Digital Currency in the Developing World
Where should ownership of the platform reside?
Currency units are digitizing. That trajectory is widely and enthusiastically seen, the desirability of access for the currently unbanked unquestioned.
But the implications of the how behind the what have largely been passed over, the subtleties dismissed as afterthoughts confined to later — some undefined future, a space comfortably elsewhere.
This has led to an implicit acceptance of private parallel currencies.
Is this an acceptance of conviction — or convenience?
Perhaps we — the private enterprises holding the needed IP; the foundations and governments influencing and setting policy; the citizens, investors and human talent making implementations possible — can yet intercede, question the foundations once more, by collectively engaging what Lewis Lapham termed the passion of thought and the will to understand.
I. Underlying Framework
If we agree:
i. that economies function on earnings and credit (credit itself a belief);
ii. that fractional reserve monetary systems delegate credit creation to private sector banks;
iii. that the resulting total stock of outstanding debt is a set of claims against collective future output; and
iv. that this in turn has evolved the mandate of National Central Banks (”NCBs”) from one of passive convertibility to active stability — a stability inseparable from both their right to oversee and ability to intervene.
Should we then be concerned that comprehensive digital monetary solutions — which in some cases already contain within them close to a third of a country's GDP — may be built on top of the private parallel currency systems of telecom providers?
II. Pain Points
Could we collectively pool resources to create an alternate digital currency system — within existing NCB oversight institutions?
Could we collectively implement:
i. A system that would take the current currency rights of citizens — to freely access and interchangeably deposit, exchange/transfer and redeem hard currency — and extend them to digital legal tender managed under the auspices of institutions these citizens elect, appoint, or otherwise vest with the authority to govern?
ii. A system that would permit NCBs to retain control over policy execution and transmission (insurable deposits, reserve requirements, macro-prudential oversight, bank resolution frameworks)?
iii. A system that would help private sector banks evolve to still court sufficient attributable inflows of M0→M1 deposits — critical to lending models in fractional reserve monetary systems — yet be more motivated to substantively expand the reach of services to rural areas?
iv. A system that would encourage developers to confidently invest in building user applications, secure in the knowledge that the underpinning platform had a viable operating model and would be precluded from predatory encroachment on the services provided above it?
III. Solution Helpers
i. Would the owners of the IP be open to housing it in a perpetual industrial foundation, similar to Bosch or Zeiss? This could then enable NCBs to license the technology and create and manage their own national digital legal tender infrastructure, assured that their technology partner will not be bought, merged, or persuaded to abandon maintenance of the mission-critical infrastructure.
ii. Would the investors behind the technology lower their total return expectations, and instead shift to accepting reduced yet constant and compounding returns of perhaps 4-8% on total capital employed?
iii. Would NCBs prioritize investment — for instance, in expansive accessibility roll-outs and operating subsidies to keep transaction fees at or close to zero — to make use pervasive?
I hope these questions help us discover more inclusive ideas: we need them.
Thanks for taking the time.
