To build an ecologically sound future economy, we need to find a more sustainable system of money.That’s the view of Steve Keen, author, heterodox economist and our guest on the latest New Money Review podcast.Keen, who lives in Thailand, has stepped away from a full-time role in academia and now crowdfunds his research, with 1,500 patrons contributing monthly to support his work.He is an honorary professor and distinguished research fellow at University College London. Previously, Keen was professor of economics at Kingston University and the University of Western Sydney. According to Keen, it’s time to integrate economics and ecology and to move away from a system where private credit creation drives unsustainable demand and creates instability. Mainstream economists, he says, have severely underestimated the role of energy in production and have led us blindfold into the current climate crisis.“Students and citizens across the globe are calling for a realistic economics to replace the delusional theories that led us into this economic mess,” Keen says.Listen to the podcast to hear Keen discuss with New Money Review editor Paul Amery:Mainstream economists’ understanding of money“They get nothing right and everything wrong.”“Neoclassical economics wants to ignore the monetary system. It has no role for banks, no role for private debt and no role for money.”“The mere act of a bank creating a loan creates money at the same time.”Why private debt matters“The ups and downs of credit are much more volatile than the ups and downs of demand coming out of our income.”Finance is too powerful and house prices are too high“These days, the government is more inclined to rescue the financial sector than to rescue the real economy.”“Governments will do whatever they can to boost demand for housing, to keep house prices rising.”The link between private debt and inequality“A rising level of private debt is paid for by the working class, even if the working class is not doing the borrowing.”Post-2008 policies haven’t worked“Policies like quantitative easing and zero interest rates have made the wealthy wealthier, but have amplified the inequality caused by the rising level of private debt in the first place.” The costs of neoclassical economics“What mainstream economists did to stuff up the monetary system has got nothing on what they’ve done to stuff up the climate.”We need a private debt jubilee“Every adult in the UK would get £100k in their bank account, with the requirement that anyone with debt must pay their debt down by that amount. Those without debt would have to buy newly issued corporate shares, and that money would have to be used to pay down corporate debt.”Only public money can address Covid and climate change“A private money system alone would have collapsed during Covid and it’s even worse during climate change.” “We’re going to have to reduce our energy consumption drastically at some point. The cash flows that companies make out of the current volume of demand will disappear. Multiple bankruptcies could occur. There’s no way we can private sector our way out of this. We need government money creation.”“We can eliminate the problem of private debt while we deal with climate change. The last thing you want is someone who is unable to take part in addressing climate change because they’ve gone bankrupt.”Redesigning the monetary system“We need to make the level of credit and the level of private debt economic indicators. Second, we should stop banks being able to lend for asset speculation. And we need much more government money creation, which would come through sustained deficits.”A scary time to be an economist“It’s a scary time to be an economist, because I think economists are going to cause the collapse of capitalism.”“The market system could have got through climate change if we’d implemented the sort of policies that ‘Limits to Growth’ put forward in 1972. Economists were responsible for completely trashing those recommendations and for going for growth gung-ho.”“The result is that we’re now consuming three times as many resources as we were in the 1970s, our load on the planet is that much higher and the rate at which we have to change to not cause ecological catastrophe is so much greater.”Climate change realities “If we’re lucky, we’re in the final thirty years of the crisis of climate change. If we’re unlucky, we’re in the final decade. There’s now no chance of taking prospective, pro-active action. The time for that has passed. Once we realise how dangerous the new climate is to our survival as a civilisation and maybe as a species, we need to go into reverse. I want to see mechanisms to enable us to do that without causing mass starvation and a breakdown in social systems.”Prosecute the climate change nihilists“The crime of ‘ecocide’ should be extended to the economists that have provided the nonsense that has supported a lot of the climate change nihilists, like Bjorn Lomborg. I want be involved in prosecuting them.”

New Money Review podcast

We need sustainable money

 The public needs protection from the Wild West land grab that’s now going on in money, says Rohan Grey, our guest on the latest episode of the New Money Review podcast. Grey, Assistant Professor of Law at Willamette University in the US, was one of the authors of a controversial bill brought before the US Congress late last year, called the ‘Stable Act’. The Stable Act’s objective—it is due to return to Congress later this year—was to protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s planned new ‘Diem’ currency and other private sector ‘stablecoins’. The authors of the Act called for stablecoin issuers to be regulated as banks, a suggestion that went down like a lead balloon with much of the cryptocurrency community. Stablecoins are digital versions of existing fiat currency, such as the dollar, euro or yen. Their value has been growing explosively in recent years. They have also been called ‘the first battleground of the coming crypto regulation wars’. Notable stablecoins include Tether, the cryptocurrency market’s version of the dollar, which has grown from $3bn to over $60bn in size in just a year. There’s Circle, which is now growing even faster and whose issuer went public on the New York Stock Exchange last week. And there’s tech giant Facebook’s planned new version of the dollar. Amidst all this private sector experimentation with digital money, what role is left to the state? According to Grey, we shouldn’t leave the crucial discussion over the future of money in the hands of private actors. In his view, it’s time for national parliaments to step up and make crucial decisions on digital money’s design. This is a crucial debate and one we’re going to hear a lot more about in coming years. Here are some excerpts from the podcast discussion: Why the money infrastructure is a public good “It’s a matter of democratic legitimacy. We’ve seen throughout history these key infrastructural moments when we hand over control to certain private actors. Then we spend decades living in the repercussions. This is one of those moments. When it comes to the digitization of currency, this is a Wild West frontier land grab. I hope we don’t end up repeating the same political dynamics of most historical land grabs.” The risks of shadow banks and shadow deposits “If you allow private actors to create something that walks and talks like public money, but has none of the safeguards and none of the policy oversight that comes with public money, the result is recurrent crises and systemic breakdowns, where the public has to bail out these actors.” “One of the major causes of instability in the lead-up to the 2008 financial crisis was that various actors which we now call ‘shadow banks’ were issuing instruments that were effectively deposits. But in US deposit law there’s a well-recognised and long-standing loophole: the definition of a deposit is as something a bank does. So if you’re not a bank, by definition what you’re issuing can’t be a deposit, even if it walks and talks and is functionally like one.” Stablecoin issuers should be regulated as banks “Let’s be very clear. These actors are issuing a deposit, version 2.0. They should be regulated as banks, not [under] the hodge-podge, barely regulated money transmitter framework they’re currently operating under.” The risks in stablecoins “The conversation ends up focusing on the asset side. Do we have enough collateral? Do we have enough reserves? In my opinion the focus should be on the liability side—what are you promising? If you can’t guarantee that promise under all circumstances, it’s not a safe promise. I’ve never seen a single theory of collateral that is actually safe.” The US is now backstopping the world’s shadow money “We now have this system of international swap lines [between central banks] precisely to backstop the shadow money issued around the world, where the US is effectively the insurer of last resort for the European banking system, among others.” Tether is a ticking time-bomb “I think Tether is a ticking time bomb. The level of opacity, the level of shadiness and the track record of the people involved are extremely worrying. And huge parts of the crypto ecosystem depend on Tether. The people who are going to be hurt the most are the suckers in that ecosystem.”   

Keeping the dollar public

 In our slippery world of risk, uncertainty, change and complexity, hard and fast rules can be rare. Sometimes those rules can even be a trap, says Gerald Ashley, our guest on the latest New Money Review podcast. Ashley, a former banker, is now an author, financial historian, public speaker and consultant, specialising in risk and decision making. In his podcast discussion with New Money Review editor Paul Amery, he argues that we often misunderstand risks and have too narrow a view of the models we use to quantify them. And with no perfect solutions and many ‘known unknowns’ to the problems we face, we are often influenced by context and instinctive biases rather than rational analysis, says Ashley. In an era of pandemics, social media-driven narratives and financial instability, the topic of risk management has never been more relevant. Listen in to the podcast to hear Ashley describe: How humans assess risk Dynamic versus static risks The difference between risk and uncertainty When risk management works well—and when it doesn’t Measuring and managing risks Which industries have done best in addressing risks Market crash cycles and traders’ collective memory The power of the ‘dominant story’ in financial markets The dangers of leverage Journeys and destinations The importance of planning Gerald Ashley’s interviews with key figures from the City of London during the 1970s and 1980s are available at the website of the Centre for Financial History, run by Darwin College, Cambridge University. 

Managing risk in an uncertain world

 We should all pay attention to what’s going on in payments, because changes in the technology of money transfers are going to affect all our lives. In the latest New Money Review podcast, Gottfried Leibbrandt and Natasha de Teran discuss their new book, ‘the Pay Off’. Leibbrandt is the former chief executive at SWIFT, the messaging network that supports trillions of dollars a day in global money transfers. De Teran is SWIFT’s former head of communications. It’s hard to keep up with what’s going on in payments. Technology is dismantling payment barriers while governments are erecting them. Cash is on the way out, and cryptocurrency and BigTech are fighting their way in. The Europeans are heavily regulated, the Americans are still hooked on paper cheques and the Chinese are leading the way in new payments technology. Changing the way we pay changes everything, say Leibbrandt and de Teran, because it touches so many aspects of what we do. “The technology, the plumbing [of payments] is changing faster than ever before. I’ve been in the industry for thirty years and I can say it’s never changed as fast as it does right now,” Leibbrandt says in the podcast. “I would also be very hard-pressed to make any predictions on where things will be five years from now,” he goes on. “It’s this incredibly important part of our lives that we never stop to think about,” says de Teran. “It isn’t really discussed outside the world of payment nerds. But the payments system is as important, if not more important than the rail and transport systems or the electricity grid.” “The changes in payments will change things like who’s in charge, where your data is kept, what purchases you can make and how credit is extended,” Leibbrandt says. “It’s something the average citizen should know about.” Behind the changes in payments tech lie seismic shifts in global economic power, say the co-authors. “We’ve gone from one third of the global population having access to financial services to two thirds in just seven or eight years,” says Leibbrandt. “All that is thanks to the penetration of mobile technology. It’s a mind-boggling pace of change.” At the same time, payments innovation raises serious concerns about cybercrime, financial inclusion and consumer protection, says de Teran. Listen to the podcast to hear Leibbrandt and de Teran talk about: The accelerating changes in payments technology The rise of new payment services providers China and the geopolitics of payments Why tech giants love payments data The digitalisation of payments and financial inclusion Consumer protection in payments Why new payments tech is levelling the global playing field Digital identity frameworks and payments How payments growth has driven the fintech boom 

Pay attention to payments

In the latest episode of the New Money Review podcast, I interview an old friend and former colleague, Paul Craven. After working for nearly thirty years as an asset manager, Paul is now a consultant, public speaker, coach and author. He works with a range of clients, from investors to doctors to lawyers and entrepreneurs. His specialist topic is behavioural economics, which Paul describes as “how real people make real decisions in the real world”. His insights in this area don’t just come from a successful career in finance: Paul is also a trained magician. As you’ll hear him talk about on the podcast, we all make mental short-cuts and, sometimes, our minds play tricks on us as a result. Those short-cuts are exploited by magicians in their performances. But they can also cause us to make big mistakes when investing. The tendency for our unconscious mind to take over in certain situations can hamper us in our general lives. So to help ourselves, we need to be aware as much of our own potential weaknesses as of our own strengths. In the podcast, we cover the following topics: What links money and magic? The power of the unconscious mind The evolutionary origins of behavioural biases Countering biases when investing The herd instinct and financial markets Intuitive versus logical thinking Why process beats outcome Why diversity works Money relationships versus monetary transactions The importance of reading and creativity  

Money mind games

 The race to develop a central bank digital currency (CBDC) is often portrayed as one of polar opposites: the Chinese hare against the US tortoise. But we should keep a close eye on a third contestant in the race, the eurozone, says Jonas Gross, our guest in the latest New Money Review podcast. The new digital euro project is part of a package of measures undertaken by the European Union (EU) to ensure the region stays competitive in the increasingly internet-based global economy. Last summer the EU introduced a draft regulation for markets in crypto-assets, while today the European Commission, the EU’s executive arm, is due to set out its plans for EU-wide digital identity wallets. These wallets will offer access to a range of services for the bloc’s 450 million citizens and, presumably, be integrated with any future digital euro. Although the European Central Bank (ECB) has not yet formally committed to launching a digital version of the single European currency, its decision is expected this month or next. Gross, our podcast interviewee, is a project manager at the Frankfurt School Blockchain Centre and a PhD candidate at the University of Bayreuth. His specialist area of research is CBDCs, stablecoins and cryptocurrencies. The ECB has been active in preparing for the launch of a digital euro: in October it issued a 55-page report and public consultation on the subject, and in April it published a summary of the 8,221 responses to the consultation. In its reports, the ECB has examined the likely privacy features of a CBDC and its integration into existing payments systems. It has also discussed the euro’s future role in international foreign exchange markets, where it is already the second-largest reserve currency. In the podcast, Jonas Gross explores the critical unknowns regarding the digital euro and suggests where the CBDC debate might be heading. He discusses with New Money Review editor Paul Amery: Meeting the disparate needs of EU citizens Why a digital euro may carry greater privacy features than other CBDCs Digital currency and digital identity CBDC and the prospects for negative rates The global impact of the digital euro The European framework for regulating crypto-assets Why there are many dollar but no euro stablecoins Balancing benefits and risks in CBDC design 

All eyes on the digital euro

 Belief in a new era, rampant speculation, insider dealing, market manipulation, fortunes being won and lost… The cryptocurrency boom of 2020/21? Sounds like it. But it’s also an accurate description of the US stock market before the great Wall Street crash of 1929. “It was the Wild West,” says Kathleen Moriarty, a securities lawyer and our guest on the latest New Money Review podcast, describing the roaring 1920s. “Anything horrible that you imagine could be done would be done. Brokers were stealing people’s assets. Those running investment funds were preferring themselves to their customers. They would take the good securities and give the bad securities to the fund. You name it, they were doing it. When you read the history, it’s hair-raising as to how bad things really were.” Moriarty, who describes herself as a ‘securities lawyer by accident’, is famous for her work in helping develop the first US-listed exchange-traded fund, the SPDR S&P 500 ETF, launched in 1993. ETFs have since grown to become a multi-trillion-dollar industry and an integral part of the world’s securities markets. More recently, Moriarty was involved in the Winklevoss twins’ attempt to create a US-listed ETF holding bitcoin. That initiative was blocked by the US securities regulator, the Securities and Exchange Commission, as have a number of other bitcoin ETF applications since. “The SEC is looking out for the retail investor. That’s why the approval of a cryptocurrency ETF is taking so long,” Moriarty says in the podcast. Amidst the rampant current speculation in cryptocurrencies, could the post-crash US securities regulations of the 1930s offer us all a blueprint for what may lie ahead? Listen to the podcast recording to hear Moriarty and New Money Review editor Paul Amery discuss: The US share market ‘Wild West’ of the 1920s How regulators stepped in after the 1929 crash The four ‘New Deal’ federal securities laws of 1933-1940 Why ETFs needed an exemption from those laws The ‘Howey Test’ and its impact on the US digital asset market Why the SEC has been so cautious on cryptocurrency ETFs Would a bitcoin ETF be successful? US cryptocurrency regulation in a global context Why the digital asset boom may herald a reset in geopolitics 

New Deal rules for the crypto crash

  In the latest New Money Review podcast, talk about the behaviours, attitudes and financial resilience of self-directed investors in the UK. Britain Thinks recently conducted and published research on self-directed investing on behalf of the UK’s financial services regulator, the Financial Conduct Authority. One of the consultancy's key findings is that self-directed investors—those making investment decisions on their own behalf, without the help of a financial adviser—are at risk of overconfidence and of suffering financial harm as a result. This risk is potentially amplified by the role of social media in encouraging herd behaviour, say the researchers. “When using social media, self-directed investors are often at risk of following the algorithm because they are being served content,” Rachel Rowlinson says in the podcast. “They get the sense that there’s this big movement, that everyone is getting involved in this one thing and they don’t want to be left behind,” says Rowlinson. “A big thing for this new group [of self-directed investors] is they see a lot of content, a lot of news about something as a short-cut to saying, ‘If people are talking about it, it must be either a good investment or a shortcut to safety’,” Rowlinson goes on. “Something like cryptocurrency can be seen as massively overvalued, but they are not really aware of that.” “They are unaware that, because they are looking at this content, the algorithm is actually tipping the scale.” In the podcast, Carol and Rachel discuss their key research findings with New Money Review editor Paul Amery: Why self-directed investors’ journeys are complex and highly personalised Why self-directed investors tend to follow one of three archetypes—‘having a go’, ‘thinking it through’ and ‘the gambler’ How emotional and social motivations often drive self-directed investing Why self-directed investors investing in high-risk, high-return investments may have too much confidence in their abilities, risking financial harm How a more diverse audience is getting involved in self-directed investing From finance to politics, law to anthropology, technology to crime, the New Money Review podcast—‘the future of money in 30 minutes’—offers its listeners insights into the rapidly changing world of money.  

Meme investing risks your financial health

 Many large financial institutions have performed an about-turn in cryptocurrency during the last few years, moving from a position of outright hostility to one of acceptance and even enthusiasm. But there are still a few outspoken sceptics of the now-booming sector. One is Stephen Diehl, a software engineer, chief technical officer of a London-based fintech company called Adjoint and our guest on the latest New Money Review podcast. According to Diehl, cryptocurrency is an internet-based lottery that serves mainly to enrich insiders at the many digital token projects. “A cryptocurrency is a speculative financial product that has an embedded wealth redistribution function: it takes external capital and shifts it around to other people,” he says in the podcast. “By comparison with traditional financial instruments, there are no external cash flows. The pay-out structure is contingent on new investors coming in. You can compare it to a lottery, but with a very unclear pay-out structure. It generally looks Ponzi-like,” says Diehl. According to Diehl, there are rising risks from the assimilation of cryptocurrency into the broader financial system. “These things are working their way into the larger economy. We’re seeing publicly traded equities holding large amounts of cryptocurrency. If things are left unchecked, they’ll be finding their way into things like pension funds and ETFs,” he says. Uninformed consumers, says Diehl, particularly millennials, are highly exposed to losses when buying the many new tokens on offer. “I’m particularly concerned about retail investors being exposed to products that come with a fair amount of counterparty, systemic and market risks. The education people are getting about these things is often from social media or online sources that have a vested interest in promoting them,” says Diehl. “A lot of millennials don’t have the assets, savings or participation in the economy that previous generations had,” he goes on, explaining the popularity of crypto with the younger generation. “For them, it makes sense to buy riskier things—products that have a more asymmetric upside. And there’s a lot of disenchantment with the financial system. So the narrative about creating an alternative financial system resonates with a lot of younger people—the story of bitcoin and alternative financial services is a very compelling one.” But those investing in crypto as a way of expressing dissatisfaction with the status quo risk being sorely disappointed, Diehl says in the podcast. “Whether that system is actually being built is a separate question,” says Diehl. “I’d argue that it’s not. These things—cryptocurrencies—don’t provide anything other than [a means for] gambling. Bitcoin has hijacked the populist rage narrative to propose a story that tenuously makes sense. But if you dig into the details it doesn’t really feel solid.” In the podcast, Diehl also talks about the distorting effect he believes cryptocurrencies are having on scientific research, as well as on the prices for computing services. “Cryptocurrency has had an impact on the hardware market: it’s basically impossible to buy a graphics processing unit as these things all get snatched up by miners. That’s having an outsized impact on machine learning and artificial intelligence,” says Diehl. “People working in these domains require specialised hardware and can’t actually purchase the devices they need. Ultimately, these price increases will be passed down to anyone using cloud computing services. Even if you’re not touching cryptocurrency, you’re going to see inflation propagate for anything it touches.” And while the open-source nature of most cryptocurrency projects means their codebase can be audited, the same principle of openness doesn’t extend to many of the service providers in the sector, says Diehl. Here, he argues, there’s a major problem. “Where the fraud occurs [in cryptocurrencies] is not in the code per se, but in the governance structure around the projects, the auditing of the alleged reserves and of the bank accounts that hold the actual money,” says Diehl. Listen in to the New Money Review podcast, ‘the future of money in 30 minutes’, to hear the full discussion between Stephen Diehl and New Money Review editor Paul Amery. ********* The New Money Review podcast covers the future of money in 30 minutes The changes in money are getting faster, more chaotic and more confusing. And it’s not just money that’s changing, but technology, finance, law, government and culture with it. Each week, we interview a leading expert on one or more of these topics. By listening to the podcast, you can stay up to date with what’s going on in money and prepare yourself for what lies ahead. 

A cryptocurrency sceptic speaks out

 Political revolutions often go hand-in-hand with revolutions in money. Stores of value change, the way we make payments changes, our attitudes to credit change. According to Rebecca Spang, professor of history at Indiana University, the author of a prize-winning 2015 book called ‘Stuff and Money at the time of the French Revolution’ and our interviewee in the latest New Money Review podcast, we may once again be living in revolutionary times. “Past institutions no longer feel legitimate or stable,” she says in the podcast. “The level of instability and uncertainty does make this a revolutionary moment.” “We are seeing quite epic and dysfunctional levels of inequality,” says Spang. When the French revolution took place in 1789, those owning debts suddenly wanted to be paid. France’s credit-based monetary system fell apart and the country hit a severe liquidity crisis. France then embarked on one of the most famous monetary experiments in history: it issued a new paper form of money that was notionally backed by the property wealth of the old régime. This so-called ‘assignat’ experiment eventually caused severe inflation and in 1803 France went back to a gold standard. Could our current infatuation with different forms of money—from bitcoin to meme stocks and non-fungible tokens (NFTs)—be indicators of a shift similar to the one that took place in France more than two centuries ago? Listen to the podcast to hear Spang and New Money Review editor Paul Amery discuss: Why we may be living through a monetary and political revolution Why France’s King Louis XVI had ‘fabulous wealth but very little money’ How credit-based systems can fall into a liquidity crisis Why France’s land-backed money experiment failed How US civil war ‘greenbacks’ drew on France’s revolutionary money history How cryptocurrencies have revived arguments for privately issued money 

Living in revolutionary times

 John Kiff, our guest on the latest New Money Review podcast, has always worked in what he calls the ‘edgy’ areas of finance—from over-the-counter (OTC) derivatives to fintech and digital currencies. For 25 years, Kiff worked at Canada’s central bank, where he was in charge of managing the country’s foreign reserve risk. He then worked as a senior financial sector expert at the International Monetary Fund (IMF), where he focused on questions of financial stability. Kiff now publishes a widely followed daily digest of developments in financial technology (fintech) and digital assets. In the podcast, he tells New Money Review editor Paul Amery that a single theme unites his past and present jobs. “I’ve been called ‘the plumber’: my interest is in how things work,” says Kiff. “In the context of derivatives, I was interested in how you do transactions, how you price them and how you manage the risk of them.” “In the world of central bank digital currency (CBDC), I focus very much on how what design features central banks are playing around with. That’s where my interest lies.” In a wide-ranging podcast discussion, Kiff explains why the ongoing changes in the structure of the global financial system are important—and suggests which indicators to follow. Hidden connections and financial crises “The things that can blow up in your face are often unseen. We missed too much back in 2007. I’m trying to atone for past sins and look for those hidden connections in this [cryptoasset] market.” Risks in DeFi “DeFi is definitely a concern to the financial stability and regulatory authorities to the extent that it is purposely designed to operate outside the regulatory sphere. But the major players—the likes of Morgan Stanley and Goldman Sachs—are not involved yet. When they get involved and perhaps take advantage of leverage opportunities, that might put them in danger if something goes off the rails.” Programmable money “There are some useful things you can pull out of a smart contract in a CBDC: the distribution of stimulus payments, for example. Smart contracts in the stimulus payments could direct the users to only spend that money at certain places. You couldn’t park the payment in your bank account or use it to buy cryptoassets, for example.” Interest rates on CBDC “They could become a tool that enhances the implementation of monetary policy. So far no central banks I know of are talking openly about introducing a CBDC that’s remunerated in any way. But in the case of runaway demand for CBDC, you might want to have the option of calibrating the rate on CBDC to make it less attractive.” Developing economies’ motivations for introducing CBDC “Most developing economies are looking at CBDC to save money. They’re hoping they can reduce the amount of cash in circulation. And that goes hand-in-hand with the financial inclusion aspect of CBDC.” Tether and Diem “So far, the main use cases for unregulated stablecoins like Tether seem to be inter-exchange and inter-platform flows. So many [crypto] platforms don’t have links to the traditional banking system. In Asia, Tether is also being used to bypass capital and exchange controls. But Facebook’s proposed stablecoin—Diem—would be orders of magnitude bigger than Tether. That’s why [regulators’] focus has been so far mainly on Diem. Overnight, it would be on people’s iPhones and Android phones. That’s what scares the authorities.” Convergence of traditional finance and cryptocurrency “We now see big firms like PayPal, Visa and Mastercard saying they’re embracing crypto rather than fighting it. I suspect we’re heading towards a meeting of minds. But it could still be that crypto and blockchain dramatically change the plumbing of the financial system.” Improving payments and settlements systems “Blockchain and distributed ledger technology can play a big role in lubricating the payments and settlement systems. But you need to get both the payment rails and the settlement rails operating on blockchain, which means you have to tokenise securities. There are lots of experiments going on in this area. There are gains to be made in terms of both efficiency and safety.” A level regulatory playing field for traditional finance, crypto and fintech “Right now, many firms operate outside the regulatory sphere. The challenge for global financial regulators will be in finding ways to bring everybody under the same umbrella. ‘Same risks, same regulations’ should be what we’re aiming for.” 

Plumbing, cryptocurrency and CBDC

According to Dr. Franklin Noll, our digital money future will look a lot like the past: we are heading back to a time when humans had to juggle between many different forms of currency. Noll, our guest on the latest New Money Review podcast, is a historian who specialises in the technology of money—ranging from banknotes to cryptocurrency. “Our recent history, where you only have one kind of currency, is kind of an aberration,” Noll says in the podcast. “If you go back to colonial-era Massachusetts, you’d be dealing with pounds sterling, local Massachusetts pounds, stuff from other colonies, native American wampum and Spanish reals. You’d be juggling all this money.” We should all prepare ourselves for a repeat, says Noll. “In the future, we’ll have a lot of co-circulating currencies,” he says in the podcast. But we’ll have some help from technology, he points out. “We’ll have an app on our phone that will carry our different wallets and do the conversions. When we want to make a payment, our AI will see which is the most efficient way to make it.” But despite the rise of digital payments, mobile money hasn’t taken over completely from banknotes yet. In the podcast, Noll predicts that cash will be around for a few decades more. “Banknotes have a lot of tenacity,” he says. “People have been predicting the end of banknotes since the 1960s, but they’re still here and people are using more of them than before. My guess is that banknotes, in some form, will still be around for a generation yet.” According to Noll, banknotes could be made ‘smart’ in future by embedding technology that links them to an electronic network, perhaps one underlying a central bank digital currency (CBDC). Such crypto-notes would be a physical token of the CBDC, says Noll, and could function as a transitional element between the cash we have now and a future, purely electronic form of money. Smart banknotes could even be designed to embed a ‘carry tax’, says Noll. This would force them to depreciate in value over time. Such a design feature might suit a central bank wanting to impose a negative interest rate policy. Listen to the podcast to hear Noll and New Money Review editor Paul Amery discuss: Mobile payments and the future of cash Why smart banknotes could play a role in money The threat to the dollar from co-circulating private money Back to the future with multiple currencies Why the design of money matters How cryptocurrency reignited interest in the theory of money Balancing anonymity and traceability in CBDCs Covering a range of topics—from bitcoin to central banks, technology to politics, law to cybercrime and science to culture—the New Money Review podcast helps you stay abreast of the key trends in the rapidly changing world of money.

Back to the future with digital money

 In the latest New Money Review podcast, Paul Gordon, the founder of Coinscrum, the UK’s oldest and most popular cryptocurrency networking and events group, shares his thoughts on the past, present and future of the now-booming digital asset sector. Listen in to the podcast, ‘the future of money in thirty minutes’, to hear a wide-ranging discussion between Paul Gordon and New Money Review editor Paul Amery about: The origins of London’s crypto community From early radicalism to the financialisation of cryptocurrency London’s and Coinscrum’s links with the founding of ethereum The role of social media in digital money projects Tribalism in cryptocurrency Natural systems and network effects The governance of open-source projects Hype cycles and Elliott waves Preparing for the next bitcoin bear market Why digital ID may be the ultimate ‘killer app’ of cryptocurrency Geopolitics, digital currencies and the dollar 

A decade in cryptocurrency

 Our guest on the latest New Money Review podcast is Rich Turrin, a US citizen based for a decade in Shanghai, China, where he has had a bird’s eye view of the incredible changes taking place in money and payments. “I’ve lived first-hand through China’s experience of going cashless,” Turrin says in the podcast. “It’s changed from a place where I needed to have a large wad of 100 renminbi notes in my pocket, to a place where I don’t need any cash.” “These changes are coming to you soon,” Turrin goes on, “as we all enter the new world of central bank digital currencies (CBDCs).” And it’s China that’s setting the global pace when it comes to the confluence of finance, technology and social media. “Most people think that China is a great place, but it copies,” Turrin says in the podcast. “Many have not made the transition to understanding that China is a tremendously innovative country. On the digital front, the West is now copying China, rather than the other way round. TikTok is probably the best example.” Turrin, a mathematician by training, is a former banker who became a fintech expert at IBM and then a consultant and author. In the podcast, he tells New Money Review editor Paul Amery about his forthcoming book, “Cashless: China's Digital Currency Revolution”. He goes on to describe China’s new CBDC, which is in its pilot stage, as a ‘tsunami’. “This is a tidal wave, ready to hit the financial system,” he says. “All of this trade is going to go off the SWIFT payments system. It will not be controlled by the banks. It will be immediate. This is a major break in how we use digital money. I don’t think many in the West are sufficiently aware that this tsunami is coming.” Listen in to hear more about: Why many in the West underestimate China’s leap ahead in digital money The rise of China’s financial ‘super-apps’, AliPay and WeChatPay How digital payments helped China’s small businesses to thrive Different approaches to financial inclusion—China vs. the US Why China’s central bank digital currency (CBDC) will be a game-changer The future scope of China’s CBDC 

Going cashless

 Far from being a problem, bitcoin’s electricity consumption is healthy. In fact, making an explicit link between energy and money would help promote sustainable economic development, says Andrew Webber, founder and CEO of Digital Power Optimization (DPO), a US-based start-up and our guest on the latest New Money Review podcast. “Our money and the things we produce with our energy—and the sources of that energy—are completely divorced from one another,” Webber says in the podcast. “We produce cheap plastic toys with fossil fuel energy, because we want to consume more stuff. And we have an unlimited supply of fiat currency to do that with. There’s no value trade-off. But if you could snap your fingers and rebase the entire global financial system around something better than a fiat promise, what better thing to use than the value of energy?” By design, a network of computers solving a mathematical ‘guessing game’ provides the backbone—and the security—of the bitcoin network. As bitcoin’s network has grown, it has become increasingly energy-intensive; its aggregate consumption was recently estimated at 121.36 terawatt-hours (TWh) a year, more than Argentina. Although some have estimated that renewable energy’s share in bitcoin mining is as high as 74 percent, a recent Cambridge University study said that on average renewables have a 39 percent share. According to DPO’s Webber, there is a natural link between bitcoin mining and renewable energy producers. DPO says it works with power plants and electrical grid operators, using cryptocurrency mining as a tool to help manage load imbalances and the associated mispricings of energy. As the share of renewable energy in electricity grids around the world has risen, negative prices have become more frequent, posing a dilemma for energy producers. “If you have an energy grid that’s built on a fossil fuel basis and produce just enough power from fossil fuels to get by, and you then add 20 percent more supply from solar, the prices during the day are going to plummet. Often, the electrical grid prices can go negative for certain portions of the day,” Webber says in the podcast. “We believe that the [bitcoin network’s] power in the future is by and large going to be supplied by renewable, clean energy,” he says. Converting surplus energy into money via cryptocurrency can also beat trying to store it via batteries, says Webber. “Storage is the great challenge for the renewable energy space,” he says in the podcast. “You can produce solar all day long, but what do you do at night? You can have wind, but what if you need to store it for later usage? Instead of deploying a battery, just deploy mining computers and offtake all that excess energy. Your economic capture is going to be 2-3 times what you would have got by investing in a battery structure.” Listen to the podcast, ‘the future of money in 30 minutes’, to hear New Money Review editor Paul Amery and DPO’s Webber discuss the relationship between energy and money. 

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New Money Review podcast

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