Building an Independent Scotland on the Blockchain – Strategies for a Scottish Digital Currency

The number one topic at the heart of the Scottish Independence debate is what currency would be used.

This OpenDemocracy article sets the scene through a critical analysis of the SNP’s Growth Commission plans, being especially harsh of their currency strategy.

Thought leaders pioneering alternative ideas in Scotland include Tim Rideout, heading up the ReserveBank.scot initiative, Common Weal who have published this paper on how to make a Scottish currency, Richard Murphy and Modern Money Scotland.

See all of them together discussing the topic on this panel discussion webinar.

Pioneering the Future of Money

Rather than this being a weak point for the Independence argument, the smart move is to seize it as the moment for global technology leadership it represents, an opportunity to kill two birds with one stone – One being the need for a currency, the second being the aspiration to become a world leading digital nation.

A key trend to highlight are “CBDCs” – Central Bank Digital Currencies, the full blown digitization of national currencies, which is the grand prize of this space and given Scotland’s history of pioneering financial innovations including founding banks et al, presents us with a unique window to lead the trend globally.

It’s a behemoth of a worldwide opportunity now taking shape – In the USA former CFTC chair Chris Giancarlo has set up a not-for-profit called the Digital Dollar Foundation, to pioneer the creation of a US central bank digital currency (CBDC). In his presidency campaign Michael Bloomberg proposed creating a regulatory framework for cryptocurrencies in a new financial regulation plan.

The World Economic Forum says it’s time to take them seriously, CNBC explores what they would look like, the US Federal Reserve published a literature review, the IMF a set of considerations for their use and Brookings a set of design options. The Bank of England offers this discussion paper to explore the topic in detail and HSBC comments on them here.

Early pioneers include SwitzerlandGhana and the Marshall Islands seeking to blaze the trail, and China has ambitions to lead the world in this field.

There are concerns and critics of course. Coin Telegraph writes that they have the potential to upend global finance, and also that they are dead in the water, and the Economist asks if they will break the banking system.

“Programmable Money”

Furthermore the real magic lies in the concept of ‘Smart Money’ aka Programmable Money. This is not just about the straight digitization of money as we understand it, but an entire transformation of how money ‘works’.

As the term suggests it refers to creating an intrinsic intelligence for money. Reporting on IBM being awarded a patent for a “bespoke programmable crypto token,” Cointelegraph explores how specific functionality can be programmed into the behaviour of digital monies.

The LSE explores the idea, asking ‘Do we need programmable money?’, where they define it in terms of both Open Banking and crypto:

“In non-crypto fintech, ‘programmable money’ seems to refer to leveraging open banking APIs to build new, automated use-cases over legacy bank payment infrastructure but in our crypto world, the ‘programmable money’ refers to digital cash hosted on a blockchain, where cash can be placed under the control of a smart contract.”

A key standard that could make it possible is ‘DAML’, a programming language for creating Blockchain smart contracts that run across multiple infrastructure options. DigitalAsset is the world’s expert on this and explore the trend in more detail in this series of blogs.

Not only does this provide the technology to digitally enable currencies as they behave now, but to make possible a future of Programmable Money, where a variety of behaviours and actions can be coded into the flow of money not possible with physical currency.

A Canadian visionary in this field is Alex Tapscott. Indeed he defines it as the wholesale reinvention of capital, a journey he foresees in his 2016 presentation ‘Blockchain is Eating Wall Street‘.

“Digital assets are smart and programmable. Let’s say you’re sending money to your kid studying in college. You can now program the money to only work at certain retailers like Walmart and Whole Foods, rather than the Ontario Cannabis Store or LCBO.

By rethinking capital, we can reimagine markets, money and finance. Entire swaths of the financial services industry currently worth trillions of dollars — banking, payments and even money itself — will be questioned, challenged and upended in the years to come.”

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