By Richard Giedroyc
Fiat money is totally out of control in the opinion of hard-money or specie advocates. The worst may be yet to come, as digital currencies are being implemented or proposed by a number of countries worldwide.
Ecuador tops the list. Due to its unstable economy Ecuador has been using U.S. dollar coins accompanied by minor denomination coins of Ecuador to make small change. It was recently announced that Ecuador now plans to vacate the use of dollars, using its own national digital currency system instead.
The Central Bank of Ecuador has appointed Fausto Valencia as the head of its new Electronic Currency Division. Valencia said, “We are visualizing how society will respond to this tool and to be able to correct eventual problems we detect in a controlled way to then launch it in a definitive way.”
Valencia has his work cut out for him. About 40 percent of the adult population of Ecuador doesn’t use any banking services. The Ecuadorian National Digital Currency system will require a telephone of some sort. Plans call for the system to be in use by December. How many Ecuadorians have a telephone? How many of them would rather hold onto their physical cash? How many of them don’t trust that the government won’t be tracking their every financial move by forcing them to use this non-cash system?
The financial problems for which Bitcoin is remembered are hoped to be avoided through the new Ecuadorian system. It is a centralized system. More specifically, the government has officially banned Bitcoin. Article 96 of the new monetary law bans “emission, production, initiation, falsifications, or any other type of simulation, and its circulation through any channel or way of representation.”
Proponents of specie will be quick to point out that almost six percent of all Bitcoin value was lost in one action originating in Japan in February. A Ponzi scheme Bitcoin-based virtual hedge fund has since surfaced in Texas. Bitcoin is known for its volatility. Why should Ecuador’s un-backed fiat crypto-coins be any different?
The worst might yet be coming. Jersey is seeking to become “Bitcoin Isle,” the Jersey Financial Supervision Commission having approved the introduction of a Bitcoin investment fund.
Gibraltar, by default a European Union currency member because of its association with Great Britain, has been discussing using a crypto-coin system since 2011. Luxembourg, an EU currency union member is already attracting start-up companies by allowing Bitcoin to be used as a means of payment.
Dominica and Mexico are both watching, considering crypto-coin systems of their own. The Philippines, already plagued with a continual shortage of coins for circulation, is considering Blockchain technology for a new e-peso.
The Oct. 15 issue of The Costa Rica Star reported, “Breakout Gaming (BRO), a company with headquarters in San Jose, Costa Rica, is a new budding leader in crypto-currency technology and game development. The company recently announced the launch of the first destination for online gaming and digital currency with the support of an all-star roster of sponsored players.”
According to the Oct. 15 issue of the online publication Mondaq News, “The Isle of Man is showing great enthusiasm for crypto-currencies - from the landlord at a popular Douglas drinking hole to the lieutenant governor, everyone is talking about digital currency and the potentially huge benefits to the Island.
The Isle of Man Financial Supervision Commission (FSC) has announced plans to include the industry in the list of designated businesses to which anti-money laundering (AML) rules apply, with the Isle of Man government as a whole appearing keen not to suffocate this evolving area with onerous regulation, even suggesting that residents may soon be able to pay their taxes in Bitcoin.”
Has the whole world gone mad, or are governments looking for new ways to create unbacked fiat currency systems while creating the capability of watching your every financial move? Coin collectors may be concerned, but perhaps the entire world should be concerned for its economic health as well.
This article was originally printed in Numismatic News.
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