SECTION 8. Stablecoins & CBDCs as private & public money: confront or co-exist?

Abstract

Note that fiat money should not be confused with representational money. Representative money has an intrinsic value because it is backed by and can be converted into precious metal or other commodities. External fiat money can be similar to representational money, for example, it can be in paper form. However, fiat money is not backed by a security, while representative money is a claim on a commodity 12 .The use of commodity money can be traced back to the Bronze Age cultures from 3300 BC, the most popular were: bronze, silver, gold 13 . In Europe and the Middle East in the Bronze Age, unofficial pieces of metal (silver and bronze) served as circulating money long before coins were minted. The «silver bars» that served as currency were irregularly shaped and unminted pieces of silver cut into pieces of standard weight 14 .Charles Arthur Conant pointed to a passage in the Old Testament (Genesis 23:16) where the King James Version states that Abraham paid Ephron «four hundred shekels of silver, the current money of a merchant.» Charles Arthur Conant has noted that this language «shows that it was the merchant community, not the government, that set the standard» (p. 128) 15 . The shekel was a unit of weight, not a coin or bullion.Classical antiquity was the high point for the state monopoly on money production. Ancient rulers from the Greek city-states to the Roman Empire, looking for a source of profit to exploit, granted themselves a legal monopoly on this business by banning private coinage. With the decentralization and weakening of political power after the decline of the Western Roman Empire, private coinage returned to Western Europe. Babelon (Ernest Charles François Babelon, 1897, pp. 124, 127) comments on the period of the Merovingian dynasty (476-750): «Whoever had gold in his possession arrogated to himself the right to turn it into money, ... substituting his own name for that of the emperor as a guarantee for the public.» In medieval India, silver coins with perforations were also «minted by private institutions» (Mukherjee 2012, p. 215). The strengthening of nation-states brought back state coinage monopolies.Gold was the preferred form of money because of its rarity, durability, divisibility, fungibility, and ease of identification, often in combination with silver. Silver was usually the main medium of circulation, and gold was the cash reserve. Commodity money was anonymous 16 .