[Dave Birch] I very much enjoyed my day chairing the Next Generation Cards and Payments conference (tag #ngcp) in Brussels. I have to say that our friends at Clarion did a fantastic job: the speaker line-up was outstanding and the room was packed (mainly with banks but there were telcos, retailers and others too).

It was genuine honour to chair some of the key players in the European payments world, including the European Central Bank executive board member Gertrude Tumpel-Gugerell:

My speakers also included the European Commissioner for Internal Market and Services Michel Barnier, the head of the Financial Services Unit in the Competition Directorate, Ms. Irmfried Schwimann and the new Secretary-General of the European Payment Council, Mr. Marco Musto. What an excellent day, which entirely reinforced my prejudice that it is regulation that opens up competition that is the single most important driver towards the aforementioned next generation. Thanks also to Dominique Buysschaert from PayFair for being the lead sponsor of such an excellent event.

There was an interesting end to the day. The final speaker, Michel Barnier, was late because of traffic. So I had to fill in while we were waiting for him. Trying to be topical, I gave an off-the-cuff talk (which, it subsequently turned out, was rather well-received) explaining how next generation cards and payments might be used to help with the break up of the eurozone and a smooth transition to new monetary arrangements. Crazy? Maybe not.

Could Portugal leave the euro, as recently implied by their foreign minister, even though just nine months ago there was an emphatic view this could never happen.

[From The Financial Services Club's Blog: What happens if a country leaves the Eurozone?]

This is a good question, and I don't think the role of technology is fully appreciated. Using Ireland as an example, I suggested that the hard e-punt might be the right way forward. This would be a reverse of John Major's suggestion of a hard ecu: remember that?

British Chancellor John Major is proposing a new European currency which would circulate alongside existing national currencies… The Conservative Government is sceptical about full monetary union and regards this new proposal as a way of putting forward a genuine alternative… It is envisaged that the currency, which Mr Major calls the "hard Ecu", would be used initially by businesses and tourists, and managed by a new European monetary fund.

[From BBC ON THIS DAY | 20 | 1990: Major proposes new Euro currency]

This was entirely sensible then, and just as sensible in reverse now. It would work as follows:

  1. The Irish government announces that in three months they will leave the euro and they announce that their new currency will be the e-punt (which would have the same ISO currency code as the punt).
  2. On the appointed date, the government begins to sell bonds in e-punt and the e-punt is allowed to float against the euro.
  3. The euro would remain legal tender to the STR limit in Ireland and people would be allowed to keep euro bank accounts, euro credit cards and so on. There would be no need for people to open e-punt bank accounts immediately, although they might want to in time.
  4. Irish EMV terminals would default to e-punt and euro transactions would simply become cross-border (in this case, the border to cyberspace) transactions. No big deal. Shops could carry on as before pricing in euros if they want or in e-punts if they want to. No big deal.

Thus, the e-punt would become the first virtual fiat currency, there would be no need to create notes and coins, the Irish economy would become more efficient as a result an the disruption to commerce would be minimal. Over time, as mobile phones and who-knows-what become the standard technology for exchange, the need for cash (except for tax evasion and such like) will gradually fade. There will never be a physical punt, although they might make some for souvenir purposes I suppose. The Irish survived without a circulating means of exchange before, and they would survive again.

Since people could not go to the bank and draw out more money, they developed their own currency substitutes

[From Digital Money: Payments without banks]

Having talked about using the transition to new currency as an opportunity to go cashless, imagine my surprise when I found this article in my RSS reader before bedtime:

Raul Eamets, professor of macroeconomics at the University of Tartu, proposed today during his TEDx talk that Estonia should stop using cash at all when adopting the Euro as the national currency

[From Estonian Economist Suggests Abandoning Cash – Slashdot]

Yes! What a guy. So what was once nutty fringe stuff discussed only at the Digital Money Forum is marching towards the mainstream. Perhaps it's time to start looking further a field for the next trend in national currency!

If Facebook were a country, it would be the third largest in the world, so it figures that the social networking giant is trying to develop its own currency – Facebook Credits.

[From Facebook Credits starting to make some real money]

It isn't a country, of course, and we shouldn't get too carried away with that kind of thinking. Perhaps a more practical, while still more radical option, would be to go down the Ron Paul route. Abolish legal tender laws and simply let the market sort it out.

HR 4248 would abolish the legal tender laws, allow the establishment of private mints, and repeal capital gains taxes on gold and silver, allowing them to compete effectively as currencies

[From The Monetary Future: Ron Paul Testifies on Behalf of Free Competition in Currency Act]

(I'm not necessarily advocating going back to bullion here, just saying that perhaps the market might find a good answer.)

If the market does start from scratch, it's not going to end up with bits of paper and lumps of metal, it's going to start with mobile phones and the kind of smart "banknotes" (actually super-clever chip cards with e-paper and contactless interfaces) that we looked at for the Gates Foundation last year.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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