The health of a democratic nation’s currency is shaped by two forces: monetary policy, set by its Central Bank; and fiscal policy, set by the state’s ruling government. The thrust of it is that currency and politics are bound together, whether we like it or not. But that’s old news.
Citizens of the cryptosphere are already aware of this, as many members of the community will have been drawn to crypto through dissatisfaction with the governance of modern currencies and the sway that politics has over it. At the very least, we recognize it — and are making choices to hedge our exposure to it.
National politics is increasingly unstable ground — with the political landscape globally colored by polarized opinions. More and more, elections the world over are resulting in coalition governments since no one party receives the majority consensus. Issues such as Brexit — or the incredibly close results in the last United States presidential elections — are demonstrating the deepening divide in opinions, resulting in governments stagnating or acting against the will of a considerable portion of the voting populace.
These are no firm foundations for the money that powers the lives of a nation state’s citizen. Through the powers of technology, we are now global citizens and global consumers. Yet, our global identities are tethered to and restricted by our default currency — that of our home nation-state. Take the British pound — the currency of nearly 68 million people, for example. On the announcement of the Brexit vote result back in 2016, the value of the pound plummeted — a drop, from which the currency has not yet fully recovered. Regardless of whether or not you voted for or against the United Kingdom’s exit from the European Union — the weight this sudden depreciation put on the wallets of the public was the same.
Though it is only January, we’ve already seen rising levels of political turmoil in 2020 — such as the escalating tensions between the U.S. and Iran, weighing on a historically tense political backdrop in the Middle East and garnering concern from leaders globally — how can currency, and its value for holders, sustainably play out against an unstable political backdrop over the next decade? We see three forks in the road ahead of us.
Central banks taking the reins
We have already seen a number of central banks gear up to move into the cryptocurrency space. Appearing to lead the charge are the central banks of authoritarian countries Russia and China, whose initiatives have been making headlines for some time. Central banks of nation-states across the Eurozone have taken middling stances — indicating that, while they are investigating the application of the technology, we are unlikely to see them rolling out their own any time soon.
But, let’s say, for argument’s sake, that over the next decade, central banks rollout the digital iteration of their respective currencies. While this may seem like the most logical progression, there are two sides to the digital coin: A central bank-issued digital currency has built-in acceptability but does not address the challenges of paper currency.
What’s more, this digital national currency is still subject to fiscal policy set by the government, as well as to the challenges of a nation whose consensus is increasingly divided. This scenario is not sustainable for the same reasons as non-digital national currencies.
Corporates take the lead
Another scenario is that digital currency initiatives led by corporations come to the fore. This would feasibly insulate the purchasing power of a given currency holder against government agendas and central bank policies since the governance of such a currency would be the prerogative of the corporation.
Yet, this may be a case of jumping out of the frying pan into the fire. Corporates are essentially governed by their shareholders, or by the executive board who are trusted to act in line with the shareholders’ values. While this means that decision making on issues of governance could be more efficient, we must consider that shareholder values generally tend more toward profit.
Of course, this is entirely sound for a business — but currencies should not be seen as a business opportunity. If a corporation were to produce and implement a new currency, whose direction is decided in line with shareholder values, we would essentially be returning to the fiscal governance of pre-democracy. In this instance, decisions would be made by an elite ruling class, exposing consumer purchasing power to an agenda set to turn a profit for a select few.
A technological change of tact
In my mind, there is no doubt that technology will factor into the future of currency: Technology has already become intertwined with most aspects of modern life. When it comes to money and accounting, technology can offer huge value through its agility, security and automatic, immutable record-keeping.
The consumer citizen governance dilemma is really a question of purchasing power — and how much of the purchasing power of a currency should be subject to governance according to political or corporate agendas. Of course, identifying this as a challenge is diagnostic — and a diagnosis is not a solution. But here is where the case for technology becomes especially compelling.
Applied correctly, technology can allow currency holders to set the agenda for the governance of their money. So, instead of peripheral factors — such as public sentiment or a given government’s spending agenda — shaping the health of a currency, individuals could have a democratic say in how they want the currency they hold to be governed. This type of monetary democracy is unprecedented — because until technology revealed the building blocks, it would not have been possible.
Now, it is. With the help of blockchain technology and a ground-up approach to building out issuance and governance policies, we can build a currency that doesn’t rely on a national or corporate entity for issuance. Instead, the crucial functions controlling the money supply can be based on predefined rules and algorithms — offering built-in transparency and reliability, and assurance that these functions are carried out as intended. Since this is not limited by geography nor borders — it could function as a true global currency, accessible to anyone with an internet connection.
The crux of the issue is this: There is a growing need for a global currency that is not a by-product of national politics. In our view, a currency’s governance should take the will of its holders into a direct account. Especially as we, on an individual level, engage more and more with global goods and services — national currencies are increasingly demonstrating that they are unsuited for the needs of modern citizens on the global level. National currencies tend to meet their needs of national economies — they are designed for this. It makes sense that a global economy needs a tailored currency that would accommodate its needs. Modern technology allows users of a currency to become real decision makers; thus, a global digital currency — that will unite all humanity and serve the needs of the users without political interference — is the most compelling parth forward that I can imagine.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ido Sadeh Man has spent the last 10 years leading product and technology organizations, including both Odysii and Mobli, Considering blockchain as one of the required set of tools for creating updated governance structures for the data-era citizen, Ido has founded an applied research project within Saga the New Contract Policy Institute. The project contributes to the process of defining a new paradigm for a coherent social exchange of value — i.e., an updated social contract.