‘Itcoin’ finds Italian support

ECONOMY Crypto-currency could exist alongside euro

Bitcoin is soaring past US$ 8,000, and on its way to five figures. Ethereum is growing in strength all the time, and so are some of the newer cryptocurrencies such as Litecoin, Ripple and Dash. And yet there is another kind of coin that is starting to get some coverage in the markets as well — the “Itcoin.”

It’s a name for a new Italian currency that runs in parallel to the euro. It is picking up some serious support among the parties likely to form the next government of that country, and deserves to get a lot more coverage. Why? Because although it would face some formidable obstacles, there is no necessary reason why an Itcoin shouldn’t establish itself.

On some measures, parties hostile to the euro now command more than 70 per cent of the votes in Italy. National elections are not due until May next year. But there is a lot of ground for pro-euro forces to make up before then. There is a twist, however, and an important one. Italian politicians have toyed in the past with leaving the euro. But now they have come up with a different strategy. They are looking at a parallel currency to run alongside it.

Here is how it could work. The government would issue a new kind of IOU, in much the same way new cryptocurrencies are launched. It could then pay Company A using those “coins.” Company A could then use them to pay Company B for its own supplies, or it could use them to pay its taxes, since the government could pledge to accept them. If it was then extended to social security and welfare payments, the new coins would circulate very quickly. A parallel currency would have been created to run alongside the existing one, in much the same way that Bitcoins now operate alongside pounds and euros.

Of course, it would face some major problems. The ECB and the EU would fiercely oppose it, although within Italy there is already an argument about whether there would be any legal basis to prevent it.

And yet it is a far from ridiculous idea. With government backing, the currency would have immediate presence and credibility. The Italian state accounts for about 40 per cent of GDP, so if it used the new currency rather than the old it would immediately account for close to half the economy. It would only take a few mediumsized companies to get it over 50 per cent. The economic impact is harder to assess. But assume that it devalued sharply against the euro, and assume that over time most wages came to be paid in the new unit. There would be an immediate competitive devaluation against the rest of the eurozone, which is exactly what Italy needs.