I’m delighted to welcome back Anna Wright to The New Era. Many long-game readers will be aware that Anna was a regular feature writer here until a couple of years ago. But as a professional writer she had to focus on the day-job (there’s precious little money to made writing for New Libertarian substacks). However, with all the “debate” around Digital ID she wanted to focus on money and fungibility. This is a very important topic. And, it gets to the root of a problem we have with digital tokens: they’re not money.
Incidentally, I am publishing this article courtesy of the free WiFi in Container Coffee in the village of Koliaki in the Peloponnese. The coffee is wonderful and the Leek Pie is sublime. Both cost a mere 5 euros. In cash. Although I’d have preferred to have paid in drachmas. Life was better when there were Greek drachmas. Ed.
A former boss once said to me, “the contract means nothing, the deal’s not real until the money’s in the bank.” We worked for a theatrical agency placing actors in film roles. Several times, just before filming was due to start, contracts all signed, actors all pumped up, the money would not arrive and the whole project would fall apart.
We all know what money is. We are so sure we know what money is, we have grown complacent about how to recognise it and several imposters have wormed their way into our lives, fooling even the most senior public officials. Money is something that has nominal (not necessarily intrinsic) value that can be exchanged for goods and services or money of a different value (a foreign currency), and is recognised and accepted by the state and general population as legal tender. But there is one critical and fundamental property that defines money, and that is that it must be fungible. If it’s not fungible, it’s not money... it’s a contract.
What do we mean by “fungible”? Many people make the critical error of mistaking fungibility for parity. Yes, to be fungible, the unit of something must be par, but it also must be immutably exchangeable and thus interchangeable. One pound in your pocket or sterling bank account can never be given different properties from another pound in your pocket or bank account. If I offer you two new £20 notes and ask you which one you want, you won’t care, they are exactly the same to you. If I say I’ll transfer £20 to your bank account and ask if you’d rather it came from my Halifax account or my Barclays account, again you won’t care, there is no difference between them. Everything I’ve offered you is fungible pound sterling and you instinctively know that. A digital currency doesn’t work like that.
A digital currency is not made up of fungible units; it is made of unique non-fungible tokens. By its nature, a piece of code, or a “token”, which is what defines a “digital currency”, is not fungible. Each “coin” is a unique piece of code that can be programmed with certain conditions embedded into it, making it – to all intents and purposes – a contract. Indeed, that is what we call digital units that are held on a blockchain, we call them “smart contracts” because they are supposedly tamperproof. It was (perhaps purposely) deeply deceptive to call cryptocurrencies “coins” because they are anything but. Sometimes they are called “digital assets” but each code is still unique, making it non-fungible with another piece of code even if they are “worth” the same value. Sure you can hold a fungible representation of those tokens on a crypto exchange, but then your “asset” is only ever as safe as that exchange, as users of the FTX exchange discovered to their horror in 2022.
By its very nature, non-fungible money cannot be immutably interchangeable with the same value of fungible money, it can only be pegged to it, and something that is pegged can always be depegged, even if no one ever expected it to be. The depegging of the Swiss Franc to the Euro in 2015 stunned investors and sent shockwaves through the financial markets. If the UK launched a crypto version of the pound in the form of a new central bank digital currency (CBDC), regardless of whether as a wholesale or retail token, it could only be pegged to pound sterling; it cannot be pound sterling. And two concurrent state-issued currencies existing is a clear risk to financial stability. Taken a step further, if commercial banks are able to create tokenized deposits, you could have a number of private digital currencies (eg a Barclays “coin”, HSBC “coin” and LBG “coin”) all effectively competing against each other, similar to the free banking era in the US in the mid-19th Century. Legislation to guarantee parity between currencies could be overturned by any successive government; the risk is still hardwired into the properties of the product (a tokenized “currency”). Regulators will believe they can somehow safeguard tokenized deposits but will find the challenges they have already faced in maintaining financial stability in a world of fractional reserve banking considerably exacerbated in a world where each unit is a contract, a code, a non-fungible programmable token.
We already have scenarios that suggest how tokenized funds could alter the value of pound sterling. If you are given an Amazon gift card and redeem that in your Amazon account, each pound is worth a pound sterling, but you can’t use them to pay for goods from the Apple store, so those pounds on your Amazon gift card have a condition attached to them; they are not fungible. That said, they are at least at parity with pound sterling as Amazon currently has its goods marked in consistent prices, so it doesn’t matter if you’re spending pounds from your credit card or your Amazon gift card, the price is the same. Sainsbury’s does not have consistent prices; Sainsbury’s operates its own dual currency system. If you hold a “Nectar” card, you pay a different price from everyone else. You are still paying in pound sterling, but, as a Nectar member, your pound sterling has a different value from a non-member when you pay £2 for a bag of oranges and they only pay £1.40 (price as listed in October 2025). If we scale this up in a world where huge corporations issue proprietary stablecoins, we could have a situation where, for example, you can only use Uber by purchasing a stash of “Ubercoins” and people start trading Ubercoins and the value of Ubercoins skyrockets until he who holds the most Ubercoins wins and pound sterling is in freefall; an exaggeration, perhaps, but a plausible worst-case scenario.
Here’s another somewhat radical but plausible scenario. Say the UK issues a CBDC (let’s call it a “state-coin”), pegged to pound sterling and decides to pay all benefits in state-coin into a person’s state-issued e-wallet (not unlike the infamous NHS app), and I am known to the authorities as having issues with alcoholism so they – in an act of over-zealous do-goodery – decide to programme those particular coins going into my wallet so that they cannot be used to buy alcohol or cigarettes; do you think I am going to go without my alcohol and cigarettes? No, I am going to buy a load of milk and bread for my mate in exchange for alcohol and cigarettes. What’s in it for my mate? I am going to give him a preferential rate of exchange. Effectively, I have just unpegged my state-coin from pound sterling, and we have the beginnings of a dual currency economy, not to mention a brand new black market for alcohol and cigarettes.
Several jurisdictions now have stablecoins (spoiler alert – not “stable”; not a “coin”) and some have launched retail CBDCs. The more we are pushed into using non-fungible tokens to pay for goods and services, the more the state and commercial institutions that own and control those tokens will be able to dictate what we do with them. Tie all of this into our state-issued “Digital ID” code, where our very identity is reduced to nothing more than a QR code, and we could find ourselves living in a digital dystopia beyond the dreams of the most fascist dictators we could name from history.
It doesn’t matter if the cryptocurrency you are using is a “stablecoin” (commercial token pegged to a national currency) or a CBDC (state-issued token pegged to the national currency), and it doesn’t matter how many pinky promises governments make that “CBDCs will not replace cash”, if the infrastructure is designed with a certain functionality, the use of that functionality remains a grave risk both to the personal sovereignty of the general public and to financial stability more generally. Money is fungible; human beings are not.
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