Page 24 - Forest Row Local June 2022 Edition
P. 24

24 June 2022 • Forest Row Local
The future of money?
Money is a great invention:
easily transportable, immediately exchangeable and, one would hope, fundamentally rather stable. We are rather used to the folding stuff that fits in the wallet and
the more slippery stuff that slides through our bank accounts as ledger numbers. Will we be as comfortable with the emerging new digital currencies? The future looks... interesting with promises of radical change over the coming years. Here are some of the current streams of developments.
Changes to money are really nothing new, such as dropping
the gold standard in the 1930s. Despite the furore at the time, governments were more free to adjust monetary policy to suit
their other policy objectives. Translated, this means that governments could issue more
of their country’s ‘fiat’ money without holding matching gold reserves. British banknotes famous quotation, “I promise to pay the bearer on demand the sum of...”, was transformed. Rather than redeeming banknotes for gold, one could redeem them for yet more banknotes as trust became the all- but-visible foundation of financial arrangements.
president has made Bitcoin
legal tender. Other countries have not followed his lead. The immaturity of cryto-currencies’ supporting mechanisms, their tendency to be structured and used to make a rather fast buck and their experimental scale
make them intriguing but a touch risky. By contrast, good old British pounds remain firmly supported by tradition, law and everyday financial arrangements. So what is the future of digital currencies? This is where things get rather interesting.
While cryptocurrencies remain those wild-west wonders
that we know and dabble in, institutional investors have also become involved. Whether this has given crypto-currencies greater credibility or simply accentuated their volatility, stories of eviscerated accounts, handfuls of hugely wealthy speculators
and the all-too-frequent sudden collapses in market value continue to abound.
As more money has flowed into cryptocurrencies, governments and central banks have grown restive. That money is drained out of the regular system and may begin to establish a competing and uncontrolled financial system. A powerful organisation such
By Roger Lyon -
Rather like the early days of
the internet, cryptocurrencies
have thrived on a decentralised, almost anarchic infrastructure devoid of centralised regulation
or constraint. In contrast, central banks are considering issuing
their own central bank digital currencies (CBDCs). These are
in many respects the antithesis
of cryptocurrencies: centralised, stripped of all anonymity and entirely under the control of the issuing body. Agustín Carstens made an illuminating statement regarding CBDCs in 2020: “the central bank will have absolute control...and the technology to enforce” when, where and how their CBDC may be used. In other words, CBDCs give central banks the power not only to know what you spend and where but also
to turn off one’s access to CBDC money instantly. Mr Carstens is no outlandish visionary. Rather, he spoke as the head of the Bank of International Settlements, a major hub of the global central banking community.
If money is to be portable, exchangeable and reasonably robust then neither the current crop of cryptos nor the strings- attached CBDCs offer a lasting solution. In between these lies a world of possibilities that continues to bubble with new offerings. Perhaps something durable and useful will emerge.
 Does this put fiat currencies
on a similar pegging with
cryptocurrency since both are
essentially based on trust?
Naturally, this is not true in
practice since if it were simply
trust then Bitcoin might hope
to be as acceptable as pound
notes. El Salvador’s colourful
01342 889 455
as Facebook announcing their impending cryptocurrency (Libra) seems to have galvanised central banks to take a stand before
that prospect materialised with potentially market-shifting results.

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