Electronic Money : Its Economic, Social, Political, and Environmental Impact

As a potential disruptive technology electronic-money raises fundamental questions on the role of money, how it should be designed, issued and managed. The 2008 financial crisis created the opportunity and need to rethink the role and design of the financial system. The now Governor of the Bank of England raised the possibility that ldquo;Free Bankingrdquo; and/or decentralised banking could replace Central Banks. Profound changes would result in the power of governments, business and the nature of democracy. Four different historical types of money are considered for rebuilding the financial system with e-money: (i) the monopoly form of synthetic or ldquo;fiatrdquo; money as decreed by governments that can earn interest (ii), fiat money that does not earn interest but has a usage fee (iii) ldquo;Free-moneyrdquo; issued privately with a usage fee and (iv) natural money redeemable into specified goods and/or services with a usage fee. Market forces are identified that would favour the adoption of e-money with a use fee redeemable into units of renewable electricity. These arise from: (a) creating a stable unit of local value negating the need for Central Banks; (b) money no longer a store of value; (c) improved equity by reducing unearned income; (d) reversing financialization with real assets becoming more attractive; (e) facilitating steady state economies with a global unit of account but not of value; (f) promoting sustainability by making finance intensive renewable energy more attractive than burning carbon; (g) facilitating community banking (h) mitigating the social power of money and (i) enriching democracy