Sovereign Digital Currency
Since around 2013/14 scholars have been looking for an intermediate approach to monetary reform. If a full 'big bang' transition from bankmoney to sovereign money cannot be achieved in the immediate future, something less comprehensive might be attainable, some kind of sovereign money reform light. Such reasoning is also encouraged by a growing number of central banks, who are now looking into the matter by conducting research and even enacting pilot projects.
The common feature of such activities is to introduce digital cash – also known as central bank issued digital currency (CBDC) – into public circulation alongside the continued bankmoney regime. CBDC can exist either in the form of sovereign currency on account or sovereign cryptocurrency. These would coexist with bankmoney, even if competing with it as well as with some future cryptocurrencies which might gain currency as a general means of payment.
Today, the public has the choice between central-bank money as cash and bankmoney on account, whereby the cash option is becoming ever more limited and bound to disappear sooner or later anyway. By introducing CBDC, the nonbank public would be given the option to choose between bankmoney on the one hand and CBDC as sovereign currency on account and perhaps also sovereign cryptocurrency on the other hand. Some tend to idealise the approach as 'combining the best of both worlds', while others hope for a half-way house to a more comprehensive restructuring of the monetary system in the course of which bankmoney might eventually become obsolete as a result of reversing the wrong-headed development of the last hundred years through which bankmoney has driven out sovereign money to about 90 per cent or even more.
or print out as > PDF
• In accordance with the concept of sovereign money accounts, Ben Dyson and Graham Hodgson (Positive Money, London) have detailed a plan for Digital Cash. Why Central Banks Should Start Issuing Electronic Money >
Contributions to sovereign digital currency built on distributed ledgers by scholars from the International Monetary Reform Movement include the following:
• Yokei Yamaguchi and Kaoru Yamaguchi have contributed a plan for a Peer-to-Peer Public Money System >
• As a follow-up by K. Yamaguchi Public Money, Debt Money and Blockchain-based Money Classified, Japan Future Research Council, Working Paper No.01-2017.
Digital Cash Without a Blockchain
There are different approaches to digital cash technology beyond blockchains and distributed ledgers. One such approach comes from Australia. According to the firm's own terms, 'digicash' is competitive regarding safety, transfer speed and costs > It's better than Blockchain! finews asia, 22 Sep 2017.
safe deposits by 100%-banking
• Among those who have been making the case for 100% individually backed- up deposits is Thomas Mayer, Senior Fellow at the Center for Financial Studies, Frankfurt, and former chief economist of Deutsche Bank
> A Copernican Turn in Banking Union Urgently Needed, CEPS Policy Brief, No. 297, July 2013.
Also cf. > Banish fractional reserve banking for real reform, Financial Times, 24 June 2013; re-published at Thomas Attwood Blog, 24 June 2013> Banish fractional reserve banking for real reform.
Sovereign Currency on Account
The Swedish central bank (Riksbanken) has published a report on the introduction of digital or electronic cash called e-krona. This is deemed urgent all the more as traditional solid cash is bound to disappear in a not so distant future. E-krona is about a new kind of money account with direct transfer of balances, nothing short of a sovereign money account, along with e-cashcard and app. E-krona constitutes a new money circuit of its own, separate from and in addition to the circulation of solid cash and the split circuit of public circulation of bankmoney (sight deposits) and interbank circulation of central bank reserves. E-krona enables the use of electronic central bank money in public circulation. Finance speak would say, e-krona is about opening the central bank balance sheet to nonbanks.
Here is a press release by Riksbanken > This is what an e-krona could look like.
Here is the 40 pages report in full > The riksbank's e-krona project, Sep 2017.
With this, the Sverige Riksbank makes clear that it is serious about its announcement from autumn 2016:
• Riksbanken is definitely poised to come up with a digital currency scheme within two years > Sweden's Riksbank eyes digital currency, Financial Times, 15 Sep 2016.
• Lars Alaeus, Samuel Orrefur, Spencer Veale > Sweden's central bank to consider implementing digital cash, 30 Nov 2016.
• Stefan Ingves, Governor of the Riksbank, rhetorically asks > Do we need an e-krona? , 8 Dec 2017.
Business Insider Nordic, 20 Sep 2017, just learned five key features of the Swedish e-krona >
N. Haering in Handelsblatt Global > Sweden's Big Digital Currency Idea, 1 Nov 2017.
• Dirk Niepelt, Study Center Gerzensee of the Swiss National Bank, has repeatedly argued in favour of sovereign money-on-account side by side with bankmoney > Reserves for everyone. Keep cash, let the public hold central bank reserves, VOX Policy Portal, 21 Jan 2015.
• In an article in the real-world economics review, no.68, 2014, Trond Andresen explained a concept of Electronic Sovereign Money Accounts (ESMA), a system of purely electronic payments that might help to make the transition from bankmoney to sovereign money >
• Uruguay to issue digital 'peso tickets', Bitcoin.com News, Nov 5, 2017.
• A Role for central-bank issued Euro Cryptocash? by Ruth Wandhoefer, FinExtra, Dec 2, 2017
The Governor of the Bank of England, Mark Carney, had announced in June 2016 to extend access to the BoE's payment system to non-bank payment service providers. What sounded then like a plan to introduce sovereign money accounts in public circulation was specified soon after as Central Bank Digital Currency (CBDC). Even though the technical form of CBDC was left open, the indications came down to a variety of a central bank-fed distributed ledger. In the meantime, the project has been deprioritised. Independently, the papers by Barrdear/Kumhof und Broadbent, as linked below, remain basic reading.
> Progress update on the Bank’s blueprint for a new RTGS system, Bank of England, June 2016.
> UK banks to lose their status as gatekeepers to the payment system, Positive Money
• The approach to a digital currency under control of central banks is explained and modelled in a BoE working paper by
J. Barrdear and M. Kumhof > The macroeconomics of central bank issued digital currencies, July 2016.
• Prior to this, Ben Broadbent had discussed the possibility of introducing a central-bank digital currency
> Central banks and digital currencies, Bank of England, 2 March 2016, as a PDF>
• Estonia going for Estcoin? Estonia tests water for own virtual currency > EUobserver, 24 Aug 2017 - which is particularly interesting in that Estonia is a euro member state.
• IMF director Christine Lagarde ponders the issuance of Special Drawing Rights as an IMF cryptocurrency to complement or even replace existing reserve currencies > IMF Chief Suggests IMFCoin as possibility, Investopedia, 7 Oct 2017.
• The Bank for International Settlements, Basel, makes the case for central bank issued digital cash, the more so as traditional solid cash is bound to disappear > Central bank cryptocurrencies, by Morten Becht/Rodney Garratt, BIS Quarterly Review, Sep 2017, 55-70.
Two years before, the Basel Bank had released a first report in favour of
> central bank issued digital currency, 23 Nov 2015.
• David Andolfatto, Vice President of the St. Louis Fed, had put forth a proposal for digital central-bank money in public use, 'Fedwire for all' so to say > Fedcoin: On the Desirability of a Government Cryptocurrency, Macromania, 3 Feb 2015.
Prior to this, J.P. Koning had published a blog on
> Fedcoin, 19 Oct 2014. - Robert Sams comments on this at > Which Fedcoin?
• China's central bank, too > aims to issue digital currency, South China Morning Post, 22 Jan 2016.
What keeps most central banks from embracing the new developments? Quite typically in this respect, Carl-Ludwig Thiele, board member of the Bundesbank, portrays central bank digital cash as an interesting perspective, but does not consider it really relevant:
From Bitcoin to digital central bank money - still a long way to go >
• Marilyne Tolle, Bank of England > Central bank digital currency: the end of monetary policy as we know it? Bank Underground, 25 July 2016
• An explanation of the approach by Ellen Brown > Central Bank Digital Currencies: A Revolution in Banking?, Web of Debt Blog, 16 Sep 2016.