The news was full of surprises this week.
In the undeniably fun and not-so-serious surprise column was animoji karaoke. We admit, the use case for pandas singing hip hop was something we didn’t quite expect, but are happy to see them, nonetheless.
We also had a few surprises on the undeniably more serious side, in the payments and commerce world. Ethereum hiccupped, PayPal pushed into India (and into a direct competition with a hometown hero) and The Federal Reserve decided to take on a reset of digital payments.
Some things go so poorly together that you don’t even want to hear them used in the same sentence. (Peanuts and sardines come to mind.) This week, we saw the equally distasteful combo of “glitch” and “several hundred million dollars.”
Such was the difficulty on the Ethereum cryptocurrency network this week, when a few hundred million dollars (no specific amount has been released yet) were frozen due to a vulnerability in the wallet.
According to reports, a bug in the Parity wallet is serious enough that it could potentially cause the contents of the wallets to be erased. The issue specifically affects a multi-signature wallet that was issued after July 2017; any ICOs that used Ethereum after that data could be impacted.
This is the second big bug that has plagued Parity in less than a year – at least that’s been discovered – and is serious enough to pose a threat to Ethereum, the currency it supports.
Parity’s first bug-related issue led to $30 million of Ethereum being stolen. So far, with this latest bug, a large amount of Ethereum’s digital currency is at risk, with estimates approaching as much as $150 million.
In a comment on Twitter, Parity said the company is looking into the problem and that it thinks the wallets are locked.
We imagine Parity users would prefer if they knew that for sure.
But not to worry, folks: This is just an inconvenient speed bump on the way to a future where cryptocurrencies – bitcoin and Ethereum and the 998 offspring they beget – become the underpinning of our new global financial system.
PayPal’s India Push
The competition in India for digital payments dominance got that much more competitive this week with the announcement that PayPal has officially launched domestic operations in India.
The move puts PayPal into direct competition with locally founded and Ant Financial-backed Paytm, the nation’s current leading digital payments firm.
“India is transitioning away from our biggest competitor – cash – and our digital platform and technology has immense scope to enable this at scale,” said Anupam Pahuja, country manager and managing director of PayPal India. “For us, the marathon has just begun.”
Per a study by PayPal earlier this year, some 57 percent of consumers polled across India, China, Hong Kong, Singapore, Thailand, the Philippines and Indonesia revealed that cash still carries a lot of power, citing cash as their preferred payment method for daily purchases.
Digital payments are still misunderstood among many, often seeming like a difficult and unnecessarily complex addition to their lives.
But that is changing as more consumers in the region are embracing digital methods and purchase channels, and the payments industry is pegged to grow ten-fold to $500 billion by 2020.
PayPal will allow Indian consumers to use the platform to shop online at some of the country’s most popular businesses. Merchants will be able to use the platform to process both local and global payments.
The Fed’s New Digital Payments Outlook
The Federal Reserve is taking a newfound interest in FinTechs – and the potential disruptions they may be bringing in their wake. Or at least that seems to be the takeaway from the recent public statements by various members of its Board of Governors.
“History has shown us that it’s not just a question of where has the risk that we knew moved, but what new risks are developing?” said Randal Quarles, new member of the Fed’s Board of Governors. “I think that in the regulated area … we ought to be looking at the implications of the growth of FinTech … I think we ought to be looking at cyber[security], obviously.”
Quarles’ comments came during a question-and-answer panel at the Clearing House Association’s annual conference in New York, just a few weeks after the president of the Federal Reserve Bank of St. Louis, James Bullard, offered a warning of his own: U.S. banking regulators need to pick up the pace in their efforts to confront the risks FinTech companies pose to the banking sector.
“We need to speed up our consideration of the FinTech issues and think harder about what is the regulatory environment that is going to be appropriate,” Bullard said. “I think we have been complacent so far. That is the battleground for the next 10 years. It is not the same as the battleground for the previous 10 years.”
In the meantime, Quarles also talked about the Fed examining new approaches to its regulatory and supervisory activities, including stress tests, capital ratios and living wills.
“As I have come into the job, I have perceived quite an openness in the deep state at the Fed to taking a fresh look … at regulations,” Quarles said. “There’s a lot of work there to be done, and it won’t be entirely to everyone’s satisfaction, but I think that proceeds fairly straightforwardly.”
So, what did we learn this week? We’d say, don’t bank our future on cryptocurrency – but of course we already knew that.
Perhaps the better lesson is that the end of the year is upon is – just 49 days and counting – which means the twists will keep on coming.
We’ll be here to keep you caught up.