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Visa to join Digital Dollar: Is demonetization and negative interest rates the next move?

Visa joins digital dollar

Following is an opinion.

Visa has applied for a patent for ‘digital currency’. There are many fascinating parts in this patent. One section of the patent makes a very interesting proposal: “removal of the physical currency from circulation in a fiat currency system.

Removal of physical fiat from the circulation is the first step before digital dollars utilizing blockchain technology can work the way they are intended to.

You see, digital dollars help governments to trace, track, tag and tax income in real time. In theory, you don’t need complicated forms or wait for taxes to be collected. 

Once the US successfully implements the digital currency on the blockchain, it may encourage others to do the same.

We expect international bodies like the IMF and World Bank to mandate all countries to follow suit with the US.  This will help every single digital fiat currency exchanged between citizens of the world be traced, tracked, tagged and taxed, without a lot of human effort.

This move will have major benefits, including:

  • Clamping down on nefarious activities
  • Tax evasion can be eradicated
  • ‘Following the money’ will actually be possible
  • Minimize transfer of diseases from physical paper
  • Calculating and collecting taxes will become automatic
  • Cross border transactions can take place in minutes instead of weeks
  • Those without an ID will be kicked out from participating in the financial system
  • Sanctions, seizures and other measures can be implemented with ease

Many of these benefits will be touted in the upcoming gatherings to set the stage and then the plan to digitize the fiat on a global scale will ensue.

Turning paper fiat into digital dollars with central bank

Visa’s patent alludes to the benefits of turning traditional fiat currency into digital currency based on blockchain.  

Patent confirms that Visa itself doesn’t have the power to convert the physical cash currency into digital dollars. It needs central authority, the Central Bank, for that.

In order to accomplish dollar digitization, Visa will interact with Central Bank blockchain systems to record and then have Central Bank release the digital dollars to Visa.  

Central entities may have exclusive permission to transform physical currency into digital currency in order to regulate the value of the digital currency,” patent reads.

Visa’s patent also indicates that the Central Bank will interact with Visa’s systems through a blockchain network.  “The central entity may be a node of the blockchain network which may include the blockchain,” the patent reads.

Ethereum network, a possibility

Ethereum ETH ETFVisa may use Ethereum network in this digital currency project. This further solidifies our speculation that we will see an interaction of public and private blockchain networks.

As per the patent, “In some embodiments, Ethereum may be used to implement various aspects described herein.”

Ironically, we may see a private company use a public blockchain network like Ethereum while the Central Banks which are supposed to be public entities may end up using private permissioned blockchain systems.

Use of different blockchain networking may create interoperability challenges, as a result, we may see some type of custom solution to integrate different systems.  

Everything is playing out according to the plan

Visa filed for this patent in 2018, digital dollar mention was made in the recent stimulus bill (although it was later removed) and Trump is now tweeting about ‘negative interest rates’ idea in public. Looks like things are stacking up according to the plan.

We have laid out the ‘Great Digital Dollar plan’ last month about how the next economic stimulation will come from a combination of digital dollars and negative interest rates.

For instance, if people can simply take their physical cash money out of the financial system and hoard it, then negative interest rates cannot be implemented.  People will just choose to deal in paper currency outside the system.  You need to convert every single dollar into a digital dollar to enforce such a policy.

Next move: Demonetization of paper currency?

ecash walletThere is one more step before the negative interest rates can be enforced and that is demonetization of paper currency. We have explained how this may work out in phases in the Digital Dollar Inevitability article. 

For brevity sake, the first step would be to automatically convert the existing bank balances into digital dollars and issue a deadline to deposit the ‘paper money’ into a bank to convert to digital dollars.

If you think this is impossible, think again. India with a population 3 times the size of the US and with more cash-based economy than the US has demonetized its highest denomination bills overnight, without any heads up.  

Once the majority of the paper cash currency in circulation is converted to the digital dollar then a move to introduce negative interest rates could be introduced.

This will make ‘saving’ rather futile and people will be forced to spend or invest or both. 

Spending and investing stimulate the economy better than any temporary stimulus packages. It will keep the market at a perpetual high.  This is why we speculate that in the coming years we might see new all-time highs on the Dow Jones.

Global scale:  International implications

If our speculation is correct and we emphasize on the speculation part because Jeremy Powell has ruled out the negative rates as an option to stimulate the economy based on data from the other countries who previously tried negative rates. However, what we are experiencing does not have a reference point and desperate times will call for desperate measures.  

Fed Chair Powell: The US won’t have negative interest rates

As President Trump calls for negative rates, Federal Reserve Chairman Jerome Powell tells 60 Minutes the central bank won’t lower interest rates below zero. …

What Jeremy’s viewpoint misses is the combination of a digital dollar with negative interest rates.  

Countries that tried to implement negative interest rates before have done it without the ‘absolute control on money flow’ which yielded lukewarm results. Digital dollar based on blockchain affords absolute control on money flow with the government and makes implementing negative interest rates a totally different ball game.

Thank you for reading and sharing this article. Stay safe and healthy!

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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