The Three Futures of Digital Money

Posted 2/27/20 by Yan Pritzker

As money rapidly turns digital, we must contem­plate three possible futures of money: central bank managed, corpo­rate issued, and decen­tral­ized.

But first, a brief detour for some history.

The current monetary system is a very recent invention

Most people reading this, being younger than 75 years old, have known money as something the govern­ment issues at will, without any backing. In fact, the current global finan­cial system, which hinges on the US Dollar as the world reserve currency was born as recently as 1944, was stripped of its gold backing only in 1971has created massive inequality, and may in fact be on its way to a bitter end.

We are now witnessing the next rapid trans­for­ma­tion in the nature of money. The vast majority of dollars in existence are already digital entries in bank databases. Many of us swipe our credit cards or wave our mobile phones or watches at payment termi­nals without giving much thought to the impli­ca­tions of such a system: every payment is now controlled and surveilled by an inter­me­diary, whether a corpo­ra­tion or govern­ment.

If we want a glimpse of the future, we can look to China, where 86% of the popula­tion already uses digital payments. While global penetra­tion of mobile payments is standing at a modest 34%, it’s not hard to see that with exponen­tial growth, we will likely see the vast majority of payments go digital within a gener­a­tion.

Once payments go fully digital, we can expect one of three futures, depending on who controls the produc­tion and transfer of digital money.

Central Bank Digital Currency (CBDC)

CBDCs are no longer a fiction. Nearly every major central bank is either planning to launch or planning to inves­ti­gate issuing their own digital currency. A number of inter­esting (as in “May you live in inter­esting times”) things become possible in this world. The first of these is negative interest rates, which allow the bank to make your money evapo­rate over time unless you spend it, as per this paper from the IMF:

In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe reces­sion. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depos­i­tors would have to pay the negative interest rate to keep their money with the bank, making consump­tion and invest­ment more attrac­tive. This would jolt lending, boost demand, and stimu­late the economy.


In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe reces­sion. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depos­i­tors would have to pay the negative interest rate to keep their money with the bank, making consump­tion and invest­ment more attrac­tive. This would jolt lending, boost demand, and stimu­late the economy [source]


If the thought of your money being stolen from you automat­i­cally in order to “stimu­late the economy” is scary to you, good. You’re still living in a world where negative interest rates haven’t been normal­ized. On the other hand, if you’re reading this from a future where this is the new normal, then just remember: your prede­ces­sors were warned, and they did nothing.

The second thing CBDCs allow for is much greater surveil­lance and economic censor­ship. China’s already playing this game full force. Latin American dicta­tors also love economic censor­ship, so here’s another beauty from the BBVA:


CBDCs are Central Bank-issued instru­ments that combine cryptog­raphy and DLTs to achieve four possible general goals [source]

  • Improve inter­bank settle­ment
  • Digitize cash to improve efficiency in manage­ment and payments
  • Develop a new monetary policy tool to overcome zero-bound interest rates 😱
  • Increase surveil­lance and reduce finan­cial system insta­bility

Corporate Digital Tokens

This future is exempli­fied by the likes of Libra, Hashgraph, Ripple, or Telegram. These compa­nies or corpo­rate conglom­er­ates expect us to buy their corpo­rate-issued tokens and treat them as money in the digital world, while they hang on to our “real money” and earn interest on it in the real world.

This vision of the future is quite bleak. For a visual, look to the movie Wall‑E, where a giant corpo­ra­tion called Buy-n-Large takes over the entire world, to the point where the de facto leader of Earth is the CEO of BnL.

If this future sounds prepos­terous, simply consider what you believe in if you’re buying up tokens of Ripple, Hashgraph, Telegram, Libra, or any other corpo­rate-issued money. If these tokens do indeed become world money, then the people who issue them will be the wealth­iest people in the world, will own a giant propor­tion of world money, and will be our de facto leaders, with the oligarch class of token fund bros following close behind.

The peddlers of such systems will sell you awful lies. They may even possibly be so deluded as to believe them for themselves. Does Zuck really think he’s banking the unbanked with Libra? He actually might. Maybe he intends in full faith to maintain the Libra currency peg basket in perpe­tuity. But will this hold true of Supreme Chancellor Zuck III, his great-grandson? I don’t know. I wouldn’t want to find out. Every currency that was ever backed by something of value has had that peg broken.

Not only do we have to trust these corpo­ra­tions with our money, but this system has all the same proper­ties that the CBDCs do, since they ultimately operate under the watchful eye of govern­ments, who will surveil and censor to their heart’s content in the name of protecting us from ourselves. Poten­tially worse, these new corpo­rate behemoths could overpower states, creating the very world Wall‑E warns us about.

Decentralized Money

Person­ally, I don’t think any of the above is going to happen. And the reason is: we now have Bitcoin.

Those of us living in America or other consti­tu­tional democ­ra­cies funda­men­tally believe that limiting the state’s power is a good thing. Yet we give the state unchecked power to spend money. We have seen in practice that the debt ceiling is a charade, and that the govern­ment creates money whenever they want. Fiat money, backed by nothing, is printed out of thin air to fund perpetual wars.

While a consti­tu­tional democ­racy is decent at preventing any one branch of govern­ment from taking too much control, it is not immune to corrup­tion by bribery, whether the outright illegal kind or the legal kind we call lobbying. When the state wields power over the monetary press, it never ceases to expand, as money creates power and power creates money in a perpetual cycle. It doesn’t matter which party is in charge when money is at stake, and the game is who can get their hands on more of it first.

Bitcoin fixes this. With Bitcoin, the monetary policy is fixed in stone, and enforced and audited by every node on the network, preventing anyone from being to arbitrarily print more. Rather than giving the state monopoly over money produc­tion, the produc­tion of bitcoins is decen­tral­ized, by allowing anyone who commits hardware and burns electricity to partic­i­pate in securing the network and earning bitcoins in reward.

As a volun­tary system, people can now choose to save some of their income in Bitcoin, regard­less of where they live, or what money their govern­ment imposes on them. As they build up a stash of BTC, they amass sover­eignty and option­ality to escape their country with their wealth secure, if their circum­stances become dire.

The existence of the Bitcoin option is itself a check on misbe­havior on the part of the state. As more people acquire these coins, they opt out of the fiat system of their state, eventu­ally gaining the power to move freely in the world to a juris­dic­tion that offers them the freedom they seek. Over time, this defunds autocratic states, as they lose the human capital they require to function.

The choice is yours

All money will be digital in the future. Whether it happens in your lifetime or in the lifetime of your children and grand­chil­dren is relatively unimpor­tant. What’s more impor­tant is that we now have freedom of monetary choice, thanks to Bitcoin. If you believe that free and decen­tral­ized money is the only money of the future, you know what to do.

Buy Bitcoin.

This blog offers thoughts and opinions on Bitcoin from the Swan Bitcoin team and friends. Swan Bitcoin is the easiest way to buy Bitcoin using your bank account automatically every week, month, or paycheck, starting with as little as $5. Sign up or learn more here.

Yan Pritzker

Yan Pritzker is the co-founder and CTO of Swan Bitcoin, the best place to buy Bitcoin with easy recurring purchases straight from your bank account. Yan is also the author of Inventing Bitcoin, a quick guide to why Bitcoin was invented and how it works.[

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