SWIFT. It isn’t very swift of course, but now there is a much more efficient method for transferring money across countries. It’s being tested as we speak, and maybe it will be up and running by the end of the year, or very soon after. I mean mBRIDGE.
mBRIDGE is close to being rolled out as the new cross border finance settlement system.
What’s it all about and how is it going to change the financial world order?
mBRIDGE is based upon the new digital technology called blockchain, which is a system of embedding an operation into a distributed ledger which is a multi-party committee-based project backed by several central banks. Its purpose is to streamline cross border payments. It seeks to do this in three ways. It will speed up such transfers, make them considerably cheaper, and it will prevent the weaponisation of currencies and trading blocs.
At the moment such cross border payments are largely channelled through the SWIFT interbank system, which is painfully slow, clunky and expensive. It is also subject to interference from the USA government.
One of the new system’s premises is that it is not designed to support the use of American dollars. This is going to have enormous consequences for global trade and the viability of the US$.
Global trade is set to become simpler and cheaper in terms of payments, and the US$ is quite deliberately being marginalised.
When the system goes live, possibly within the next twelve months, it will potentially be used by the BRICS+ nations, and friends, and that means being used by more than two-thirds of the world’s population.
Consequentially that also means that two thirds of world trade will no longer need the US$, and that will mean countries will no longer need to hold those dollars in order to be used for cross border settlements. That is going to be an enormous hit to the dollar, and consequentially to the US economy.
Since the US is already the world’s largest debtor by far that also means the US is going to suffer a considerable fall in the value of its currency. That will also have a significant impact on other major currencies. I have to admit I cant work out what damage that will do to international finance. Something like this has never happened before. We are in uncharted territory.
It will also make international trading with the US rather difficult as it will have to be done through an antiquated system, and will therefore be more expensive and slower. Imports to the USA will start to become more expensive at the same time the dollar is tumbling.
Now is not the time to move to the USA!
Close on the heels of this new trading system will be the gradual rebalancing of currencies so they are backed by gold. That is going to be a further debilitating hit to Western financial systems. Financially mismanaged currencies like Sterling, the Yen, and the EU are going to be in big trouble.
I dont know what the US does about this, but the outlook does not look good.
Japan is already starting to look towards its Asian neighbours instead of aligning itself with the Western Alliance. Western Europe will also have to start waking up and ditching its suicidal links with the US.
We live in interesting times.
And do remember that the ancient Chinese saying “May you live in interesting times” is a curse.
Of course, this is only the beginning. Blockchain is coming for a lot more outdated technologies. The one that interests me is the eventual use of blockchain in government and the social contract.
What is now happening is that the technology we are producing today is capable of doing things so much easier, cheaper, and better than we can do ourselves. We are rather rapidly making ourselves and our erstwhile institutions redundant.
That means we have reached the stage where we could dispense with politicians who are constantly making a mess of things, and devise a better way of organising the way we relate with each other in a large community.
It is possible to create and use blockchains to work without much in the way of human guidance or interference, why can that technology not be used to create a blockchain version of the social contract?
In the UK we already have systems that could take over the Land Registry, and improve the way that works, and also drastically reduce the cost of the service.
The same could be done with DVLA, the pension department, and various other governmental departments, particularly where back offices have grown huge.
It is also already possible to deal with voter registration and elections using blockchain technology. There is nothing to stop the public finances being dealt with via computer code, with checks and balances so that it is only possible to spend what the public exchequer has in the bank.
It will then be but a small step to go back to the old style democracies and have stakeholders in the government scheme who could vote directly on policy. There would be no need for a local representative in a parliament building, the affairs of state would be decided within the relevant blockchain.
Greek city states governed themselves because they were small enough to organise things that way. Clearly with a world population now in excess of eight billion the management of a country has grown way beyond the capabilities of such systems. However, by investing the structure of a state, together with its principles or constitution into the architecture of a blockchain specifically designed to enable stakeholders to directly make decisions according to those embedded principles, a governing body could be created. Thus the function of public discussion can be used to initiate decisions without the need for intermediary representation.
A blockchain needs a clearly defined purpose and founding principles, plus a structure which would enable decisions to be made and entrusted to ancillary entities for implementation. The way decisions would be decided would be quite simply a vote among the members, or stakeholders who by their commitment to the support of the blockchain are entitled to vote. That would be anybody who complied with the rules for becoming a stakeholder.
I believe our salvation is to create distributive networks controlled by their token-holders that take over the decision-making traditionally given to governments. It is perfectly possible, and in my humble opinion it is desirable for the continuance of the human race in a tolerable format.
mBridge