11-07, 17:05–17:50 (America/El_Salvador), Galoy Stage
Today we have a highly fragile banking system: fiat-based, loosely limited by fractional reserve requirements, heavily regulated and subject to government interventionism. It is a house of cards where even second tier banks are considered system-relevant and require bailouts. Recent advances on the legal and technical fronts allow us to think about a radically different system: a Bitcoin-based full reserve banking system under standard commercial law and strictly separated from the state.
This talk is part lecture, part a speculative look into the future of banking. It will first describe a third class of money, credit money, as a money in the narrow sense like the two better known types, commodity money and fiat money. We delve into the fundamental difference between discount and interest rates. We recap the problem which Austrian Economists see in the conflation of present money and future money in traditional banking, and how cryptography could offer a new take on the problem. Then, we will look at the old concepts of “reserve” and “backing”. What are they, how will they be needed in a Bitcoin system, and could there be a missing element? We will consider two ways in which monetary elasticity was achieved during the times of gold redeemable money. Using these concepts, the talk concludes with a possible future, where well-balanced monetary elasticity - neither inflationary nor deflationary - could be achieved in a liberalised free banking system under a novel full reserve requirement.
Hubertus Hofkirchner conceived and founded Bitcredit Protocol, a community-driven open software project which aims to facilitate the adoption of Bitcoin by the real economy. Bitcredit is a fiat-less on-ramp and circular Bitcoin system based on an elastic Bitcoin money supply to finance working capital needs and the wage fund for workers.
A former commercial banker, investment banker, and telecom CEO, Hubertus has been an independent serial entrepreneur at the intersection of finance and IT for two decades, founding an online brokerage, a digital options exchange, and a global prediction market platform. He also hosts the monthly Austrian Economics Salon at Vienna's Hayek Institute.