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Category: Campfire

Around the Campfire: Who’s in control?

My eye was caught this week by the Bank of England (BoE) posting vacancies for several people for jobs related to Central Bank Digital Currencies, inc...

6 May 2021

Jason Cozens

My eye was caught this week by the Bank of England (BoE) posting vacancies for several people for jobs related to Central Bank Digital Currencies, including a ‘Stakeholder Analyst – Central Bank Digital Currency’. Not that I am looking for another job – but the relentless shift towards a cashless society and digital payments is a big part of my life.

It’s going to become a big part of your life too.

In April, the BoE and the UK Treasury created a ‘task force’ to study the establishment of a CBDC. The CBDC idea is spreading like wildfire – the National Bank of Georgia said at the start of this month it’s considering launching its own CBDC by creating a digital version of the Georgian currency, the Lari. The CBDC is no longer just a theoretical concept; it’s already been tried and tested in China. Cash – paper money – is dying on its feet. In the euro area, cash transactions account for around 10% of GDP. In the UK and US it is around 5%. In Sweden, it is less than 1%.

The Bank for International Settlements (BIS – the central bankers’ bank) put out a report last year, a collaborative study from seven central banks (including the US Federal Reserve) on the ‘foundational principles and core features’ of CBDCs. The first sentences of this report say: “central banks have been providing trusted money to the public for hundreds of years as part of their public policy objectives. Trusted money is a public good”.

The problem for central banks – which they hope to redress by developing CBDCs – is that ‘trusted money’ has become a scarce commodity. Declining confidence in fiat currencies has followed the decline in their purchasing power – that essentially explains why privately-created cryptocurrencies have been created. People have lost confidence in governments and understandably want to control their own assets; they hope to do that via cryptocurrencies.

A major fight is looming and there are more questions than answers. Who issues and controls this ‘public good’? Will CBDCs in our country be identity-based rather than token-based? As one commentator says: “the state of the discussion is so specialised and technical, new monetary systems risk being swept in without any democratic oversight at all”.

The issue of public money was on no-one’s agenda in the latest elections in the UK, where some 48 million people on Thursday this week were eligible to vote in the most extensive range of local elections in almost 50 years. In Scotland – still part of the UK – voters chose the 129 MSPs of the Scottish Parliament, with the Scottish National Party, which backs Scotland’s independence, seen as returning with a majority. The ties that have bound Scotland are bound to be tested again soon; those that link Northern Ireland to the UK feel looser, post-Brexit, than for many years.

Against the background of one of the most shattering events in recent history – the pandemic – the world feels poised on the verge of momentous changes. It’s a bit like the W.B. Yeats poem The Second Coming:

“Things fall apart; the centre cannot hold;

Mere anarchy is loosed upon the world”,

Countries divided, monetary systems changing, previous certainties tossed aside, authoritarian creep in many places – the need for control over what one has, has rarely been more important. In the midst of all this gold provides some certainty – some security. If gold is security, then Glint is its key.

Until next week,

Jason

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