9 February 2023, 4:00pm UAE time

Professor Lipton has authored or edited 11 books and more than a hundred scientific papers on topics stretching from thermonuclear fusion and astrophysics to monetary circuits. He is an Associate Editor of several journals and a frequent keynote speaker at international conferences.

He joined ADIA in 2021 in the position of Global Head - Quantitative Research & Development in the Strategy & Planning Department. In addition to his role at ADIA, Professor Lipton is Co-Founder of Sila and is an advisor to several fintech companies worldwide. He received the Inaugural Quant of the Year Award in 2000, and was named 2021 Buy-side Quant of the Year Award by Risk Magazine.

Seminar Overview:

First, we start this talk with a quick exposition of the modern monetary circuit theory (MMCT). Then, we analyze money creation by the banking system as a whole and by individual banks and highlight the central banks’ role as the glue that keeps the financial system together. Additionally, we look at the organization of the international monetary system as a whole, emphasizing foreign exchange.

Second, we discuss some of the pain points and frictions of the monetary system and argue that distributed ledger technology (DLT) can remove some of these frictions.

Third, we describe some of the most recent developments in this field. Specifically, we review central bank digital currencies (CBDCs), stable coins (SCs), and digital trade coins (DTCs) and their potential applications. We also address the emerging field of DeFi (Decentralized Finance), including Automated Market Makers (AMM).

Fourth, we show how AMMs can reorganize forex trading and market-making by proposing a cross-settlement mechanism for digital assets on interoperable blockchains capable of handling CBDCs, SCs, and DTCs. By construction, this mechanism generates fair exchange rates for on-chain assets, which are consistent with traditional off-chain markets. Finally, we illustrate the efficacy of our approach on realized FX rates for G-10 currencies.

In the talk, we explain the mathematics, economics, and technology behind these developments and elaborate on their pros and cons.