing a digital platform to offer tokens based on palladium and nickel. 

According to reports in Bloomberg, Vladimir Potanin, the Russian billionaire and CEO of Nornickle, is interested in creating new Cryptocurrency backed by palladium.

These Digital Assets could allow Nornickel to raise capital and potentially avoid sanctions.

Anything that can reduce the costs of trading in commodities has to be welcomed, and such Digital Assets could offer an interesting New Asset class for investors, as well as creating potentially greater liquidity and low commodity volatility for existing institutions.

Indeed there had been some reports, in February 2019, that Russia would develop an oil-backed Cryptocurrency. 

More recently, on the back of the announcement from Facebook about its new Libra Digital currency, Russia has said that it will not legalise Libra. In an interview with local radio station Kommersant FM, Anatoly Aksakov, Chairman of the Russian State Duma Committee on Financial Markets, said “With regard to the use of Facebook cryptocurrency as a payment instrument in Russia at this stage – my opinion is that. in our country, it will be banned.” 

Unfortunately, recent reports that the biggest ever hack of a Cryptocurrency exchange on  Coincheck, in Japan, (where it lost $530 million in January 2018) will not endear any regulators, including Russia, to Cryptocurrencies.

Nevertheless, Russia’s Agency of Far East for Investments and Exports is reported to be looking at creating a Cryptocurrency hub in the Chinese Russian border, on an island called Bolshoy Ussuriysky. This island falls under the national border of both Russia and China! Has Bolshoy Island been chosen for its location, as the Chinese may also be looking to see how they can use Cryptocurrencies in the Chinese economy?