May the Best Cryptocurrency Win: Part 1
Welcome, Stephen Moore to the Cryptocosm!
Steve is the savvy supply-side author-guy almost appointed to the Fed by President Trump but bumped for alleged male foibles.
As a result, first, we got foible-free, double X, Judy Shelton on the Fed. Among many attainments, Judy is the estimable inventor of “Shelton bonds.” These were hypothetical treasuries convertible into fiat or gold currencies at the option of the holder and thus a constraint on runaway money printing.
Second, we get Frax!: “The Coming Synthetic Hegemonic Currency,” introduced on Hacker Noon by Steve Moore with software guru Sam Kazemian and money theory virtuoso Ralph Benko. Frax aspires ultimately to replace the dollar as the world’s reserve currency.
It may not succeed but it is the first notable entry among a long series in preparation for a rousing 2020 on the money front.
Along with a pungent critique of Facebook’s Libra, Moore, Kazemian, and Benko offer a pithy presentation of what the world needs now as new digital money.
Their presentation follows:
“The Kansas City Fed held its annual central bankers’ conclave at Jackson Hole recently. Mark Carney, the governor of the Bank of England, had something very interesting to say there.
Call Gov. Carney the Oracle of “The Old Lady of Threadneedle Street,” long the BoE’s nickname. Carney whispered in delicate central-bankerly terms of the potential overthrow of the dollar as the world’s ruling currency.”
The coup’s leadership?
Governor Carney asserted:
“While the likelihood of a multipolar IMFS [International Monetary and Financial System] might seem distant at present, technological developments provide the potential for such a world to emerge. Such a platform would be based on the virtual rather than the physical.
History shows that the rise of a reserve currency is founded on its usefulness as a medium of exchange, by reducing the cost and increasing the convenience of international payments. The additional functions of money – as a unit of account and store of wealth – come later and reinforce the payments motive.
Technology has the potential to disrupt the network externalities that prevent the incumbent global reserve currency from being displaced.
Retail transactions are taking place increasingly online rather than on the high street, and through electronic payments over cash. And the relatively high costs of domestic and cross border electronic payments are encouraging innovation, with new entrants applying new technologies to offer lower cost, more convenient retail payment services.
The most high profile of these has been Libra – a new payments infrastructure based on an international stablecoin fully backed by reserve assets in a basket of currencies including the US dollar, the euro, and sterling. It could be exchanged between users on messaging platforms and with participating retailers.
There are a host of fundamental issues that Libra must address, ranging from privacy to AML/CFT [Anti-Money Laundering and Countering Financing of Terrorism] and operational resilience. In addition, depending on its design, it could have substantial implications for both monetary and financial stability.”
Libra Faces Large Hurdles
Indeed, there are a host of issues and implications. We respectfully suggest that Libra already has stumbled upon these.
Other stablecoins, however, may clear these legitimate hurdles. Follow along.
Governor Carney grasps what central bankers used to call “The Rules of the Game.” Those rules prevailed back when the central banking game had rules rather than operating by an arcane “Calvinball” discretion.
Carney went on to hint at the possibility that private sector innovation, rather than wise regulators, might prove the engine of progress.
“The Bank of England and other regulators have been clear that unlike in social media, for which standards and regulations are only now being developed after the technologies have been adopted by billions of users, the terms of engagement for any new systemic private payments system must be in force well in advance of any launch. As a consequence, it is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies. [Emphasis added.]”
An open question indeed. Full disclosure: Frax, a stablecoin company which we, with several others, cofounded is set out to accomplish nothing less.
Facebook fielded an extraordinarily gifted team of coders and designers proficient in Move to fashion Libra. Bravo. First-rate!
Its team’s grasp of monetary economics?
Not so much.
Libra has incorporated some crippling conceptual design deficiencies. Some are severe and, we believe, fatal.
More to come on this topic tomorrow…
Editor, Gilder’s Daily Prophecy