Amnon Samid, CEO of BitMint AI-Powered Cyber-Innovation Hub, breaks down the economical, technological, and political aspects affecting policymakers.
As the fog and geopolitical backlash that follows the US President's new policy on the digitalisation and tokenisation of financial instruments clear, we reached out to an industry expert to find out if other countries will put on ice their CBDCs exploration and put forward legislation in favour of stablecoins to be issued by private firms and banks.
Historically, whenever payment became easier and smoother, commerce flourished, and civilization jolted up.
The world faces an opportunity to cure a fundamental deficiency experienced by money when most of it has become computer-handled. Money then lost its identity, which was there when money was physical, and it shrunk to be a number only.
This opportunity opened up with well-orchestrated public relations, after the seminal paper of Nakamoto (2008), which yielded the Bitcoin, although the basic idea was invented earlier. Samid preceded Nakamoto, and filed the first out of many comprehensive digital currency patents in March 2007, but lacked Bitcoin’s PR.
It introduced a new financial language that restores identity to digital coins and thereby puts them at par with physical coins as to the inherent advantages held by banknotes and metal coins while offering cyber-unique advantages for being subject to cryptographic processing.
Most central banks did not realise that it is a lifetime opportunity, and instead of offering citizens the opportunity to trade without intermediaries and pay freely and privately, they explored CBDCs that would allow for surveillance, and on top of that not immune against bad actors willing to circulate counterfeit national currency tokens, which may lead to the collapse of a national currency.
As a consequence, the US President signed an EO banning CBDC, since it ‘threatens the stability of the financial system, individual privacy, and the sovereignty of the United States’.
As an alternative, the EO advocates the ‘growth of lawful and legitimate dollar-backed stablecoins worldwide’.
Will the private market pick up the gauntlet that central banks have not picked up and issue stablecoins that can bring the welfare that a proper CBDC could have brought to residents, communities, and businesses?
The idea of digital money is to fulfil the main attributes of money, as a store of value, unit of account, and medium of exchange, while not overlooking other attributes, such as creating a bond between two strangers, being a social lifeline, being universal desirable and restoring the old way of payment with cash and to fit it for the digital age.
Digital payments utilise a digital message that is a string of bits, representing a pointer to the money that is actually stored in banking servers (as numeric value), or on the internet (e.g., blockchain).
A real digital currency will be utilising the sequence of bits not as a pointer to the money, that is stored somewhere else, rather these random bits that reside in our phone are the money itself, with value and identity (serial number), just like banknotes, enabling bilateral payment online and offline, peer-to-peer transactions directly and instantly from one phone to another without intermediaries, with the finality of settlement, cash-like.
In addition, it is essential that the user can very easily chop any desired fractional unit of the digital coin that resides on their phone, in any required resolution, without the need to connect to a network or an intermediary for receiving change.
Then we need an autonomous validation and transaction protocol that enables bilateral payments in the cyber world exactly like cash in the physical world, without validators or peers, while ensuring financial privacy.
The blockchain utilised by the crypto network, including its more centralised versions, Ethereum and Solana, represents novel protocols to address the validation and settlement challenges, but so far have not been overwhelmingly successful as a payment infrastructure. Private blockchains miss the attributes of DeFi, and with a public blockchain, the whole world knows about the transaction, which means that AI may mis-profiling us in a no-recourse manner, and soon enough quantum computers will unveil the identities of the payor and the payee.
Digitalisation is advancing rapidly. A public ledger design that mimics the biological behaviour of viruses to be immune against attacks by powerful computers and AI-Cryptanalysis, and that offers an autonomous settlement process without the hassle of DLTs, has recently been developed. The LeVeL-Paying-Field (‘LeVeL’), which was shortlisted by the G20, will serve as a global user base in a modern economy in the AI age, with the potential to disrupt today’s dominant payment and value transaction protocols. It can serve as a financial market infrastructure with ultimate effectiveness and unique attributes of DeFi for any asset, including CBDCs, stablecoins, tokenized RWA, and tokenised-cash.
It enables bilateral payment that is homomorphic with cash payment: strictly bilateral, while the Hi-Tec sophistication will deny criminals from abusing the privacy that law-abiding citizens will enjoy and prevent bad actors from hacking the money even with the strongest computers and with AI capabilities.
It was designed for an economy that demands global access 24/7, not dependent on cumbersome consensus mechanisms, validators, or block creation, making it suitable for retail, wholesale, and cross-border payment in any currency or any arbitrary stores of value (tokens).
Ideally, a well-designed CBDC would be an enabler to democratise access to finance and would contribute to economic and financial inclusion by equalising and connecting people, creating trust between strangers, embracing interoperability, advocating digital innovation, and contributing to the well-being of citizens, and for the communities to flourish.
In reality, most central banks adopted inferior technologies that cannot provide the above, ignoring proven solutions of Harassment-Resistant digital currency that will gain public trust, by avoiding surveillance and censorship, by preserving cash-like privacy when two parties trade with digital currency, by everyone, everywhere, anytime, and that offers disruptive use cases that does not exist today with prevailing payments protocols.
Stablecoins can stand alone or serve a complementary role to CBDC, acting as a store of value and a censorship-resistant asset, while offering stability and speed for everyday payments and remittances.
Europe is tightening regulation, and the European Central Bank (ECB) announced it will accelerate its digital euro exploration for reducing reliance on US-backed payment systems, and expand the initiative to settle DLT-based transactions in central bank money.
The Digital Euro’s narrative is well positioned; however, it seems that the chosen technologies are far from being an ideal and doable CBDC. It might endanger the economy and the financial system and does not bring meaningful added value to citizens.
Many other countries are moving away from retail CBDC. Then the question arises:
Does it make sense to promote payment-stablecoins (tokenised-cash) as the primary means of payment? Can it fulfil market demand for ‘on-chain’ settlements in the modern era?
Around 99 percent of stablecoin market capitalisation is denominated in US dollars, with an estimated worth of USD 220 billion. They are privately issued and usually backed by liquid assets, while issuers commit to maintaining convertibility at par by backing the on-chain tokens with off-chain reserve.
Places without easy or affordable access to cash or banking services, or citizens seeking the use of stablecoins for retail payments, need payment-related stablecoins for peer-to-peer payments.
Stablecoins in their current form, are only coated in a veneer of ‘freedom’ and ‘innovation’ and are not practical for immediate and secure private bilateral day-to-day payments.
Fiat-denominated stablecoins can enter the retail payment space, and compete with account-based and card-based schemes. For that to happen, we need payment-stablecoins that are more convenient for citizens to pay. If they are easy and secure for use in retail payments, reduce transaction fees and allow merchants to attract customers with rewarding programs, then merchants could have an incentive to accept them.
BitMint developed such payment-stablecoins, enabling streaming money cash-like, the way we stream data from phone to phone. They are structured in a manner that enables splitting each coin with the user's phone alone, to enable fractional units of any currency to be streamed directly from payer to payee, with no intermediaries, nor cumbersome consensus mechanism. It relieves central computation load, thus being environmentally friendly.
Payment-stablecoins are digital claim-check of the fiat currency (Tokenised-Cash), that represent obligation against cash (IOU); an obligation that doesn’t impact liquidity, while keeping these claim checks with instant redemption ability, and enabling embedding rewarding programs on the coin itself. They are being shaped to become AI-ready, quantum-resistant, and Internet-of-Things compliant.
The world of money and payments is undergoing a rapid transformation. Money is going digital, being transferred in real-time and AI-powered. Staying ahead means embracing more advanced technologies, new validation and settlement models, and friendlier regulations.
Digital claim-checks payment-stablecoins, as utilised by the LeVeL technology, represent a novel type of payment and settlement infrastructure that gives rise to a new generation of innovative solutions that can serve as a credit risk-free and trusted means of payment and store of value, denominated in the national unit of account, that is accessible to the general public and serves as an anchor to other types of digital money including commercial bank deposits.
Further work is needed to assess the implications of internationally coherent consistent regulatory models, to be complemented with an InterMint that will enable stablecoins to be used to transact across borders.
About Amnon Samid
Amnon Samid is a seasoned and forward-thinking professional with a diverse journey spanning roles from R&D and university lecturer, through co-founding and managing global technology companies in Israel, The Netherlands, Asia Pacific, and North America. He is a member of the expert panel of the Digital Euro Association. As CEO of an AI-Powered Cyber-Innovation Hub, BitMint, he was leading the first-ever retail digital currency project that successfully passed banking stress tests.
About BitMint AI-Powered Cyber Innovation Hub
BitMint is delivering practical digitalisation and tokenisation solutions that help consumers, businesses, and communities to build wealth, without tradeoffs regarding ease of use, functionality, use cases, cyber security up to being quantum-safe, and users' privacy. BitMint is crafting comprehensive full Fledged payment solutions conducting a wide range of transactions, including CBDCs, Stablecoins, and Asset tokenisation, providing a secure and seamless experience – from issuing, through validation and transactions, tethering and smart contracts, all secure up to quantum-level, shaped by advanced Financial Language and of Pattern-Devoid Post Quantum Cryptography, the only one with a mathematical proof of efficacy.
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