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Erschienen in:
Digital Economy and the Information Society Kapitel lesen Erstes Kapitel lesen

2020 | OriginalPaper | Buchkapitel

5. Currency Under the Web 3.0 Economy

verfasst von : Abeba N. Turi

Erschienen in: Technologies for Modern Digital Entrepreneurship

Verlag: Apress

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Abstract

Digitalization, as a core development in the modern socioeconomic and political interactions, has called for sectoral digital transformations. In line with this, the digital economic system is evolving and so are currency and payment systems. Financial innovations through a development of new financial services and products to date have helped in reducing the costs of deposits and increasing the return from lending. Some of such developments have been discussed in Chapters 1 and 2 of this book.

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Vorheriges Kapitel Blockchain and Distributed Ledger Technology Applications
Fußnoten
1
See Mikesell and Mikesell (1994).
 
2
On August 15, 1971, President Richard Nixon closed the gold window and imposed a 10% surcharge on all dutiable imports to force other countries to revalue their currencies against the dollar. See Irwin (2013).
 
3
On May 6, 2016, CNN ran a story on “The 100 trillion dollar banknote that is nearly worthless” highlighting the long-rooted hyperinflation in Zimbabwe and the failed central banknotes in the country, retrieved on April 5, 2019.
 
4
The very recent example in this regard is the demonetization of all 500 and 1000 rupees banknotes by the Indian government with the goal to “curtail the shadow economy and reduce the use of illicit and counterfeit cash to fund illegal activity and terrorism.” See the press release by the Reserve Bank of India “Withdrawal of Legal Tender Status for ₹ 500 and ₹ 1000 Notes: RBI Notice (Revised),” Reserve Bank of India, November 8, 2016, www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=38520, retrieved on April 20, 2020.
 
6
In 2018, the Bank of England published a working paper on the design principles and balance sheet implications of the central bank digital currencies (CBDCs). The paper showed the dynamics in the initial stages of CBDC launch and the potential dramatic shift (bank run) of private sectors and users from the bank deposits to the CBDCs (Kumhof and Noone, 2018).
 
7
See also a working paper series on the central bank digital currencies by the Norge Bank, Norges Bank Papers No. 1 (2018).
 
8
Bloomberg on January 7, 2019, run a story, according to which “Virtual Currencies To Go Down as ‘Load of Nonsense’,” says ECB’s Hansson. Quoting the cryptocurrency bubble and the European Central Bank policymaker Ardo Hansson, they reported the need for investor protection from the private cryptocurrencies. Similar reports show that the European Central Bank has no plans to issue digital currencies; see story by Reuters on September 14, 2019, quoting “ECB has no plan to issue digital currency: Draghi,” www.reuters.com/article/us-ecb-bitcoin/ecb-has-no-plan-to-issue-digital-currency-draghi-idUSKCN1LU1JM
 
9
See the Speech by Tony Richards, Reserve Bank of Australia Head of Payments Policy Department, on “Cryptocurrencies and Distributed Ledger Technology,” Australian Business Economists Briefing Sydney, June 26, 2018, www.rba.gov.au/speeches/2018/sp-so-2018-06-26.html, accessed on March 20, 2020.
 
10
Up until the writing of this text, the Federal Reserve of the United States is not convinced about the idea of CBDCs.
 
11
See Fintech Research by the Bank of Canada: www.bankofcanada.ca/research/digital-currencies-and-fintech/fintech-research, accessed on May 22, 2020.
 
12
See, for example, Griffoli et al. (2018), IMF Staff Discussion Note No. 18/08.
 
13
See the article by the IMF published on November 14, 2018, with running head: “Winds of Change: The Case for New Digital Currency,” www.imf.org/en/News/Articles/2018/11/13/sp111418-winds-of-change-the-case-for-new-digital-currency, accessed on March 20, 2020.
 
14
A study by the IMF supports that CBDCs facilitate real-time and secure international settlements (He et al., 2017).
 
15
See Riksbank’s e-krona project report 2 (2018).
 
16
See also Mancini-Griffoli et al. (2018).
 
17
See the report by the Monetary Authority of Singapore on “Project Ubin: Central Bank Digital Money using Distributed Ledger Technology,” www.mas.gov.sg/Singapore-Financial-Centre/Smart-Financial-Centre/Project-Ubin.aspx, accessed on March 20, 2020.
 
19
Data Source: Sveriges Riksbank, Payment Patterns in Sweden Survey 2018, www.riksbank.se/en-gb/statistics/payments-notes-and-coins/payment-patterns/
 
20
Data Source: Sveriges Riksbank, Payment Patterns in Sweden Survey 2018, www.riksbank.se/en-gb/statistics/payments-notes-and-coins/payment-patterns/
 
22
Data Source: Barontini and Holden (2019). BIS Central Banks’ survey on CBDCs, 2019
 
23
Here, central banks need to have the mandate and ability to increase the CBDC supply, thus the liquidity, to eligible institutions during crisis. Unlike the caped private cryptocurrency supply principle, the supply of CBDCs varies with the demand where central banks buy/sell short-term government securities in exchange for the CBDCs in the account-based CBDC system (see Bordo and Levin, 2017).
 
24
See Barontini and Holden (2019), BIS Central Banks’ survey on CBDCs, 2019, and Hileman and Rauchs (2017).
 
26
See Norges Bank Papers No. 1 (2018).
 
27
See Rogoff (2015) for the details on the cost and benefits of forgoing banknotes in favor of electronic currencies.
 
28
See also Friedman Rule (Friedman, 1989).
 
29
See Barrdear and Kumhof (2016), Bordo and Levin (2017), and Rogoff (2015).
 
30
Norges Bank Papers No. 1 (2018) states that scalability, interoperability, accessibility, security, and flexibility of the CBDCs are possible to realize assuming the associated financial costs of the system development which depends on the technology, functionality, and security and other institutional factors like outsourcing and system ownership.
 
37
See Norges Bank Papers No. 1 (2018). See also Bordo and Levin (2017) who have stated their concerns over the shrinking seigniorage with the diminishing use of cash in the digital society.
 
38
See Norges Bank Papers No. 1 (2018) which identified currency competitiveness, insignificant monetary policy effect, and seigniorage in support of the introduction of CBDCs, even if, according to them, the latter is not an issue for Norway’s baking system.
 
39
Gemini Dollar, https://gemini.com/dollar/, accessed on April 20, 2020.
 
40
Tether, https://tether.to/, accessed on April 20, 2020.
 
41
TrueUSD, www.trusttoken.com/, accessed on April 20, 2020.
 
42
MakerDAO, https://makerdao.com/en/, accessed on April 20, 2020.
 
43
Dai, https://makerdao.com/en/dai/, accessed on April 20, 2020.
 
44
Basis, www.basis.io/, accessed on April 20, 2020.
 
45
In the early 2000s, Enron (an American energy, commodities, and services company) used a fraudulent accounting practice in collaboration with an accounting and auditing company, Arthur Andersen, through techniques of “mark-to-market accounting” and strategic transfer of problematic assets to special purpose entities (SPEs), misrepresenting its financial condition. The company consistently covered its internal problems and publicly released dubious financial statements. Enron went bankrupt and collapsed in July 2002.
 
46
An Introduction to Libra, a White Paper from the Libra Association Members, https://libra.org/en-US/white-paper/, accessed on April 20, 2020.
 
48
See the Libra Blockchain at https://developers.libra.org/docs/the-libra-blockchain-paper, accessed on April 20, 2020.
 
49
In its initial stage, founding members of the association are identified as Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa, Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, MercadoPago, Spotify AB, Uber Technologies, Inc., Iliad, Vodafone Group, Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited, Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures, Creative Destruction Lab, Kiva, Mercy Corps, and Women’s World Banking. See Introduction to Libra at https://libra.org/en-US/white-paper/#introducing-libra, accessed on April 20, 2020.
 
50
Highlighting the data breaches of Facebook, UpGuard report on April 3, 2019, shows that over 540 million records of Facebook users detailing comments, likes, reactions, account names, FB IDs, and so on have been exposed on public Amazon cloud server, www.upguard.com/breaches/facebook-user-data-leak, accessed on April 20, 2020.
 
51
Could Libra solve Zimbabwe’s hyperinflation whose monetary system has been on a roller coaster? BBC, on February 26, 2019, reported a running head, “Zimbabwe introduces RTGS dollar to solve currency problem,” www.bbc.com/news/world-africa-47361572, accessed on April 20, 2020.
 
52
See a chapter from BIS Annual Economic Report 2019 on Big tech in finance: opportunities and risks at www.bis.org/publ/arpdf/ar2019e3.htm, accessed on April 20, 2020.
 
Metadaten
Titel
Currency Under the Web 3.0 Economy
verfasst von
Abeba N. Turi
Copyright-Jahr
2020
Verlag
Apress
Buch
Technologies for Modern Digital Entrepreneurship

Print ISBN: 978-1-4842-6004-3

Electronic ISBN: 978-1-4842-6005-0

Copyright-Jahr: 2020

DOI
https://doi.org/10.1007/978-1-4842-6005-0_5

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