It is such an irony that the old one pound coin just went out of circulation to be replaced with a new version of it, much more ‘safe’ and 12-side borders. Indeed, it is an irony because it represents the good times of an old currency in continuously expansion but heading, inexorably, to its end.
So, despite the huge cost of changing the currency, the cost that the fakes have made to the real economy and the implementation of the new coins and notes, same problems will come up on the onwards. Because sooner or later, some people will start to replicate them and the Bank of England will have to start the process over again.
The old system loop
These problems will never be wiped out in our current monetary system as it is an aggregation of old monetary systems. They will be there forever. Instead, there is an opportunity, a revolution never seen before whether the central banks, the Bank of England included, might or might not take part.
We are talking about the cryptocurrencies. It is a natural evolution of globalization and new digital technologies. Cryptocurrencies are the way the citizens and users take back control of their money.
Central Banks and Institutions shouldn’t fight it back but to join this revolution and, of course, take the watchdogs role. Recent tends show how, slowly but firmly, those aspects controlled by governments have gone back to the hands of the people. It happened with social communications (internet, open and free-access) and manufacturing (3D printers and open non-regulated markets) and, now, the economy.
On the other hand, they left aside one of the most relevant facts monetary system is experiencing in its history, the cryptocurrencies.
So, at least is what ex-central banker Eugéne Etsebeth sees it. For him, Central Banks are to follow this trend or to die trying. Here are some of the issues banks are facing now in the dawn of the crypto-economy, extracted from his article on Coindesk.
Workforce of the past
Central banks will need to attract and retain fresh talent that will enable them to deal with the new openness and transparency demands
Decision-making in central banks is like wading through treacle – decisions take months because of numerous layers of hierarchy.
Too few technologists and innovators
When they are represented, technologists are generally not part of the discussion when it comes to policy and economic decisions for currency.
Fear of experimentation
This is natural, should a central bank make an error, it may turn out to be a reputation buster – and reputation is the cornerstone of central banks. There is also some trepidation that the early regulation of cryptocurrencies, and associated new technologies, may legitimize their adoption.
Territorial and siloed thinking
Central banks are similar to conglomerates in that they have a number of different and distinct departments that require diverse skills and outputs.
These differences make it difficult to approach a new technology and economic tour de force like cryptocurrency, because it doesn’t fit neatly into any one of the industrial-style conglomerate domains.
Buy versus build approach
Most central banks do not have substantial software development capability. Therefore any new project will have to buy its technology.
Stuck in the status quo
A large portion of central bankers are career central bankers, so the desire and ability to change are not incentivised. Change is often considered a threat to staff, and threats are met with jelly-like stickiness to the status quo.
The central bank asks the banks to protect depositor’s hard-earned money and to serve as many customers as it can: i.e. maximizing financial inclusion. The task of banks is therefore to service a nation’s citizens at the behest of the central bank.
They cover treasury, financial intelligence (KYC), financial services conduct authority, central bank, tax revenue and secret service units. Each of these units may have different acts and regulations that overlap cryptocurrencies and ICOs.
Internationally the nation-state must get guidance from a multitude of organisations like the G20 or G7, International Monetary Fund (IMF), Bank of International Settlements (BIS), Financial Action Task Force (FATF) and INTERPOL. International coordination often requires prolonged diplomacy and mismatched agendas.
The cryptocurrencies allow normal people to create money, organized and supported by the blockchain back-end technology. It is decentralized indeed, but not chaotic as the algorithms behind them can be overseen by everyone and all the mining and code-writing is following the blockchain.
Cryptocurrencies allow new standards through transparency, as all transactions are recorded and are visible. Even so, small companies have seen potential in it, and thanks to Initial Coin Offerings, ICOs, they are basically creating their own money to get investment and develop their ideas, they call them tokens.
Therefore, Central Banks, who regulate and rule the currencies are seeing their roles being override by this decentralized digital money. They can join and recognize their value or, instead, fight it off. New demands and the future are against the banks odds.
Thought leadership series on new trends and blockchain, powered by Humaniq.
Launched in 2016, Humaniq aims to provide mobile finance to the 2 billion unbanked population through its mobile app for good, that uses biometric authentication to replace traditional methods of ID and security. Humaniq’s open source stack and API will be available for startups and other businesses to build services on its core technology, making it easy to adapt their service and plug it into Humaniq’s network to reach a huge, untapped audience.
Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist, he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.