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The future of money: Intangible economy and Electronic money Charles Goldfinger www.gefma.com www.fininter.net Central Banking Publications Seminar Cambridge,

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Presentation on theme: "The future of money: Intangible economy and Electronic money Charles Goldfinger www.gefma.com www.fininter.net Central Banking Publications Seminar Cambridge,"— Presentation transcript:

1 The future of money: Intangible economy and Electronic money Charles Goldfinger Central Banking Publications Seminar Cambridge, September 5, 2002 GEF

2 © Charles Goldfinger The future of money Presentation plan The new economic landscape Electronic money Three scenarios Opportunities, risks and challenges

3 © Charles Goldfinger The new economic landscape Feudal economy FiduciaryMoney Capitalist economy ScripturalMoney ? economy ?Money Money and economy

4 © Charles Goldfinger ? Service Economy Information Society Knowledge Economy The new economic landscape Interaction Economy Plug-&-Play Economy Digital Economy Buzzword proliferation

5 © Charles Goldfinger The new economic landscape Service Economy Information Society Knowledge Economy Interaction Economy Plug-&-Play Economy Digital Economy Shift to the intangible Shift to the intangible Defining trend

6 © Charles Goldfinger What is the new economy ? Shift to the intangible Price in USD Weight in lbs) Price per lbs Pentium III8510, ,00 Viagra80, ,00 Gold3010, ,00 Mercedes Benz E-class ,0019,00 Hot rolled steel ,000,20 Source : G. Colvin, Fortune

7 © Charles Goldfinger The 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 Valuation Abundance, Obsolescence, Volatility...

8 © Charles Goldfinger The 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

9 © Charles Goldfinger The 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 MarketsNetworks Netmarkets

10 © Charles Goldfinger Electronic money Largely unsettled realm Technology Economics Institutional set-up in the state of flux Make or break issue Ontological: What and Why ? Definition and purpose of e-money What is the new ?

11 © Charles Goldfinger Electronic 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

12 © Charles Goldfinger Electronic 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 moneyElectronic money Store of value Means of Exchange Unit of account

13 © Charles Goldfinger 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

14 © Charles Goldfinger Future 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

15 © Charles Goldfinger Future 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

16 © Charles Goldfinger The 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

17 © Charles Goldfinger The 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

18 © Charles Goldfinger The 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

19 © Charles Goldfinger The future of money Risks Conceptual confusion Unstable institutional framework and governance Loss of control Systemic volatility and fragility Social backlash Growing dependance on technology

20 © Charles Goldfinger The 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

21 © Charles Goldfinger Future 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 Architecture to Global Financial Technology Infrastructure


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