Speaking through a robot from Sydney at the Financial Times's Camp Alphaville conference in London, Guy Debelle argued that the experience would be similar to Scotland's own period of free banking in the 18th and 19th centuries, when the country's banks were given the power to issue their own currencies.
"I hear there's going to be an election in Scotland in a couple of months time," Debelle said during his speech on the future of money, referring to the forthcoming independence referendum in September. "Those guys have a bit of experience with competing currencies back in the 18th and 19th centuries. So I suppose one possibility is, if the vote for independence actually gets up, they're going to be short a currency, given that the last time we talked Mark Carney is not entirely clear that he wants to let them use the pound anymore.
"The Scots can go back to experimenting with a multitude of currencies, bitcoin and the like, and we can just sit back and see how it goes. A nice natural experiment about the future of money in Scotland – again. Because as I said, they tried this in the 18th and 19th centuries. It worked for a while, but eventually it fell apart."
In the discussion that followed Debelle's comments, some panelists disagreed – but not with the idea that Scotland should give cryptocurrencies a chance. David Birch, director of digital currency consultants Hyperion, argued that the fatalistic view of Scotland's previous experiment with multiple currencies was wrong, and that they more successful than history gives credit.
"The economic research shows that in Scotland, the bank failures were fewer, and less disruptive, than the bank failures in England at the time," he said, "Competing note issue in Scotland didn't end because it collapsed: it ended because of an outrageous extension of the Bank Act of 1844, which extended the Bank of England's monopoly over note issue north of the border."
Debelle's comments follow the publication of a pamphlet by the Institute of Economic Affairs, a neoliberal thinktank, calling for Britain to ditch the pound and adopt bitcoin, or a similar form of digital money, as its currency. For Kevin Dowd, the pamphlet's author, the rationale would be to encourage competition, which would lead to innovation in finance.
"The natural analogy is with some of the old, bad, monopolies like British Gas or British Telecom," Dowd told the Guardian. "Telecoms is a very good example: for a long time, we had a government monopoly, which stifled innovation, and the service was poor. Once that got opened up, competition opened, new innovation prospered, and we got all sorts of innovation that we couldn't possibly anticipate, and we're a lot better off for it."
Control the platform, not the payments
But at the Camp Alphaville, one panellist argued that all present were putting the cart before the horse. David Galbraith, an entrepreneur who was one of the co-founders of Yelp and co-creators of RSS, said that innovation in payments wasn't going to happen directly, whether or not it was in bitcoin or through the conventional banking system.
"I'm basically an internet nerd," Galbraith said. "We normally try to replace middlemen with a platform. But if you look at innovation in payments, I'm not so sure it's going well." Citing more than 600 mobile payment startups, Galbraith pointed out that all of them were attempting to introduce a new payments system on top of already existing platforms.
Similarly, the need to control the platform payments come from means that "bitcoin is irrelevant," Galbraith said. "It's opposed to market forces, which favour platform monopolies." If the future of money did come from the internet, he argued, it would come from one of those monopolies. "It's not inconceivable that Facebook de facto becomes a bank, they have the scale. But Apple could have done that a long time ago, but it hasn't. Why? Because the multiples in being a tech firm are better than banking, so why go into banking?"
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