Will Scotland be the first to issue a national digital cryptocurrency? (Part 1)

Compiler's Note: It seems that the Scots are once again leading humanity forward, as they have an urgent need to issue digital cryptocurrency.

We all know that in the history of human civilization, those outstanding Scots (or people of Scottish descent) shine like stars, Adam Smith, David Ricardo, David Hume, Alexander Bell, JK Galbraith. Just thinking about the achievements represented by these names will make people burst into tears. The theories or inventions of these greats have deeply influenced our society and our current lives.

In interaction with the equally rational English people, from March 2013 to September 2014, the Scots staged a wonderful drama of an independence referendum on the global stage. The fate of 5.3 million people was decided in a peaceful and bloodless manner, which is also a chapter worth writing in the history of human civilization.

During the independence referendum, in addition to discussions on major systems such as defense, energy, democracy, and social welfare, the uncertainty in monetary system arrangements profoundly and decisively affected the outcome of the independence referendum: Scotland remained in the Commonwealth.

But the Scots continued to explore monetary system arrangements, resulting in this report published by the NEF think tank.

Note: The title image is Mel Gibson's movie "Brave Heart", a movie that you can watch many times. It tells the story of Scottish national hero William Wallace's pursuit of freedom. Go watch it and listen to the flute playing.

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Original author: Duncan Mccann and Josh Ryan-Collins are both researchers at the New Economics Foundation (NEF), an independent think tank. Scotland wants to create a new, all-inclusive payment system.

Contents

==Summary==

Digital innovation opens up exciting possibilities for new types of currencies and trade organisations. As a clearly defined, integrated economic region of 5.3 million people, with a strong sense of national identity and a local council, Scotland is well placed to create a new digital currency and payments system. Such an approach could stimulate the local economy, create a level playing field for small businesses, and deliver social justice for all citizens.

Currency concerns loomed large in the Scottish independence referendum campaign. The fear of losing the pound was one of the deciding factors in the final vote. But the lack of debate also prevented a sensible analysis of what independence and the pound should be about, or what a new Scottish currency should be.

Crucially, Scotland has not attempted to abandon the pound in order to launch its own new domestic digital currency. Such a new payment system could operate alongside the pound and complement the social and economic benefits of continuing to use the Commonwealth currency.

Money is humanity’s greatest invention and a powerful social technology. But most people, despite using it every day, have never thought about what money really is, how it works and its impact on society.

A growing number of innovators have recognised the potential to redesign money to make it better for people and the planet. So far, most of these initiatives have been small-scale, but developing internet and mobile phone technologies are offering new, larger opportunities.

In the Commonwealth, 97% of new money is created by commercial banks in the form of interest-bearing liabilities – that is, loans. Scotland, like the rest of the Commonwealth, would benefit from a diversified monetary system, including one where money is not created by bank credit, to mitigate the worst consequences of the current system and create a more diversified and dynamic economy.

This report outlines the creation of a new national digital currency system: in Scotland, the currency is the ScotPound, and a free point payment system - ScotPay.

Our proposals draw on more than two decades of research on top-down reforms of existing national monetary systems, as well as grassroots and complementary currencies.

Scotland's new currency, the ScotPound, will be non-convertible and purely digital, operated through a public utility - BancaAlba.

The launch of such a program, even if the first batch is relatively small-scale, will have a number of social and economic benefits:

1. It would boost the economy : We propose a 250 ScotPound (S£) dividend to be given to every Scottish citizen, improving overall purchasing power within the economy. The injection of funds would not go into the UK deficit and we estimate that the cost of paying for the infrastructure would be very low – £3 million, especially in times of austerity.

2. Reduce costs for businesses : A new payments system – ScotPay – will provide the world’s first publicly owned, not-for-profit national payments system, enabling Scottish merchants to accept payments for goods and services without being charged fees by banks and global credit card companies.

3. Social inclusion : Currency will be available to everyone, and payments will be made via mobile phone text messages or an app. For those who cannot or do not want to use this technology, a voice recognition system will also be implemented to ensure everyone is included.

4. Lead by example : The project will demonstrate that a new national currency can be created and implemented. Successful implementation will significantly reduce the chances of any future debates about independence being inappropriately abandoned due to fears of losing the pound.

The programme will raise awareness of how money works and its potential uses, positioning Scotland as a world leader in financial innovation.

The specifications and designs in this material are for the ScotPound currency, the ScotPay payment system of public interest, and the public utility operating company BancaAlba. This report is not a final blueprint. While highlighting the huge economic and social potential of financial innovation, we hope that the people of Scotland and the political parties will discuss and consider such options, whether or not there is another independence referendum in the future.

1. Introduction – Why is currency a problem?

In the most important area of ​​economics, the study of money, complexity is used to obscure the truth or to avoid it rather than to reveal it. The process of money creation by banks is so simple that it is excluded from consideration. A deeper reasoning should be commensurate with such an important matter. (Note 1)

JK Galbraith, Economist (1975) (Editor's note: JK Galbraith, this American tycoon is of Scottish descent.)

1.1 Currency and Independence

Many independence campaigns call for a new national currency and sovereign monetary policy. But in Scotland’s 2014 referendum debate, the main pro-independence party took the unusual step of proposing that the British currency continue to be used after independence. (Note 2) This demand has had a modest impact on monetary policy in the Sterling Area, including among the few representatives of the Bank of England. In stark contrast is the American Revolution in the 19th century, about which Benjamin Franklin said that “the fundamental cause of the Revolution was the act of Congress prohibiting the colonies from continuing to issue their own money.” ^{(Note 3)}

During the Scottish independence referendum campaign, the currency issue was marred by misinformation and misunderstanding. For example, repeated assertions that Scotland was too small to support a successful currency and that prevented Scotland from using the pound were unfounded. But the suspicion and fear generated among Scottish voters led to currency doubts, which were the single biggest issue driving people to vote against independence. (4)

It is worth stressing that while Scotland may be prevented from having any representation at the Bank of England, there is no way that the Westminster government or the Bank of England could take steps to prevent Scotland from continuing to use the pound after independence, or from creating a new currency. In fact, Her Majesty's Revenue and Customs (HMRC) already allows individuals and companies to pay their tax bills in any major currency (Note 5) .

Some countries have successfully introduced new currencies, and there are many formal and informal agreements between governments to use other countries’ currencies. See the table below:

In summary, the currency issue should not be a decisive factor in the Scottish independence debate. But this still raises an important question: why it is particularly problematic, and the debate is heavily skewed by two main false assumptions:

1. Scotland can only use one currency, so there is a choice between pounds, euros, or a new Scottish currency.

2. The only way to create new money is to continue using the current system: credit creation by private banks and liabilities (deposits) underwritten by the central bank and the state.

This paper refutes both assumptions. We advocate a diversified monetary system, including money creation that does not rely on bank credit creation. Economies, especially those open to international trade, would benefit from the active use of multiple currencies, so that new money is not created solely by banks.

The diversified system we describe in this paper would create a more resilient monetary system that would allow Scotland to increase its money supply without requiring individuals, businesses or the government to go further into debt.