Digital Currencies and the Changing World of Banking

 

Digital Currencies and the Changing World of Banking

I Lead in.

A.   Take 1 minute to think about your associations with the phrase ‘(commercial) banks’ and write down your ideas.

B.   Compare your lists of associations with other students. What similarities and differences do you have?

C.    Do you use bank services? Are you happy with the way banks work in your country?

D.   Do you use online payment systems? What online systems do you use or know?

E.    How do you think the banks will change in the future?

II Match the words to their definitions. Use four words in your sentences.

1.	currency	A.	a statement that shows a company’s assets and debts
2.	consumer	B.	to produce officially
3.	fractional reserve banking	C.	money that is not invested and earns no interest or investment income
4.	to claim	D.	something valuable that can be used for the payment of debts
5.	to loan	E.	to make something stronger
6.	interest	F.	type of money a country uses
7.	idle deposit	G.	to lend money
8.	to fuel	H.	someone who buys and uses products and services
9.	to issue	I.	the practice of holding a portion of customer deposits in bank reserves and giving out the remainder
10.	asset	J.	the extra  money that people must pay back when they borrow money
11.	balance sheet	K.	to demand money because it belongs to you

III Watch the video and fill in the gaps with the words from the list. There are some words you don’t need to use.

monetary; economy; fiscal; fundamental; gold; engines; principles; investors; digital; banknotes; invested; business; circulation; financial; businessman; money; account

Banks are one of the 1) ______ of the modern economy, but the way they work is under threat. Tech-payment giants and 2) ______ currencies are revolutionising how people use money. And this could have dramatic consequences far beyond banking. It could affect consumer privacy, government power, and the stability of the entire 3) ______ system.

 It is difficult to overstate sort of how radically different that world could be from the one that we live in now.

So what would a world without banks look like, and would you even miss them?

The fundamental 4) ______ of banking have been the same for centuries  and revolve around the greatest magic trick of all: how to create 5) ______. It’s called fractional reserve banking. Here is how it started. Hundreds of years ago banks stored gold for 6) ______. But they realised it was unlikely everyone would claim their 7) ______ back at the same time. So they began to loan some of these gold deposits out to other people. This made money for the bank through interest and helped power the economy by allowing idle deposits to fuel new 8) ______ and trade.

As time went on, the banks started issuing 9) ______ or IOUs — rather than physically giving out gold.  And these IOUs started being traded in the economy. This meant the amount of money in 10) ______ was much larger than the value of the gold held by the banks. So the banks’ lending had in effect created new money.

Nowadays, most money is digital. When the bank makes a loan, it creates a new asset on its balance sheet and credits the borrower’s 11) ______ with new funds which creates a new deposit. The 12) ______ principle is the same. Every time the bank makes a new loan it creates new money. In fact, 90% of money in the world is digital deposits that have been created by banks in this way. This is hugely important for the 13) ______.

 IV Watch the video again. Are the sentences true (T) or false (F)? Correct the false statements.

1.    Governments are revolutionising how people use money.  

2.    The fundamental principles of banking revolve around creating money.  

3.    Hundreds of years ago banks stored banknotes for investors.  

4.    Banks began to use their gold deposits to create coins and give it to other banks.  

5.    As time went on, the banks stopped giving out gold and started issuing banknotes or IOUs.   

6.    The amount of money in circulation was much larger than the value of the gold held by the banks.  

7.    The banks’ lending created new money.  

8.    Nowadays, most money is digital.  

9.    Every time the bank makes a new loan economy loses money.  

 

V Match the words to their definitions. Use four words in your sentences.

 

1.	supply	A.	something that people promise to give if they cannot pay back money they have borrowed
2.	interest rate	B.	the capital of the company
3.	intangible asset	C.	(gross domestic product) the total value of all goods and services produced in a country, in one year
4.	software	D.	to get lower in number
5.	security	E.	the amount of something available to use
6.	equity	F.	computer programs
7.	GDP	G.	the per cent people pay to the bank when they borrow money
8.	to recede	H.	asset that is not physical in nature, such as a patent, brand, trademark

VI Watch the video and choose the correct option to complete the sentences.

What it means is that banks are able to respond to commands/demands/demons for money in an economy.  And that means that the apply/reply/supply of money in the economy is very elastic.

There is no set amount of money in circulation. So if the economy is booming and more goods/goodies/gods are being created, then thanks to fractional reserve banking the supply of money should also increase, as people take out loans and make new investments/invested/investor. The ease with which commercial banks can create money is largely controlled by central banks like the Federal Reserve, which set interest rates. If interest rates are high, banks pass those costs onto borrowed/bellows/borrowers.  This makes it more expensive for them to borrow money to buy things, and so banks create less new money. 

Central banks also supply money for use in the economy. They print the physical paper clash/dash/cash people carry around. And so banks and central banks balance the need to create money between them.

That sort of balance means that, you know, money can grow easily with demand, but also that the central bank has sort of a direct presence in payments and transactions/translations/transistor.

 But this delicate balance is under threat thanks to revolution/resolution/evolutions in the way people use money. For a start an increasing number of businesses no longer rely on banks for loans. This is because businesses historically used to create concise/repeat/ concrete assets —like machinery - against which banks were happy to lend.  They could always claim the assets if the borrower stopped repaying.

We know you are reliable.

 I’m glad you think so.

 But intangible assets like software can’t easily be posted as secretly/security/maturity for a bank loan.

The world has shifted in a way that does makes it hard for banks to fund the, sort of, most innovative/innovators/innovator parts of the economy. If you want to get funding as a Silicon Valley get up/ start-up/set up, in general, you’ll need to go to people who are equity investors, so they take a slice of your business in return for some money.

And it is not just innovative start-ups that are turning elsewhere for fundamentally/funding/funded. Since the 1950s the share of bank loans as a percentage of GDP has been relatively stable. At the same time, non-bank loans and securities have risen sharply/sharper/sharpener. This means the role banks play in financing important businesses is receding. And that’s not all.

VII Watch the video again and answer the questions.

1.    How do banks influence the amount of money in circulation?  

2.    What organizations control commercial banks when they create money?  

3.    What do central banks do to control the amount of money?  

4.    What kind of assets did banks use as a form of security in the past? How has the situation changed?  

5.    Do innovative start-ups use banks to borrow money?  

VIII Match the words to their definitions. Use four words in your sentences.

1.	transaction	A.	a type of  computer program
2.	wallet	B.	in a foreign country
3.	stocks and shares	C.	very strong
4.	app	D.	parts of company ownership that people can buy
5.	overseas	E.	a business deal or action
6.	acute	F.	a small case for carrying paper money and credit cards

 IX Watch the and choose the correct option to complete the sentences.

1.    One of the most popular new mega-apps is Alipay from _____ tech giant Ant Group.

a)   Chinese                   b)   China                             c) chosen

2.    Alipay customers carry out transactions by loading money into digital ___________.

a) accounting                             b)    wallets                            c) cash

3.    They can buy lunch or investing in _________  without leaving the app.

a)   stocks and shares         b)  innovative start-up              c) government bonds

4.    And rather than paying expensive international transaction fees to their bank, Alipay users can also use the app _____.

a)    overdraft                             b)  overheads                              c) overseas

5.    Facebook is developing its own _____ _____ and Amazon is also working on financial services.

a)   digital currency            b)  digital stocks                 c) digital fees

6.    Some worry this could concentrate too much ____ in the hands of a few tech companies.

a)  powerful                            b)   power                             c) powered

7.    The super apps in China now do provision of loans, provision of investment services, they provide ______.

a)  insured                           b) insurance                        c) assure

 X Watch the video and put the sentences in the correct order

A.   A central bank digital currency — or CBDC — is a bit like digital cash as it gives the consumer a direct relationship with the central bank.

B.   CBDCs are used or tried in several of countries worldwide, but they’re growing fast.

C.   Some central banks have taken radical action by creating their own digital currencies to rival the tech giants’ payment systems.

D.   The Bank for International Settlements, which is a club of central bankers, says that within three years a fifth of the world will live in countries that have this central-bank digital money.

E.    Most central-bank money is held by commercial banks as reserves against customer deposits. Customers can only access a small amount of this government-made money via physical notes and coins.

F.    China is one of the largest economies leading the way by trialling a digital yuan.

G.   But digital currency issued by governments might be even more radical.

H.   Physical cash is issued by the central bank.

 

XI Watch the video. Complete the sentences with the words you hear.

 

This could change everything. If everyone put their money into a CBDC, then fractional 1) ____ _____ could potentially be out of a job. This could affect economic growth, as they could not rely on consumer 2) _____ to finance their loans. And this would be particularly pronounced in the 3) _____ world where most lending still comes from banks. But that’s just the beginning.

There are also concerns about potentially, you know, cyber-warfare. Because if you can take down the servers that support the central bank digital-wallet system, then you could shut down an entire 4) _____.

Digital currencies could also increase the potential for state intervention in everyday transactions.

It becomes much easier for 5) _____ to completely block your ability to pay for something. It’s very easy to imagine that, you know, perhaps you could program, you know, money in China, so that it can’t be used to pay for books or newspapers from 6) _____ sellers.

Supporters of CBDCs claim they could lead to a world where more people have access to financial 7) _____, and it’s cheaper and easier to move money across borders. But innovations like this could also disrupt the financial equilibrium and give governments far greater 8) _____ over their citizens’ money and lives. So, although it’s possible for the first time in modern history to imagine a world without 9) _____, you might just find you’d miss them if they were gone.

 

XII Watch the video again. Are the sentences true (T) or false (F)? Correct the false statements.

 1.    If everyone put their money into a central bank digital currency (CBDC), then fractional reserve banks would have too many clients.  

2.    In the developing world most lending still comes from banks.  

3.    If there is an attack on the servers that support the central bank digital-wallet system, then an entire economy will suffer.  

4.    Central bank digital currencies could also end the state intervention in everyday transactions.  

5.    With central bank digital currencies it is easier for governments to completely block clients’ ability to pay for something.  

6.    Supporters of CBDCs claim digital currencies could lead to a world where only very rich people have access to financial services.  

7.    Central bank digital currencies make it cheaper and easier to move money across borders.  

8.    Central bank digital currencies could give governments far greater control over their citizens’ money and lives.  

 XIII Fill in the gaps with the correct preposition. Watch all the videos from the tasks to check your answers.

across; under; at; in; out; to; out; in

1.    Banks are one of the engines of the modern economy, but the way they work is _____ threat.

2.    Hundreds of years ago banks realised everyone would not claim their gold back ____  the same time.

3.    The amount of money _____ circulation was much larger than the value of the gold held by the banks. 

4.    People take _____loans and make new investments.

5.    Alipay customers carry _____transactions by loading money into digital wallets.

6.    Customers can then do anything from buying lunch to investing _____stocks and shares   without leaving the app.

7.    Digital currencies could lead to a world where more people have access _____financial services.

8.    In future it would be cheaper and easier to move money _____borders.  

 

XIV OVER TO YOU. Think of the world without banks. Get ready to discuss the benefits and drawbacks of having no banks and using digital currency. Use the questions below to organize your ideas:

A.   Do you think it will it be easier to carry out financial transactions with no banks? Why or why not?

B.   Do you think that it would be easier to use digital money and not paper cash and coins? Why?

C.   Will more people in the world have access to banking services? How will the use of digital currencies influence the life in the developing countries?

D.   What are the dangers of having central bank digital currencies (digital currencies controlled by the government)?

E.    Would you like to use digital currency in your country? What benefits will it give to you as a customer?

 

Lockdown and Office Routine

I Lead-in.

1)    Take two minutes to write down your associations with the word ‘habit’. Work in pairs and compare your lists. What are the similarities and differences in your list. Ask follow-up questions to find out more about other students’ associations with the word ‘habit’.

2)    What habits are considered to be good? What habits are bad?

3)    How do habits form? How long can it take for an action to become a habit?

II Vocabulary focus. Match the words to their definitions. Use three words in your sentences.

1.	entrenched	A.	cause of trouble or unhappiness
2.	commute	B.	to work more slowly and with less effort than usually
3.	anxiety	C.	a place that gives protection from danger and unhappiness
4.	to slack	D.	a person paid by another company to work on a particular project
5.	fatigue	E.	able to imagine how someone else feels
6.	wake-up call	F.	fixed and difficult to change
7.	to abandon	G.	nervousness or worry
8.	curse	H.	extreme tiredness
9.	refuge	I.	regular journey between work and home
10.	contractor	J.	something that makes people realize they need to change the situation
11.	empathic	K.	to leave forever

 

 

III Look through the article. Five sentences have been removed. Read the article and choose from the sentences (A-J) the one which fits each gap (1-7). There are sentences that you do not need to use.

 

Habits can be slow to form. But when they do, they can become entrenched. 1) ______. It is now ten months since many British employees have made a regular commute into the office. New routines have taken root and those will be much harder to break. Some of these new habits are bad, and they may stem as much from managers as from workers.

A survey of more than 13,000 knowledge workers (defined as those who mostly work at a computer) across eight countries  found that, on average in 2020, employees were working 455 hours a year more than their contracted requirement, or around two hours a day. That overtime had almost doubled relative to 2019. And much of the excess may not have been necessary; workers complained about the amount of time they spent in meetings and video-calls, or in responding to messages.

Perhaps this forced communication is the result of manager anxiety. Fearful that remote workers will be tempted to slack, they have closely monitored their teams. 2) ______. They may have trapped themselves in a cycle of useless activity. Many managers complain of “Zoom fatigue”, as they drag themselves from one video-call to another, often keeping other participants waiting as they try to wrap up the previous meeting. However, if they get rid of the needless meetings, productivity should improve. Perhaps managers will make it their new year’s resolution to ask the question, “Is this meeting really necessary?”

3) ______. Cut that time in half and think of how much more might be achieved. And that will be just as true when people return to the office as it is when they work from their kitchen table. The pandemic could provide a wake-up call on meeting futility.

The best habit developed during the pandemic has been flexibility. 4) ______. And with it, the curse of “presenteeism”—the idea that, unless you are constantly visible, you are not working. Self-isolating workers have shown they will happily get on with their work, even when not under the eye of their boss.

A survey of personnel chiefs by a research firm found that 65% planned to allow employees flexibility on their working arrangements, even after vaccines have been distributed. They predicted that around half the workforce would want to return to the office, for at least part of the time. Permitting this flexibility makes perfect sense. When lockdowns end, many workers may relish the chance to escape from their homes and see their colleagues in the flesh. 5) ______. And if they decide to work at home on Fridays, they will no longer feel as guilty as they might have done before the pandemic. The office can be a refuge, not a prison.

Employers will also take advantage of the new flexibility. 6) ______. Handling a combination of remote workers and freelancers will require managers to acquire new habits. The key will be to develop “empathic leadership” that understands the varied working conditions of team members. This might involve sending small gifts; at the start of the lockdown, some employers sent slippers to their team so they could feel comfy (mentally as well as physically) working from home. 7) ______.

 

 

A.   They will be even happier if they can arrive at 10am one day, and 8.30am the next, if that suits their domestic requirements.

B.   Being fully virtual has forced us to reconsider how we meet and collaborate.

C.   Firms will likely change the way they scale up their operations, relying far more on freelancers, contractors and vendors than on full-time employees.

D.   The concept is simple, especially for a global company that works across multiple time zones: work doesn’t happen at the same time for everyone.

E.    The ritual of the daily commute and the standard working day has been abandoned.

F.    As employers begin to think about what it will look like to return to the office, employees should consider what habits they’ll want to continue when the day comes to return to their desks.

G.   Research suggests that executives may spend 23 hours a week in meetings.

H.   When workers headed home during the first lockdown of March 2020, they probably thought the break would last for a month or so.

I.      Contacting workers should not be a matter of a rigid schedule but rather friendly, informal contacts.

J.     Or managers may have felt the need to look busy, prompting them to call more meetings than before.

IV Fill in the gaps with the prepositions from the list. Look through the text and check your answers.

up; up; from; on; under; of; of; on; for; from; in

1.    Many managers keep other participants waiting as they try to wrap ____ the previous meeting.

2.    If mangers get rid ____the needless meetings, productivity should improve.

3.    Firms will likely change the way they scale ____their operations.

4.    Many workers thought the lockdown would last ____a month.

5.    Self-isolating employees often work ____their kitchen table.

6.    Some new working habits stem ____managers.

7.    ____average in 2020, employees were working 455 hours a year more than their contracted requirement.

8.    Employers will also take advantage ____the new flexibility.

9.    When lockdowns end, many workers may want see their colleagues ____the flesh.

10.Self-isolating workers can get on with their work, even when not ____the eye of their boss.

11.The pandemic could be a wake-up call ____meeting futility. 

 

V Comprehension check. Mark the sentences as True (T) or False (F). Correct the false statements.

1 Habits form slowly and are difficult to change.

2. Office workers in Britain have developed new habits since lockdown began.

3. Knowledge workers are people who work in education.

4. Studies show that employees tend to work less than they used to.

5. There is a requirement for employees to work two hours more than their contracted working hours.

6. The overtime is necessary in times of lockdown; it allows to have more productive meetings and video-calls.

7. Some managers feared that employees working remotely would be less motivated, enthusiastic or hard-working than in the office.

8. Many managers chose to closely monitor their teams and have more meetings than before.

9. “Zoom fatigue” became a new problem that many managers faced.

10. Effective time management allowed managers to quickly switch between online meetings without having to keep participants waiting.

11. Managers may spend 23 hours a month in meetings.

12. The pandemic allowed employees to avoid daily commute and be more flexible.

13. Flexibility is a welcome change for most office workers.

14. There is a belief that unless employees are not visible, they are not working.

15. Most self-isolating workers need the attention of the boss to get on with their work.

16. Even after vaccines have been distributed, some executives plan to allow employees flexibility.

17. When lockdowns end, many workers may hate the idea of leaving their homes and meeting their colleagues.

18. After the pandemic employees would not feel guilty if they decide to work at home.

 19. In future firms will likely rely more on freelancers and contractors than on full-time employees.

20. “Enigmatic leadership” is an approach that understands the varied working conditions of team members.  

 

VI Vocabulary focus. Follow the link below. Study the words and word combinations using flashcards, check your understanding, practise their  spelling. Check your knowledge in the test. Play matching vocabulary game (match words to their definitions to make cards disappear)  and save the planet from asteroids by typing in correct words.

 

VII OVER TO YOU. Discuss the questions with other students:

a)    What new habits can people form during the lockdown? Which of the habits may remain even after the lockdown is over?

b)    What good habits can people develop working or studying from home? What habits can be bad?

c)  Have you developed any new habits during lockdown or remote studies? Which of those habits do you want to keep after the pandemic is over?