Smart Money for the People: Using Financial Innovation and Technology to Promote ESG

By: Frank Emmert
Traditional fiat currencies managed by governments and central banks have had negative impacts on environmental, social, and governance (ESG) goals. Central banks in mature democracies pursue policies that prioritize economic growth and high employment. However, these policies often lead to inflation, eroding the savings and pension funds of average citizens and encouraging risky behavior by banks and entrepreneurs. The pursuit of endless growth is socially and environmentally unsustainable. Leaders in developing countries and dictatorships use expansive monetary policy to maintain their positions, further exacerbating the situation. Convertible fiat currencies moving across borders in untraceable transactions evade regulation and taxation, with trillions hidden in offshore tax havens.
Virtual or crypto currencies on a blockchain can address these issues. Transactions on a public blockchain are transparent, traceable, and immutable, and monetary policy is controlled by algorithms, free from political influence. However, existing crypto currencies like Bitcoin and Ethereum have failed to align with ESG goals and have harmed the environment. They favor large capital holders and allow illicit money movements. Blockchain technology can be used differently, however. A virtual currency with strong governance, pegged to a currency basket, could be designed to build trust and appreciate in value, promoting savings, sustainability, and value preservation. Stringent KYC and AML procedures, along with transparent blockchain transactions, would simultaneously reduce illicit financial activities.
The article outlines the key features of Smart Money, a new generation virtual currency eliminating all major shortcomings of traditional fiat currencies and of early generation crypto currencies.
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Cite: 22 Duke L. & Tech. Rev. 21