A BIG deal has been made with digital currencies and cryptocurrencies since the start of the pandemic. Many countries have introduced or announced their intention to launch their own digital currencies to complement physical (fiat) currency, while the price volatility of cryptos such as Bitcoin and Ethereum has regularly made headlines.
Should Scotland follow Sweden, China and Nigeria in embracing the idea of a digital currency that can be used nationally?
The main advantages of digital currencies are their cost and their targetability. The cost of transferring fiat money across the world is deceptively high. For example, moving £1 million between two accounts could cost between £20,000 and £30,000, while doing the same via cryptocurrency only costs £2 or £3.
This was one of the main reasons why El Salvador decided to adopt Bitcoin as legal tender, while the Philippines also explored how cryptocurrency can reduce costs for its migrant population when sending goods. money with them. Scotland has some 10 million members of its diaspora – being able to hold a digital currency, usable here, could make a real difference for them and their families.
Naturally, however you choose to transfer money, there’s also the concern of whether the intended recipient receives it. The cryptocurrency allows transactions to happen in minutes – rather than the days that international bank transfers can take – and it’s programmable to ensure it reaches the right person.
Closer to home, the widespread use of a digital currency could mean a significant reduction in bank charges for SMEs, social enterprises and charities, all of which need all the support they can get in this regard. moment. A 2016 survey found that SMEs in the UK spent £4bn on bank charges for international payments, of which Scotland’s share could have been as high as £248m.
Cheaper and easier transactions would benefit everyone and free up more cash to mitigate rising costs. A digital currency would also create greater flexibility and liquidity, which could be particularly beneficial for the 1% of Scottish households who still do not have a bank account or building society.
However, the main obstacle to achieving all of this is adoption. We need as many people as possible to hold, use and accept digital currency. While the number of Scotcoin holders has grown to around 7,000, we need a much larger user base to deliver its full potential. We think this might mirror what Switzerland did with WIR: a kind of cryptocurrency used in conjunction with Swiss francs that has brought greater stability to the economy since the 1930s.
Digital currencies are not a replacement for the money we already know and own – they are a complementary medium of exchange. With so much economic uncertainty post-Covid-19, now is the time for Scotland to embrace the idea of some form of extra money to strengthen its businesses, charities and communities and support our recovery.
Temple Melville is CEO of the Scotcoin CIC project