It is fair to say that historically, worldwide payments were based on technology and centralized regulation. The more technology has improved, the more regulation were required to address the additional complexity of the payment industry and protect companies' and people's interests.

The payment industry was based on gold or paper cash. The good old cash was rather decentralized operationally - it was issued by the central bank, but people were capable of making buying and selling operations in P2P mode, hopefully respecting the tax authorities. It was not clear how to understand how much money every person had - besides the home-kept cash, the bank branches often had their accounts kept in branches. More or less -people, companies, and states could control their finances.

But the technological progress in the XX century was very significant. It allowed centralized information accumulating and keeping, credit scoring, electronic payments, and vast reporting. Payments now exist in the form of global services and as embedded retail cards and BNPL services. Government is capable to become the sole payment operator within the whole country, aggregating personal and financial information about every person under the government digital ID. Also information security has suddenly become a critical issue. The level of progress has broken the traditional balance between technology and regulation and revealed the depth of connection between payment technologies and society's well-being itself.

The payment industry now seriously impacts society and vice versa. There is a huge difference between the thousands of moneylenders who lend loans to the villagers and the uncontrolled national multiple credit card super-emission to the poor and homeless people who have no idea how even to operate their own budget. Getting a house loan in a bank and the micro-crediting for pocket-money amounts with to-the-moon interest rates differ too. The significant growth of poor people is something that affects societies and, obviously, is not simply a common technical question.

Payment mechanisms can be an instrument of politics - we can see that the global banking money transfer system can fall into segments due to the sanction policy. People can instantly lose access to their money. Payment technology follows the global narratives about the eco-green agenda, and we see that top payment service providers come with the 'carbon calculation' as a service product.

The original deal was to let the central bank manage the monetary policy and oversee the banking systems, assuming that the bank's lending business was relatively simple. However, if the payments are so integrated into the life of society and the amendments to the operational policies can impact people's life badly, isn't it fair to share the authority with people and professional communities?

The question now is if the old formula 'payments = technology + centralized regulation' is good enough. Is it even possible for the central bank to operate all the payments in the country by itself? What will be the impact, and are we ready to accept it? Should we, perhaps, extend this formula into 'payments = technology + ethics + society + community control'. When your fridge is capable of giving you a loan - it means that some major change has happened in the world that potentially expects the next level of governance to be in place.

Technology itself is apolitical and can be used to support both ways of ruling the financial system. The difference is in the impact on the people. We either share authority and responsibility with a society which basically means the adoption of web3 principles. Or we continue the surrender of civil rights in order to empower the central monetary authority with enough instruments to guarantee stability.

Regrettably, it is exactly as it sounds – the first way will be the liberalization of payments, whereas another one will straighten the risk of downgrading back to the totalitarian or even monarchy way of living. In that scenario, the payments will be relatively straightforward.

Technology was always a game changer when we analyzed the storyline of the history of payments. For example, the breakthrough in microelectronic technology has allowed advanced tech companies such as VISA and Mastercard to introduce exceptional standards of electronic payment that democratized electronic payments, making them available to the whole society. EMV, Contactless, and tokenization. Biometry and POS hardware. The multiple successful technological stories made it possible to use the banking card issued, let's say, in a Swedish bank, anywhere from, for example, Saudi Arabia to New Zeeland, without any trouble. Very convenient.

Looking at the bigger picture, we can notice the government national IDs and national service apps that simplify access to government services. There is no need to stay in a long queue since you can simply create one request, and all different state agencies will talk to each other on your behalf, providing you with a generalized result. Apparently, this identification system can be easily enriched with the loan and pension sub-products. There is no limit to what level the technology can improve people's lives and make service levels faster and cheaper.

However, it is worth mentioning the downside, if there is any. The technology itself is just a tool, it has neither heart nor ethics, inseparable from the core idea. You can use similar tech to create a nuclear power plant (that we consider good here) and an unclear bomb (that usually looks bad). The question is how we shape it, how we actually use it, and who is in charge of the control. Electronic bank accounts, digital money, KYC policies, biometry - they all can be easily used both ways.

Regrettably, those are no longer just theoretical constructs since we can see the consequences of such neglect of ideology and ethics in real life. The centralized authority shows clearly that if there is an unlimited power to influence something - it will be done to serve even not the justice but the political need of a group of people and even single individuals. For example:

(a) Russian banks have shown the ability to update the negative numbers of the balances of bank accounts that belonged to individuals who were not exactly beloved by the state. It has been done instantly, with the typical bureaucratic boredom like something ubiquitous and non-interesting. Still, it was a significant revelation for me. Despite my deep expertise in payments and programming, I've been obviously forgetting that, at the end of the day, my money is just a single record in the database that can be easily changed by one command. And there are always several people who can do it quickly - for example, the system administrator's junior assistant who was hired last week.

and beyond:

(b) Another significant event happened in 2014, after the Crimea situation. When the global payment companies instantly removed the BINs of 3 Russian banks from production. All plastic card infrastructure supported by those banks has turned into nothing immediately. It was the move of power showing that, basically, one government will decide who will be allowed to stay part of the global payment system and for how long. They have reminded me that at the end of the day - the junior assistant operations manager (who was just hired a month ago) can make a move, and the whole in-country payment system will stop operating. Pensions will not be distributed, and the people will not able capable of paying for groceries.

That message was so clear that launching the national switches has become the ultimate trend for the next decade, from Russia to Saudi Arabia and Sri Lanka. Of course, the low-democratic societies were more motivated, but even the EU has an ongoing discussion about the need to process the payments locally.

and if you may think that it is all about Russia:

(c) The Central Bank of Nigeria just limited the amount of money you can withdraw from the ATMs. It is now $45 per day and $225 per week. If you want to withdraw a larger amount - the 10% commission will be applied. Basically, the idea is to oppose the alternative 'cash USD exchange rate' and support the local CBDC money. The interesting fact is that this has been done instantly to over 211+ million of the population. I am also pretty sure that there was no referendum procedure applied to make such a decision. One media that wrote about it used the term 'technological fascism'.

Whereas originally, the technological advancement was being sold to people as a purely technical matter of better service and convenience, they found a reckoning in significant growth of personal and even national insecurity. The CHIP-based economy seems rather comfortable until you realize that the Taiwan factory TSMC controls more than 51% of the global chip market. What will happen to the high-technology economy if this country ruins its relationship with Taiwan? Even more - there was an open discussion if the national service mobile application should be used for searching for people who are trying to avoid military service. Very convenient in the era of mobile-first, assuming that most people have granted GPS permission to the application without a second thought or even light hesitation.

We see now that technology itself can be pretty dangerous as it narrows the distance between the decision to make a change and the actual change enforcement. It takes nothing but pushing a button in order to launch the missile and make a huge distraction. It also takes no effort to turn the CCTV-like camera system into a totalitarian tool of espionage over the citizens.

Basically, all those issues are caused by excessive centralization, and the appropriate actions focused on decentralization can improve the situation.  If we split the transaction processing over multiple countries - it will not be possible to switch off the payments. In web3 terminology, it is called - federalization which can be quite far away from the ideals of the sovereign digital identity but the freedom of choice where you have to be processed - really matters. Basically, the EU PSD2 directive supports this to some extent.

The reference to the junior system administrator is an apparent intimation to Edward Snowden, who has managed to get the top classified data out of the intelligence facility and successfully publish it then. We could only imagine how exactly the intelligence keeps its secrets, but it would be fair to assume that its standard is much higher than the mandatory PCI DSS requirements for card payment data storage. So, is it difficult to protect the data correctly?

Strict security policies are implemented ruthlessly, IT systems are to be renovated and patched daily, and training sessions for the engineers and operating managers are. It is good, but not enough. Referencing the Russian banking experience, it turned out that it is much easier to bribe the operators than to attack the information security defense - the Ligne Maginot was left unattended once again.

On the other hand, we assume that the major financial institutions have the significant economic power to implement new AI-empowered systems, and I have even heard about the corporate-owned mobile cell stations that allow intercepting all calls from the area and analyzing them for keywords. But will it help? Can they really protect the huge amounts of data they own? We came to this point rather fast, governments are trying to come up with some positive initiatives to protect user data, like GDPR, but they are desperately insufficient. There is no serious legal regulation on how the corporation can use users' data and no adequate responsibility to lose it.

The methods corporations are trying to use to address this issue are also a huge problem. Is it ethically correct to work under constant CCTV surveillance, with keylogger software installed on your working PC, when your mobile calls are being intercepted as well as e-mails? Will it be comfortable to work under such pressure in those organizations? It looks inhuman, and it raises the question of who would really like to work in such military barracks.

But if we even forget about the corporations. Can we really protect critical user data architecturally? Can it be guaranteed? Human biometry can only be lost once, as it is impossible to change it. And if there is no way to ensure the 100% safety of this data - is it ethical to ask people to share this kind of information? Data security leaks happen all the time, affecting many countries and industries, and are being sold out for a penny then.

Besides the technological inability to protect people's data, there is another threat to personal security that is connected to the overexposure of personal data to the government. The national security departments do not respect anonymity and sincerely believe that they should have real-time access to all people's data, including financial transactions, phone calls, and e-mails. Therefore there is a very short time between Apple's declaration to use P2P encryption and the warning from the FBI.

In point of fact, the state agencies cancel the presumption of innocence principle, saying that in order to verify that there is no felony committed - they should possess all the data. And, of course, the questions of national security. Once again, it is very comfortable when any state employee can easily get whatever data he needs and use it according to his job's duties or to his moral code. At the end of the day, he can decide to expose for good as Edward Snowden or sell it on the black market. Data gathered in databases - it is very convenient.

The downside of the state agency’s comfort will be the significant level of every citizen’s exposure and insecurity. In the world of payments, government agencies already practice debiting people's accounts when they need to charge a fee, especially when there is an overdue. Technically it is a simple integration between the state bill payment system and the banks. But from the societal perspective, it means that people lose control of their finances and the order of how he wants to make the operations. It is also unknown who can limit the list of legit reasons to debit someone's account automatically. In perspective, it leads to the alienation of financial instruments from people. Even with the current level of technology, I can easily imagine a world where a person's account is managed by the central bank, and when he gets the salary, it is automatically distributed to cover the utility payments, fees, payments for the credits, and so on. And in the end, he does not have anything. I mean that it is very efficient, of course, but at the same time becomes indistinguishable from slavery. Modern, technological, but still slavery.  With no rights, no free will, and with full dependency on the third party.

A centralized way of storing the data comes with unsolvable data security, ethic, and extra exposure issues. It is comfortable for the state since it allows easy access to data from government agencies and makes their job easy. The downside is people’s data and life security. Alternatively, looking at the sovereign digital identity concept, we see that mass data leak is not technically possible since every data piece is stored separately under its cryptography keys.

We should not allow ourselves to be trapped by technology. Technology is just a tool to help build a more fair and happier society, and the fintech area is no exception. If we give the green light for the specific project, there should be a balance between technology, economy, and moral ground. It seems pretty evident that not all the projects can be released based on tech availability only.

The questions of how we should pay for the goods go far beyond the technology expert discussion immediately after the central banks come up with future development plans and enforce the regulations. Some of the questions are so important and affect so many people and actors that it is hard to believe that the decision on them can be taken in backstage mode. The most critical of those questions is the role of cash and the transformation towards a cashless society.

Getting rid of cash is making people vulnerable in front of the unstable world that changes swiftly and can bring war to your door in a day. The inability to relocate and rescue some of your assets in the liquid cash banknotes can hardly be justified by the general fight with money laundering.

But the cashless society issue would be incomplete if we do not mention the CBDC initiative that many central banks are ultimately supporting. I prefer to believe that the original intention was good or at least neutral. Payments are being commoditized, and central banks now see the technology that can eliminate the need to use commercial infrastructure, decrease costs, and perhaps help the unbanked (everybody worries about the unbanked). Plus, anti-money laundering and transparency.

The problem is that there is never an open and public discussion about payment technologies. It is considered a purely technical area that should be managed by specialists from the central banks. Novations are being accepted in the auto-mode, and the CBDC does not seem like an exception. Because if there is a discussion, somebody will raise the following risks:

(a) Government control over your money will be ultimate. They will see all your spending and will be capable of using this information for different purposes, starting with taxation and selling this data for personalized advertisement generation (when the budget looks empty - many ideas start shining much brighter).

(b) CBDC means the centralized blockchain – the government will be able to track the history of every penny since the day of emission. Unlikely that it will allow money laundering elimination - the criminal world will adapt. Still, the amount of personal data the government will possess will be huge, and it is hard to assess the natural consequences of it.

(c) If the government is upset with you - they can leave you without money. And in CBDC digital cashless society, no money means precisely no money. They will able to forbid other people to transfer or lend you money also. It will be technically possible. In the same way, the regulator is now capable of blocking specific addresses in public blockchains such as Ethereum.

(d) As we discussed earlier, protecting such a massive amount of personal data is tough. Primarily if it is implemented nationally, it is easy to expect that the databases will be leaked and made available to a broad audience for a small fee. For example, at least a year ago in Russia, a Telegram bot was generating reports about any car, including the places where road cameras spotted it. Moscow is full of those cameras, and the cost of this service was just $2.5. That will be the average price for your privacy. No more, no less.

Somebody will have to answer:

(a) What should we do in a critical situation when the assets must be transferred immediately?

(b) What should we do if the central bank infrastructure (responsible for the CBDC) fails?

Considering the arguments above, CBDC is a shining example of the technology that had to be stopped by the community in the very early stages. But in reality, it was accepted automatically without broad discussion or referendum. Even more - the technological narrative makes it look smart to support CBDC. It is the perfect example of the lack of public control and lack of moral grounds. Only by involving more parties and decentralizing the process of decision-making can we potentially avoid such situations in the future.

Subscription - is a temporary right to use something that is not causing any ownership by default. The speed and easiness of using the service are being exchanged on the constant risk that this right will be revoked, which will consequently cause the inability to use whatever was provided through the subscription. Also, the subscription-based economy assumes that you regularly pay for the service that can consume irregularly. As a concept, it is relatively efficient for both the seller (stable income) and the customer (easy to use and low cost); however, in a long-term perspective, there are serious issues that again affect society’s wellbeing.

(a) Subscription-based economy erodes the concept of private property. If you want to listen to music or read a book - the easiest way is to buy a subscription to the service that will not allow you to make even a soft copy of it. What is the electronic book purchased from Amazon Kindle if you are banned on Amazon?

New initiatives from Tesla, BMW, and Mercedes offer you only partial car ownership and constant control from the corporation. They will be able to switch off and on several functions. It can be packaged nicely so that you always will be able to pay the so-called 'full LTV price' and get all parts enabled, but it is easy to assume that only some people will be able to do it.

The rightful question - do we need to regulate the share of the subscription-based economy in our life? Do we need to introduce PSD2-like directives to prevent the domination of this kind of economy?

(b) The new metaverse economy already tends to cherish the exchange of something for nothing, which most likely will not lead to a prosperous society. It is hard to sell a digital copy of something because of the ease of copying it.

However, the subscription economy gives a bright new level to the issue saying that people will exchange their time and money for temporary access that will not even leave the digital trail on their computers. Magnificent.

(c) In the worst-case scenario, we will get a society of people who own nothing. Where BNPL will be typical of leaving and where your salary will be purely virtual since the central bank will re-distribute it across the service providers, covering your last month’s spending.

As it was in the Russian Empire, the absolute monarchy was a role model of a society where only one person could possess the land, machines, financial instruments, and even people themselves. The one man was on top of all the assets and could grant the temporary right to use them to one of his vassals. No one had anything; if the monarch was displeased - he could revoke any granted right immediately.

It was far from efficient economically speaking, but historically we can read about that period making the necessary amendments to understand better the 'subscription-based' economy offered for our consideration as a simple good.

The original public governance system should have worked like this. We are too busy doing our professional duties, so we delegate our ruling power to the temporary elected authorities. And these authorities perform good governance, which is to be controlled by the institutions and possibly by people directly. The people we elect should represent us and our values. If they do not perform well - we select different people.

Unfortunately, in real life, it is more like - we elect people, and they do whatever they want. By all means, we are not electing people who are going to start the war. They never say, please elect us so we can start the war. Or, just an example, to limit your rights and get rid of cash and establish the complex system of civil espionage. Fascinating.

And this problem goes through the whole of society. The fundamental problem is that the world has become too complex, and really, it is tough to manage it well and fair, which leads to automatic acceptance of the offer to manage it somehow - just not to avoid the chaos. Huge decisions are being taken without a proper justification. The most important issue - is the issue that has been highlighted by the media, which shifts money, human resources, and other assets.

The concept of web3, on the contrary, suggests distributing the decision-making power across the community, giving more to ones with more expertise and contribution to society. The control and verification function falls into the smart contracts stored inside the blockchain. Community members can stake their asset-tokens against the pieces of infrastructure that work better and immediately eliminate the non-efficient nodes. The idea is to sustain the meritocratic way of governance and prevent the over-concentration of power in one’s hands that will lead to the ethical and moral collapse of the system. Not speaking about legal consequences.

Another critical piece is the so-called 'digital sovereign identity. This web3 concept says everyone should own their data - it is and should be a fundamental human right. It affects all the data starting with the national ID, diplomas, air tickets, texts, posts on the internet, and by all means, banking and payment credentials and history. Every human should be capable of quickly granting and revoking the right to access every piece of this information to every entity who wants to use it.

This paradigm changes everything. No one can now break the banking database and steal user data - no such a vault anymore. The junior government employee can't use the city cameras to track his ex-girlfriend. Just search by her name. No one will be able to cut you off from your money since you are the only one who controls the private keys from your digital wallet, and god knows how many wallets you even have.

Web3 society will be different from the hyper-centralized world, and the payment part is no exception. The choice is either to surrender the rights and responsibilities to the central facilities in exchange for good service and security. Or to participate within the DAO communities, trying to add value more consciously and taking part in the responsibility. It will define whoever will orchestrate the national payments eco-systems and determine the legal status of trans-border payments and the taxation mechanism. In one world, anonymity will be the greatest sin, and in another - it will be a natural human right. It is our choice.

The State is decentralized by its nature. Based on the votes staked for several years, it is able to execute its governance. Those votes support the authority to enforce the different policies and decisions that are intended to make the life of society better. Of course, it is a very conservative approach that was introduced a long ago when the technological level was primitive and did not allow, for example, to revoke of the vote.

Whatever State is doing is no more but the realization of the stakeholders, voters' power projection. And nothing else. For example, one of the critical functions of the state is to redistribute money between the rich and the dependent members of society. It is easy to imagine that the digitalization and decentralization of this function will eliminate corruption, provides unlimited transparency, and much more control to society over money spending. At the end of the day, nobody will oppose the idea of using open blockchain specifically to control public money spending and government salaries.

The amount of resources matters, and the state is now in charge of the redistribution of the resources towards the creation of a better governance system for the common benefit. It is very unlikely that it is possible to develop and implement the national-scale decentralized system without direct involvement from the state itself.

Help from the state is also required to legitimize the decentralized finance system and oppose malicious aberrations such as CBDC and giant CEX/CEL players who can compromise and parasitize the common infrastructure for their extra benefit. It is impossible to explain why a company such as FTX could function for so long. It is also very questionable why Tether with is allowed to exist with a more than $65 billion valuation without the A-class regular asset and procedures audit. It really does not take so much effort to implement the basic policies for the biggest centralized players in a decentralized world.

Regrettably, what we see now happening is quite different. The state's attention is not affecting the most problematic part of the crypto ecosystem. For example, the straightforward step that should have been considered a long time ago - is to forbid capital concentration on the CEX infrastructure. The regulator had to say that since you people talk so much about decentralization - we are expecting from you 100% transparency in operating people's funds and control from the community over the centralized wallets and open-source-only software.

The regulation we now expect to be executive such as MICA is ignoring the key principles of decentralized finances, assuming that crypto-money is just another kind of electronic money that requires the same regulation as before. Of course, new technology is considered, and, for example, there is a special section about NFT. From one point of view - it is a positive step since the completely deregulated environment led to the well-known rule when at least 95% of all decentralized projects are a pure scam. However, the technological progress in DeFi is partially the consequence of this scam economy. If the state wants to establish the regulation, it is important not to forget to substitute some form of the legit support mechanism. Legitimization, inclusion into the state governance processes, and 0-tax policy for a period of time - could surely become such mechanisms.

I also believe that the lack of state support and the absence of legal status - are what bring the most damage right now. The legit market of web3 projects bringing value is extremely small, mostly due to legal limitations. At the same time, society's interest and demand for such technology are huge, which sustains the incoming money flows which could not be properly invested. The centralized exchanges accumulate an enormous amount of money without any state interference. Then they invest it into risky crypto ventures around, once again, without any concerns from the regulators.

The completely wrong processes push the crypto industry up, and the obvious bubble is being blown, but the government's concern is no more than the taxes.

The role of centralized government should be, by all means, to oppose market manipulation and this obvious bubble creation. It is unlikely to believe that $15 billion or $50 billion bubbles could be created totally unnoticed. Therefore, highly likely, there will be a new omerta agreement when everybody knows about the liquidity and risk issues, but no one raises a flag since it can bury the whole industry. And what is the regulator's strategy? Wait until it falls deep enough, blame the technology and decentralization itself and then justify the more radical CBDC enforcement. Is it that wise?

The ideas under modern blockchains are complicated and usually overwhelmed with cryptography, technology, and math. It makes them difficult to be understood by most people and, as a side effect, opens a broad road for scammers of all kinds. And this also leads us to the thought that the lack of proper education in decentralization is the pillar-size issue of the whole industry. Why will we propagate the decentralized values among the people who do not understand the basics of managing their family finances? Scammers and ponzi-people see the high potential in this under-educated market; it is even more promising than the traditional pirate-like stock exchange. It is very common in the crypto community to talk about X's. Like 4 X's mean 400% of revenue. In this world, 19% per annum from Terra Anchor protocol was rightfully classified as a rather conservative investment.

But are we better?  EU MICA regulation requires providing fair white papers for the new blockchain projects. Still, we can not justify that it is not enough protection before allowing the investment into this kind of asset. It is exactly the profanation of the whole idea, like when the websites ask you if you agree that your data should be collected and analyzed - how should I choose?

The right answer, by all means, is to invest in education. It is not heroic at all and may seem boring. But if we start to explain the basics of asset management since middle school and the idea of the decentralized economy since high school - we are going to wake up in a completely different world. The world where people are much more self-conscious.