Cryp­tocur­rency could help Cata­lans go it alone if they want to re­alise their dream

Irish Independent - - World News - Is­abelle Fraser

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

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