Few things can bring markets to a standstill, but the death of the Queen is certainly an exception…
Traders on the NYSE floor paused for a minute of silence overnight in a show of respect for Elizabeth II’s legacy. Because whether you’re a royal fan or not, you can’t deny the impact she has had on the UK, the Commonwealth, and the world.
It truly is the end of an era.
And with it comes a whole host of changes…
One of the more peculiar changes in this regard will be money. The UK mint will now cease to make notes and coins featuring the late Queen. In fact, the mint will need to start replacing these notes and coins with new ones featuring King-to-be Charles III.
It’s a costly and, no doubt, lengthy process. One that the mint concedes will take years to finalise, and even then, they may never replace all the currency they need to.
Luckily for Brits, there is no issue in terms of legal tender. But it is certainly a dilemma that highlights a rather bizarre limitation of fiat currency. And while I doubt this will be the tipping point that pushes the UK toward a digital pound, it definitely doesn’t detract from it.
Private push
See, it was just over two weeks ago that a new privately led consortium instigated a new push for a digital currency in the UK. With the likes of IBM, Finastra, and FinClusive forming this new group, too, it is no slouch in terms of credibility.
That’s why their push for ‘Project New Era’ (a terribly fitting name) is something to pay attention to. Because as their press release states:
‘The group will focus on real-world testing to evaluate a future digital currency ecosystem, environment and economy that includes the coexistence of current forms of money, regulated digital assets (including cryptocurrencies and stablecoins) and Central Bank Digital Currencies (CBDC), starting in the UK with Project New Era.
‘The world is undergoing a financial revolution from which there is no turning back. With the advent of DLT and blockchain technology, digital assets are ushering in a new era for money, with potentially transformative benefits for consumers, businesses, financial institutions and states.
‘The industry needs to now come together to help the lawmakers and central banks shape the design and regulatory aspects of the biggest change we will see in the payments ecosystem in our lifetimes.’
Now, I certainly don’t disagree with a lot of these sentiments. I, too, think we’re on the verge of the next big evolution for ‘money’.
However, I don’t believe CBDCs are the right way to go about it.
The whole point of the blockchain and cryptocurrency is to unwind centralised power. A CBDC, handled by Reserve Banks, would likely lead to more centralisation. After all, just imagine how easily they could control spending if cash was no longer an option.
That’s what has so many people in the financial industry worried.
Even long-time experts like Jim Rickards are starting to realise just how ominous these CBDCs are. And you can certainly expect to hear more about Jim’s thoughts on this topic in the coming days.
Because even though Rickards is anti anything crypto related, a position that I don’t agree with, we can certainly see eye to eye on the threat of CBDCs.
A rogue Fed
All these details and musings about CBDCs, of course, come as central banks worldwide grapple with the matter. None of them likely understand the potential of this technology, nor do I expect they appreciate what makes blockchains so important to monetary freedom.
What I do think they understand is that these CBDCs are sort of a financial arms race. And the first major power to really build one effectively will likely have a lot of sway over others. At least in the bankers’ minds…
Indeed, even US politicians are worried about whether the Fed will go rogue on them. A group of members from the House Financial Services Committee recently posed a few questions for Jerome Powell and his colleagues.
As they rather bluntly asked:
‘Is it your view the Federal Reserve may not establish an intermediated CBDC model without direct authorization from Congress?’
This isn’t so much a question as it is a thinly veiled threat. The politicians clearly want to know if the Fed thinks it can greenlight a CBDC without political approval. And while Powell certainly tried to reassure the committee, he didn’t give certainty to the answer they were looking for (emphasis added):
‘We do not intend to proceed with issuance of a CBDC without clear support from both the executive branch and Congress, ideally in the form of a specific authorization.’
In other words, while his intent may fit with the politicians’ plans, who knows if those plans won’t change at a whim? I’m sure Powell will find some devious way to justify his decisions if need be. After all, remember when he told all Americans that inflation was transitory for months on end?
Yeah, I wouldn’t trust much coming out of his mouth.
This is why the point in all this is that we’re in for some big changes. Whether they will be positive or negative, no one really knows.
What I can tell you, though, is that money will never be the same again.
It is truly the end of an era.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
