This is a dated article but very positive and objective. I have been having a hard time finding positive and meaningful articles on digital currency lately and hence, selected this one with my comments:
Quote from: Bank of Canada Senior Deputy Governor Carolyn Wilkins:
"What we find is that adoption of e-money is exactly like the tango - it takes two. Buyers need to decide whether to use the new payment method while sellers need to decide whether they’ll accept it. It turns out that it’s the seller’s side that leads the dance; if there is a large enough fraction of sellers accepting new payment methods, more and more buyers are prompted to use them, eventually leading to complete adoption on both sides. In the case of Bitcoin, not many people want to dance." She went on to explain that this, “is due to the fact that Bitcoin has "serious flaws when it comes to satisfying the three main characteristics of money."
She was referring to the three functions of money being: 1) unit of account, 2) store of value, and 3) medium of exchange. I have provided extensive coverage on this subject beginning on page 105 of this forum in case you are interested:
https://bitcointalk.org/index.php?topic=470155.2080I suspect that her concern about Bitcoin’s serious flaws is due to Bitcoin high volatilities making it a poor store of value and a risky medium of exchange with high potential currency loss. Hedging could minimize these serious flaws, but it is costly, without sufficient advantages from other sources to offset it.
Miss Wilkins went on to say, "If e-money denominated in Canadian dollars were to significantly replace bank notes, there are some options that the central bank could take so as to be in a position to intervene in markets or be the lender of last resort."
To conclude, Wilkins said that while 'e-money' offered many benefits, these technologies are "circumventing our old models of payment," and have developed "new risks" that could dramatically affect the Canadian financial system as a whole.”
It is most encouraging to learn that she did not rule out the possibility that digital currency could significantly replace bank notes. That has been DNotes’ position. It will not replace fiat currency but significantly supplement it on a global scale. The potential is straggling.
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Bit-Curious? Bank of Canada Flirts with Bitcoin despite ‘New Risks’ to Status Quoby Diana Ngo @ 2014-11-14 11:54 AM
http://cointelegraph.com/news/112922/bit-curious-bank-of-canada-flirts-with-bitcoin-despite-new-risks-to-status-quoOn November 13, Bank of Canada Senior Deputy Governor Carolyn Wilkins gave a speech at Wilfrid Laurier University in Waterloo, Ontario, on 'Money in a Digital World,' where she tackled the topic of 'e-money,' dissecting both the benefits and risks of such innovations, and said that Canada's central bank was "undertaking research on the potential merits of issuing e-money."
"There are two types of e-money that I want to talk about today," started Wilkins. "The first type is denominated in a national currency, and it represents a claim on the issuer. The second type of e-money is cryptocurrency - such as Bitcoin. This type of e-money is not denominated in any national currency and so has its own unit of account."
She continued,
"It is also completely decentralized and does not represent a claim on the issuer. This is the revolutionary part of cryptocurrencies - transactions can be validated without a trusted third party."
Mentioning the case of Kenyans and M-Pesas, the Senior Deputy Governor said that while e-money was particular popular in developed countries where relatively fewer people have access to banking services, cryptocurrencies have yet to gain much traction with people making purchases in Canada.
Taking the figurative example of the tango, she argued, "What we find is that adoption of e-money is exactly like the tango - it takes two. Buyers need to decide whether to use the new payment method while sellers need to decide whether they’ll accept it. It turns out that it’s the seller’s side that leads the dance; if there is a large enough fraction of sellers accepting new payment methods, more and more buyers are prompted to use them, eventually leading to complete adoption on both sides. In the case of Bitcoin, not many people want to dance."
This trend, she explained, is due to the fact that Bitcoin has "serious flaws when it comes to satisfying the three main characteristics of money." Thus, the Bank of Canada views Bitcoin and other cryptocurrencies as investment products rather than money, and she noted that "any resulting gains or losses could be taxable income that must be reported."
Even though 'e-money' is not big enough to pose any risk to Canada's financial stability, the central bank is "watching developments closely."
She added, "The federal government also is undertaking a review of payment systems in Canada to ensure that the degree of regulation of payment systems and methods is appropriate."
And while cryptocurrencies offer many benefits such as costs reduction, and increased privacy, the Senior Deputy Governor argued there are many risks from which people needed to be aware of. These risks, she said, include the fact that cryptocurrencies are "lightly regulated with limited or no user protection," the exposure to theft, fraud and loss, when trusting a third party such as an exchange or a Bitcoin wallet company, and finally, the fact that cryptocurrencies can be used for money laundering, terrorist financing, and other criminal activities.
In the potentiality that cryptocurrencies were to gain widespread acceptance, "there would be implications for the central bank," said Wilkins.
She explained, "In the unlikely situation in which cryptocurrencies were used broadly, a significant proportion of economic transactions would not be denominated in Canadian dollars. This would reduce the Bank’s ability to influence macroeconomic activity through Canadian interest rates.
"If e-money denominated in Canadian dollars were to significantly replace bank notes, there are some options that the central bank could take so as to be in a position to intervene in markets or be the lender of last resort."
To conclude, Wilkins said that while 'e-money' offered many benefits, these technologies are "circumventing our old models of payment," and have developed "new risks" that could dramatically affect the Canadian financial system as a whole.
Thus, she said, "the federal government, with the Bank's help, is modernizing the oversight frameworks for payments," and "the Bank is also undertaking research on the potential merits of issuing e-money."
The Bank of Canada is said to be "working through the tough issues," in order to "support the benefits of innovation, while safeguarding the integrity of Canada's money and payment systems and, ultimately, financial stability."
In all these articles, good and bad, there seems to still be a lack of understanding exactly what Bitcoin et al, really is. Financial "experts" treat it as a token rather than a complete financial system. Granted, it has the ability to be both as well as a commodity but, truth be said, Bitcoin is a fully functional financial system with a digital "token" being the Bitcoin unit itself. It's a matter of semantics, call it what you want, it's a two part system at it's core.
This is how I see it anyway and until a global consensus is reached, we will have volatility and varying levels of adoption. DNotes has the ability to stem this problem by fully defining itself and it's included parts. I would say the following apply.
1. DNotes is a financial system and store of transferable value.
2. DNotes is a currency.
3. DNotes is a token within the currency.
4. DNotes can ACT as a commodity if needed.
We need to define how these individual constructs make up a complete system that can function world wide. What I'm getting at here is something much more than "Bitcoin" and buying trinkets on line. This overall view of Bitcoin right now is fragmented into many pieces and directions. A solid financial system with a well defined purpose and use can make much headway in the adoption arena.
SO, my point is simply, DNotes can be something more than the sum of it's parts. I'm not saying Bitcoin can't be but, Bitcoin is quickly getting locked into it's roles both good and bad, and will not be able to fulfill all the roles it's being asked to play. If we can set out clear guidelines and purposes for DNotes now we have a great chance to fill those roles in the future. Perhaps it's time to define digital currency as a whole new form of exchange of value which can be spent, saved, invested, used as a global transfer medium, used to convey value in all transactions, and most important, used by ANYONE.
And, we must avoid over complicating the issue. K.I.S.S. applies here is a big way. Some of the things needed to make this work:
1. No bars to entry.
2. Ease of exchange
3. Steady/appreciating value.
4. Clear method of transfer and use.
5. Easy secure storage
We already have some of these in play. Oh well, just my rambling 2 cents worth as I sit here at the Museum and watch the temp drop and the snow swirl...
