Richard Olsen On The Economic Impact Of The Coronavirus
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Richard Olsen On The Economic Impact Of The Coronavirus
Richard Olsen On The Economic Impact Of The Coronavirus

Richard Olsen On The Economic Impact Of The Coronavirus

Richard Olsen, the founder and CEO of Lykke Corp, is giving us his insight about the impact of the coronavirus on the global economy and what this means for blockchain technology.

Being that the virus is highly contagious, the best remedy against it is isolation. In these circumstances, technology helps us out to keep on functioning as a society on the whole. Thanks to new technologies, such as blockchain, the economy will get transformed completely. This process has accelerated in the aftermath of the COVID-19 outbreak and spread.

On Coronavirus

Coronavirus is really a very infectious flu, which so far has infected more than 400k people in the last months. China has opted for draconian measures, and in the meantime it's starting to spread around the globe. The biggest challenge of Coronavirus is actually its impact on the health care resources, and the threat is that if too many people become ill too rapidly that health care resources cannot cope. It's obviously unknown how the virus would really spread.

What we also don't know is how governments will respond. Will they be very proactive? Or actually, be slow. Finally what we don't know today is the economic impact of the current virus but what it is sure is that people stay home, and the amount of spending will be dramatically reduced, which affects all businesses. We have seen the impact on the economic level already by trade with China. In previous weeks, we have seen a dramatic drop in the stock markets. We don't know for sure how big the impact is on the economy. Scenarios differ.

Some people say it's just a significant slowdown, others believe it is a massive hit for the global economy. Central bankers have already embarked on what they have done since 2008, that is rate cuts and quantitative easing, led by a recent US $5 Trillion stimulus package. That strategy has been and so far continues to be, to provide cheap funding for banks in the hope that the banks will then hand out and pass on the money to the rest of the economy. We have witnessed that this has worked to boost the economy, but has really not had that impact which we had hoped in the sense of strengthening the underlying economy. Now it’s clear the Coronavirus will have an impact potentially much bigger than just a minor recession.

Technology and Decentralization as a Remedy

So what can we do? I argue, my colleagues argue, that technology can help. Why is that so interesting? Because blockchain technology can help bottom up. It is something which is not top down, but anyone who starts to deploy it can leverage its full potential. The genius of blockchain, the technology we propose to deploy, is that it dramatically simplifies everything that historically has been done by middle and back offices within banks. This technology can be used for any type of industry that wants to use financing as its core feature. Key is, that with blockchain, it is possible to tokenize any financial asset, which now can be done at a fraction of the cost. Tokenization can capitalize all assets, including hidden assets like property, natural resources and most importantly shares of small, medium, and also large enterprises. But also governments can use it. They can tokenize their services, which they provide, and all the assets which are at the disposal of governments. Blockchain technology can unlock the resources that are available to the masses, the man in the street, everyone.

Lykke as Enabler

Lykke has been working on this technology for many years. Our vision is to create a seamless liquid global marketplace that allows for easy issuance of shares and utility tokens, and includes wallets, which are in your smartphone. Now when you go and use your smartphone, and go to the local shop, every one—every person—can choose which tokens he wants to use to buy. And the most important part is that the recipient, the shop owner, will receive the token that he wants to receive. Everyone is paid in the currency and token of their choice.

In the background, there is a fluid exchange mechanics, which exchanges one token for the other. The operating model that we have designed to build is scalable, and we do this in the fully regulated framework.

Regulation as a Strategy

So regulation has been key to our strategy. The Coronavirus is here and it is changing the face of the streets from one day to the next. What is necessary is, a fully compliant strategy that can support the government in its existing activities. The swiss OTF license—as it is technically called—but it is a broker dealer license which allows for an organized trading facility to be used as a legal framework for the issuance of tokens, from within Switzerland, but also from around the world. Securities brokers, from any company can then access those tokens that have been issued on the spot.