The Government of India has decided to set up a committee to report back within six month with recommendations on how to regulate digital currencies.
Digital currencies are cropping up on the internet to address some fundamental short comings of capitalism and world trade. Whilst some might want to allow only Rupee in India and reform the Reserve Bank of India (I myself have made such a proposal), others (and I count myself an advocate of this option too) are determined to make complementary currencies on Cloud platforms the solution to currency scarcity of 95% of Indians in the informal sector.
Sunil Aggarwal, commented on his “Moneyframes: A Blockchain Venture facebook group:
“See the number of ether transactions and they are almost touching 300,000 per day. This is nearly identical to bitcoin transactions. I imagine a day when crypto-currency transactions would be 1,000 million a day. The way things are going, I think that it is achievable in next 5-10 years. I don’t think that it would be on bitcoin or ether only. There would be other blockchains too and I also feel that we shall have interoperable chains as well as half-a-dozen odd smart contracts
enabled chains. That will become unbeatable peer to peer driven automated infrastructure that can be utilized by all existing as well as new players. It will be a game-changing thing.”
The authors of the Indian Constitution gave us important provisions related to money, though what they left out was much mention of the fact that most of legal cases in the world and India pertain to money. Money is property par excellence in the capitalist world. Indian Penal Code, 1860, Code of Criminal Procedure, 1973 and Indian Evidence Act, 1872, and Code of Civil Procedure 1908 are obsessed with enforcing debts, creating debts and managing debts.
Article 110 in The Constitution Of India 1949 tells us what a Money Bill is that Parliament may pass, but not what money is. The Legal Tender (Inscribed Notes) Act, 1964 tells us Governments may not print political messages on currency notes. But it does not tell us what currency is. Currency coinage and Legal tender are in the Union list under the Seventh Schedule of the Constitution, as is trade and commerce with foreign countries, companies law, weights and measures,
banking, bills of exchange, cheques promissory notes and “other like instruments”, and control of industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest. Economic and social planning is in the concurrent list, as are trade and commerce; markets and fairs, money lending and money lenders, relief of agricultural indebtedness, some companies, betting and gambling and treasure trove are in the States’ List. The government’s committee has its work cut out.
In India the national currency is the Rupee, and it is just not getting into circulation where it is needed. The suffering in each District and in towns is enormous. Each place has its own problems. The Uttar Pradesh government under BJP’s Adityanath needs nearly one lakh crore Rupees to fund election promises including loan waiver for agriculturists. In Bihar instead of just a State Budget of 1.6 lakh crore Rupees for this year, we need 25,000 crore Rupees at least for each District. The promised central funds for Bihar even of much lower amounts have not materialised. Gram Panchayats in India are starved of funds. Gram Sabhas have political but no economic standing and even their political power is constantly undermined. Urban unemployed are scavenging in the official system.
In his article in the Indian Express over the weekend former Finance Minister P. Chidambaram taunted Narendra Modi with whether he is planning to pull a rabbit out of the hat to deal with this liquidity problem. But the reality is P.Chidambaram and Arun Jaitley, the present Finance Minister, agree on the macro economic framework that prevents government creating money. The rabbit that both Chidambaram and Jaitley know has to be pulled out of the hat is ad hoc
monetisation of very much higher levels of fiscal deficit than the 3% what FRBMA 2003 permits. The latter Act has to be abolished and there has to be a review of imports and limit to full convertibility of the Rupee in order to free domestic money creation from the constraints of foreign exchange requirement. But neither of them is willing to do this or any other fundamental reforms of the money system for economic and social justice.
In the absence of such measures, the agriculture sector will continue to be subject to a very very unjust price irrationality due to Narendra Modi’s government’s macro economic framework with no alternative for us to divert to. 25% of the national budget 2017-18 goes on agricultural subsidy but the Rupee economy still continues to inflict malnutrition on India’s workers at levels not seen since British days. The same percentage of the national budget 2017-18 by the way goes on paying off interest to private banks on the governments’ outstanding loans. 95% of Indians are in the informal sector. In other words, the Rupee is not organised for us and we are not its primary users. Women suffer inordinately and disproportionately. What a ridiculous monetary system the nations of the world have imposed on themselves and each other; because of their focus on world trade and private corporate profit. Despite a socialist constitution India has not been able to escape its colonial legacy.
On the other hand the landless unemployed of the world are trying to use technological developments brought by capitalism to reject capitalism and governments, because they predominantly seek to exclude us from our rightful place in society and economy; and they ruin ecology. In some countries complementary currencies are being created for local economic trading systems (LETS). The Cyclos platform is a Cloud application for different forms of digital money. SBI/BSNL’s Mobicash App in India uses the platform. But whereas Mobicash is a part of the Rupee system, the Cyclos software does not require a LETS to trade in the national currency. Sardex in Sardinia is a system of payments and receipts in the local complementary currency that was created after the 2008 US bank failures. It allows manufacturers and producers of various goods and services to trade with each other in Sardinia. Similar systems exist in Greece, the UK,
Brazil, Switzerland and elsewhere.
The reason the various LETS all over the world did not flourish and grow as expected was that these complementary currencies did not usually allow the members to buy the most standard products they need, namely food; – in developed countries food is produced by MNCs, not small farmers, and MNCs do not join LETS. The complementary currencies failed to get enough shops and manufacturers to participate and offer things for the unemployed to buy and the unemployed could not work even for wages in LETS currency if there was no food to buy with it. The basic shortcoming of Cyclos as a brand is that the complementary currencies created are not yet exchangeable with each other. The history of the Rupee is its own story of lurching from one crisis to the other for the last few hundred years.
The deficiency of small autonomous local economic trading systems in a world that is very very determined by regional ad class and caste divisions of labour, is now being overcome with the smart tokens of the Bancor Network. The authors of the Bancor Protocol published their discussion paper on 30 May 2017. They explain the problem in their language:
“…The current exchange model for currencies/assets has a critical barrier, requiring a certain volume of trading activity to achieve market-liquidity. This inherent barrier makes it nearly impossible for small-scale currencies (such as community currencies, loyalty points or other custom tokens) to be linked (exchangeable) to other popular currencies using a market-determined exchange rate.”
“We are now beginning to witness the emergence of user-generated currencies. …New smart tokens can be created simply by depositing an initial reserve/s and issuing the initial token supply. Alternatively smart tokens can be initiated through a crowd sale, where a part of the proceeds is allocated as the initial reserve.”
It is important for landless labourers in India to understand this. All we need to do is issue ourselves our own currency and start using it. Trust is the only thing separating us from each other. Bancor smart tokens with their system of constant reserve ratio allow us to do this.
Modern digital currencies have many advocates who wish to break up the monopoly on money being held by capitalists and central banks in the world. These two sets of people have made society inequitable and unjust, and have ruined the ecology.
A theoretical complex around complementary currencies in the Cloud would include regulation against hoarding, usury, and excessive fees. But of course it is impossible to regulate programmers. They will do whatever they want, as we have seen with the early birds Facebook, Google, Amazon and Microsoft, to name just some.
Landless labourers of the world will loose the opportunity to make the internet our own unless we take control of the technology by using it. Constructive alternative model complexes will not emerge unless we want them to. If we don’t make digital currencies in the Cloud serve us, the hoarders, usurers and racketeers will run away with the technology.
There is much material on the internet on alternative monetry theory.
In my view loss of Rupee currency in the hands of the majority of Indians has eroded the Constitution in India. The rot started under the Congress regime and is continuing under the BJP with a vengeance. When you cannot trade with each other because you have no job and no coinage, society is robbed of one of its basic means of cohesion and trust. The market should give you the opportunity and a place and a purpose in life: a livelihood. Fascism is the result of the collapse of the Rupee economy in India. The time has come to overthrow the fascist revolution.
In this context digital currencies should be created on a massive scale in India, in every District of the country. That it has not happened spontaneously is of course sadly because of the caste system that cuts off the upper caste programmers from the lower caste landless labourers who need such currency.
The Chief Monetary Architect at Bancor is Bernard Lietaer, the man who was asked to design the EURO but whose advice was rejected by the powers that be. Bancor is named after the international currency that Keynes wanted to set up after World War 2. Bancor’s head office is in Zug, Switzerland.
Bancor overcomes the “double coincidence of wants” problem of barter. The term was coined in 1875 by William Stanley Jevons who wrote A General Mathematical Theory of Political Economy. He said: “The first difficulty in barter is to find two persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting, and many possessing those things wanted; but to allow of an actual act of barter there must be a double coincidence, which will rarely happen.”
Bancor is designed with an obligatory reserve; you may only issue a smart token if you create a reserve with it; through suitable programming the platform then ensures that any holder of any smart token can always sell and buy her smart token, thus ensuring liquidity of even the smallest smart token market.
The reserve chosen for the first Bancor Network smart token crowdsourcing event to raise Bancor Network Tokens (BNT) is the standard ERC20 token which implements the Bancor protocol.
The fundraiser was held on June 12 2017. 396,720 ETH were raised and 3,967,200 BNT were issued. The organisers say “a portion of the funds will be used to participate in and support innovative and promising future smart token crowd sales in the BNT network. These may include new, location-based and vertical-specific smart token initiatives such as regional token networks, community currencies, crowd funded projects and other online or offline token-based ecosystems.” Their main offices are in Switzerland.
With this system, there is continuous liquidity. It simultaneously automatically facilitates price-discovery. “The smart token’s contract instantly processes buy and sell orders, which drive the price-discovery process. Due to this capability, smart tokens do not need to be traded in an exchange in order to become liquid. A smart token holds a balance of least one other reserve token, which (currently) can be a different smart token, any ERC20 standard token or Ether.”
“Smart tokens are unique in that they can be purchased or liquidated by a single party, using the calculated price, removing the need for two opposite wants to be simultaneously matched. This effectively means that by using the Bancor protocol, small-scale currencies with a low expected trade volume can offer continuous liquidity, thus, removing the barrier for them to be linked to the global economy.”
“Smart tokens introduce multiple advantages over the traditional exchange model: continuous liquidity irrespective of their trading volume; no extra fees – the only mandatory fees applied by a smart token are the block chain platform fees (gas) which are relatively low; no spread – since the price calculation is done algorithmically by the smart token, the same price applies for purchasing and liquidating the smart tokens; predictable price slippage: smart tokens allow pre-calculation of the precise price slippage, based on the transaction size, before it is executed; lower volatility – a smart token with a 10% constant reserve ration is comparable to an exchange with 10% of the entire supply of a token in its order-book at all times, forming substantial market depth. In a typical crypto-exchange,
the share of the supply in the market depth at any given moment is well below 1%. The higher the constant reserve ratio (CRR), the lower the smart token’s price volatility. The lower the CRR, the more “new credit” is created relative to the original reserve amount.”
Looking at these interesting technological developments in money creation, we may look at the problems faced by us landless labourers in many many regions and towns and Districts and villages with a fresh eye. We cannot buy the product of each other’s labour because national and international financial interests stole the socialist sovereign Indian Republic’s Rupee.
Let us take an example. I know that there are millions suffering from arsenic poisoning and I know that there is a cure if only we all infuse our drinking water with Jamun leaf powder for three hours every day.
But even if the inventor has a Jamun leaf powder machine, he may not have the money to market his product. The prospective Jamun tree growers may also not have money for saplings or wages to maintain the trees. The consumers do not have the Rupees to jointly invest in an aggressive mutual fund to set up their production and distribution and consumption network. So a new financing system is needed to do what the Rupee and the artificially scarce international currencies are not doing.
It is despicable of P. Chidambaram to write that this is akin to pulling a rabbit out of a hat. It is an insult to the intelligence of Indians. What we must do is not some kind of magic, but use the scientific principles of currency liquidity and market creation of Bancor to urgently create our own online and offline token-based community currency and overcome the problem of Rupee poverty.
A group should be constituted to look into how to do this urgently and quickly. The government committee should keep the principles of socialism, equality and fraternity on the masthead of its terms of reference when thinking about how to use digital currencies for creating local community livelihoods, health provision, employment, child care, and much more.
The first step in the example above would be to organise and educate producers and consumers of Jamun leaf powder who want to produce, buy and sell products that they are not able to get financed by Rupee let alone the existing international money system.
After we have educated ourselves, the second step is to jointly create our new Bancor smart tokens for ourselves by creating the required ETHs as reserves and issuing the matching smart tokens to ourselves.
We will then as the third step use our new currency to trade with each other, buying each others’ food and selling our produce to each other. The platform will be online and offline, which means it may include the use of paper tokens and mobile phones and smart phones. Because our tokens will be exchangeable with other smart tokens in the Bancor Network, we will have our own complementary market that may be quite big and will allow us to exit from the Rupee, which description is in any case a misnomer as we are to all intents and purposes not in it in the first place.
The role of government should be to help but not hijack.
Anandi Sharan is a current affairs commentator focusing on India and the policies needed for people to be able to adapt to climate change. She has drafted a new Reserve Bank of India Act 2017 which she would be happy to share with interested readers. She can be reached at firstname.lastname@example.org