Last week I awoke to an email from Jason Brett, CEO of ValueTechnology, a non-profit think tank focused on blockchain. “Check out Nancy Pelosi’s version of the stimulus bill,” he wrote. I learned that it talks about using digital currency and digital wallets as a potential source of distribution for the $2 trillion package.
My heart skipped a beat. For 5 years, as founder of The Digital Money Forum at CES, I’ve been banging my head against a wall watching the snail’s pace of adoption of digital currency. Simply put, it’s a more ecumenical, more hygienic, more accountable, faster and cleaner way to distribute money to everyone, most importantly the underbanked or non-banked. Just maybe, could one upside of the virus dbe to refocus on the need to get this done?
But before I had a chance to process the news and do a little research, the words digital currency were stricken from the draft of the bill. (Not before a number of outlets reported on it.) This week we learned that in all probability the stimulus money for consumers will be distributed through direct deposit to bank accounts.
The Radicalization of Finance
OK, Camelot shattered. But Pandora’s box remains wide open. The cumbersome process of mailing checks, licking envelopes, travelling to a branch bank to interact with tellers, and often paying transaction fees seems patently illogical and unhealthy at the moment.
In an internet-connected world a better answer could be distributing the money through stablecoins–a digital currency pegged to the value of a stable asset. (Not to be confused with Bitcoins or other digital assets that lack that stability.) A stablecoin that is delivered through a digital wallet pinned to the value of the US dollar could offer anyone with a smartphone immediate access to their stimulus money–no human contact involved.
It’s in times of tumult and stress that innovation flourishes. Yuval Noah Harari, renowned author of Sapiens and 21 Lessons for the 21st Century recently wrote that in emergencies, “decisions that in normal times could take years of deliberation are passed in a matter of hours. Immature and even dangerous technologies are pressed into service, because the risks of doing nothing are bigger.” So why not move now towards a new digitally-based banking system?
Bypassing the banks
I zoomed with Catherine Coley, who’s been at Morgan Stanley, Ripple and is now CEO of Binance.us a digital asset trading platform. She just wrote an article about why stablecoins should be used for the emergency Coronavirus stimulus payments. And then I checked in on Michael Casey and Noelle Atchison from Coindesk. They did a good video interview explaining the issue. In the podcast, Casey, Coindesk’s chief content editor, (and host of our Digital Money Forum at CES) put this new application of digital currency into perspective, saying “It should be thought of a way to distribute funds in a very targeted way.” Recognizing that using some form of government-backed coins flies in the face of the more purist decentralized notion of digital currency, Casey suggests it’s “befitting of the crisis mode we find ourselves in.”
In my conversation with Coley, she agreed. “Now is the time to test what we’ve built using stable coins,” she said. “In this unique crisis, there’s a requirement to stay in place, not leave the home, minimize deliveries. The traditional banking system is antithetical to the times.”
It’s no understatement that the COVID-19 virus has made just about everyone who has an internet connection more tech-savvy and tech-dependent. Tech for so many has become a lifeline for remote working, education, family and friend connectedness and even health. In a matter of a few short weeks, we’ve upped our nation’s digital game.
Why not banking? After all, if you have Apple Pay or another contactless payment system on your phone or credit card, you are already comfortable with digital transactions and you’re probably striving not to touch anything at all at a checkout counter. Last year’s debacle with Facebook’s roll-out of Libra, a global currency that would be pegged to a stablecoin, was a truly solid idea but introduced at the wrong time from the worst possible messenger. (Facebook’s privacy issues were at their apex in the news, so Libra’s adoption was implausible just on that basis alone.) While digital wallets have, until now, taken off more slowly than many had expected, the pieces are in place to pivot to digital transactions quickly.
There’s also some sign of renewed government bipartisanship in the face of the crisis, and it might expand to include finance. Democrats can embrace digital currency as a more streamlined way to get dollars into the hands of those without bank accounts. Republicans can focus on the fact that we need a digital currency plan to stay competitive with other nations. Purists who believe the system should be completely decentralized without a central entity to control the disbursements would be the only whiners. But hey, carpe diem.
In our conversation, Coley reminded me that the emergence of digital currency was born out of the 2008 financial crisis. (Bitcoin, which started the entire movement, was invented in 2008 and launched in early 2009.) Watching big corporations get government bailouts kickstarted the nascent digital currency model. Wouldn’t it be poetic justice if what began as a reaction to one recession helped save us from the next?