You would have to have been living in a cave these past few years not to be aware of the travails that currently afflict the Greek people and their economy. As the Greeks debate the choice that apparently faces them, the Euro or the Drachma, there could be other options on the table. What about digital currency? Some of you may have heard of it by another name, 'cryptocurrency', others may have heard of types of digital currency such as Bitcoin, Litecoin and our very own LEOcoin. The crisis now gripping Greece could force one of the most radical rethinks in fiat economics in generations.
Not everyone will be aware of the interesting figure that is the outgoing Greek finance minister Yanis Varoufakis. Mr Varoufakis has resigned in the wake of the weekend's no vote in Greece which rejected the EU's current austerity demands of the floundering country, his resignation is particularly interesting given his previous assertion that it would in fact be a yes vote that would precipitate his departure.
However, it is not his departure, or the nature of it, that interests me necessarily. It is his unorthodox views on the potential posed by digital currency for a struggling economy like Greece's that should catch the eye of those of us working in this exciting digital arena.
Yanis' reflections on digital currency have focussed on Bitcoin as the case study for his assessments of the potential they offer, and his appraisal of their potential has largely been negative. Yet this has not prevented him from examining how a digital currency of sorts could work for his native Greece.
As the founder of a digital currency, LEOcoin (the exchange went live this April), that has already seen thousands of businesses engage in this new type of transaction, I feel his comments are worth exploring further. Much like the War Bonds of Word War II, Mr Varoufakis presents a theoretical digital currency as an opportunity to provide a government with immediate, but sustainable, liquidity in a crisis. In essence Mr Varoufakis advocates a 'temporary switch' to a government backed (the Greek government that is) digital currency that would offer liquidity to solvent Greeks by offering tax reductions on future taxes. This would mean a citizen would be able to buy this currency, and use it in digital form, as cash - its value being attached to the future discounts the individual would get on tax once the economy is 'out of the woods.'
What the former finance minister, and world renowned economist, proposes is the creation of a currency using "cryptocurrency's" unique algorithms which he termed Future Taxes Coin (FT-coin for short).
In the example he offers you would purchase, for example, 1 FT-coin for €1000 from a Treasury backed source, then redeem it say two years after it was issued as payment that extinguishes, for example, €1500 worth of taxes.
Every year (after the system has been operating for at least two years) the Treasury would issue a new batch of FT-coins to replace the ones that have been extinguished, as taxpayers would have used them. To make sure that the system is fully transparent, FT-coin could be run by an algorithm, like those used by LEOcoin, designed and supervised by an independent non-governmental national authority, like how the current digital currency community 'polices' its ledger currently.
His proposition is interesting not least of all because not only does it fly in the face of current fiat economics, it also flies in the face of the main reason people use digital currencies currently - namely that they are not government tender. For business and entrepreneurs it is the 'access to cash' during a crisis that could be the vital life line to recovery. The fact that a digital currency like LEOcoin is 'stateless' could be the key factor allowing a business to keep trading, even as a state falls down around them. It is for this reason that I am not surprised to see an uplift in the price of Bitcoin this week, and LEOcoin has also seen increases in trading. People are looking to currencies whose value lies with the community who use it, rather than a nation state.
This is where I think Mr Varoufakis' views, though interesting, are perhaps short sighted. Rather than a government looking to digital currency as a potential salvation because of the instant liquidity it may offer to them, people should be looking to digital currency to trade directly with each other.
It is small business owners and entrepreneurs that turn recessions around - you can have all the clever fiscal policy in the world, but as long as real business people aren't driving commerce then government intervention amounts to nothing. That is where the real opportunity of digital currency lies. Instant trading with the business community, free from the restrictions of the international banking status quo, is how you can get an economy moving again during these strained times. That is the big picture for digital currency, let traders trade.
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