Derek Queisser de Stockalper published in MPRA - Monetary System 2.0

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Derek Queisser de Stockalper is a trusted advisor, innovative thinker, published author, and thought leader in ‘Sustainability as a Source of Innovation’. His track-record in sustainable, alternative, and impact investment fields has provided him with valuable insights into related fields.

Derek wrote a piece featured in the Munich Personal RePEc Archive (MPRA), Monetary System 2.0: Hybrid credit notes, a novel inclusive digital monetary instrument for central banks, asset managers, and emerging green value chains.

Below are some interesting excerpts from Derek's paper, or you can read the original paper here.

Abstract

Description of a post-modern implied monetary system — or Monetary System 2.0 — enabled in one embodiment by a Central Bank’s permissioned distributed ledger technology (“DLTs”) architecture trading a novel digital hybrid credit note instrument or token. This novel monetary instrument could over time help rebalance some of our modern fiat currency system’s resource allocation imbalances leading to material economic, environmental, and social benefits for the agents of the system.

Synopsis

Our modern financial system is facing profound challenges and potential deep structural transformations. Challenges due to the consequences of the 2008 financial crisis and the Quantitative Easing programs (“QE”) launched shortly after by the Fed and other Central Banks to avoid the 1930s like Great Depression, and structural transformations with the rapid digitalization of our economies and payment systems.

QE is a monetary liquidity event unprecedented in scale and duration and is itself leading to new challenges for our economic system: misallocation of capital and resources, financial asset inflation, and the widening gap between capital owners and wage-earning citizens. These new dynamics are testing the trust socio-economic agents put in the modern financial system and post-World War II-related Bretton Woods institutions to create a fair, just, and sustainable economy for all. As a result, socio-economic agents are increasingly challenging Governments and their Central Banks to find new solutions to excess credit formation, which at 13x the size of global GDP 1, has become a key lever of instability, consumption excesses, and natural resources depletion. Populism, climate change growing certainty, and the loss of biodiversity and natural habitats are some of the “symptoms” of these profound modern resource allocation imbalances.

In parallel to these financial and economic challenges, we are witnessing the emergence of new payment systems based on the combination of cryptographic technologies and open geography digital financial solutions. The blockchain, smart contracts, and cryptocurrencies are just a few examples of technologies fueling novel payment processes that, if increasingly used and accepted by socio-economic agents, could become viable alternatives to incumbent fiat currency payment systems and their related financial infrastructures. But Central Banks do not stay idle and are themselves considering the issuance of their very own Central Bank crypto currencies (“CBCCs”) on so-called “permissioned” decentralized or distributed ledger technology networks (“DLTs”), also called private blockchain platforms.

In this paper, I will attempt to define precisely some of our modern fiat monetary system imbalances2 that, for example, green or inclusive financial solutions are aiming to address, before proposing the architecture of a new monetary instrument and its related permissioned transactional platform that could, together, enable the formation of new types of monetary and financial credit and/or payment processes. These new digital contractual envelopes could become the token of a new (novel neutral institution) or incumbent (Central Bank) permissioned DLT platform architecture, for example, which could enable the emergence of implied monetary asset currencies that will extract the benefits of both “metallist” and “non- metallist” traditional monetary systems,3,4 as well as more ancient forms of reciprocity mechanisms.5

The wider use and acceptance of these new contractual envelope tokens - or Hybrid Credit Notes (“HCNs”) - could in turn help limit excessive fiat currency credit formation and facilitate the anchoring of our economic system in a more grounded, balanced, inclusive, adaptable and thus environmentally sustainable economic growth model to the benefit of the system’s agents and its conex social and Natural systems.

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