SHCs are sick, as the kids say

Now, of course, when techno-determinist mirrorshaded hypester commentators (eg, me) say that the future of money might be somewhat different to the Bretton Woods II structure and that perhaps the decentralising nature of computer, communications and cryptographic (CCC) together mean that there might be currency issuers other than central banks (as, for example, I did in Wired magazine two decades ago), this might be dismissed by scenario planners and strategists as cypherpunk-addled babble.

It seems to me, however, that the reflections of sensible, knowledgable and powerful players is tending int the same direction. Mark Carney, governor of the Bank of England, recently gave a speech at Jackson Hole, Wyoming, in which he said that [Central Banking] a form of global digital currency could be “the answer to the destabilising dominance of the US dollar in today’s global monetary system”.


Mr. Carney went on to talk about the idea of “synthetic hegemonic currency” (abbreviated to SHC by everyone else but abbreviated to SyHC by me so that I can pronounce it “sick”). An obvious example of such a currency would be an electronic version of the IMF’s Special Drawing Right (SDR). In fact the former boss of SDRs has already put forward such a proposal, asking for the IMF to “develop a procedure for issuing and using market SDRs following currency board rules and backed 100% by official SDRs or by an appropriate mix of sovereign debt of the five basket currencies”. This, of course, sounds a little like Facebucks (or “Libra” as they are more properly designated) and, indeed, it is.

So what would be the difference between holding Facebucks and holding eSDRs? Well, for one thing, Facebuck currency board basket will not include Yuan. In responses to questions from a German legislator, Facebook have said (Reuters, September 20th) that their basket will be:

  • One half US dollar,

  • Euro 18%,

  • Yen 14%,

  • Sterling 11% (although why anyone would be this in “stable” basket right now is beyond me), and

  • Singapore Dollar, 7%.

The composition of the SDR varies from time to time, but the current basket (last reviewed in 2015) is:

  • 41.75% US dollar,

  • 30.93% Euro,

  • Yen 8.33%,

  • Sterling 8.09%, and…

  • Yuan, 10.92$%.

So Libra vs. eSDR (or Libra vs. A Chinese digital currency) comes down to the Yuan. I think the Wall Street Journal (September 23rd) is right to characterise the fascinating future of digital currency as a “coming currency war” between digital money and the Dollar, saying that “The U.S. dollar has been the world’s dominant currency since the 1920s. But if national digital currencies allow for faster, cheaper money transfers across borders, viable alternatives to the U.S. dollar could emerge, embraced by nations and monetary officials concerned about the dollar’s outsize influence on the global economy”.

This is about so much more than permissioned vs. permissionless or proof of work vs. proof of state.

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