Introduction to FinTech
and Cryptocurrency
The Role of Finance
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Moving, allocating and pricing of
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Money
Risk
throughout the economy
The functions of financial institutions
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Investment (store of value)
Credit (borrowing value)
Risk transfer (diversification)
Advisory (information)
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FinTech
Innovative Finance
OR
Financial Technology
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Innovative Finance
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Equity-linked hybrid securities
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Securitization
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SPAC
PIPE offerings
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Mortgage-backed securities
Reverse merger
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Convertible bond
Private investment in public equity
Futures and options
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Financial Technology
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Technology aims to compete with traditional
banking methods in the delivery of financial
services
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Smartphones for banking and investment
Risk assessment in online lending
Machine learning in trading
Automated insurance policy
Cryptocurrency and blockchains
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Financial Technology
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FinTech makes financial services more
accessible to the general public
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Technologies
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Artificial intelligence (AI)
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Big data
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AI provides insight on customer spending
habits, allowing financial institutions to better
understand their clients
predicts client investments and market changes
in order to create new strategies
Robotic process automation
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automats specific repetitive tasks such as
accounts payable and receivable
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Technologies
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Blockchain
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Its decentralized nature can eliminate the need
for a third party to execute transactions
Blockchain made bitcoin the first digital currency
to solve the double-spending problem without
the need of a trusted or central authority
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Disruptive Technology
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Financial services, much like publishing,
are made of information rather than
concrete goods
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Very vulnerable to disruption by computer
technology
Blockchains have the potential to reduce
the cost of financial transactions
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Eliminate the need for third parties to manage
transactions and keep records
Lower merchant processing fees
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Largest FinTech Companies
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Bitcoin vs. Cryptocurrency
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Bitcoin is a decentralized digital currency
Bitcoin is a cryptocurrency
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Use cryptography to keep it secure
All digital without physical coins
Not issued or backed by banks or governments
Transactions are verified by “mining”
Records are encrypted
Balances are kept on a public ledger that
everyone has transparent access to
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What is Cryptocurrency?
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Asset
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Commodity
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raw material for productive needs
Currency
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generating cash flows in the future
A means of exchange for goods and services
Collectible
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esthetic value as a painting or sculpture
emotional attachment as a book with autograph
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Bitcoin vs. Blockchain
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Bitcoin is a network that runs on a protocol
known as the blockchain
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A chain of discrete blocks of information,
arranged chronologically
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Information can be payment transactions, trading
activities, business contracts, land titles, ownerships
Bitcoin’s blockchain contains mostly payment data
Bitcoin mining verifies transaction records
across the network
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Miners are rewarded with bitcoins
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Blockchain
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Blockchain Data
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Nodes
Bitcoin is a peer-topeer (P2P) network
Node is a peer, a
computer running
Bitcoin software
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Bitcoin, Blockchain and Node
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Bitcoin network is composed of nodes
Node is a computer running Bitcoin software
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All nodes are treated equally
Nodes verify and accept transactions
Mining nodes organize them in to blocks and
add to blockchain
Each node keeps a full copy of blockchain
Nodes broadcast newly mined blocks to and
receive updates from other nodes
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Layers of the Internet
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The Future of Cryptocurrency
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Blockchain technology has changed finance
since the launch of Bitcoin in 2009
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Distributed system and cryptography
Some believe that blockchains will be
integral to the future of money and market
Others claim that this is a transient bubble
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Optimistic, Pessimistic or Realistic?
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We have seen so many technology innovations
What's new and different this time
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El Salvador’s Bitcoin Experiment
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6.4 million population with 1.5 million abroad
Middle-low-income country with low
economic growth, high unemployment rate,
and large trade deficit
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Remittances from oversea citizens finance the
majority of trade deficit
Oversea remittances are 24% of GDP
US Dollar became its currency since 2001
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Giving up monetary policy
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El Salvador’s Bitcoin Experiment
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El Salvador’s Bitcoin Experiment
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The government wants to maximize the
remittances
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Using bitcoin to transfer money can
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rather than economic reform to grow economy
save fees: $190 million for $6 billion remittances
avoid IRS scrutiny
have no restrictions on transfer amount set by
US banks
Great! Let’s do it …
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El Salvador’s Bitcoin Experiment
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El Salvador’s Bitcoin Experiment
What went wrong?
⚫ Technology
⚫ User problem
⚫ Government
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