Digital currency
Transacting and value
exchange in the digital age
Katherine Stewart
An overview of the consultation on digital currency held as part
of the Corsham Institute Thought Leadership Programme 2017
CORSHAM INSTITUTE
For more information on this publication, visit
Published by the RAND Corporation, Santa Monica, Calif., and Cambridge, UK
© Copyright 2017 RAND Corporation and Corsham Institute
R® is a registered trademark.
Limited Print and Electronic Distribution Rights
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual
property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited.
Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete.
Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for
commercial use. For information on reprint and linking permissions, please visit
This report was produced following a consultation at St George’s House, as part of a programme of events in
the Corsham Institute 2017 Thought Leadership Programme.
This report should be read in conjunction with the ‘Building our Connected Society’ summary report
and the perspective papers from the series (which are available at
and The consultations in the 2017 programme were:
Digital learning: Digital technology’s role in enabling skills development for a connected world – March 2017
Open science: the citizen’s role and contribution to research – April 2017
Currency: Redefining the way we transact in a digital world – May 2017
Civic engagement: How can digital technology encourage greater engagement in civil society? – June 2017
This programme hosted at St George’s House was developed in
partnership by Corsham Institute and RAND Europe.
Corsham Institute (Ci) is a not-for-profit organisation that is working for a fair, inclusive, prosperous and
creative society based on trust and security.
RAND Europe is a not-for-profit research organisation that helps to improve policy and decision making
through research and analysis. RAND Europe’s work combines academic rigour with a professional,
impact-oriented approach.
St George’s House, Windsor Castle is a place where people of influence and responsibility in every area of
society can come together to explore and communicate their views and analysis of contemporary issues. The
aim is to effect change for the better in society by nurturing wisdom through dialogue.
CORSHAM INSTITUTE
3
Foreword
1 For more information, visit:
or
The pervasiveness and ubiquity of all things
digital has accelerated over the past 20
years and continues to grow exponentially.
Digital technology is becoming increasingly
intertwined with everyday life: from schooling
and education, to political engagement and
even financial and health management.
Developments in digital technology, and the
speed at which they emerge, drive innovation
and new applications that touch our lives in
different and often profound ways. While there
are numerous opportunities and aspirations
associated with digitalisation, there is also a
crucial need to understand and mitigate the
challenges it presents to society.
In partnership, Corsham Institute and
RAND Europe design and deliver an annual
programme of Thought Leadership at St
George’s House. From its inception in 2016,
the aim of the programme has been to explore
the opportunities and challenges that digital
technologies are creating within different
aspects of
The Currency and the Future of Transacting
Consultation on 4 and 5 May 2017 was the third
of the four consultations that took place as part
of the 2017 Thought Leadership Programme.
Other events in the series focused on:
• Education and skills
• Open science
• Civic engagement
‘Building our Connected Society’, a summary
of the key findings identified across the
four events in the 2017 Thought Leadership
Programme, is published alongside this report.
4 Digital currency
Background
2 See:
3 Stewart, Katherine, Salil Gunashekar & Catriona Manville. Digital Currency and the Future of Transacting. Santa Monica,
CA: RAND Corporation, 2017.
Our ability to exchange value and make
commercial transactions relies on connectivity:
the ability to identify, communicate with and
exchange goods or services with another
individual or entity that is willing to trade with
us. In enhancing this connectivity, digital
platforms have also led to innovation in the
way we trade: from early online mail order
shops, to today’s complex cryptocurrencies and
digital assets, which can be created and traded
with no material equivalent. Understanding
the economic, social and political implications
of such change in the way we can transact
– and how these fit into the context of wider
socioeconomic trends – are key areas of focus
for policymakers who wish to address social
challenges and also make the best use of such
platforms for public benefit.
With these considerations in mind, the
overarching question considered for the
consultation was:
As digital technology continues to
disrupt the way we transact and as new
currencies emerge, how can we ensure
that the benefits of a connected world
remain open to everyone in society?
The consultation was held at St George’s
House. As is the case for all Thought
Leadership consultations, our discussions were
held under ‘The St George’s House Protocol’
and ‘The Chatham House Rule’.2 Participants
at the event included senior figures from
academia, industry, government and third-
sector organisations, covering both the
technical and socio-political aspects of digital
currencies and wider transaction practices (for
a full list, see page 22).
Ahead of the consultation, a short thought-
piece was developed for the participants in
order to provide background information on
some of the issues as well as set the scene for
the
The following report provides an overview
of the discussions among the participants
and key themes that arose over the two-day
consultation. It aims to capture preliminary
ideas about how digital technology is changing
the way we are able to transact and about the
implications of such change on society, as
well as recommendations for further research.
Participants were encouraged to develop and
steer the topics under discussion in order to
provide a better reflection of the emerging
themes. Because these topics were often
interspersed, they have been grouped by
theme in this report rather than presented as
a chronological record. It should also be noted
that the views and proposals contained in this
report may not necessarily be endorsed by
everybody involved in the consultation.
5
1. Currency in a digital world
4 Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and
circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.’
Investopedia. 2017. ‘What Is “Currency”.’ As of 18 August 2017:
5 A cryptocurrency is ‘a digital or virtual currency that uses cryptography for security.… [It is] not issued by any central
authority, rendering it theoretically immune to government interference or manipulation’. Investopedia. 2017. ‘What Is a
“Cryptocurrency”.’ As of 18 August 2017:
6 ‘Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodi-
ty.’ Investopedia. 2017. ‘What Is “Fiat Money”.’ As of 18 August 2017:
7 ‘Pegging is a method of stabilizing a country’s currency by fixing its exchange rate to that of another country.’ Investopedia.
2017. ‘What Is “Pegging”.’ As of 18 August 2017:
To try to develop a shared understanding of the
topic for the ensuing conversation, we began
with a discussion that explored the nature
of currency in an increasingly digital
Specifically, we focussed on understanding
the potential impact on overarching financial
structures, the likely path of adoption for new
forms of currency, and our understanding of
the concept of currency itself.
Prospects for adoption of digital currency
Prospects for the adoption and use of
cryptocurrencies5 was one of the main
themes that emerged from our discussions.
Participants noted that Bitcoin, the most
prominent cryptocurrency, is still ‘scary’ for
some people. However, while it is still used
by some for criminal purposes, certain pull
factors – such as the lack of geography,
efficiency and low-cost transactions – mean
that Bitcoin is gaining further acceptance, with
more institutions and hedge funds moving into
the market and the potential for machine-to-
machine (M2M) transactions. Some suggested
that it was becoming easier to buy Bitcoin as a
result of the development of better exchanges,
although one participant noted that Bitcoin
continues to be used more often as a store of
value rather than as a medium of exchange.
Views on the future role of cryptocurrencies
in day-to-day transactions were mixed. Some
in the group felt that digital technologies
were reducing the need for physical currency,
particularly among younger generations,
who are more used to engaging with digital
platforms and virtual communications.
In this regard, it was suggested that such
‘normalisation’ of digital technology (and
in particular the ability to transact using
smartphones) could entail a diminished need
for physical currency, or even fiat currency6
more broadly, with citizens able to potentially
hold a range of digital currencies for different
purposes and to transact in each as required.
This led us to consider the prospects for a
single ‘global’ currency and associated global
prices, with potential efficiency benefits –
although some questioned whether such a loss
of diversity would be a benefit, or whether such
a global currency would even be needed, given
the ability for digital platforms to convert prices
in real time.
The view that cryptocurrencies would continue
to grow in prominence among the public
was challenged by others in the group, on
the grounds that, while volatility might be
good for investors, currencies with a high
degree of stability – such as those backed
by a central institution – are preferable for
everyday transactions (for example, paying
rent and setting trade price lists) and for
pegging7 alternative currencies. Although some
6 Digital currency
initiatives to develop ‘stable’ cryptocurrencies
have been ventured to this end,8 it was noted
that these are not yet in common use.
Others reasoned that, despite innovations in
digital payments, the paradigm remains that
people tend to use the currency that they
are paid in, and in which they pay taxes, for
the majority of transactions. In this regard, it
was felt that when discussing alternative or
digital currencies, we should also consider the
question ‘Can the dominant unit of account
really be disrupted?’
Another participant contended that efficiencies
in connectivity provided by digital platforms
are disrupting the very need for currency at all:
“as long as we have electric current”. However,
other participants challenged whether the
direct bartering of goods and services could
ever be so efficient as to reach mainstream
adoption, and argued that currency will
continue to retain a role as an IOU in this
8 The suggestion was made of stablecoins as an example of an initiative in this area, albeit one not yet operational. See:
Buterin, Vitalik. 2014. ‘The Search for a Stable Cryptocurrency.’ Ethereum Blog, 11 November. As of 18 August 2017:
9 ‘Clearing is the procedure by which an organization acts as an intermediary and assumes the role of a buyer and seller
in a transaction to reconcile orders between transacting parties.’ Investopedia. 2017. ‘What Is “Clearing”.’ As of 18 Au-
gust 2017:
10 Bristol Pound (homepage). 2017. As of 18 August 2017: Sánchez, Santiago José, & Ferran
Moreno. 2016. ‘Bristol to Barcelona: “Be as Ambitious as Possible with New Local Currency”.’ El País, 23 November. As of
18 August 2017:
regard. The role of currency in enabling clearing
for financial institutions9 was also discussed,10
although some noted that digital payments, if
used in a coordinated manner, could eventually
bring an end to the need for clearing altogether.
Overall, there was widespread agreement that,
in the short term at least, we will continue to
see an economy involving innovative, new
currencies and methods of transaction, as well
as traditional, physical currency. It was also
highlighted that while we currently use sterling
out of convenience in the UK, other types of
currency might provide different forms of value,
such as community benefits or lower levels of
government control. While different currencies
– both digital and physical – will be in use for
the foreseeable future, the ‘matrix of decisions’
that we consider when deciding to use one
form of currency over another – whether
local, national, foreign or cryptocurrency –
may become increasingly broad (this will be
discussed in greater detail below).
The Bristol Pound
One example of digital platforms facilitating the development of alternative currencies
discussed during the event was that of the Bristol Pound. The Bristol Pound was established
in 2012 as a community interest company to manage the administration of a local community
currency for Bristol, with the aim of keeping money circulating in the local economy. The
currency – which is pegged to GBP at a 1:1 exchange rate – collaborates with the local authority
and can be used to pay local energy bills, council tax and business rates. The currency is
exchanged as paper notes and through text payments (managed by a local credit union), and
Bristol Pound plans to launch contactless cards in
7
Future financial system
A key theme that emerged relates to the
potential impact of digital technologies on the
structure of the financial system and to the role
of the central bank.
Given the increasing ease of use and decreasing
costs of implementing digital platforms, and
the lack of need for cryptocurrency to go
through a central exchange, some participants
wondered whether the central bank’s position
as a guarantor of the store of value would be
challenged– although, as noted above, some
participants felt that a central bank–backed
currency would still have benefits for the
foreseeable future.
Even with a prominent central bank,
cryptocurrencies could influence monetary
policy by allowing people to ‘opt out’ of the
system in response to monetary policy
This was identified as both a
potential benefit, by acting as a check on bad
decisions by government, and a potential risk,
by diminishing state control and influence
over the financial system, particularly in
responses to crises. In some situations, such
loss of control could even deepen financial
crises, by allowing participants to ‘opt out of
the mainstream financial system and thereby
creating additional
Others noted that the ‘traditional model’ of
careers in banking and policymaking, with a
high rate of transfer between the two sectors,
may be changing as increasing numbers of
people choose instead to make a career in the
‘Silicon Valley’ venture capital and technology
ecosystem, with potential consequences
for the ‘power axis’ of traditional financial
industries.
11 Participants noted that this was particularly the case in such countries as Venezuela, where is it difficult to obtain
foreign currency, gold or other assets.
12 Participants noted that a sufficiently large alternative currency could cause global instability in this manner.
Participants noted that ‘currency is more than
just currency’; a broad financial infrastructure
has arisen over time, including complex norms
and structures relating to the traditional
exchange of value and the physicality of cash.
In this regard, Bitcoin and other innovations
in the ability to transact represent an
‘unbundling’ of financial structures: the ability
to separate out some discrete functions of the
traditional banking system (such as facilitating
transactions between individuals), with no
requirement to engage with other traditionally
concurrent aspects of the financial system
(such as the role of a bank in holding individual
deposits). It was noted that if we begin to
unbundle such structures, it is not clear what
the ultimate impact will be – or what wider
beneficial aspects of the current system might
be lost.
We also discussed the potential development
of international economic communities that
are not limited by state authorities. Termed
‘cloud societies’ by one participant, these
communities could potentially transact
electronically across borders, unrestricted by
national laws or trade agreements. Another
suggested that such economic activity
already occurs naturally, with distinct regional
dynamics, rather than uniformly across a state.
In this regard, international alliances of certain
types of economic regions could develop, with
emerging currencies or transaction platforms
tailored to their specific needs (for instance,
an alliance between cities to transact using a
particular alternative currency).
New models of value exchange
Our discussions turned to wider changes in
the practice of exchanging value, such as the
8 Digital currency
use of time or data to conduct transactions
(and the understanding of these as ‘alternative
currencies’), as well as the wider role of
innovative digital transaction platforms to create
new ways of exchanging value within society.
One particular focus of conversation was the
role of data in exchange for services, and the
extent to which we will see further development
of a ‘data economy’. It was noted that at the
moment, understanding of the value of data by
individuals is low (this perception was likened
to that of an individual silk worm, which has no
understanding of the collective value of the silk
threads that are produced). We also discussed
the prospects for greater individual control over
data, including what one participant termed the
prospect of ‘data capitalism’: 7 billion individual
‘data traders’, facilitated by platforms allowing
greater control over the use of personal data
and with the ability to exchange access to that
data for products or services.
However, others suggested that increased
exchange and trading of data will require a
certain level of knowledge and understanding
on the part of the public, and queried whether
13 The Economist. 2016. ‘A Time-Banking Scheme Aims to Overcome Britain’s Crisis in Care for the Elderly.’ The Econo-
mist, December 17.
redeemed-kind-their-own; .
such knowledge, and adequate consent in this
regard, would even be possible. This also raised
questions as to the extent to which individuals
could claim ownership over data rights; while
some types of information (such as names) are
clearly within the individual remit, others – such
as national insurance numbers – are artefacts
of a separate institution. It was also noted that
there are broader economic benefits of data
being held, owned and analysed in aggregate
form, and that any initiatives to monetise data
would have to consider these network effects.
We also discussed the potential use of time
as a currency, and its ability to facilitate
transactions across extended time periods,
even with individuals who have yet to be
born. The value of most currencies can’t be
measured tangibly as units in their own right,
because their value stems from the expectation
that they can be exchanged for different
goods/services that are considered of value
to the holder at a particular future moment.
However, the use of time tokens could help to
realise the value of social relations, both now
and in the future.
Give&TakeCare
Give&TakeCare (G&TC) is a form of circular economy, based on time banking principles, to
encourage people to get involved with befriending and providing assistance to the elderly in their
community, developed in 2016 by academics from Brunel University and funded with a grant
from Innovate UK, The Innovation Agency. Volunteers who provide one hour of support earn 1
‘GAT’ – a dedicated time credit intended to remain a store of value (a ‘care saving’), and that is
immune to wider economic trends – which the bearer can exchange for their own support in
later life. GATs cannot be sold or exchanged outside of the scheme, but can be passed to other
family members as a gift or
9
2. Challenges and opportunities of changing practices
14 Although local and alternative currencies existed prior to the digital age, the conversation was undertaken on the as-
sumption that the connectivity offered by digital platforms is facilitating the creation of such initiatives.
15 Sweatcoin (home page). 2016. As of 18 August 2017:
16 Auchard, Eric. 2016. ‘New Apple App Launches in Britain That Pays People to Get Fit.’ , 5 May. As of 18
August 2017:
17 WIR (home page). 2017. As of 18 August 2017:
It was generally accepted that the impact
of digital transaction platforms will not be
felt uniformly or universally. As participants
acknowledged, the extent of use and
acceptance of various currencies will depend
on which sections of society ultimately
adopt them. As such, part of the discussion
over the course of the event considered the
impact on, and roles of, different actors in the
system, at the level of the individual citizen and
communities, business and government.
In this section, we summarise the strategic
themes and issues discussed that are likely to
impact on each of these different groups.
Citizens and communities
The discussion on citizens and communities
centred on the capacity of digital currencies
(whether currencies run by a central authority
or cryptocurrencies) to act as a tool to enable
change in terms of behaviour within the local
and wider
A prominent theme of the conversation
revolved around the way in which the design
of a currency can influence the way it is used
both by individuals and by communities as
a whole, and in doing so increase the value
of certain underlying behaviours or assets.
In this regard, participants discussed how
new currencies could encourage social
outcomes by using new forms of currency
to enable and reward behaviour change, by
linking aspects of the generation or use of a
currency to specific actions or behaviours. As
an example, we heard about Sweatcoin,15 a
start-up that allows individuals to earn digital
‘coins’ for the number of steps taken and
then to trade these for rewards. The company
also intends to pursue commercial deals with
stakeholders, such as employers, who would
want to incentivise healthy lifestyles among their
workforce, or healthcare insurance providers,
who would find value in the data generated by
the app (for example, by analysing the data
provided by users to determine insurance
policy premiums).16 The Sweatcoin founders
indicate that the long-term aim is to establish
an exchange rate with the British pound (but,
as one participant contended, maintaining
the value of such currencies for holders of the
‘coins’ could be a challenge).
We also discussed the development of other
new currencies to prioritise local needs and
involving local assets, such as time, food
or other aspects that are specific to a local
community. In this regard, currencies have
the potential to create new forms of liquidity
based on local circumstances and assets in
order to meet market needs. As one participant
noted, some currencies facilitate the draining
of money out of a network, while some
encourage re-use by design (for instance, by
limiting the currency’s ability to act as a store
of value). Examples of local, community-
driven currencies were raised throughout the
discussion, including the Bristol Pound (see
box above); WIR in Switzerland17 and Sardex in
10 Digital currency
Sardinia,18 both of which are complementary
currencies (with no physical cash form) used
by local businesses to extend forms of mutual
credit; and a planned introduction of a local
currency in Barcelona in
Emerging local or alternative currencies may,
however, face barriers or challenges to their
development or viability. Most notably, new
currencies may face issues of user buy-in
and trust, particularly if they are perceived
as complicated or difficult to use. As some
participants noted, sterling and other fiat
currencies may sit within a complex financial
system, but they are relatively easy to use
and familiar to most people. The longevity of
emerging currencies was also questioned as
a potential challenge for citizens, particularly
those currencies with a ‘controlling’
organisation that may not endure in the
long term, meaning citizens may not have a
guarantee that non-fiat currency or tokens will
be viable in the future. For some individuals,
the use of ‘unofficial’ currencies might also
mean a lack of a safety net (such as the deposit
protection scheme or legal framework), which is
often provided for fiat currencies.
Despite the potential benefits for communities
and citizens, some participants contended that
there could be a potential loss of democratic
control over the economy, given the ability
for individuals to ‘opt out’ of the mainstream
financial system through the use of non-
regulated currencies or through the anonymity
granted by certain cryptocurrencies. Such
outcomes could potentially deprive local and
18 Sardex (home page). 2017. As of 18 August 2017:
19 Mount, Ian. 2015. ‘What’s Paid in Barcelona Stays in Barcelona in Move to Local Currency.’ Fortune Global Forum, 3
November. As of 18 August 2017:
20 A Blockchain is a form of distributed ledger, in which ‘information is stored on a network of machines, with changes
to the ledger reflected simultaneously for all holders of the ledger… [and] authenticated by a cryptographic signature.
Together, these systems provide a transparent and verifiable record of transactions.’ See: Deshpande, Advait, Katherine
Stewart, Louise Lepetit & Salil Gunashekar. 2017. Distributed Ledger Technologies: Challenges, Opportunities and the
Prospects for Standards. London: BSI. As of 18 August 2017:
national authorities of economic control as well
as tax revenues. It was noted that widespread
use of local currencies – and the consequential
change in the balance of influence over aspects
of economic control, such as sales tax or
regulation – could also affect the relationship
between local and national authorities.
We also discussed the role of digital platforms
in facilitating access for the financially
excluded or unbanked (discussed in further
detail below). As digital transactions move
closer to the norm, there will be a need to focus
on how various groups fit in to the evolutionary
pathway and also to recognise the potential
for exploitation, as well as opportunity, for
marginal or vulnerable groups.
Business
Our discussions also considered the potential
impact of digital technologies and emerging
currencies on businesses and markets.
It was suggested that new platforms for
transactions could create new market
opportunities and funding models for
organisations (particularly start-ups), with
crowdfunding models or micropayment
capabilities being offered as two examples.
Small to medium-sized enterprises (SMEs)
could also benefit from greater equality of
opportunity in terms of reaching customers,
such as through online advertising platforms.
Businesses could also benefit from lower
operating costs afforded by digital transactions
and new payment technologies (.
Blockchain-based solutions).20 In addition to
11
efficiencies in payments allowed by digital
platforms, this could include efficiencies in
back-room processes, such as having a real-
time view of tax receipts; improved access to
data for audit, through the use of digital ledgers
and records; and improved efficiency, accuracy
and timeliness in executing the organisation’s
business intention. It was, however, noted
that some businesses (such as small retail
establishments) may not be fully prepared
for the change in markets and transaction
practices that are heralded by digital platforms;
the services that such organisations offer
might need to change as a result, and this
needs to be carefully managed and planned for.
Participants also discussed the ability for
organisations to collect richer data on
customers, for example the ability to collect
both end-user data and real-time data on
transactions through the use of website and apps
for buying and selling; the use of direct digital
transaction methods such as cryptocurrencies,
removing the need for an intermediary; or the
development of payment ecosystems, such as
store cards, facilitated by digital platforms . This
could facilitate better targeting of services to
customers, but could also be used by the traders
to manipulate prices for individual customers. A
related concern noted by some participants was
that ownership of data by one company might
also serve to limit market competition.
Participants also discussed how new platforms
for transaction can facilitate better and faster
engagement with customers by allowing
faster responses to queries and the ability
to reach new markets and customers more
cost effectively and rapidly through online
platforms. At the same time, others noted that
the near-instantaneous – and public – nature
21 One participant suggested that this, too, could be considered a form of currency.
22 See: Kharpal, Arjun. 2017. ‘Bitcoin Value Rises over $1 billion as Japan, Russia Move to legitimize Cryptocurrency.’
, 12 April. As of 18 August 2017:
of customer feedback could also serve to
destroy reputations. On a related note, some
participants discussed the role and importance
of trust in online transactions. As a widely
accepted form of IOU, traditional currency itself
facilitates trust. However, new forms of value
exchange – including remote exchange in
which the receipt of goods is not instantaneous
– may raise new questions as to the extent
to which individuals can trust the people they
are trading with. It was noted that the use
of ranking systems, such as the star ratings
used by eBay, now provide a collective trading
history for the potential purchaser, which can
help to facilitate trust in online
However, others felt that this rapid feedback
cycle could have a negative effect on trading
behaviour and create different incentives.
As one participant noted, due to the speed
of exchange, it is possible that ‘observations
become definitions’ with decreasing incentives
for the individual to work to correct low scores.
The gathering of collective opinions would have
to ‘slow down’ in some cases to operate as a
more effective incentive.
Government, policy and regulation
It was suggested that governments
may increasingly choose to engage with
cryptocurrencies as a valuable commodity, in
order to benefit from their features or to exert
influence where possible. It was noted, for
instance, by some participants that Japan and
Russia have recently taken steps to legitimise
the use of It was felt that
policymakers face a challenge in terms of
deciding when it is appropriate to regulate or
not regulate new forms of currency – and for
regulators to understand whether new forms of
12 Digital currency
currency or transaction methods sit within or
outside of the existing regulatory sphere.
Similarly, for competition and antitrust
authorities, a key challenge will be to understand
whether the playing field is appropriately level in
light of the availability of emerging technologies
and, in particular, the collection and use of
customer and market
At the national level, participants suggested that
digital platforms could have broader economic
benefits, such as increasing trade opportunities
through the reduction of barriers. Remittances,
both across and within national states,
could benefit from more efficient channels.
Policymakers may also benefit from improved
access to data in order to understand real-time
transactions and the relationship between
events and spending behaviour.
The introduction of various new currencies
could also have wider implications for taxation.
This includes the aforementioned concern that
digital platforms could decrease state control
over tax revenues by allowing users an ‘opt-
out’ through the use of unregulated currencies
and tokens, but also over the appropriate form
of the tax itself. As one participant noted,
the intention behind certain types of tax,
23 See, for example: The Economist. 2017. ‘The World’s Most Valuable Resource Is no longer Oil, but Data.’ The Economist,
May 6. As of 18 August 2017:
rules-worlds-most-valuable-resource
such as the carbon tax, is not necessarily to
collect revenue, but to change behaviours; it is
important to recognise that the ethical basis
for taxation is that gains are taxed, in order not
to create skewed incentives.
In this regard, some participants noted the
potential use of digital currency for more
effectively targeting tax. Through more effective
analysis of money flows, as facilitated by digital
transactions, tax rates and bands could be more
effectively targeted to identify the minimum
burden and avoid creating skewed incentives.
Participants also pointed out that some kinds
of specific-use currencies, should they reach
widespread use and transferability with regular
currencies, could have different externalities
and payments ‘built in’ to their design (such as
a carbon credit), and so require different kinds
of taxation to reflect this, rather than a ‘one-size-
fits-all’ approach to taxing income or the overall
value of money/assets held.
Finally, cybersecurity was noted as a
key strategic and systemic challenge for
government, relating not just to new digital
platforms and currencies, but also to more
general control over key public services and
economic institutions.
13
Smart contracts and the legal system
Some participants discussed how ‘smart contracts’, facilitated by Blockchain technology, could
facilitate changes in the global legal system. A smart contract is a self-executing contract: ‘a set
of promises, specified in digital form, including protocols within which the parties perform on
these promises’.24
It was noted that, just as the Internet has driven innovative commercial practices and helped to
diminish the role of the intermediary by connecting consumer to supplier, smart contracts may
facilitate increased access to the law and innovative methods of participation by the public in
the legal system.
Participants also discussed how changes to the way we write the law itself – for example, by
developing ‘modular law’, with a similar structure to that of computer code – could make it
easier to code as a smart contract. One participant raised the idea of developing a global legal
‘ecosystem’ or standard in this regard, to facilitate cross-border legal agreements, for which
core competency could be based in the UK: a ‘digital GMT’ for digital contracts.
Others noted that this could create a ‘mythical’ level of legal obligation, which does not reflect
the actual functioning of the law; if perfect surveillance is introduced (for example, over traffic
violations), we might see how much the functioning of the current system relies on a level of
non- transparency.
24 Szabo, 1996, cited in Murphy, Sean, & Charley Cooper. 2016. Can Smart Contracts Be Legally Binding Contracts? Lon-
don: Norton Rose Fulbright LLP. As of 21 August 2017:
14 Digital currency
3. Strategic challenges
Given that the impact of changing transaction
practices is difficult to predict, it seemed more
appropriate to consider how such innovations
in transaction practices might be harnessed for
societal good – and to address any potentially
negative consequences.
We identified four overarching challenges
related to encouraging responsible use of
emerging digital platforms and technologies
for societal good:
• Developing a resilient financial ecosystem
• Encouraging digital and financial literacy on
the part of citizens
• Encouraging ethical behaviour
• Promoting financial inclusion
Developing a resilient financial ecosystem
Participants noted that one of the main
strategic challenges faced by society is the
speed of evolution of digital platforms and
transaction practices. As noted earlier, new
platforms have facilitated the entry of new
providers, who can ‘unbundle’ services by
taking part of the service offering that is usually
integrated with other services by traditional
financial institutions. Some participants felt
that this unbundling of the system may have
unforeseen impacts, and may introduce new
elements of risk if such services are unbundled
too much. In particular, participants noted that
changing structures could lead to more rapid
crises, as individuals and organisations in the
system are able to take advantage of faster
information flows and transaction times to
make and effect decisions en masse, thereby
giving regulators and policymakers less time to
analyse and assess the situation and react in a
careful and measured way.
We noted that this implies foremost the need
for an understanding of ‘where the threats
are’ in the developing financial ecosystem, and
how emerging currencies or digital platforms
might affect the functioning of such a system.
Similarly, having an understanding of what
resilience means in this context, and how
to identify and measure different types of
resilience, are key challenges that need to be
considered.
One participant also highlighted that assurance
providers may need to be more aware and
better educated about the emerging financial
and economic landscape and may need to
create new assurance products and services
which are better aligned to the emerging
changes in transaction processes.
Encouraging digital and financial literacy
on the part of citizens
There was broad agreement that current
levels of economic and financial literacy
among the public are low, and that this could
potentially limit individuals and communities
from being able to make the most of the new
opportunities presented by digital platforms.
As one participant contended, the key task in
this regard should be encouraging wider public
understanding of the process by which money
is created.
A number of participants suggested including
digital and financial literacy as part of formal
schooling. Suggestions in this vein included
the introduction of coding courses at primary
school level, both to increase digital skills and
to develop logical thinking skills; courses at
secondary level on aspects of the history and
functioning of the financial system, such as an
understanding of money creation; and the use
of real-world examples in the curriculum. It was
acknowledged that introducing new items to
the curriculum would require trade-offs in other
areas. The group also noted the utility of online
courses, such as massive open online courses
15
(MOOCs), and online coding academies for
encouraging lifelong learning across the
population with a view to developing digital and
financial literacy.
Developing the capacity of the media with
regard to reporting financial news was
noted as a further area of improvement in
terms of digital and financial literacy. It was
suggested that the ‘impact agenda’ in UK
higher education incentivises engagement
with the media by the academic community
and could help to encourage academics
to engage with the public on issues of
financial or digital technology to widen public
understanding and engagement with digital
Prominent ‘digital champions’ or
‘key influencers’ could also encourage public
engagement in this regard.
Making websites user-friendly and adaptable
to individual users’ needs could also encourage
more sustained engagement with digital
platforms and financial providers, and the
associated development of skills. We should
also consider avoiding the use of jargon,
using clear language for terms and conditions
to encourage understanding and informed
consent, and developing more user-friendly
websites that can be adapted to the users’ level
of skill.
Encouraging ethical behaviour
Digital platforms offer many new opportunities
for innovation in value exchange, but also new
vulnerabilities as new platforms offer forms
of activity outside existing legal or regulatory
frameworks. One strategic challenge discussed
was for providers of digital platforms and
25 Concerns have been raised by others that the ‘impact agenda’ may, however, promote short-term thinking, thus
undermining ‘blue sky’ research. See Manville, Catriona, Molly Morgan Jones, Michael Frearson, Sophie Castle-Clarke,
Marie-Louise Henham, Salil Gunashekar & Jonathan Grant. 2015. Preparing Impact Submissions for REF 2014: An Eval-
uation: Findings and observations. Santa Monica, Calif.: RAND Corporation. RR-727. As of 18 August 2017:
26 One participant noted, however, that the concept of ‘ethics’ was only coherent in the context of choice.
actors in the financial system to understand
the extent to which they are responsible for
maintaining certain behaviours or ethical
standards in light of changing transaction
practices (for instance, the ethical use of
emerging data streams), and to understand
what responsible citizenship – and responsible
governance – may entail when dealing with
aspects of digital exchange for which ethical
norms have not yet had time to develop.
In this regard, participants noted that, rather
than considering ethical questions in isolation,
this may call for an understanding of what
constitutes an overarching ‘digital citizenship’
and public acceptance of the definition of
‘ethical behaviour’. The roles of the public in
upholding ethical norms in behaviour through
the risk of reputation damage, and that of
government as the ‘honest broker’, were also
noted. The immutability and transparency of
certain Internet platforms may also encourage
greater reflection on the consequences of
actions.
The role of digital platforms in actively driving
ethical behaviour through design – such
as automating tax payments – was also
discussed. Developing ‘ethical currencies’
with a specific goal in mind – such as
carbon credits in order to introduce an
opportunity cost to the release of greenhouse
gases – could also help build in a greater
understanding of externalities in transactions.
Participants also discussed the potential role of
smart contracts in ensuring ethical behaviour
by removing the option to behave unethically
or unlawfully through their nature as an
automated
16 Digital currency
Promoting financial inclusion
The need to consider the ways in which
barriers to financial inclusion might be
addressed by digital platforms was the fourth
area explored as part of our discussions.
Suggestions included innovative methods
of providing collateral or identification for
transactions for those without traditional
sources of either, such as using mobile phone
payment records as evidence of credit history;
using Blockchain technologies to facilitate
recognition and legal ownership of assets;
developing community currencies relevant to
local requirements and conditions; developing
digital currency innovations specifically to meet
the needs of people in lower income brackets,
such as a currency that could be used without
incurring sales tax; and using incentives to
encourage engagement with digital platforms,
such as offering a form of universal basic
income (UBI) available only on a certain digital
platform.
It was widely acknowledged within the group
that perhaps the most fundamental factor
associated with inclusion is that of basic
connectivity, and the cost of data. Inclusion
initiatives may facilitate banking access for the
digitally included, but still exclude those without
a basic level of Internet access. Similarly, as
connection speeds increase and platforms
are developed on the basis of this, the speed
differential in slower geographies may be more
keenly felt.
Others noted that there are systemic issues
in the banking system that are wider than the
digital technology agenda and that result in
many unbanked individuals remaining unable
to become part of the banked population. Any
strategy to increase financial inclusion should
bear in mind what one participant termed the
27 One participant suggested that the role of Safari Telecom in promoting inclusion of the unbanked through mobile
telephony is a good example in this regard.
‘systemic global problem of the left-behinds’
and be wary of furthering a situation in which
society is split between the ‘super-connected’
and the ‘others’, a split which may not be
simply generational.
In this regard, it was suggested that using
historical evidence on the introduction of
different financial products and their financial
and wider social consequences would be
helpful to inform future Another
important factor that was highlighted is how
digital platforms and currency innovations can
help those individuals who don’t want to use
the traditional banking system. However, one
participant queried whether this would in fact
help to change behaviour and the relationship
with banks and banking services, or simply
reinforce the ability for some people to ‘step
out’ of the system, which may not necessarily
be a positive thing. It was also highlighted that
the number of people wary of the Internet and
reluctant to use digital platforms should not
be underestimated, and may serve to further
compound exclusion.
Our discussions also considered the challenge
of extending the potential benefits of digital
platforms to vulnerable or marginalised
groups. Participants noted that the design of
digital platforms should be user-centric, with
simple interfaces for customers to navigate
an often-complex topic. One participant also
suggested that data analytics and artificial
intelligence could help to identify vulnerable
individuals by assessing behaviour patterns to
predict individuals’ future behaviour or assess
which individuals in a system are following
convention, and in doing so identify individuals
in potential need of assistance or intervention,
such as vulnerable individuals or those who are
potentially being defrauded.
17
A further unintended consequence of new
digital platforms may also be that changes to
the wider financial sphere could actually act
as a disincentive for financial institutions to
offer certain services to individuals, should
disruptive innovations and resulting changes in
the market make these services unprofitable.
This could therefore risk ‘unbanking the
banked’ and in fact extending the problem
of financial exclusion to groups who are not
currently excluded.
18 Digital currency
4. Harnessing digital transaction platforms for societal benefit
In line with the overarching question for this
consultation, we considered how different
actors at the local, national and global levels
might utilise new digital transaction platforms
and emerging currencies to support the
wider benefit of society in general, or, as one
participant termed it, recognise the ‘art of the
possible’.
At its most general, it was noted that to make
a concept mainstream, it needs to have
mass appeal. In the case of new transaction
mechanisms, this means having a general
understanding of the benefits of digital
platforms, in order to show how specific
applications can be of benefit to individuals
throughout society. As one participant put it,
we have to ‘situate it within the story’.
As mentioned earlier, participants noted the
ability for the design of currencies themselves
to drive behaviour (such as facilitating the
ability to accumulate wealth). Understanding
the reciprocal impact of currencies on the
world around them is therefore required
in order to understand how they can be
harnessed for social benefit. Participants
noted that key to this process is the need for
discussion on the values underpinning the
advice and knowledge we provide about the
financial system. As digital platforms expand,
there are a number of key questions that need
to be addressed, including:
• Who is responsible for governance?
• Is public education about the use and
impact of these platforms adequate?
• How much is the responsibility of the state,
the platform operator and the individual?
At a local level, one participant noted,
the focus needs to be on enabling, rather
than helping local initiatives to develop, as
feedback loops will help such initiatives
to grow once they have started. Local
innovations, however, always need someone
to lead the implementation effort, and
they may face issues of scalability and
transferability. The most effective approach
may be one of maintaining a manageable
system rather than growing a system at scale
across different geographies. With regards
to local currencies, this might mean thinking
about replication, rather than scaling up, as
it is easier to keep a focus on local issues
and needs – for instance, by replicating the
Bristol Pound in Manchester by introducing
the Manchester Pound, rather than rolling out
a new ‘national local currency’.
At a national level, participants acknowledged
that in order to realise the benefits of digital
currency and platforms, there is a need to
consider the wider adoption of digital technology
across the population. Views were mixed on
the role of government, with some participants
noting that government can help set standards
and create an enabling environment, but should
not pick the ‘winners’. Others felt that from its
position, government could probably see the
sectors and areas for priority, and in this regard,
there was broad agreement that a key role of
central government should be that of enabler,
helper and ‘incentiviser’, and that government
could help to normalise and encourage
the use of digital currencies and platforms
through example (for instance, by using
such mechanisms to pay suppliers or make
personal tax and welfare payments). It was
also suggested that a ‘digital roadmap’ could
help here, as could the existing digital strategy
developed by central government.
Participants also felt that there are a number
of information gaps that make it difficult to
develop a cohesive strategy for utilising new
digital transaction technology for the greater
benefit of society. They identified a need for
19
further research in a number of areas, including
the following:
• Understanding the drivers behind current
transaction choices, including the choice
to use cash rather than existing digital
currency
• Understanding the extent to which
individuals and businesses take value from
Internet platforms that is not accounted for
• Understanding the digital skills learning
needs of target groups in order to enable
the strong return on investment (ROI) from
investing in digital skills
• Understanding the ways in which new
currencies enabled by distributed
technology can enhance living standards
• Understanding at what point (and why)
new currencies gain intrinsic value and
thus become a commodity rather than a
medium of exchange
• Digital technology is enabling a global/
national debate on the creation,
governance and usage of new currencies.
How does this debate move forward?
20 Digital currency
5. Conclusion
Throughout the course of our discussions,
some common themes and ideas that
emerged. In this section, we summarise some
of the most prominent themes that arose
during this consultation.
Unbundling of financial structures
A recurring theme throughout the consultation
was the role of digital technology in unbundling
elements of the existing financial system. Our
current financial structures and institutions
were not designed at once, but rather have
developed over hundreds of years to their
current form. Through the use of new digital
platforms, new market entrants and non-
financial organisations are able to engage with
discrete areas of the financial services sector
that have traditionally been the preserve of
financial institutions. In this regard, we might
also see the unbundling of different functions
of the financial system relating to roles, risks
and institutions. This may even extend to
currencies themselves, through the separation
of their function as a medium of exchange
from their role as a store of value.
The financial system is complex, and while the
unbundling of traditional functions and new
entrants to the market may have many positive
consequences – as discussed above – it may
also introduce unforeseen consequences
for the system itself and for the provision of
various services, which may not necessarily
be positive or predictable. Similarly, for the
individual consumer, navigating this landscape,
and understanding the individual risk to which
they are exposed, may present vulnerabilities
as well as opportunities. Understanding the
way in which these innovations can in fact
contribute to social and economic problems,
such as introducing new elements of systemic
risk, will be also important.
The concept of currency
There was broad agreement that for the
medium-term future at least, we will continue
to see a mixed-currency transaction landscape,
consisting of fiat currency and physical cash
alongside new, innovative forms of currency
and value exchange.
While participants did not attempt to come
to a firm conclusion on the definition of the
term currency, our discussions went beyond
simply understanding the way in which we
tokenise assets. Rather, we discussed the need
to situate our understanding of currency and
value exchange within the context of changing
transaction practices, in which new economic
models and information flows facilitated by
digital platforms are transforming the way
in which we are able to exchange value, in a
form increasingly unrestricted by geography,
government or even (in the case of time
banking) time period. As well as innovative new
forms of IOU (such as cryptocurrencies), this
may require new thinking about assets such
as data, time and space, and the role they play,
and will play, in economic organisation.
The link between currencies and assets
We also considered how we understand the
concept of underlying value when thinking
about digital or emerging currencies. As one
participant noted, given the lack of hierarchy,
cryptocurrencies are best characterised as
‘network-centric protocols and effects’, while
another participant compared the development
of cryptocurrencies to the move away from the
gold standard, in that it further diminishes our
connection to real-world assets (for example,
bank reserves) by transitioning to a system of
IOUs built primarily on trust and software alone.
But this does not necessarily mean that
currencies will universally move further away
21
from real-world assets. New currencies
developed with a specific purpose and enabled
by digital technologies (such as the Bristol
Pound, GATs or Sweatcoin) could serve to
facilitate the realisation of value in other
spheres by linking the use or generation of the
currency to particular behaviours or assets,
such as restricting use to a local economic
region or linking it to the generation of data
about physical activity. Understanding how
the design of currencies can influence the
behaviour of the holder, and so have an effect
on transaction choices and economic activity,
will be an important aspect of this.
22 Digital currency
List of participants
Claire Alexander Chief Operating Officer, Corsham Institute
Dr Jonathan Cave Senior Fellow, University of Warwick
Victoria Cleland Chief Cashier, Bank of England
Andrew Cortis Senior Advisor, Perimeter Group
James Fleming Vice Chairman, Arbuthnot Latham & Co Limited
Dr Jon Freeman Research Group Director – Innovation, Health & Science, RAND Europe
Dr Salil Gunashekar Senior Analyst, RAND Europe
Dr Garrick Hileman Research Fellow, University of Cambridge, Cambridge Centre for
Alternative Finance
Mark Jackson Partnerships and Fundraising Director, Corsham Institute
Simon Johnson Director, Vo1t Ltd
Dr Catriona Manville Research Leader, Innovation, Health and Science, RAND Europe
Professor Chris Marsden Professor of Internet Law, University of Sussex
Duncan McNeil CEO, Pumpco
Ciaran Mundy Founder and Director, Bristol Pound CIC
Rachel Neaman Chief Executive Officer, Corsham Institute
Brian Parry Director, Strategy and Thought Leadership, Corsham Institute
Mr Peter de Putron CEO, GResearch
Dr Gabriella Spinelli Reader in Innovation, Brunel University, London
Katherine Stewart Research Assistant, RAND Europe
Jeffrey Thomas Founder, Corsham Institute
Maeve Walsh Deputy Director – Digital Strategy, Department for Culture, Media and
Sport
23
Organisations
Corsham Institute
Corsham Institute (Ci) is a not-for-profit
organisation that is working for a fair, inclusive,
prosperous and creative society based on trust
and security.
Our focus is on education and research, going
beyond traditional ideas of knowledge to
promote lifelong learning in the digital age.
We aim to empower citizens to develop the
critical thinking and creative problem-solving
skills they need to make the most of the
opportunities that our increasingly networked,
connected and data-rich society provides.
The Thought Leadership Programme provides
an opportunity to explore the potential and
impact of digital technology within society
today, focusing on shaping a future where
citizens are empowered with the knowledge
and skills they require to live their lives socially,
economically and even politically.
Our wider programme of work encompasses
Research, Learning and Enterprise, placing the
citizen in control of the creation, acquisition
and exploitation of their knowledge.
RAND Europe
RAND Europe is a not-for-profit organisation
whose mission is to help improve policy
and decision making through research and
analysis. As part of the RAND Corporation,
we were founded in 1992 in Europe to
provide quality research and rigorous, fact-
based analysis to serve policy needs in
EU institutions, governments, charities,
foundations, universities and the private sector,
where impartial research is required.
Our work lies on the spectrum between that
of universities and consultancies, combining
academic rigour with a professional, impact-
oriented approach. In other words, we operate
as a research-focused business, using a
professional services model, within the context
of a public good mission.
We combine deep subject knowledge across
many policy areas – including health, science,
innovation, defence and security, transport,
infrastructure, criminal justice, education,
employment and social policy – with proven
methodological expertise in evaluation, impact
measurement and choice modelling. Our
clients include European governments and
institutions, charities, foundations, universities
and private sector firms.
St George’s House, Windsor Castle
St George’s House was founded in 1966 by
HRH The Duke of Edinburgh and the then Dean
of Windsor, Robin Woods as a place where
people of influence and responsibility can
gather to grapple with significant issues facing
contemporary society.
The House offers a safe physical and
intellectual space set in the narrative of history
but focused firmly on the future. You will
find here an environment receptive to new
ideas, conducive to taking intellectual risks
and to thinking through challenging topics in
imaginative ways. The House is a sanctuary,
removed from the pressures of everyday life,
where the topic to hand takes precedence. It
is this focus that encourages creative thinking,
informed debate and sustained engagement.
The emphasis throughout our carefully crafted
Consultations is on dialogue and discussion.
Participants are in a place where a real
contribution to society can be made, where
personal enrichment and social progress are
mutually compatible, a place where Wisdom is
nurtured.
In order to offer a safe and secure intellectual
space our Consultations are run on the
understanding that all debate and conversation
takes place under the House Protocol.
24 Digital currency
Acknowledgements
In addition to the lead rapporteur, Katherine
Stewart, this report was also co-authored by
Salil Gunashekar and Catriona Manville, RAND
Europe.
Ci and RAND Europe would like to thank all
participants for stimulating and contributing to
the discussions that took place. It is through
the enthusiastic and forward-looking approach
of participants that we have been able to
generate new insight and ideas to tackle
the challenges faced. We also thank Jess
Plumridge for her time and effort in creating
the design for this report.
