the future of money: intangible economy and electronic money charles goldfinger central banking...
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The future of money: The future of money:
Intangible economy and Intangible economy and
Electronic moneyElectronic moneyCharles GoldfingerCharles Goldfinger
www.gefma.com www.fininter.netwww.gefma.com www.fininter.net
Central Banking Publications Seminar Cambridge, September 5, 2002
GEF
© Charles Goldfinger
The future of moneyThe future of money
Presentation plan The new economic landscape Electronic money Three scenarios Opportunities, risks and challenges
© Charles Goldfinger
The new economic landscapeThe new economic landscape
Feudal economy
FiduciaryFiduciaryMoneyMoney Capitalist economy
ScripturalScripturalMoneyMoney ? economy
??MoneyMoney
Money and economy
© Charles Goldfinger
?Service
Economy
InformationSociety
KnowledgeEconomy
The new economic landscapeThe new economic landscape
InteractionEconomy
Plug-&-PlayEconomy
DigitalEconomy
Buzzword proliferation
© Charles Goldfinger
The new economic landscapeThe new economic landscape
ServiceEconomy
InformationSociety
KnowledgeEconomy
InteractionEconomy
Plug-&-PlayEconomy
DigitalEconomy
Shift to the intangibleShift to the intangible
Defining trend
© Charles Goldfinger
What is the new economy ?What is the new economy ? Shift to the intangible
Price
in USD
Weight
in lbs)
Price
per lbs
Pentium III 851 0,001984 42 893,00
Viagra 8 0,00068 11 766,00
Gold 301 0,0625 48 277,00
Mercedes Benz E-class 78 445 4134,00 19,00
Hot rolled steel 370 2000,00 0,20
Source : G. Colvin, Fortune
© Charles Goldfinger
The new economic landscapeThe new economic landscape Three dimensions of the Intangible economy
Demand: Intangible artefacts Final consumption products or service
Information, Entertainment, Communication, Finance... Supply: Intangible assets
Intermediate production factors used by businesses to create artefacts and generate value added
Brands, Intellectual Property, Human Capital... Economic structure: Dematerialisation logic
New rules of Business organisation Competition ValuationAbundance, Obsolescence, Volatility...
© Charles Goldfinger
The new economic landscapeThe new economic landscape Intangible markets
Planetary haggling Loss of relevance of traditional price yardsticks
Production costs• Falling marginal costs
Willingness to pay • Free-riding ubiquitous
Pervasive volatility Toward real-time pricing
• Yield management New pricing approaches
Individualisation Getting rich on crumbs Third party
© Charles Goldfinger
The new economic landscapeThe new economic landscape
Networks and markets Markets as networks
Network externalities Liquidity
Broad access Interconnection requirements
Networks as markets Access and capacity management Quality of service delivery adjudication Trust and identification infrastucture
Markets NetworksNetmarkets
© Charles Goldfinger
Electronic moneyElectronic money
Largely unsettled realm Technology Economics Institutional set-up
in the state in the state of fluxof flux
Make or break issue Ontological:
What and Why ? Definition and purpose of e-money What is the new ?
© Charles Goldfinger
Electronic moneyElectronic money
Conceptual confusion Technology-based definition
From « E-cash to megabyte money » Eternal promises of financial smart cards
Used-based definition Loyalty points LETS
Contrasting views Apocalyptic enthusiasts
The end of monetary system as we know it Sceptical incrementalists
Nothing really new
© Charles Goldfinger
Electronic moneyElectronic money
Fiduciary money
Elements of a definition
Unit of account
Means of Exchange
Store of value
Unit of account
Means of Exchange
Store of value
Scriptural money Electronic money
Store of value
Means of Exchange
Unit of account
© Charles Goldfinger
Electronic money Electronic money Elements of a definition
Electronic money as a Digital Value Contract Software based Network-resident Continous rather discrete value
Infinitely granular
Intelligent money Complex transactional rules Event-based value
Fungibility Monetary Time Intellectual property Peer recognition
Digital barter
© Charles Goldfinger
Future of moneyFuture of money
Three scenarios Private currencies
Community currencies LETS
Corporate currencies MSFT dollar
Denationalised currency Hayek
Anybody can issue e-currency…but who will clear and settle
© Charles Goldfinger
Future of moneyFuture of money
Three scenarios Global currency: the geo
Logical consequence of economic integration ? Symbolic value Technologically feasible
Global RGTS Politically challenging
Macro-economic convergence Euro as a model
• The jury is still out
© Charles Goldfinger
The future of moneyThe future of money
Three scenarios Market nexus
DVCs Value and image of value
Extension of scope Commodities Financial instruments Asset classes Enviromental protection Social protection
• Macromarkets
© Charles Goldfinger
The future of moneyThe future of money
Three scenarios Displacement or coexistence ?
Displacement Denationalised currencies and the geo Corporate currencies and DVCs
Coexistence DVCs and the geo
Likely scenarios Strong DVC momentum Geo question will return
© Charles Goldfinger
The future of moneyThe future of money
Opportunities Aligning intangible economy and electronic money
Allowing higher speed limit ?
Vector of new products and services Deployment of new business models
Multi-tier third party systems Multi-revenue stream aggregation
Easier capture of intangible value
© Charles Goldfinger
The future of moneyThe future of money
Risks Conceptual confusion Unstable institutional framework and governance Loss of control Systemic volatility and fragility Social backlash Growing dependance on technology
© Charles Goldfinger
The future of moneyThe future of money Risks
Wither central banks ?
“ The key to any such development is the ability of computers to communicate in real time to permit instantaneous verification of the creditworthiness of counterparties. The realisation of this possibility would make money’s unique role, as the means of final settlement redundant. If final settlement could be made without recourse to the central bank’s money, the bank itself would cease to exist. Present monetary policy preoccupation with the need to limit money creation would give way to the more “technically neutral regulation” of the integrity of the computer systems that verify the creditworthiness of the counterparties’ assets.”
Mervyn King, Bank of England
© Charles Goldfinger
Future of moneyFuture of money
Critical challenges Reconciling innovation and soundness Defining new forms of governance
Co-opetition Networking
Harnessing and leveraging technology Code as a regulator
From International Financial Architectureto
Global Financial Technology Infrastructure