“It is often said that a wrong decision taken at the right time is better than a right decision taken at the wrong time.”
― Pearl Zhu, Decision Master: The Art and Science of Decision Making
In recent weeks, both Germany and Switzerland have taken decisive steps forward in the realm of cryptocurrencies. On one hand, the German Ministry of Finance is set to introduce a “Future Financing Act” that will establish a regulatory framework for the issuance of “crypto shares. Meanwhile, Switzerland’s government-owned bank PostFinance has partnered with Sygnum Bank to offer its 2.5 million customers the ability to buy, store, and sell bitcoin and ether.
While these decisions are a step in the right direction toward harnessing the potential of digital assets and tokenization, timing may be an issue. Even with the best intentions, a strong business case, and a clear roadmap, implementing disruptive innovations without addressing the underlying problems in the financial system may not be the best course of action.
There are some similarities between these two cases that can provide some strategic advice for others. For example, in Germany, the Wirecard scandal highlighted the need for better regulatory supervision and increased responsibility by auditors. While corporate governance guidelines may look good on paper, their effectiveness in practice can be undermined by weak governance, poor performance, and unscrupulous management. Companies that fail to adhere to these standards risk being left out in the cold, particularly if they fall out with their auditor in public.
The collusion between Wirecard and its external auditor was so embarrassing that EY has been banned from taking on any newly listed audit clients in Germany for two years over failures in its work for the collapsed payments company. Against this backdrop, the Future Financing Act may represent a significant challenge, particularly given the complexity of tokenization and the need for greater auditor supervision.
In Switzerland, PostFinance’s decision to offer crypto services comes as the government is grappling with the fallout from the Credit Suisse scandal. While the investigation is ongoing, the responsibilities of various parties remain unclear. A lawsuit will be filed citing the auditor and underwriters, and an upgrade for the local regulator (BaFin) may help to improve the monitoring of the entire financial system.
The era of social media and mobile banking is changing the landscape of the banking industry, as evidenced by the recent events in Silicon Valley. However, before exposing clients to further problems, it may be prudent to carefully examine the internal and external responsibilities associated with digital acceleration. Companies like Palantir can support investigations and monitoring efforts to improve top-line growth, manage risk, optimize legacy processes, and build truly customer-centric enterprises.
As the banking industry transitions to the platform economy, it is essential to prioritize digital acceleration through strategies of interdependence. However, before exposing the industry to the interconnected worlds of TradeFi and DeFi, it is important to address potential problems and streamline decision-making processes. For example, some managers may need to be transitioned to individual contributor roles to simplify the chain of command and boost efficiency. The goal is to make simple decisions at the right time and avoid potential disasters.