Cryptocurrency could help Catalans go it alone if they want to realise their dream
THE Catalan independence vote has drawn parallels with the 2015 Greek crisis – including speculation the region could form its own currency.
During the upheaval in Greece in the summer of 2015, the spectre of a Grexit was on the horizon that would have entailed it withdrawing from the eurozone. Even before Greeks voted in a referendum against the deal laid out by its creditors, preparations were under way to prepare for this by creating a currency, a version of its old drachma. In an echo of the Grexit crisis, the Catalan government is planning contingencies so that it can go it alone, separate from the Spanish banking system. But its preparations make it different from Greece’s moment because the Catalans could be looking to set up a cryptocurrency.
The Catalan government recently sent representatives to Estonia to learn more from digital currency pioneers there. Experts in the high-tech Baltic state have set up an “e-residency programme”, a digital identity card that allows its holders to access Estonia’s public services. It is designed to attract entrepreneurs to set up a business there without stepping foot in the country.
Dani Marco, the director of Smart-Catalonia, said that Estonia “started from scratch, with all the possibilities they were offered to build a model of economic development”.
But European Central Bank chief Mario Draghi dismissed the idea, saying: “No member state can introduce its own currency; the currency of the eurozone is the euro.”
Barcelona is a fintech centre, and hopes to leverage this to potentially create a national blockchain currency beyond the control of the Spanish state and the European Central Bank.
This would essentially create a decentralised store of value, and mean that it might not have a central bank. It is relying on advice from Vitalik Buterin, the founder of Ethereum, a blockchain-based system to create and regulate contracts. Russia and Kazakhstan have also proposed setting up their own national digital currencies, while some Japanese banks are considering a “J-coin”.
Catalonia’s ideas recall the actions of Greece’s former finance minister Yanis Varoufakis in trying to launch a parallel payment system at the height of the crisis in case Greece was ejected from the euro. However, there are big issues with Catalonia’s amorphous plans: firstly, scale. It would be difficult to replace transactions overnight in such a sophisticated economy with this system. Second, it would be left with no everyday currency.
In 2015, the governor of the Bank of Spain warned that if Catalonia became independent, it would automatically drop out of
Setting up a new currency is complex and typically takes about a year and a half
the euro and lose access to the ECB. But Stephen Brown, of Capital Economics, argues that “if independence did happen, they would continue using the euro” in a parallel currency system, like Montenegro, which has adopted the euro but is not in the eurozone.
He added that Catalans would have “assets and debts in euro in banks in the rest of Spain. Unless those banks agreed to create a new subsidiary in this new Catalan country, they would stay in euro”.
Claus Vistesen, of Pantheon Macroeconomics, compares the hypothetical independent Catalan economy to “emerging markets like Argentina and Zimbabwe”. He adds: “There is the local currency, which is useless, and then the dollar or euro. Catalonia is not Zimbabwe; over time their own currency, if they managed it properly, would be strong.”
The Catalan situation is different from the Greek one as a whole new banking system would need to be created, adds Brown. “There is no national banking network – it can’t impose capital controls or redenominate the debt to the new currency.” Even if Catalonia successfully broke away, says Vistesen, civil servants and pensions would have to be paid for and debt would have to be serviced by the government in a new currency.
How do you create and print a new currency?
First, you need a design for a note. De La Rue organised the complex operation to replace Iraq’s old currency in 2003-’04, delivering the notes 10 weeks after the order was placed.
The company said that this process typically takes a year and a half.
Setting up a brand new currency is a complex procedure: central banks provide designs or guidance, or a competition is held to produce ideas. De La Rue then works on the design.
Steve Pond, a designer at De La Rue, said: “A banknote is a country’s national, or international, calling card. An aesthetically pleasing banknote, or one that really communicates the special features of a country, has a knock-on effect. It influences people’s perceptions of that country.” (© Daily Telegraph London)
An independence supporter outside the Palau Catalan Regional Government Building. Photo: Jeff J Mitchell/ Getty Images