Here is my take. A single global currency is a bad idea and will not likely to happen. It will be way “too big to fail” and there is no conceivable scenario for the world population to allow that to happen.

A trusted global digital currency as an alternative to existing fiat currencies that is available for everyone worldwide to participate is a very different mission with starkly different ultimate goals. It is designed to be a choice for the world population to have an alternative, almost as an insurance policy, if 1) their own sovereign currency failed or devalued drastically due to bad governance or economic conditions beyond their control or whatever the case may be, 2) as a medium of exchange to conduct global commerce between two parties with nearly zero transaction cost anywhere worldwide, and 3) as an opportunity for anyone worldwide to participate for potentially high risk/high returns even with small regular savings for millions who normally have little left that is sufficiently meaningful to save.

Informed scholars and common reasonable people will agree that fiat currencies have always been abused by governments and political leadership around the world. It is not a new phenomenon. It has always been that way and will continue to be so. The open debate will be the intensity. It can get worse and it can get better. As a whole, on a global scale, it is more likely than not to get worse as political leaders continue to make more promises of hand-outs with the full knowledge of governments’ inability to fulfill the immense financial burdens accumulated over generations of irresponsible political leaderships.  

Apologies if this is difficult to read etc, it's one of my 'long posts' where I think of things and get confused about the order I should discuss them, then 'chop and change' sentences around which can make the message harder to follow. These views and 'on the fly' thoughts are my own, and do not necessarily reflect those of DNotes.

To begin I'm not sure I like the idea when regulators and officials take jobs from companies who had been lobbying them.

To use a politically neutral example, who remembers Darleen Druyun, former weapons buyer for the US Air force? Well in 2005 she was jailed for (only) 9 months after pleading guilty to giving Boeing special treatment in a 23.5 billion dollar government contract - of course, after the deal was inked, Druyun was hired by Boeing as a vice-president with an annual salary of 250k. Druyun allowed Boeing to negotiate for an extra 6 billion dollars more than the contract should have been. This kind of hiring of 'career' government officials into highly paid corporate executive roles has been routine for decades. I don't know if Mr Lawsky made the regulations incredibly expensive and difficult to comply with, to the detriment of itBit's competition before he left the NYDFS, but considering that to the best of my knowledge, itBit is still the only exchange to have a banking licence... it kinda stinks of corruption. This could be a big misunderstanding though, and those two regulators may have just joined itBit fair and square, or these two regulators made itBit a 'sure thing' - we may never know. The next question would be that in the event that there was unfair favouritism affird to itBit, is it sensible (risky) to go into business with them should foul-play be uncovered in the future, or do these appointments provide some level of immunity? It will take more time watching how this all plays out.


In regards to the 'bankchain' thing, I've been waiting for something like this to come along for a while. We all expected banks to try to take the technology for their own to improve their settlement payments from overnight to near-instant. I can see lots of problems with itBit's idea - but I presume many customers may prefer joining banks that are members of the 'bankchain' system for faster payments, which could encourage even more banks to join. I don't have any issue with itBit being profit motivated, but re-my point about the regulators passing ridiculously difficult regulations in NY that have turned away nearly all of itBit's competitors... it doesn't sound like they're playing fair game. Again, this may not be the case at all - pending further research and developments.


Of course, ItBit and the banks are still at a disadvantage - they haven't fixed the money, they still use fiat. I could go on and on with various graphs and points (may I point people in the direction of IMZ's crypto kindergarten blog posts on cryptomoms.com forums), but the reality is that fiat is created as debt, which means new money must come into creation to pay for the interest owing on that debt, which is completely unsustainable. World governments are in massive debt crises, and they have all failed to create the next 'economic' bubble that would give a false sense that the 'real' economy isn't in decline.

But why has recovery been unattainable on this occasion?



https://www.quandl.com/data/FRED/DFF-Effective-Federal-Funds-Rate

Take a look at the effective federal funds rate in the link above. The interest rate tends to be lifted by the fed in times of economic boom, and severely lowered in times when the government want to promulgate economic activity, which leads to 'bubbles' (stock bubble, dotcom bubble, housing bubble etc). The chart clearly shows drops in the interest rate in ~1988, ~2001 and ~2007 in line with the decline of each bubble. These low interest rates make borrowing really cheap, and encourage ridiculous investment activities that no sane person would make if interest rates were dictated by the free-market. Currently, the Fed has an effective 0.14 % interest rate, and it has been near zero since ~2010.

The fact that interest rates are still low, is the obvious tell that there has been no 'real' economic recovery. What is worse, is that there is now nothing in the way of 'government tools' to improve this situation - QE has already convoluted the real decline in the US economy, and dropping interest rates any lower would make them go negative. I hardly think anybody would be interested in running a restaurant where they paid customers to come and eat, and I think it would work the same with your bank deposits if you were earning negative interest - It would mean the destruction of the banking system. I could go into this much further, and bring about many other points, but this should suffice for the moment. Basically, crypto currencies have more long-term stable potential than fiat currencies do. Crypto is going to become a more attractive alternative, and quickly.

But DNotes doesn't only have the advantage of sound money - It is a good point to highlight that DNotes is creating a global digital currency that is useful everywhere and holds an equal value worldwide, so there is no requirment no transfer between currencies (i.e. Euro to USD) like with itBit's system - (presuming foreign banks co-operate, or foreign exchange is possible as a service of the banks through the bankchain).
ItBits 'bankchain' simply can not compete on the near-zero transfer cost possible with DNotes and our ecosystem. Not within the same country, and certainly not internationally. If ItBit does try to compete, the banks will not be pleased to forego all of their processing fee's (income) and leave the bankchain. If they don't try to compete on processing fees, then DNotes holds a competitive advantage and consumers would get more value using DNotes for transfer. ItBit's strategy could like like any number of things, but one could be that they work to get adopted by the banking system, and quickly, then proclaim victory and hope everybody else gives up - including crypto industries. They would come up with some slogan to entice banks like "Bitcoin brought instant payment transfers, banking uses 'real' money. ItBit brings you both". ItBit may simultaneously remain one of the only exchanges where crypto-USD transfers are permitted by the US Gov through banking licences, especially if the NY regulations are adopted in other states (which looks likely). ItBit could continue to accommodate the 'niche' crypto market and make extra profits as a monopoly / oligopoly player to supplement their 'bankchain' income - which would be a great way to hedge their bets in the short term.

Normally I try to avoid speculating this far ahead because there are too many assumptions made along the way. Changing one assumption, would then change the 'next step'. The above is but one potential path we could see.

Chase, I have no idea if banks in developing nations would be invited to the party. I imagine it would be the US banks that wouldn't want to deal with those in developing nations. Assuming any banks even wanted to use ItBit's platform, I doubt the US government would allow the banking system to shift from predominantly being traded in USD, to being traded in "ItBit tokens"... I think DNotes and digital currencies in general are safer from government trying to shut down their ecosystems. It would be much more likely that if this 'bankchain' thing is successful, the US government would buy the rights to it, then force all banks to trade using their own 'issued' tokens by the "BankFederalReserveChain". That way the US government would be able to spy much more easily on every banking transaction, and all but make physical cash illegal...

Of course, at that juncture, who knows how many everyday people would have decided they would prefer to use decentralized crypto's like DNotes?

Anyway, hopefully it sparks an interesting conversation.

Here comes centralized Digital Currency, I mentioned earlier. This may not be a good thing for the consumers, many bank employees and many of us who are committed to decentralized financial services as an alternative to government/bank controlled currency. Unfortunately, we don't even have an industry association to speak with a united voice. That is just my opinion. What is yours?



itBit Hires Former NYDFS General Counsel Daniel Alter, Pushes Ahead with Bankchain Project

by GIULIO PRISCO on SEPTEMBER 3, 2015 0
https://bitcoinmagazine.com/21845/itbit-hires-former-nydfs-general-counsel-daniel-alter-pushes-ahead-bankchain-project/


In April, Bitcoin Magazine reported that Bitcoin exchange itBit had filed for a banking license in New York. Later in May, itBit was granted a trust charter by the New York Department of Financial Services (NYFDS) under New York State banking law, the first such charter granted to a digital currency company by the NYDFS. ItBit also announced the successful completion of a $25 million Series A funding round.

On September 2, itBit announced the appointments of Daniel “Danny” Alter as the company’s new general counsel and chief compliance officer, and Kim Petry as chief financial officer. Petry was previously CFO of global operations and technology at Broadridge Financial Services and, before that, served as CFO and vice president of global commercial/corporate card payment at American Express.

Alter joined itBit after stepping down in February from his most recent post as general counsel of the New York State Department of Financial Services (NYDFS), where he served as principal counsel and strategic adviser to the New York state superintendent of financial services.

The former New York State Superintendent of Financial Services Benjamin Lawsky left the NYDFS after releasing the controversial Bitlicense regulations for digital currency businesses operating in New York. Lawsky’s move to a consulting business was strongly criticized by the libertarian Cato Institute.

“Because of the contacts he made as a regulator, [Lawsky] can hire himself out to Bitcoin companies wanting to signal to other regulators that they have the approval of the regulatory establishment,” noted Cato Senior Fellow Jim Harper.

It seems likely that Alter’s move to itBit might be criticized in the same grounds.

“The New York State Public Officers law requires that I have a two-year recusal before I can appear before the New York Department of Financial Services on behalf of the company,” said Alter in a pre-emptive statement reported by Reuters. “And it will certainly apply to itBit. I will not step near or have any communications with the New York Department of Financial Services. Those will be handled by outside counsel or qualified compliance people within the company.”

“Between Danny’s deep expertise in financial services and virtual currency regulation and Kim’s demonstrated track record as a successful CFO of global financial organizations, I’m confident that itBit will continue to grow and develop innovative blockchain-based solutions to address the financial industry’s greatest pain points,” said itBit co-founder and CEO Chad Cascarilla. “Danny and Kim possess a deep understanding of how to grow and run a successful business within the regulatory framework of the financial services industry, and their expertise will be invaluable as we work toward the launch of our new permissioned distributed ledger product – Bankchain.”

Bankchain, a new high profile project still held under wraps by itBit, will be a closed, “permissioned blockchain” owned and operated by banks and financial institutions – in other words, a private blockchain without bitcoin and anonymous miners. According to itBit claims, Bankchain will automate, accelerate and simplify post-trade processes across the financial services industry, saving institutions time and money.

Bankchain is “the first consensus-based ledger system exclusively for financial institutions,” states the still very basic Bankchain website. “Bankchain is a new clearing and settlement network that leverages blockchain technology to reimagine how financial institutions execute post-trade. The decentralized network is powered by itBit but fully governed by the member participants that join the platform.”

“[Bankchain] is a proprietary itBit protocol, not blockchain based, but is derived off of blockchain,” itBit head of global operations Steve Wager told Coindesk in August. “We will also not be using bitcoin as the native token; it will be an itBit proprietary token.”

Reddit users strongly criticized the “Sinister Bankchain Project,” but it appears that the trend toward private, permissioned blockchains is here to stay, with strong support expressed, among others, by Accenture and Digital Asset Holdings CEO Blythe Masters.