Personally, I think the rise of a digital currency is almost inevitable. I reserve judgement as to whether Bitcoin is the equivalent of Google or AltaVista or Yahoo in the digital search space. There have been interesting ideas floating around recently about Bitcoin as a reserve currency. The idea of a frictionless conversion between currencies without the dead hand of banks is one of those utopian or dystopian notions according to how it fits your own views.

In the 1990s Edward De Bono wrote a paper on the “IBM Dollar” outlining the possibility that corporations not governments might issue legal tender. It would be interesting to rework that paper in the light of Bitcoin.

There have been numerous inventions of novel trading mechanisms since the rise of the internet. There is a local currency, the Bristol Pound, for instance. There are Timebanks and various LETS (Local Exchange Trading Schemes) schemes.

I was amused to come across an example of “air miles” being an inheritable property, part of a deceased’s estate. On the subject of Air Miles, Michael Mainelli has suggested that in the interest of sustainability corporations might look at Chairmiles. Look inside many people’s purses and wallets and you will find cards for Tesco, Nectar, Boots and the like. Add to that hotel chains point schemes on cards and it can add up to a considerable amount. I did a check recently on my own situation and found I had over £200 of shopping “money” in my wallet and over £1000 of travel “money” on various card schemes. Some of these have interesting properties such as expiry. Imagine having a currency that you have to spend or it will expire! Paul Krugman famously wrote about a liquidity trap in a baby-sitting Co-op.

Could we envisage a world where we could take air miles, or nectar points and convert them into Bitcoins? This in turn leads to some intriguing possibilities for future currencies.

Public policy is often caught in dilemmas over differences in the performance of UK regions in areas such as house prices, incomes and employment for instance. Setting interest rates to handle housing inflation may damage investment. Health inflation is different to housing inflation or education inflation. It may seem off the wall today, but the emergence of a digital currency not only creates the possibility of a new form of reserve currency for international goods and services, but it also provides potential for local currencies and sectorial currencies. If we carry around tokens now which can be exchanged for shopping, travel or entertainment now as “money” on cards what stops a future of London pounds or Health pounds or Housing Pounds or Education pounds or Savings Pounds?

Consider an individual with a long-term health condition. Could they protect themselves by buying health currency in advance?

Could the notion of a “spend now” or it expires currency emerge as a replacement for QE in the next recession?

In some of the LETS schemes the ability to trade an hours gardening for a haircut without “money” exchanging hands has interesting, to say the least, implications for transaction taxes. Yet these schemes can support activity in some communities where conventional money is in short supply.

Systemic shifts often come from the fringe, as has Bitcoin. At first the tendency is to co-opt it to the old world, or ignore or suppress it. The idea of a “single currency” be it for a country or the EU may well be challenged by the rise of digital currencies in ways we cannot yet conceive.

Anyone want to buy my air miles for Bitcoins?