Temple Melville

A great deal has been made of digital and cryptocurrencies since the start of the pandemic. Many countries have either introduced, or announced plans to launch, their own digital currencies to complement physical (fiat) money, while the price volatility of cryptos such as Bitcoin and Ethereum have regularly grabbed headlines.

Should Scotland follow the likes of Sweden, China, and Nigeria in embracing the idea of a digital currency that can be used nationwide?

The biggest advantages of digital currencies are their cost and targetability. The cost of transferring fiat money across the globe is deceptively expensive. For instance, moving £1 million between two accounts could cost between £20,000 and £30,000, whereas doing the same through cryptocurrency costs just £2 or £3.

This was one of the main reasons El Salvador decided to adopt Bitcoin as legal tender, while The Philippines has also been exploring how cryptocurrency can cut costs for its emigrant population when sending money home. Scotland has some 10 million members of its diaspora – being able to hold a digital currency, usable here, could make a real difference to them and their families.

Naturally, however you choose to move money, there is also the worry of whether the intended recipient receives it. Cryptocurrency allows transactions to happen in minutes – rather than the days that international bank transfers can take – and it is programmable to guarantee it reaches the right person.

Closer to home, the widespread use of a digital currency could mean a significant reduction in bank charges for SMEs, social enterprises, and charities, all of which need all the support they can get right now. A 2016 survey found that SMEs across the UK spent £4 billion on bank charges for international payments, Scotland’s share of which could have been as much as £248 million.

Cheaper and easier transactions would benefit everyone and free up more cash to mitigate rising costs. A digital currency would also create greater flexibility and liquidity, which could be of particular benefit to the 1% of Scottish households that still have no bank or building society account.

However, the main barrier to realising all of this is adoption. We need as many people as we can to hold, use, and accept a digital currency. While the number of Scotcoin holders has increased to around 7,000, we need a much larger base of users to deliver its full potential. We believe this could mirror what Switzerland has been doing with WIR: a cryptocurrency of sorts used in conjunction with Swiss Francs that has provided greater stability for the economy since the 1930s.

Digital currencies are not replacements for the money we already know and own – they are a complementary means of exchange. With so much economic uncertainty following Covid-19, now is the time for Scotland to embrace the idea of a supplementary form of money to strengthen its businesses, charities, and communities and sustain our recovery.