World Class Faculty & Research / March 8, 2024

Finance Grand Challenges Speakers Series Addresses the Future of Fintech

Finance is going through a once-in-a-generation technology revolution. Everything from retail banking to wealth management has moved online, and the sector’s rapid growth has fueled innovation, created new opportunities for value creation and generated a host of new challenges. At the heart of it all is this question: How will people pay for things in the future?

Brian Morgenstern, head of public policy at Riot Platforms, which owns and operates North America’s largest Bitcoin mining facility, and Heath Tarbert, chief legal officer and head of corporate affairs at Circle, the largest and most widely used stablecoin network in the United States, shared their answers, and many more questions, with students at the University of Maryland’s Robert H. Smith School of Business’ Finance Grand Challenge Speaker Series event on March 6, 2024.

Hosted by Dean’s Professor of Finance Michael Faulkender, former assistant secretary for economic policy at the U.S. Treasury Department, the series brings the best minds from academia and government to share an open and impactful discussion on the nation’s most pressing economic and financial challenges. During this event, Morgenstern, former Deputy Assistant Secretary for Public Affairs at the U.S. Treasury Department, and Tarbert, former Chief Executive of the Commodity Futures Trading Commission, shared insights from their respective tenures in the upper echelons of the federal government.

Guest speakers Brian Morgenstern of Riot Platforms and Heath Tarbert of Circle join Dean's Professor of Finance Michael Faulkender for a discussion on the evolution of the payment system, digital assets and fintech.

To contextualize the conversation, Faulkender highlighted money's essential and dynamic role in society from a historical perspective, most notably the shift in payment systems from the barter economy to the gold standard and paper currency. Each shift promoted and facilitated the exchange of goods and services while improving value storage.

“Money lets us exchange goods and services and stores value between when we’re paid and when we need to use it,” said Faulkender.

Over the last several decades, digital currencies have experienced a similar trajectory regarding improving payment systems. Faulkender cited the shifts from wire transfers to ATMs to credit and debit cards and, more recently, online banking and cellphone apps.

“The big thing that’s changed today is that substitutes are emerging from outside the traditional banking system,” said Faulkender.

In an overview of currencies, Tarbert discussed the differences between traditional currency, tokenized deposits and stablecoins and presented the risks associated with various types of digital money.

Centrally issued digital dollars, for example, could be tracked by the government that issues them, signifying that a government can prohibit its citizens from enacting transactions based on the goods or services being bought or sold. In comparison, tokenized deposits aren’t widely accessible and operate in a closed network, while stablecoins, which are unregulated, do not have equal value and present liquidity issues.

Despite those shortcomings, a digital dollar might be a good first use case to exploit the value of blockchain and cryptocurrency, said Tarbert.

In a discussion on Bitcoin, Morgenstern argued in favor of its value as an alternative to fiat currency and centralized banking, primarily given that it is inclusive and transparent, censor-resistant and has become more secure in recent years.

“Bitcoin is digital gold,” said Morgenstern. “Similar to gold, bitcoin mining is expensive and difficult, and there will ever only be 21 million bitcoins, so like gold, it is a scarce asset.”

While Bitcoin is an energy-intensive currency, Morgenstern underscored its unique benefits for people sending money to families in other countries or political refugees who are not welcome in their home country’s banking system.

So, what other economic problems could digital currencies solve, according to the experts? They could improve financial inclusion, alleviate poverty and drive economic activity in parts of the world without access to a significantly developed banking system. They can also enhance the speed of transactions and make liquidity available more quickly to more people.

There’s potential, too, to provide financial stability to people in countries experiencing high inflation or devalued currencies, where it’s hard to store value. And because no one government controls the supply of cryptocurrencies, people living under repressive regimes now have a choice in how they store value.

As blockchain technology rapidly advances, Tarbert suggested that the U.S. must strive to keep pace with its global counterparts in passing legislation to establish consumer protections.

“I don’t think we need another federal agency,” said Tarbert. “We need dollar-denominated stablecoins. I’d call them a monetary instrument, the equivalent of cash, and have them regulated by the Fed, but we need to distinguish between commodities and securities.”

Regardless, Tarbert and Morgenstern agreed that the dollar isn’t going anywhere. However, the future of payment will undoubtedly include digital currencies in some capacity. Understanding their benefits, limitations and dangers will help innovators design solutions that benefit society.

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Finance Grand Challenges Speaker Series

The Finance Grand Challenges Speaker Series, presented by the Smith School’s Office of Executive Education, is the school’s latest example of its strategic imperative toward addressing society’s grand challenges. The first event in the series featured Congressional Budget Office (CBO) Director Phillip Swagel and ExxonMobil Chief Economist Tyler Goodspeed in a discussion on the federal budget.

Upcoming events will bring additional luminaries to campus. In April, Sandy Baum, a nonresident senior fellow at the Urban Institute and professor emerita of economics at Skidmore College, and Diane Jones, Former Acting Undersecretary at the Department of Education for Postsecondary Education, will discuss student loan forgiveness.

In May, U.S. Senator Ben Cardin, Chair of the Senate Small Business and Entrepreneurship Committee, and Linda McMahon, Former U.S. Administrator of the Small Business Administration, will join the series to discuss entrepreneurship and small business.

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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