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Decentralized currencies in trinidad and tobago. Presentation done for the TTCS in June 2014
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Decentralized currencies in Trinidad and Tobago
Rationale and Outlook
Prepared for the TTCS by Richard Jobity
Saturday 14th June, 2014
Me Business analyst Staff Economist for 11
years at CBTT (1990-2002) Currently employed in
energy sector Current interests include
the role of competitive intelligence in agile businesses, energy economics, technology, institutional strategy
Agenda Decentralized currencies – some definitions? TT Economy 101 Functions of money Role of the monetary authorities (Quick) overview of he TT Financial system So... decentralized currencies? Conclusion Outlook
Some definitions Digital currency
form of virtual currency or medium of exchange that is electronically created and stored.
Some digital currencies, such as Bitcoin, are cryptocurrencies. Like traditional money these currencies may be used to buy physical goods and services but could also be restricted to certain communities such as for example for use inside an on-line game or social network (Arscoin, etc)
Virtual currency/virtual money has been defined as
"a type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community“ (European Central Bank, 2012 )
"a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency“ (US Department of Treasury, 2013)
The key attribute a virtual currency does not have at this time is the status as legal tender
Exports
Offshore
Exploration and
Production Petrochemica
lsLNG
Services
Onshore
FinanceLight
ManufacturingConstruction
Services
State (Government)sector
Expenditure
Revenue
Foreign exchange earnings
Social Services
Foreign Exchange Spending
Employment Prices
Non-tradeables (Real Estate)
TT Economic overview
Linkages between petroleum sector and rest of inland economy
PetroleumSector
Government Sector Expenditure
Rest of the
economy
Natural gas and petroleum products
Wages and salaries
Purchases of goods and services
Taxes and other
payments to
government
Incentives to investors
Revenu
e
Dual sector & economic growthPetroleum sector
Most of the investment takes place in this sector
Growth and investment dependent on exogenous
factors
Growth opportunities depend on international prices for oil
and gas, proven reserves
Growth possibilities in services sector related to growth in
petroleum sector and petrochemical industries
Non-Petroleum sector
Growth and investment dependent on petroleum sector
Growth in non-oil sector dependent on services
Lack of autonomy (growth in non-oil sector highly dependent
on oil sector)
Relatively underdeveloped non-oil tradeables sector
TT: Plantation Economy?
1500154415881632167617201764180818521896194019842028Subsistence farming Tobacco Cotton Sugar Cane Cocoa Oil PetrochemicalsLNG ?
The plantation economy model posits that plantation slavery and specialization in export of primary commodities has marked the evolution of the societies in which it existed.
“The legacy of institutions, structures and behaviour patterns of the plantation system are so deeply entrenched that adjustment tends to take place as an adaptation within the bounds of the established framework”
(Best 1968, p. 32)
Trinidad and Tobago – an enclave?
Export commodity concentration ratios, average 1900-1913
Export commodity concentration ratios, average 10 years after independence
First produ
ct %
Second
Product %
Enclave
First produ
ct %
Second
Product %
Enclave
Trinidad and Tobago
Bananas 50 Sugar 16.9 Yes
Petr. Products 75.1 Sugar 5.6 Yes
Source: Robinson, James A, and Jonathan H Conning. 2009. Enclaves and Development: An Empirical Assessment. Studies in Comparative International Development 44: 359-385.
We need to understand the grip of the founding institution of the plantation in order to remove its stranglehold on the dynamic for change ...
•Normal relationship between State and business is reversed.
•Private sector (outside of the enclave, largely foreign-owned resource companies) “… are dependent upon the State for direct and indirect welfare gains, through disbursement of oil revenue.’’
- Homa Katouzian
TT Financial System Initially established to assist the merchant class
(plantation owners) Relatively stable Very conservative (as a result of the institutional
failures of the 1980s – Winsure, ITL, etc) Imperfect competition between institutions, alongside
association with said institutions Commercial banking with associated retail (in keeping
with plantation social structure) Generally profitability from consumer lending &
trade/manufacturing business Not friendly to entrepreneurial initiatives or calls
on services outside favored customers
Credit culture of commercial banksBirchwood study-
Under a state of financial liberalization, the credit culture of commercial banks was found to be suboptimal to the social goals of innovation and entrepreneural development. In particular, the credit culture was found to be closely tied to economic cycles and biassed against some segments of the market, both in terms of allocation and lending rates. Moreover, the credit culture was bedevilled by inadequate information which consequently weakened risk management.
Functions of money Medium of exchange (intermediate the exchange of goods
and services, it is performing a function as a medium of exchange - avoids the inefficiencies of a barter system)
Unit of account ( standard numerical unit of measurement of the market value of goods, services, and other transactions.)
Store of value (money must be able to be reliably saved, stored, and retrieved – and be predictably usable as a medium of exchange when it is retrieved)
Standard of deferred payment (an accepted way to settle a debt)
Measure of value (a standard measure and common denomination of trade - basis for quoting and bargaining of prices (accounting systems). Essentially a method for comparing the values of dissimilar objects)
Role of the Monetary Authorities
That said...
Can decentraliz
ed currencies
work?
So... decentralized currencies?Institutional Framework
Government rules regulate all electronic currency (FI Act 2008) including bitcoin & other electronic money
Existing monetary policy geared to stimulation of economic growth in framework of stable financial system
Fairly well-working conventional financial market, so less explicit need for alternatives. FINANCIAL MARKET GENERALLY ENJOYS CONFIDENCE OF CLIENTELE
So... decentralized currencies? International money transfers (which could be
used to buy bitcoin abroad) are restricted Duties on the import of computer parts that
could be used to “mine” bitcoin (high-end graphics cards are quite expensive)
Cost of regulation and monitoring for the monetary authorities disproportionate to use (for now)
How do you track these transactions?
So... decentralized currencies? Limited market accessibility - not that easy to acquire if
you do not have access to foreign money Requires a high level of digital skills Not yet fulfiling the role of money Not (yet) dependable - holding bitcoin is still risky Potential for abuse (underground economy use)
NOT ISSUE OF POTENTIAL PUBLIC CONFIDENCE (public have no problem using electronic money, c/cs,
Amazon credit, Apple store credit, Paypal, etc)
PROBLEMS ARE INSTITUTIONAL Institutional deficits in information, monitoring, and
participation
Conclusion Decentralized currencies are potentially
disruptive The TT monetary authorities seek to maintain
a stable, well-regulated financial system Decentralized currencies, like financial
markets cannot be trusted to regulate themselves
Regulatory nightmare
So no, not right now. BUT
Outlook
Is this a case of a technology before its time?