Futures of Money – Monies of the Future. Introduction

Table of Contents

1. Introduction

2. Histories of Money

3. Rules of Exchange

4. Money and Information

5. Theorizing Money

6. References

Futures of money – monies of the future

1. Futures of Money – Monies of the Future. Introduction, by Horacio Ortiz, https://doi.org/10.1515/ael-2022-0116.

2. Stablecoins, Central Bank Digital Currencies and US Dollar Hegemony, by Luca Fantacci and Lucio Gobbi, https://doi.org/10.1515/ael-2020-0053.

3. Privatizing Cash: Currency and Public Goods in Sweden, by Gustav Peebles, https://doi.org/10.1515/ael-2020-0087.

4. Distributed Ledger Technology and the Future of Money and Banking, by Fred Huibers, https://doi.org/10.1515/ael-2019-0095.

5. Digital Payments in China: Some Questions for a Pragmatist Anthropology of Money, by Horacio Ortiz, https://doi.org/10.1515/ael-2021-0102.

6. Potential Implications of Retail Central Bank Digital Currency for Banking Systems Identified in the Literature and by Central Banks, by Anna Iwańczuk-Kaliska, https://doi.org/10.1515/ael-2022-0005.

1 Introduction

This CONVIVIUM symposium on the future of money alias the monies of the future aims to explore the current transformations of money, resulting from a combination of institutional, political and technological changes in the last few years. Although they do not have a historical dimension, the symposium articles explore transformations in the making that challenge the institutions of money that have been dominant for the last century or so, based on the issuance of national money by the quasi-monopolistic alliance between nation-states and banks. The present introduction proposes a tentative conceptual frame to situate all the symposium contributions in a historical and theoretical context.

2 Histories of Money

It is useful to situate the current developments of money in a history of political and financial institutions, global power relations and technology.

Most of the current issuance of money results from public-private partnerships between nation-states and banks. These national partnerships have been issuing national monies, which circulate through variable geographies, ranging from the global US dollar to currencies that are shunned even within their national territories. This institutional setting was slowly established through centuries. In particular in the 19th century, it was featured by the development of European colonial empires, industrialization and the creation of nation-states. This process expanded to the rest of the world through a combination of several factors. Among them, the development of technologies of paper-money issuance was fundamental for the standardization of the form of money, along with the expansion of nation-states as colonial empires. When these empires were progressively dismantled, a variety of state monies arose. At the same time, power relations and circuits of commerce, production and consumption related to colonial empires were only partly redefined and largely maintained under new forms (Helleiner, 2003).

The concentration of the rights and capacity to issue money in the hands of nation-states and banks became the dominant form of money during the 19th and 20th centuries. A multiplicity of national monies was institutionally interconnected through banks and international financial institutions, in global relations of power that temporarily sustained shared standards such as the Gold standard until the end of the 19th century and, progressively, the US dollar exchange standard since the end of the World War II. Since World War II, the US dollar was anchored to gold, until 1971, when it became a pure fiat monetary standard as the Bretton Woods agreement came to an end. The US dollar exchange standard after World War II enabled a new global institutional space of monetary relations through the circulation of Eurodollars, an expression used to designate US dollars that circulated outside the US territory after World War II between non-US based actors, especially among banks located in European jurisdictions. Eurodollars allowed for monetary relations where involved parties were not based in US territory and therefore not directly subjected to the rules of the US State. As Fantacci and Gobbi (2021) recall, although this circumvented some of the possibilities of action of the Federal Reserve and the US government, these institutions reasserted part of their own power through their influence on the interbank payment system and their capacity to sanction financial institutions operating within US territory. The emergence of Eurodollars contributed to reorganizing a hierarchy among states. Consequently, the US dollar increased its dominance, in a process whereby the global financial industry both challenged US state power and offered it new paths to assert itself (Eichengreen, 1996).

The symposium articles identify a new transformation in this history. The new forms of money they explore are intimately linked to the global expansion of the Internet in the last 30 years, and of cellphones, smartphones and data encryption technologies in the last 10 years, in the context of an increasingly multipolar geopolitical setting that ensued from the collapse of the Soviet Union and the rise of Asian countries, especially China. This has not been an abrupt revolution, but a transformation where some of the previous features of monies remain, others change and new ones appear. Observing historical changes is always somewhat the deed of the analytic focus that stresses change over permanence. Without pretending that money could be easily defined in the past, so that we would know exactly what in it is changing, the symposium articles do share the idea that institutional and technological transformations are opening up to new possibilities of monetary practices, relations and regulation. Fantacci and Gobbi (2021) show that the emergence of digital monies that are not directly backed or controlled by states and the proliferation of separated digital monetary exchange systems could create spaces of monetary interaction that challenge the hegemony of the US dollar. Peebles (2021) shows that the development of the Swedish central bank digital currency has been the occasion of a public debate about the legitimacy of private bank’s control over monetary issuance and distribution, bringing to the fore the idea that money is first and foremost a public good. Huibers (2021) shows that the blockchain technology, initially developed with Bitcoin in a project to separate money issuance from state authorities, is being taken up by state monetary authorities to redesign their own role, hence reasserting their centrality and potentially challenging the place of private banks, for instance with the issuance of central bank digital currencies. Ortiz (2023) shows how the development of digital payments in China brings together BigTech, the state and the financial system, as part of a political project of nation-building that foregrounds digitalized social relations. It still remains to be seen how this would transform power relations concerning money circulation and issuance. Below are a few theoretical questions raised by the transformations highlighted by the symposium articles.

3 Rules of Exchange

Joint monetary issuance by nation-states and banks has anchored the stability of money to a bank-dominated credit system since World War II. In this institutional setting, the rules of banking, concerning both inter-bank arrangements and the issuance of loans and collection of deposits, play a crucial role (Biondi, 2018). Digital technologies enable creating new monies and payment systems with a wide plasticity concerning the rules of use and the capacity to enforce them. Concerning digital monies, the definition of who can issue money, who can use it, with whom and for which purposes is much more plural than under the cash money regime where currency is issued by states while loans and deposits are managed by the banking system. This technological plasticity raises questions about the convertibility and backing of money in ways that are partly different from those raised with the definitive farewell to the gold exchange standard in the early 1970s.

For instance, Initial Coin Offerings (ICO) operate under strict legal provisions concerning buyers and sellers, and are aimed at soliciting, at least initially, particular professional networks (see Huibers (2021) in this issue). The Swedish and Chinese digitalization of payments has been limited so far within the national territories of state jurisdiction, but they enable forms of circulation and control that may challenge money creation by banks (see Peebles (2021) and Ortiz (2023) in this issue). Digital interbank systems that connect financial institutions around the whole world make them crucial infrastructures that can become weaponized in geopolitical confrontations (see Fantacci and Gobbi (2021) in this issue). And Facebook’s proposal to launch a private digital currency called Libra in 2019 envisioned money without state territory, controlled by a private corporation without appealing to the imaginaries of national community or solidarity, potentially opening for new forms of legitimization of money in a global space.

All together, these developments redefine what can be a monetary community, so far mainly defined by national borders and global inter-national relations, and what are the rules of monetary use, so far determined by the relation between citizens, banks and states under the rule of law enforced by national jurisdictions. As the contours of monetary communities are redefined, nation-state monies remain powerful. Sometime they are reinforced, as in the Swedish and Chinese cases, sometime they are partly challenged, as in the case of Libra or ICOs. These transformations should thus not be analyzed as a clear-cut opposition between new and old monetary forms, but as changes that can be subtle, have multiple and contradictory aspects, and are so far partly open-ended. The roles of states and banks in the issuance and circulation of money are thus being partially redefined, and so are global monetary relations, which in great part depend on them.

4 Money and Information

The new forms of money and payment explored by the symposium articles are all intimately connected to the use of digital technologies. In this connection, money becomes integrated in a broader set of digital data, susceptible of being treated as a form of information like many others, with which it can become mixed. While in the past decades the digitalization of monetary exchanges was restricted to the banking and financial sector, its expansion to a variety of everyday life practices produces new forms of information, which can transform the way in which money is theorized and managed by monetary authorities, for instance when e-commerce platforms determine rules for transactions, and governments use real-time data to inform their monetary policy. Also, the digital traces of monetary transactions can become assets in themselves, in particular as they can be combined with other data, concerning geographical location, socio-demographic characteristics, health and education, or interactions through social media (Zuboff, 2019). This, in turn, implies that monetary and non-monetary everyday practices become interdependent and submitted to the way in which algorithms make them affect each other (Hart, 2000). This can impact management and control of both monetary practices and non-monetary practices with which the former are combined. In particular, inequalities in access and use of digital devices and services and inequalities in the access to money can influence each other. For instance, as credit scoring uses non-monetary data to evaluate credit risk, it potentially reinforces exclusion of those who have little access to money and a digital traceability that algorithms consider deficient (Burrell & Fourcade, 2021). Users aware of this may in turn change their behavior to try to profit from these algorithmic interactions between monetary and non-monetary practices, as MacDonald shows for low-income Chinese workers navigating forms of credit based on digital technologies and on kinship and friendship (MacDonald & Li, 2020). Finally, digital forms of interaction, such as those produced and mediated by digital platforms like Google, Facebook, Wechat and others, have tended to blur the distinction between the private, the public and what can be owned and traded by corporations (Cohen, 2019). These developments constitute legal, but also moral and political challenges that are unfolding, as it is exemplified by the plurality of recent regulatory proposals attempting to address them. As digital phenomena, monetary practices become enmeshed in, and partly shape, these new fields.

5 Theorizing Money

Many theorists of money have highlighted its role in the constitution of groups of interdependence, as the rules of monetary use can contribute to the establishment of shared standards about the legitimacy of the often hierarchical ways in which money is issued and circulated (Simmel, 1978). In the last couple of centuries, theorization of money and monetary policy has been intimately connected to national imaginaries and to the institutional setting organized around both symbiotic and conflictual relations between nation-states and banks. The new monies explored in this symposium highlight the potential creation of new forms of monetary interdependence, with specific forms of inclusion, exclusion, accumulation and hierarchy. They call for thinking different forms of monetary interdependence that do not match those of state jurisdictions and banking rules.

Some theorists stress money’s function in market exchanges, either as an enhancer of social wealth through competitive maximization of utility, or as an enhancer of exploitation through rendering the capitalist mode(s) of production more pervasive. Some developments of the forms of money explored by the symposium articles raise similar issues. These monies may enhance transparency and hence trust in exchanges, as evidenced by the expansion of e-commerce, the traceability of digital transactions and the reliability of encryption. Enthusiasts of neoclassical economics may therefore read these developments as a pathway to social optimization of resource allocation (World Bank Group, 2014). These processes may at the same time be read as an expansion of capitalist exploitation (Zuboff, 2019), especially as digital monies are associated with the expansion of the use of financial worldviews, methods and instruments into everyday practices and emotional relations and into domains such as the provision of public goods or the protection of the environment (Birch & Muniesa, 2020). Moreover, some of these monetary forms, like some central bank digital currency projects (CBDCs), explicitly reject the narrow focusing on market mechanisms and the preeminence of private corporations in the management of money and the provision of financial services. While most central banks currently project to develop CBDCs maintaining the status quo concerning the role of banks in monetary issuance and distribution and concerning the global hierarchy of currencies, the fact that they would have to do so by design opens the possibility, explored by different institutional players, to call for more radical transformation of monetary systems (Ortiz, 2021). The development of CBDCs thus asks for a revision of the place assigned to market exchange and private property in the theorization of money.

The expansion of digital technologies makes the global character of monetary interdependence, already established through the banking system, even more intense, as they involve increasing numbers of everyday uses of money by entities around the globe. As Fantacci and Gobbi (2021) show, on the one hand, digital monetary connections expand the power of actors like the US government to act beyond their territory, through the influence of networks like SWIFT. The proliferation of alternative networks to avoid this hegemony may transform some of these interdependences and create new ones. These new monies thus ask for new theorizations about the distinction between private and public and between local, national and global. This may reshape the controversies and legitimizing discourses that accompany today’s global monetary inequalities, for instance in terms of income and assets. The global proliferation of projects to produce central bank digital currencies is a good example of this, since it foregrounds the role of public authorities in the design of money and hence in the way it is unequally distributed, something the four articles of the symposium highlight in different ways. The ongoing shift in institutional settings and technological possibilities concerning money issuance and circulation demands a transformation of normative perspectives involved in constructive critique and reform proposals of established monetary settings.