The day that digital currency started

Mondex paraphernalia

We’ve just had an important anniversary. I’m sure you are all thinking of July 4th and, of course, who can forget it! It’s a date that is very important to many people because it is the anniversary of the birth of The Clash, who played their first live gig on 4th July 1976. But for me, there is a much more important and personal anniversary. Here is the front page of the Swindon Evening Advertiser from 4th July 1995. The day I finally made the front page of my home town newspaper. Got to see my picture on the cover, got to buy five copies for my mother…

MONDEX-History in the making

Yes, I was there on 3rd July 1995 in Swindon town centre when the Swindon Evening Advertiser vendor Mr. Don Stanley (then 72) made the first ever live Mondex sale. And here is the photographic evidence of same — in case you don’t happen to have copy of that Swindon Evening Advertiser — as I emerge Zelig-style from the crowd to watch Don take the e-cash. It was a very exciting day because by the time this launch came, my colleagues at Consult Hyperion, who were instrumental in creating Mondex devices and software, had been working on the project for some years (and for the first three or four years it was entirely in secret).

So for those of you who don’t remember what all of the fuss was about: Mondex was an electronic purse, a pre-paid payment instrument based on a tamper-resistant chip. This chip could be integrated into all sorts of things, one of them being a smart card for consumers. Somewhat ahead of its time, Mondex was a peer-to-peer proposition. The value was transferred directly from one chip to another with no intermediary and therefore no cost. In other words, people could pay each other without going through a third party and without paying a charge. It was true cash replacement, invented at National Westminster Bank (NatWest) in 1990 by Tim Jones and Graham Higgins. Swindon had been chosen for the launch because, essentially, it was the most average place in Britain. Since I’d grown up there, I was rather excited about this, and while my colleagues carried out important work for Mondex (software specification, development and testing for all of the core components), I watched as the fever grew out in the West Country.

Many of the retailers were quite enthusiastic because there was no transaction charge and for some of them the costs of cash handling and management were high. I can remember talking to a hairdresser who was keen to get rid of cash because it was dirty and she had to keep washing her hands, a baker who was worried about staff “shrinkage” and so on.

The retailers were OK about it.

“From a retailer’s point of view it’s very good,” said news-stand manager Richard Jackson. “But less than one per cent of my actual customers use it. Lots of people get confused about what it actually is, they think it’s a Switch card or a credit card.”

That’s if they thought about it all.

It just never worked for consumers. It was a pain to get hold of, for one thing. I can remember the first time I walked into a bank to get a Mondex card. I wandered in with 50 quid and had expected to wander out with a card with 50 quid loaded onto it but it didn’t work like that. I had to set up an account and fill out some forms and then wait for the card to be posted to me. Most people couldn’t be bothered to do any of this so ultimately only around 14,000 cards were issued.

So, why I am wallowing in this nostalgia again? Why do I think more people should be celebrating the Mondex Silver Jubilee? Well, look East, where the first reports have appeared concerning the Digital Currency/Electronic Payment (DC/EP) system being tested in four cities: Shenzen, Chengdu, Suzhou and Xiong’an. DC/EP is the Chinese Central Bank Digital Currency (CBDC).

with the kind permission of Matthew Graham @mattysino

The implementation follows the trajectory that I talk about in my book The Currency Cold War, with the digital currency being delivered to customers via commercial banks. The Deputy Governor of the People’s Bank of China, Fan Yifei, recently gave an interview to Central Banking magazine in which he expanded on the “two tier” approach to central bank digital currency (CBDC). His main points were that this approach, in which the central bank controls the digital currency but it is the commercial banks that distribute it, is that is allow “more effective exploitation of existing business resources, human resources and technologies” and that “a two-tier model could also boost the public’s acceptance of a CBDC”.

He went on to say that the circulation of the digital Yuan should be “based on ‘loosely coupled account links’ so that transactional reliance on accounts could be significantly reduced”. What he means by this is that the currency can be transferred wallet-to-wallet without going through bank accounts. Why? Well, so that the electronic cash “could attain a similar function of currency to cash… The public could use it directly for various purchases, and it would prove conducive to the yuan’s circulation”. How will this work? Well, you could have the central bank provide commercial banks with some sort of cryptographic doodah that would allow them to swap electronic money for digital currency under the control of the central bank. Wait a moment, that reminds me of something because… yep, that’s how Mondex worked.

MONDEX wallet

That was the big difference between Mondex and other electronic money schemes of the time, which was that Mondex would allow offline transfers, chip to chip, without bank (or central bank) intermediation. Offline person to person transfers. Just like cash. That’s huge. Libra can’t do it, and never will be able to because, like Bitcoin, it needs to be online to check for “double spending”.

Mondex was a window into the future of money.

That’s why this week’s special webinar is a Mondex reunion! Tim Jones, one of the co-inventors and Mondex CEO, will be joining with Debbie Gamble who was head of Mondex North America. On our side, our CEO, Neil McEvoy (who led the Mondex specification and implementation team) and Tim Richards (who designed the underlying portable, secure operating system), will join Tim and Debbie to reminisce and have a bit of fun, but much more importantly, to talk about the lessons learned from that incredible experiment, and to share ideas for the coming generation of digital currency innovators. And there may be one or two special guests…

Those who cannot learn from history are doomed to repeat it!


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