The Swedish Bankers’ Association has spoken out against a digital issued currency, like an e-krona or an e-pound, “warning” the Swedish Central Bank that they would be competing with commercial banks.
“When it comes to electronic money, there’s already plenty. There are bank cards, credit cards, Swish and other electronic solutions. The best option also going forward is probably that the Riksbank sticks to wholesale,” Hans Lindberg, the chief executive officer of the Swedish Bankers’ Association, said.
The problem is of course that such “electronic money” is not really money. They are not even legal tender, so others, including the government, is not obliged to accept them for payments.
They do, of course, and they are widely accepted, but the only “real” electronic money is the one issued by the Central Bank, which we have dubbed senbi.
Central banks are the bankers of commercial banks. Each commercial bank has an account with the Central Bank. That account is managed by the central bank, which in effect prints money out of thin air by adjusting the amounts by buying assets, such as bonds, bad loans/mortgages, etc, from banks or selling assets to them.
Those numbers within those Central Bank accounts are the only legal tender and thus the only “real” money. They are kind of like digital cash, acting within the financial system as a sort of gold standard or the base.
Only commercial banks have access to this money, or senbi as we call it, and when commercial banks transact with each other they do so only through senbi.
A debate is now underway on whether this digital cash should be open to all, rather than limited to commercial banks only.
Previously, of course, this couldn’t really be done, but now with blockchain tech and cryptos like bitcoin and ethereum proving it works, it might be possible.
A binding referendum is to be held on June the 10th in Switzerland to decide whether it, or something like it, should be done.
While other central banks, especially in Sweden where cash usage has drastically fallen, are considering whether they should issue digital cash.
The main reason why they might want to do so is due to this connection between the payment system, run by commercial banks, and money itself.
You could even say that in the way things currently work money is the payment system. That’s because unless you hold cash, or some other concrete asset, the numbers in your debit card can simply be denied to you, and can effectively vanish in times of crisis, although around $100,000 of it is state guaranteed.
That “guarantee” however can mean blackmail. Because if banks are not given however much senbi they want following potential losses due to their reckless gamblings, then they can cut off ATMs, they can freeze those numbers in your debit card, and basically they can “turn off” the digital payment system.
In a world where all is done through this digital payment system, such as in Sweden which is pretty near it, then profit motivated commercial banks in effect have absolute power as far as money is concerned.
That, of course, would be a threat to governments themselves, democracy, liberty, and all else, which is why Sweden is very keen to keep cash moving and if instead their citizens prefer digital, then to provide them with digital cash.
Such digital cash, however, would limit commercial banks’ ability to print money out of thin air or, more sinisterly, to have that blackmail option if they face bankruptcy.
Because, the way things currently work, banks can’t go bankrupt as that would turn off the entire payment system. But if there was digital cash, then the payment system would be unaffected and a bank failure would probably be like any other company failure.
Some would lose money, of course, but there wouldn’t necessarily be any domino effect. It would be like a crypto-exchange going under.
Understandably bankers would not like all this because then they would be reduced from systemic to just another company. But it is no longer really their choice.
First, the people of Switzerland have to decide. Second, the elected need to discuss this matter, there needs to be a public debate, but we don’t think they really have much clue about any of this and we doubt 80% of them have even read the wikipedia page on bitcoin let alone how money, the payment system, and blockchain tech works.
So, perhaps second should be the civil service needs to undertake thorough studies/consultations on the matter with even potential modelings on effects. We do trust them to do a fine job, but judgment would of course be reserved until we see whether they do so objectively and somewhat impartially weigh all matters.
Third, of course, it is for the free market to decide. We’ve long said we don’t see governments as adversaries, not even really bankers, because we’ve long been confident that what this space is doing is based on the highest intellectual foundations.
So if central banks are not quite willing to go all the way to digitize their national currencies, then they should be at least impartial and preferably favorable to the innovation in this space so that their people do have the choice to use actual digital cash, albeit in a limited way.
That should start with taking action against commercial bankers’ clear anti-competitive practices in denying access to the current fiat payment system for blockchain companies by denying them bank account facilities.
Because if central banks are not willing themselves to provide digital cash, and even if they are, then they should be willing to provide their citizens with the option of it by perhaps even encouraging decentralized digital currencies.
Which is why we really are, and perhaps somewhat surprisingly, undecided on this matter of whether there should be nationally issued digital cash or whether the Swiss should vote in favor.
We are undecided because we think there could be another alternative of an incremental and a gradual transition, a sort of bottoms up approach rather than top down.
Blockchain technology and much in this space is a very new innovation and even at best estimates you can place it at ’95 when there was dial up and the blue screen of death.
We think it is actually in the 80s, before computers could “talk” and thus create the internet, or in this space before blockchains/dapps can “talk” and so create another sort of internet.
There are many issues left and basically what we’re saying is that this is no where near ready for grandma. It will be, one would think, but you can’t just “will” that sort of thing. There needs to be gradual improvements, there needs to be learning from experience, there needs to be refinement.
And most importantly it needs to be a gradual transition. People have to be educated to understand just what this thing is to begin with, what role a private key has, how it can be irreversible and therefore one needs to be careful with it, and so on.
So perhaps we’re even with the bankers for once. Perhaps the best government policy for now is to encourage free market competition, which really in this area only this space can provide, and therefore perhaps their best way to give their people a choice is to actually promote, or at least not hamper, the significant innovation going on in this space.
Because after all governments do not make money by printing money (commercial banks do that), but by taxing. So whether it is eth, bitcoin, krona, pounds, dollars or apples, shouldn’t really matter to them.