Unstable financial markets are making headlines once again. This time around politicians and regulators are being forced to admit they do not have the tools they need to build a strong economy and avoid another crisis.
We know a big part of the solution is fundamentally redesigning the money system. At Positive Money we are committed to doing just that.
We have released a new report outlining why the Bank of England needs to start issuing an electronic version of notes and coins – a new form of ‘digital cash’.
In the current system we cannot opt out of using debt-based money, which is created by private banks when they make loans. Once we deposit our money into a bank, the bank faces few restrictions on what they can do with it.
In Digital Cash: Why central banks should start issuing digital currency, we set out the case for the Bank of England to start offering bank accounts to individuals and small businesses as well as issuing an electronic currency. This would be a significant step towards a more stable and secure banking system.
[sws_yellow_box box_size=”665″] Please note, this is not a proposal to abolish physical cash. Notes and coins are going to be around for at least another 30 years or so – as long as people keep using them. This gives you the option to make electronic payments without being forced to use bank deposits created by the bank. It gives you an option to opt-out of the current debt-based monetary system. It’s a step towards full monetary reform. Once the Bank of England starts issuing money, it becomes easier to argue that it can do a better job of it than commercial banks. For privacy concerns, digital cash issued by central banks is no different in terms of privacy than payments made using electronic bank accounts. [/sws_yellow_box]
Giving people the option of holding an account at the central bank would challenge the concentration of power that lies at the heart of our financial system. Digital cash accounts would be 100% risk free, as banks would not be allowed to use this money, as they currently do.
We were pleased to see questions about digital cash being raised by the Bank of England’s research agenda last year. It seems that some form of digital cash is likely to be implemented in the future. We need to make sure it’s done in the right way – to create a money system that works for society and not against it.
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