The world of borderless banking
Although being wealthy is mostly associated with the possession of money, only the 0.1% understand how true wealth lies in control and not ownership. After all, you can’t lose what you don’t own.
My exposition here revolves around the traversal of a monopolized version of funny money controlled by the big dogs of an increasingly multi-polarized world. While the current financial system continues to be weaponized by restriction and burgeoning legislature, an emerging shadow economy so impervious in nature continues to push through the frontlines of commerce at full throttle challenging the status quo. This post today commemorates the release of Switch – my brainchild and a homage to the internet, harnessing the power of these forces that be, built upon the foundation of my years of disdain for this global banking system. To understand my quest here better, it is pivotal to first learn about the odyssey of banking between borders – the protagonist of this non-fiction. For my gen z readers’ sake, I try to elaborate on this dough flow with a pinch of history and politics.
The Nixon Shock
“Its just money; its made up. Pieces of paper with pictures on it so we don't have to kill each other just to get something to eat. It's not wrong.” – Jeremy Irons, Margin Call (2011)
The U.S. dollar was effectively depegged from gold on August 15, 1971 when President Richard Nixon announced a series of economic measures in response to the international monetary crisis, an event commonly referred to as the “Nixon Shock.” This announcement included the unilateral suspension of the direct international convertibility of the United States dollar to gold. Prior to this, the Bretton Woods Agreement, established in 1944, had set up a system of fixed exchange rates where currencies were pegged to the U.S. dollar, and the dollar itself was convertible into gold at a fixed rate of $35 per ounce. The Nixon Shock's suspension of gold convertibility effectively ended the Bretton Woods system and led to the transition to a regime of floating exchange rates, which remains in place today. This measure meant that money printed by the US Federal Reserve no longer required adherence to real gold and that the feds could now print money unfettered. Other central banks would soon follow suit; and while many would argue against this, such a decision was pivotal as with the growing population, it would be impossible to maintain a permanent peg to something as finite as gold. It would also turn out to be a decision in the years to come that would seal the fate of the US dollar to be the world’s gold standard for trade and commerce owing to the ‘then’ still comparitively strong economy and a world renown military prowess US held in comparison to the rest of world.
Something has more value only if something else has less value
The power of a nation’s currency today is defined by how wanted it is by foreign nations. This used to primarily depend upon a nation’s exports where products shipped internationally would require payment in local currency that foreign central banks would then have to buy by trading their own. The dynamic of this supply and demand of foreign reserves between the two central banks would then decide who held a higher value. The modern culture however relies on multiple other factors to decide a currency’s value, for example a nation’s political stability, national debt, and it’s currency reserves held by foreign nations – making it all the more complicated to influence a currency’s value. Despite all chaos in the world, the American dollar hegemony continues to stand the test of time having had sprung roots deep into the international economy where most nations in the Middle East such as Saudi Arabia, United Arab Emirates, Qatar, Jordan, Bahrain and even Hong Kong in Asia choose to peg their local currencies to the American dollar to this day. Economies of such nations thrive because of the stability within the dollar club while Washington benefits from a newfound alliance from nations with financial reliance on the USD. In many countries where the national currencies are not trusted (ex. Nigeria, Zimbabwe, Venezuela) or on the verge of collapse, American cash is still king.
Funny Money
“In banking or finance, trust is the only thing you have to sell.“ – Patrick Dixon
With all money in circulation now holding no intrinsic value but being just assumed value, modern banks can virtually be compared to a glorified Excel sheet of accounts where numbers in different cells are added or subtracted. As the tangibility of money continues to diminish with the war on cash and it’s usage, these banks become merely a database of numbers with a set of rules imposed by a higher authority in their jurisdiction ie. a central bank to regulate their math in the favor of state policy. Through 195 recognized sovereign states, each with their designated financial authority (monetary board or a central bank), the international banking system becomes a web of regulations where each state has a set policy in favor of it’s economy to protect it’s local currency from swings within the international trade market. This desired stability and dominance is what makes the flow of money between borders no longer just a matter of finance but strategized politics. Countries like China and India have for years maintained strict capital controls where the outflux of all foreign currency is heavily restricted to promote trade and demand in their local currencies.
The conduit
Wire transfers within the banking system of a single country (domestic transfers) are usually carried out via special channels designated (and usually developed) by the country’s central bank to accommodate for faster/instant settlements within the different banks in the same country; A few major examples being the IMPS (Immediate Payment Service) in India, FPS (Faster Payment System) in the United Kingdom or the SEPA (Single Euro Payments Area) in the EU. Since the flow of funds here is not international and the movement pertains to only the local currency, these transfers tend to have least regulatory oversight and are hence, instant. On the contrary, a DHL from New York to New Delhi today will arrive sooner than a wire transfer between their two local banks – highlighting not a flaw in technology but the bureaucracy within the financial system that governs it. SWIFT (Society for Worldwide Interbank Financial Telecommunication), a global messaging network widely used by major financial institutions worldwide to communicate with each other powers the majority of cross-border transactions today. A transaction between 2 international banks will either require both of them to maintain vostro/nostro accounts with each other or to use a correspondent bank. In both cases, the digital transfer of funds here becomes subject not to the law of one jurisdiction but multiple. For an international settlement to complete, the availability of funds in the sender’s account now no longer remain the only criteria but on top a uninamous approval to the transfer between the sender and receiver by all institutions/parties processing the transaction involved. Intimidated by the monetary fines imposed by international financial watchdogs for lack of oversight on dubious transactions, banks exercise human intervention within these transfers making it cumbersome and often subject to human error. With SWIFT being based in Belgium and subject to EU law, banks in countries subject to political sanctions by the EU risk losing access to this network and as a consequence, the ability to transfer funds abroad – Russia being a prime example as it’s major banks lost access to the network in late February 2022 as part of the Western/European sanctions.
The other major portion of international settlement is carried out via global payment processing networks like Visa, MasterCard and American Express which clearly take the crown when it comes to an industry that has benefited most from the war on cash. Exploiting on the rigamarole of international banking and in absence of a centralized international medium for day-to-day spending, these American-made networks have founded and pioneered a multi-billion dollar industry based purely on processing fee – a percentile they charge the receiver (merchant) when a customer pays them using a card issued on their network. With monolithic volume and widepread acceptability of such cards in store sales, e-commerce, and even P2P (peer-to-peer), charging a percentile-based fee for anything financial has been largely swayed by this syndicate into becoming the universal standard of today. Not without it’s flaws however, this technology remains permeable to a high volume of fraud that continues to remain prevalent to this day stemming from years of technical debt accrued by such networks as their legacy methods for authorization and billing continue to remain functional to this day in many countries. With emerging payment methods like Apple Pay and Google Pay that make point-of-sale payments much more convenient, these transactions, in essence, become even longer chains of authorization where the lapse of a single medium/entity within the chain makes the payment impossible. Fortunately, billing methods where a transaction isn’t an institutional sandwich now do exist.
Satoshi’s Gift
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.” – Satoshi Nakomoto (2009)
Circa 2008, Satoshi Nakamoto blessed the internet with a technology aimed at decentralization and one that would restore a semblence of neutrality within the financial realm. The original Bitcoin whitepaper introduced the world to a groundbreaking concept: a digital currency free from the control of any central authority, designed to enable secure online transactions directly between two parties. Bitcoin proposed a novel solution to these issues by leveraging a decentralized network of computers (nodes) to verify transactions. This network makes use of a public ledger known as the blockchain, where all transactions are recorded and confirmed transparently and immutably. This ensures that once a transaction is added to the blockchain, it cannot be altered or deleted, providing a high degree of security and trustworthiness. In essence, the Bitcoin whitepaper laid out the blueprint for a new form of money that is secure, transparent, and decentralized. It sparked a revolution in how we think about currency and financial transactions in the digital age, paving the way for the development of other blockchain technologies and cryptocurrencies. Bitcoin's underlying principles challenge traditional banking systems and propose a future where financial transactions are democratized, secure, and free from central control.
What goes up must come down
Being a decentralized asset and hence void of any intrinsic value where the price of a coin becomes completely dependent on the dynamics of the market, major swings within the international markets do sway the price of such an asset but are no guarantee of it’s demise. In contrast, markets for cryptocurrencies tend to shoot up in times of uncertainty and chaos where it becomes a more favourable liquid asset than a stock or government-issued tender. This impediment of unstability is what makes cryptocurrencies viable only as either investments or as a tool for ‘transient-banking’ which essentially means that crypto be used briskly to cover as many hops as possible in the chain of a business transaction until the funds have reached the final recipient, ultimately avoiding the volatility of the coin’s market price and exploiting the sheer advantage of transacting beyond borders on the blockchain instead of the traditional banking system.
Fast-forward today, cryptocurrencies single-handedly steer the international shadow economy despite their volatility, courtesy of ‘stablecoins’ – an emerging asset class aimed at offsetting the problem of market volatility within the cryptocurrency ecosystem. Being essentially digital tokens mimicking fiat money issued on the Ethereum blockchain (or one of it’s forks) and controlled by a private company/authority masquerading them as ‘cryptocurrencies’, such tokens, among many other things, lack the basic fundamental of being decentralized. Despite the demerit, stablecoins now reign over the crypto ecosystem with more real world usage than the actual cryptocurrencies themselves, primarily because of the convenience they bring and how widely they are accepted by exchanges worldwide. With billions of dollars in circulation, such tokens are still at the end of the day just a centralized layer on top of the actual bedrock of decentralization (the blockchain) posing a risk of sudden collapse within the ecosystem. In a way, the business model of such tokens can be attributed to that of fractional reserve banking where only a % of what is in circulation actually exists, only in this case – unregulated. And while the stability of any real cryptocurrency is a lie and a fallacy, a graver concern today lies in it’s questionable fungibility, but stay with me – not all is yet lost.
The dark horse
Shadow economies since time immemorial have relied on the virtue of fungibility – the lifeblood of their ecosystem. The fact that a 100 dollar bill can exchange a hundred hands and still be traded for another bill/bills of similar value without a history of ownership is quintessential to the prosperity of any shadow economy. In today’s world where sheep have accepted the concept of taxation of income as legal, shadow economies remain belligerent against such theft by giving precedence to control over convenience. At the end of the day, a thousand dollars in your pocket is money you have but a thousand dollars in your bank is just money you have access to. The ordeal of this usage of centralized mediums like banks can be explained best as a handicapped possession of your wealth; You can still move it, but you need help and everyone notices. This resilience against paper trails and traces of ownership is what empowers the usage of cash within such an economy and although it’s usage remains undefeated, the uniqueness/identity of each bill make it only partially fungible while it’s tangibility makes it prone to confiscation coupled with the threat of it’s transportation in large sums. This is where the world of paper and cryptocurrencies conjoin, striking a perfect balance of convenience and control – making the duo a hustler’s wet dream. While Bitcoin continues to reign supremacy over the crypto world, it’s pseudonymous nature and lack of fungibility are flaws that remain immutable. Making people associable with known addresses on the blockchain where amateur analysis of repetitive patterns enables forensics of financial data by anyone, it falls short of being the gold standard for someone wishing to remain unseen.
Monero is an open-source privacy coin built with an essence of mathematical genius. Using properietary technologies such as RingCT and stealth addresses, transfer of value within this blockchain becomes not only untreacable but as fungible as gold and even infinitely divisive. Unlike Bitcoin (and it’s family of coins) where methods like mixing of funds are used to achieve potential anonymity, Monero remains traceless by default. This hallmark of absolute anonymity comes with it’s due controversy and critique in the media owing to a vast majority of it’s usage on the dark web making many institutions wary of listing it among other coins in their basket. Despite such image, Monero remains highly revered and stands as the only true contender to the cash we use in our society today, going further than actual cash and offering true fungibility. It is without question that Monero would become part of the core suite at Switch.
Switch
The world of crypto continues to endear the misfortune of being largely centralized even though it’s underlying technology is the dire consequence of flagrant centralization of money by the governments of the world.
Conceptualised in 2017 and originally intended to be an international crypto exchange, this project is a consequence of all problems I faced in my early years of running an international online business where the biggest hurdle wasn’t profit but the poor methods of it’s cross-border settlement. For you e-hustlers from ±2007 during the internet’s adolescence; names like PayPal, AlertPay, Liberty Reserve, WebMoney and Moneybookers were memorable methods of fee settlement for most freelancers online. Yet today, even with new players emerging in the market, all of them combined fall short against the volume of the nascent blockchain money – a fine example of how anything financial with geographical strictures at its core is inevitably doomed to plateau. The fact behind this travesty lies within the prejudicing of money in the sense that the legal tender of one nation might face restriction in a certain country while it is allowed freely in another – ultimately cutting off the usage of such money transmission platforms from certain jurisdictions and instigating the then illegal opportunities for circumvention. It is the same reason why finding a payment processor for your business online today is no longer about just accepting money but about judging your income stream geographically to see if it befits the moral compass of the new world order.
Motivated by such shortcomings of the traditional payment gateways that are restrictive, hold your funds, charge obscene fees and rely on the traditional banking systems, Switch is crypto-only platform conversely designed to be an all-in-one tool for your business when it comes to managing payments – including monitoring, accounting, and statistics – all under one roof. Unlike many payment gateways however, Switch is a non-custodial platform that operates without access to your funds, relying solely on the already existing blockchain architecture to allow anyone and everyone to formally accept value online without the indulgence of borders or cast. Precisely centralized and curated for the basic internet user, Switch sets a precedent for the crypto industry where the user truly remains in control of his wealth without question or limit – fundamentals that are surprisingly rare in an industry originally established upon the principles of financial freedom.
By issuing a public identity to anyone with an active email address, an account number on Switch becomes comparable to a social media handle that allows anyone on the internet to receive payments online outside the world of traditional banking. Switch being merely an interface however, with no technical capacity to access it’s user’s funds, the user/merchant must choose an external crypto wallet to spend their holdings. This default division of control frees Switch from the responsibility of protecting any user funds creating an ecosystem where Switch becomes a layer of deposit, accounting and management while the key to the locker remains within your phone/wallet striking a perfect harmony that now allows anyone on the internet to immediately and formally start accepting crypto payments within minutes where you alone retain complete control of your funds. With it’s caveats of course, as Switch does not indulge or participate in any forms of traditional brokerage/fiat payment processing, the liquidiation of funds received by merchants on Switch remain their sole responsibility.
Switch is a platform built on the virtues of freedom, simplicity, user experience and privacy. Signups now open as of 10/09/2024 with both free and paid plans.
In retrospect
As keyboards continue to replace kalashnikovs today, the world of banking becomes a dichotomy of convenience and control with shadow economies truely raising the bar for the latter. Catalyzed by the policies of nations becoming increasingly plagued with taxation and bureaucracy, the advent of cryptocurrencies in a constantly digitalizing human life tilts the scales in the favor of those who truely understand the amount of mobility and freedom that comes with a financial independence void of all centralization. My rationale behind this piece and my work does in no way suggest or propose an obsolescence of the status quo as this parallel does not survive in the absence of either. Even though I’m limited by the technology of my time, I truely believe that ideas are bulletproof and that the purpose of life is not to live forever but to create something that will.
I remain reachable at hi@anhad.com for my readers.