Breaking Banks by Brett King

Author:Brett King
Language: eng
Format: epub
ISBN: 9781118900154
Publisher: Wiley
Published: 2014-04-22T00:00:00+00:00

THE CASE FOR A LEGITIMATE DIGITAL CURRENCY—CANADA’S MINT CHIP

One of the reasons Bitcoin has caused such controversy is that not only is Bitcoin largely untraceable, and distributed, but it is not a currency generated or controlled by a central bank or government. There’s some comfort for the market, at least psychologically, in the fact that currency is “backed” by a government. When you present that piece of paper (or an equivalent bond), it is essentially a call on the issuing government to make good with their IOU promise written on that note. That being said, most currencies are primarily valued today based on their buying power and what the market ascribes in “exchange” value to that currency. Undoubtedly the strength and stability of a government lends itself to a strong currency. This is evident by the fact that when you have events like the recent “shutdown” in the U.S. government, the U.S. currency, and U.S. markets suffer.

So if you are going to create a digital currency, then a government- backed digital currency should theoretically fare better than a private, crypto-currency like Bitcoin—which is ungoverned and peer-to-peer.

This is the current strategy behind the Canadian Royal Mint’s experiment in the creation of a digital currency, called Mint Chip. It is backed by the Canadian government and works simply by the Mint taking out of circulation one Canadian dollar, for every Mint Chip that is traded. It’s still early days, but we thought we’d invite one of the project leads for Mint Chip to give us some progress and tell us how Mint Chip is different from QQ coins or Bitcoin.

Let me introduce Debbie Gamble. Debbie runs her own consulting firm, Gamble Consulting, and she’s a project lead with the Royal Canadian Mint on their digital currency strategy.

Brett: Debbie, tell us a little bit about Mint Chip, the currency that the Canadian Mint is experimenting with right now.

Debbie: So, I’ve had the privilege of working with the Royal Canadian Mint over the last little while. They are experimenting with an R&D initiative, taking a look at digital currencies of the future. We’ve been working on what we’ve “coined” Mint Chip. Mint Chip is not too dissimilar in its aspirations, I think, to the Bitcoin community. I think it’s being designed to kind of emulate the characteristics of cash, much like the cash-and-coin environment but in a digital form so you can use it online. Probably more important, as we move into the future in a peer-to-peer mode, it is a kind of peer-to- peer type transaction. We describe it as an asset transfer, and so there is no centralized entity for clearing settlement reconciliation. It’s just as if I was giving you the $5 bill I owed you, but it was in pure digital format.

Brett: What relationship does Mint Chip have to the actual currency, the Canadian dollar today?

Debbie: This is an R&D initiative, so it’s all sort of in the experimental stage. But the notion of the model is that, because it’s

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