decentdecentralized currencies in trinidad and tobagoralized currencies in trinidad and tobago
TRANSCRIPT
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Decentralized currencies in Trinidad and
TobagoRationale and Outlook
Prepared for the TTCS by Richard Jobity
Saturday 14thJune, 2014
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Agenda
Decentralized currenciessome definitions? TT Economy 101
Functions of money
Role of the monetary authorities
(Quick) overview of he TT Financial system
So... decentralized currencies?
Conclusion
Outlook
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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)
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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 specificvirtual 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)
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The key attribute a virtual currency does not have
at this time is the status as legal tender
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Exports
Offshore
Exploration and
Production
Petrochemicals
LNG
Services
Onshore
Finance
Light Manufacturing
Construction
Services
State
(Government)
sector
Expenditure
Revenue
Foreign
exchange
earnings
SocialServices
Foreign Exchange
Spending
EmploymentPrices
Non-tradeables
(Real Estate)
TT Economic overview
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Linkages between petroleum sector and rest
of inland economy
PetroleumSector
Government
Sector Expenditure
Rest of theeconomy
Natural gas and petroleum products
Wages and salaries
Purchases of goods and services
Taxes and
other
payments to
government
Incentives to investors
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Dual sector & economic growth
Petroleum 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
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TT: Plantation Economy?
1500 1600 1700 1800 1900 2000Subsistence farming Tobacco Cotton Sugar Cane Cocoa Oil Petrochemicals LNG ?
The plantation economy model posits that plantation
slavery and specialization in export of primarycommodities has marked the evolution of the
societies in which it existed.
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The legacy of institutions,
structures and behaviour
patterns of the plantationsystem are so deeply
entrenched that
adjustment tends to take
place as an adaptation
within the bounds of the
established framework
(Best 1968, p. 32)
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Trinidad and Tobago an enclave?
Export commodity concentration ratios,
average 1900-1913
Export commodity concentration ratios,
average 10 years after independence
First
product %
Second
Product % Enclave
First
product %
Second
Product % EnclaveTrinida
d and
Tobago
Banana
s 50 Sugar 16.9 Yes
Petr.
Product
s 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.
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We need to understand the grip of the founding
institution of the plantation in order to remove itsstranglehold 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, throughdisbursement of oil revenue.
- Homa Katouzian
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TT Financial System
Initially established to assist the merchant class (plantationowners)
Relatively stable
Veryconservative (as a result of the institutional failures ofthe 1980sWinsure, ITL, etc)
Imperfect competition between institutions, alongsideassociation with said institutions
Commercialbanking with associated retail (in keeping withplantation social structure)
Generally profitability from consumer lending &trade/manufacturing business
Not friendly to entrepreneurial initiatives or calls onservices outside favored customers
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Functions of money
Medium of exchange (intermediate the exchange of
goods and services, it is performing a function asa medium of exchange- avoids the inefficiencies of abarter system)
Unit of account ( standard numerical unit ofmeasurement of the market value of goods, services, and
other transactions.) Store of value (money must be able to be reliably saved,
stored, and retrievedand be predictably usable as amedium 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 bargainingof prices (accounting systems). Essentially a method forcomparing the values of dissimilar objects)
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Role of the Monetary Authorities
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That said...
Can
decentralized
currencieswork?
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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 ofeconomic growth in framework of stablefinancial
system
Fairly well-working conventional financial market, so
less explicit need for alternatives. FINANCIALMARKET GENERALLY ENJOYS CONFIDENCE OF
CLIENTELE
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So... decentralized currencies?
International money transfers (which could be usedto 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?
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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 yetfulfiling 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
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Conclusion
Decentralized currencies are potentially disruptive The TT monetary authorities seek to maintain a
stable, well-regulated financial system
Decentralized currencies, like financial markets
cannotbe trusted to regulate themselves Regulatory nightmare
So no, not right now. BUT
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Outlook
Is this a case of a technology before its time?