Creating a cashless utopia
S Krishnamurty; Shyamal Roy and Sankarshan Basu
The Business Line
Published on December 8, 2016
Here's how an economy that swaps currency for
'byte money' will work —
no bribes and no deforestation
GORU (Government of the Democratic Republic of Utopia)
has decided to abolish paper money and instead
'print' only 'byte money'. Technologists came out with a
unique non-counterfeitable algorithm and configured
byte money in various denominations of the
Utopian rupee (UR) up to 1 million UR.
The Reserve Bank of Utopia (RBU), in charge of
'printing' the byte money, transferred huge amounts
of it to various banks through computers, in
exchange for paper currency surrendered by the banks.
This new currency was named the Utopian byte rupee (UBR)
Byte Rupee Cards
All the citizens of Utopia were asked to collect their
byte rupee cards (BRC) from the banks. These
plastic-electronic cards were loaded with UBR
equivalent to the paper money surrendered by them.
Each BRC could hold up to UBR 1 million.
Those who were already holding bank accounts,
were also given these cards loaded with the balance
amount in their account.
These BRCs were bearer cards, which, like money,
could be stolen or lost. Hence, at the request of the BRC holder,
a unique number was embedded. Alternately,
he could incorporate his own password for paying
more than UBR500 at a time.
GORU also introduced a small gadget —
'byte money storer' (BMS),
which is of the size of a cigarette packet (20s).
This was a subsidised gadget for UR50 and sold only
through the banks. Each gadget was given a unique number.
Every kirana and individual was in possession of BMS.
The system worked as follows:
Mr A goes to a kirana to buy a shampoo or tea bag
or bun for UR 2. He inserts his BRC into the kirana's BMS
and punches the amount. The amount is deducted
from his BRC and transferred to the BMS of the kirana.
At the end of the day, the kirana owner inserts his own
BRC into his BMS and gets credited with the balance in the BMS.
Now the BMS has nil balance.
If the kirana owner wants to pay his supplier, he can
do so by inserting his BRC into the BMS of the supplier, or
the supplier can insert his BRC into the BMS of the
kirana and get credited.
Even daily bus tickets, auto/taxis, cinema tickets, etc.
were dealt through the BRCs. In fact paying tolls on
highways, buying vegetables, enjoying a cup of
coffee could be through BRCs.
In other words, the BRC was the "purse" holding the
money, from which one paid to another's BRC through BMS.
The impact
The wide usage of the BRC and BMS
resulted in the following:
1. The banks earlier used to restrict withdrawal of
money from ATMs to not less than UR 100,
due to the transaction costs involved. Now this
ceased to be a problem as no one wanted to draw
money from ATMs and even UR 1 could be paid through
the BRC to any BMS and this transaction was
not through the ATM.
This was equivalent to paying paper money from
the purse. Simply put, money was transferred from
BRC to another BRC through BMS held by individuals.
2. At intervals of time, when the BRC holder wanted
to deposit money in his Bank account, he took his BRC
to the Bank or to ATM and inserted the same in the BMS
of the Bank and his account got credited in the Bank and
deducted from his BRC.
3. Within one year all the paper money got out of
the system and into the vaults of RBU for pulping and
recycling for other purposes.
4. Since there was no more printing of paper money,
millions of tonnes of wood got saved, resulting in stoppage
of destruction of forests and trees.
5. The various hazardous chemicals used in the
manufacture of the paper money got eliminated.
6. The new "byte money" (UBR-Utopian Byte Rupee)
was "printed" by the RBU according to the normal
monetary policy of GORU.
7. Everyone paid everyone else in Byte Money and the
Government also collected its taxes in the form of Byte Money.
In other words, paper money ceased to exist.
Greater common good
Just like the fight between any Federal Reserve Bank
and the counterfeiters of paper money, the fight
continued with Byte Money also. GORU is geared
up on this to combat this.
The problem of BMS being stolen, getting destroyed,
drowned, etc. were also addressed. Since BMC as
well as BMS were sold by the banks, the banks give
a unique number and just like the de-activation of a
mobile phone lost or stolen, the same de-activation was
done and new BMS could be issued.
The BMS holders were encouraged to transfer to
their bank accounts substantial balances in the BMS
frequently and keep only minimum balance in the BMS
so that when stolen or damaged, the amount lost
would be minimal (Just like the risk of carrying
wads of paper money in the purse).
The facilities were available in all the ATMs and bank
branches to draw byte money from the bank balances
either into BMS or BRC and vice-versa. This eliminated
the requirement of BRC or BMS to carry heavy balance.
One important side-effect was the demonetisation
of the paper money resulting in elimination of "black money",
bribes and corruption. It is true that for a few months,
the paper money used to be in circulation, meaning that
some people still used the paper money as
consideration for payments.
It died out eventually, for the simple reason that RBU
was not printing any more paper money to replace
soiled or damaged notes. Hence, after some time,
people refused to accept old paper money.
In this process of elimination of paper money and
restoration of forests, the Republic of Utopia earned
considerable revenue from carbon credits.
However, they were aware that they were enjoying
the first mover advantage and it was a matter of
time before other countries also followed suit.
It was a win-win situation for all.
The writers are visiting professor, retired professor and
professor, respectively, of
Indian Institute of Management, Bangalore.
INDIA SHOULD FOLLOW SUITE
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