Debate on crypto-economics at "Que no faltin!”

In the second edition of “Que no faltin!”, Susana Rodríguez Urgel, founder of The Digital Advisory Board, shared her knowledge of crypto-economics with the audience at La Plaça.

The possibilities offered by new technologies have opened the way to crypto-economics, a new techno-economic concept that coordinates different actors in the FinTech sector, with the aim of creating a decentralised economy through blockchain technology and cryptocurrencies.

As Rodriguez explains, “The digitalisation of the economy and, in particular, what blockchain is, leads to ‘ownership’. We will all be owners of what we can associate with our digital identity“. Collaboration between users gives rise to a new generation of platforms that thrive on the contributions of a decentralised global talent blockchain, which does not have to seek permission from any government entity.

However, as the expert in crypto-economics points out, “all freedoms bring more responsibility“, the decline of the cryptocurrency market is not caused by new technologies “the problem we are experiencing now is not the cryptocurrencies, the technology is not to blame. It is the people who are making use of this technology who are sometimes unethical.”

In this context, governments have seen how they have been left behind in the face of a paradigm shift that may present a challenge to the established power structure, and under their domination. Will the creation of central bank-controlled digital currencies (CBDCs) be the basis on which the centralised financial system will survive? You can watch the full episode here.

“Que no faltin!” Chapter: 3

David Garrofé, businessman and secretary general of the Catalan employers’ association CECOT from 1988 to 2021, will talk to us about the future of the labour market. You will be able to follow the conversation live from La Plaça, from 19:00 on Tuesday 13 December. If you would like to participate as an audience member, you can reserve your place by writing to [email protected].

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

The rise of e-commerce has created new consumer habits, but it has also highlighted the risk of shopping online with traditional payment methods. Virtual cards are born from the need to make online purchases more secure, and at 11Onze we already have our list, ready for Black Friday shopping.

The main feature is the format of the card, where there is no magnetic stripe or chip. The format and design of virtual cards varies between entities, but they usually only exist in virtual form and, therefore, the card data can only be accessed from the banking platform or digital wallet.

Protecting our account

Virtual cards, far from leaving your account uncovered, do just the opposite: they provide more protection than conventional cards.

The 11Onze virtual card, with a one-off price of two euros, allows us to set a daily payment limit. A card that does not have direct access to the account and can be activated and deactivated whenever the customer wishes; therefore, protection is assured.

Virtual shopping, physical card?

Digital shopping is becoming increasingly popular. Online shops, video platforms such as Netflix or Filmen, or other subscription services such as Spotify have become so popular that it is common to have a card for these services. For security and spending control, it is advisable to have a specific card for these subscriptions that does not have unlimited access to the account. For this reason, the virtual card can be very useful for Black Friday on 25 November and Cyber Monday on 28 November. These are dates when online shopping increases, and we therefore enter our card details at various merchants.

How to obtain the 11Onze virtual card

If you haven’t already done so, you have to download El Canut, 11Onze’s super app that comes to revolutionise traditional banking, a new generation wallet of wallets. Once registered, you can request a physical card, as well as a virtual card that will be automatically activated, and you will be able to use it to make online purchases.

The challenge for the coming years will be to bring this method of protection and agility provided by virtual cards to payments in other sectors, such as physical commerce or cash withdrawals.

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

Digital means of payment, cryptocurrencies, digital currencies promoted by central banks themselves… All of these are increasingly pushing physical money into the background as a tool for exchanging goods and services. Here are some of the keys to how the international monetary system is changing.

In 2020, covid-19 led to cards overtaking cash as the preferred means of payment for citizens in many countries for the first time. In the UK, for example, the use of cash was halved.

The monetary system is in the midst of a transformation process with the emergence of cryptocurrencies and even the creation of digital currencies driven by central banks themselves. In this context, the days of physical currency appear to be numbered.

Although cash is reluctant to cease being the main tool for buying and selling, it is estimated that physical money currently only accounts for between 5% and 8% of all the money that nominally exists on the planet. In just a few years the financial markets have been flooded with new products, currencies and assets of all kinds.

Just as the first coins minted by goldsmiths changed the economic systems of ancient societies, the electronic money will change the economy as we know it today. As 11Onze agent Laura Buñol explains, in this new stage of globalisation, it seems that “the system wants to make structural changes”.

Towards digital currencies

The popularisation of the Internet and mobile telephony together with the rise of cryptocurrencies are pushing us towards a world of digital money that will mean “the death of physical money“. In fact, as Laura Buñol explains, in 2019 the then governor of the Bank of England “already proposed the creation of a global digital currency, supported by various central banks”, which would replace the dollar as the world’s reference currency.

Sweden already has an e-krona in the testing phase, which is used for some transactions. And both in the United States and in Europe, studies are underway related to the implementation of digital currencies. In fact, there is already a project for a digital euro, as explained in the article “The digital euro, the end of physical money?

There are still many unknowns about what digital currencies will be like, but it seems that, like cryptocurrencies, they will also be based on the blockchain to guarantee security. In any case, the encryption of their codes will not be designed to remain outside the surveillance of central banks. And it seems that it will be a useful resource for governments to crack down on the shadow economy.

The role of central banks

Central banks cannot ignore the progression of cryptocurrencies, so they have to adapt to the new times or they will lose their sense of meaning and “eventually cease to exist”, as Laura Buñol points out. States cannot afford to lose control of monetary policies.

In fact, the traditional financial system is working hard to regulate and incorporate cryptocurrencies into its operating logic. The establishment knows that, if it does not do so, it risks being pushed into a corner in the global economic landscape.

Everything points to the fact that, as Buñol points out, in the not too distant future we will probably have to look for alternative formulas to heads or tails or the current system of unblocking supermarket trolleys.

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

In the last year, negative news has been accumulating in the cryptoasset market. After the bankruptcy of crypto-asset platform FTX and the loss of almost three quarters of the value of bitcoin in a year, the future of cryptocurrencies seems more in doubt than ever.

The Super Bowl is the world’s most expensive advertising showcase. In its last edition, held in February, nearly 7 million dollars were paid for a 30-second advert, something within the reach of very few companies. One of them was FTX, the world’s third-largest crypto asset platform at the time. Its ad compared cryptocurrencies to some of mankind’s greatest inventions, presented the company as “a safe and easy way” to access this market and ridiculed the sceptics.

Just a few months later, FTX filed for bankruptcy and threatens to leave more than a million people around the world without their money. Founder Sam Bankman-Fried’s empire collapsed in just one week.

Following the sudden drop in the price of the FTX token in early November, Bankman-Fried requested a bailout from Binance, the world’s largest digital asset exchange platform. Although Binance initially agreed to help him, a few hours later it backed out, citing mismanagement of funds and other irregularities. On 11 November, FTX had no choice but to announce in a tweet the filing for bankruptcy proceedings and the resignation of Sam Bankman-Fried as CEO.

Possible contagion

As with many cryptocurrency companies, FTX’s house of cards was built on expectations of revaluation. When investor confidence crumbles, nothing can stop a catastrophic spiral that eventually takes down the company, which in FTX’s case had reached a valuation of $32 billion at the beginning of the year.

Given its size, the aftershocks of FTX’s collapse are expected to be prolonged and devastating. The first victim could be the Crypto.com platform, which in recent months had already made massive layoffs due to the turbulent situation in the crypto-asset market. Its token Cronos has lost more than half of its value in less than a week.

Sources indicate that the platform deposited more than $1 billion in FTX, of which it was only able to recover about $100 million. However, Crypto.com’s CEO has denied this on Twitter, claiming that its exposure to FTX is less than $10 million. The truth is that his message has failed to calm the markets, which continue to fear the collapse of this platform.

The risk of a new “crypto-winter”

The collapse of FTX and the crisis at Crypto.com come against a backdrop of doubts about the future of cryptocurrencies. After reaching a valuation of 58,358 euros in November 2021, the successive falls of what became known as the “crypto-winter” and the uncertainty of the last few days have pushed bitcoin below 16,000 euros, which means it has lost almost three-quarters of its value in a year.

As we explained in the article “Cryptocurrencies, a highly volatile asset”, bitcoin is no exception. Volatility has also affected other cryptocurrencies in recent months. For example, Ether lost two-thirds of its value between April and June, falling from more than €3,000 to less than €1,000, before rising back above €1,900 in mid-August and dropping below €1,200 in recent days.

Terra Luna, the most talked-about case until the FTX debacle, went from being worth more than 80 euros at the beginning of May to being practically worthless in little more than a week. And yet it was a ‘stablecoin’, i.e. a cryptocurrency whose value is linked to that of another currency, commodity or financial instrument, which should provide more stability.

Although crypto-assets continue to have many enthusiasts, more and more portfolio managers assume that the structure of this market is too risky and the losses are too great. The notion of bitcoin as the new digital gold, a safe haven in turbulent times, has faded. As a result, many institutional investors are turning their backs on crypto-assets to increase their participation in theoretically safer markets, such as precious metals.

In any case, the current crisis in the cryptocurrency market reminds us of the importance of having a diversified portfolio to protect us from sharp falls in the valuation of any of our assets.

Session on cryptoeconomics

If you want to learn more about the crypto-assets market, on 22 November at La Plaça we will be hosting Susana Rodríguez Urgel, founder of The Digital Advisory Board, who will be speaking live about cryptoeconomics in the second chapter of “Que no faltin!” series.

This expert in cryptography and one of those responsible for “the commercial and digital transformation of Telefónica” more than a decade ago, as James Sène, president of 11Onze, pointed out, promises a provocative session open to debate. If you are interested in participating live to raise your doubts and questions, you can write to [email protected]

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

How can something that does not physically exist pollute? The fact is that cryptocurrency mining farms require a large amount of energy. In fact, if bitcoin were a country, it would be among the 30 largest consumers of electricity in the world, as 11Onze agent Aitor Canudas explains.

Just a few days after the first bitcoin transaction, which took place in January 2009, cryptocurrency pioneer Hal Finney expressed his concern on Twitter about the CO₂ emissions that this cryptocurrency would generate. And he was not wrong.

A Cambridge University study estimates that the bitcoin network consumes more than 121 TWh of energy annually, which means that, if it were a country, it would be “among the 30 largest consumers of electricity in the world”, according to Canudas. In fact, to give us an idea of the magnitude of the data, the 11Onze agent indicates that this cryptocurrency consumes almost as much electricity as Sweden and generates more CO₂ emissions than Las Vegas.

The reason is that the processes necessary for cryptocurrency operations require a large amount of computer equipment, the “mining farms”, and therefore a huge amount of energy. “This set of computer processes needed to validate transactions and generate new blocks represents 0.2 % of the world’s electricity consumption“, specifies Aitor Canudas.

The problem is particularly relevant in the case of bitcoin, since, as Bill Gates recently warned, this cryptocurrency is the one that consumes the most electricity per transaction. According to estimates by the Massachusetts Institute of Technology (MIT), the use of bitcoins generates a carbon footprint each year of between 22 and 22.9 megatonnes.

The dirty source of clean energy

While we usually see electricity as a clean energy, this basically depends on its origin. Particularly in Asia, and especially in China, much of the electricity generated comes from burning coal, which is highly polluting. Therefore, the fact that a very high percentage of mining farms are located in this region to achieve the most affordable electricity prices multiplies the carbon footprint.

In order to preserve the environment, Aitor Canudas points out the need to increase the percentage of renewable energies in the electricity used “to create the new blocks and make bitcoin transactions”. Another alternative pointed out by the 11Onze agent would be to resort to alternative cryptocurrencies, such as cardano, “which in theory pollute less than bitcoin”.

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

We present a collection of the 11 best TikTok profiles made in Catalan. These young people have gained popularity on the trending social network by making videos in Catalan.

When we hear the word TikTok, the trending app born in China in September 2016 that allows us to make short music videos of up to 1 minute, many think that this platform is only dedicated to dancing, fashion, makeup, and fun. However, it brings us Catalans something more. Its use, in the hands of some young people, young influencers, has become a great tool for spreading and promoting Catalan. Today we want to let you know what we can consider the top eleven TikTokers which promote Catalan. Let’s get started!

1. ferranxidk: Ferran, who lives between Girona and Barcelona, is a guy who makes funny videos, has more than 70,000 followers and accumulates more than 9 million likes on TikTok.
2. long_lixue: This other well-known Catalan YouTuber, who lives in Girona and has Chinese nationality, also succeeds at TikTok. Well known for collaborating on iCat, he is also famous for fighting racism with millions of likes to his TikTok profile.
3. sanyesmag: This young man from La Garrotxa is famous for his magic videos. He has more than 27,000 followers and half a million likes on TikTok. He is a strong promoter of Catalan through this social network.
4. walter_capdevila: with nearly 200,000 followers and 5 million likes on the net, we could proclaim this Barcelonan the king of absurd humour. His TikTok profile is a guarantee of laughter.
5. misstagless: here we have Sílvia, with 10,000 followers and more than 150,000 likes on TikTok. This Valencian fights for the use and defence of Valencian, playing with home-made humour and a lot of personality.
6. filologa_de_guardia: this student of Catalan Philology is called Aida. Her TikTok profile has more than 5,000 followers and almost 50,000 likes. These will be your new Catalan online lessons!
7. apitxat: here we have Xavier, with almost 50,000 followers and a million likes. He is another activist for the Valencian lands. You’ll have plenty of jokes and humour in Valencian.
8. Can Putades: these girls are from La Garrotxa and live in Barcelona. They have 40,000 followers and almost 1 million likes. Their videos raise unknown words in Catalan from the Garrotxa region, among other funny videos of jokes from their day to day, without ceasing to have Catalan as the basis of their TikTok profile.
9. Aroagr8: here we have Aroa and Paula, with 15,000 followers and over 130,000 likes. Famous from confinement, these two girls play with words according to their region, one in Girona and the other in Amposta. Listening to Catalan had never been so curious.
10.  Bertaarocach: if you prefer a Catalan profile that sticks for its energy and its typical teenager performances that you will want to see time and time again, here is Berta. A profile with more than 100,000 followers and 4 million likes.
11. julen_music: as we are in the summer, and with the sun we feel like dancing, we say goodbye with Julen’s profile. He makes some superb versions of well-known songs, playing with Txarango’s music, or doing a mix of Plats Bruts with music from the Friends show. He has about 10,000 followers and almost 90,000 likes on TikTok.

The previous TikTok profiles have thousands of followers on the trending social network, and best of all, they have gained popularity by showing themselves to the world in Catalan.

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

Cryptocurrencies have revolutionised the global financial system, but like any new technology, they raise a lot of questions. We have prepared a small glossary of the basic terms you should understand getting started in the world of cryptocurrencies.

Cryptocurrencies, also known as digital currencies, are alternative currencies that can be defined as digital assets that use cryptographic encryption to guarantee their ownership, ensure the integrity of transactions, and control the creation of additional units. That said, there are a few key concepts to be clear about when understanding how cryptocurrencies work.

Blockchain

The blockchain is a technology that allows transactions between two or more people without the need for intermediaries. It is the ledger where all transactions are stored, and distributed on computers, which can be anywhere in the world, interconnected through a Peer-To-Peer (P2P) network, and without the need for a central server. It is a technology that facilitates the decentralisation of financial applications and any other digital records. Furthermore, it is also considered very secure because a record of everything that has happened on the network can only be changed if all parties agree.

Mining

While in the traditional monetary system, governments print money according to their needs, monetary creation in the ecosystem of the most popular cryptocurrencies, such as Bitcoin, is limited. Moreover, cryptocurrencies are not issued and made available to everyone, they are put into circulation in encrypted blocks that have to be decrypted. This is where the concept of cryptocurrency mining comes from, a computational process by which a set of computers, the miners connected to the network, are given a new algorithm to solve a mathematical problem, which, once solved, is rewarded with a commission for issuing a new unit of the cryptocurrency, which is added to the blockchain.

Cryptocurrency wallets

Cryptocurrency wallets are virtual wallets by which we can manage our cryptocurrencies. The main difference with other virtual wallets that we can find in many banks lies in the security offered by their software, allowing absolute control of the public and private keys to sign transactions and operations executed with cryptocurrencies through the blockchain network. The use of these wallets is indispensable when managing cryptocurrency-based digital currencies that do not exist in the physical world.

Staking and Hodling

The concept of ‘staking’ consists of acquiring cryptocurrencies and keeping them locked in a wallet in order to support the security and functioning of the blockchain. In return, we receive a profit, or reward, in the form of additional cryptocurrencies. Hodl is a similar process, but in this case, the assets are not locked and you can use them freely. It is an option used by investors who want to hold their assets for a long period of time in the hope that they will appreciate in value.

Tokens

Although the concepts of token and cryptocurrency can be considered synonymous, the distinction lies in the fact that cryptocurrencies have their own blockchain, while tokens are issued on another blockchain, such as Ethereum. A token is a unit of value issued by a person or a private company, with which you can represent different objects within a blockchain. It is a transferable value within the blockchain network but has no real value outside of it, similar to what would happen if we had casino chips or airline points. Therefore, a token can have different purposes: from giving access to more functionalities in an online game, to being able to be exchanged for real objects, collecting, and participating in an event …

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

Traditional banking is likely to disappear sooner rather than later. And security tools such as biometrics and cryptography will help protect us from fraud.

The world of finance is changing fast. Fintechs are overtaking traditional financial institutions, above all because they are committed to combining technology and customer service. All with the aim that new technological advances will allow increasingly simple, but more secure, operations. We see it!

1. Services in the cloud. Financial institutions will increasingly organise their services via the internet. This is why financial applications are constantly innovating: they are looking for more and more transactions to be carried out in the cloud.
2. Artificial intelligence, an essential tool. This technology is much more sophisticated and has a significant influence on the internet of things, on the management of ‘big data’, on facial and optical recognition and on the ‘blockchain’, which is the structure with which the new financial institutions will work.
3. Mobile finance made easier. The so-called ‘mobile banking’ system is not new. Still, it will be increasingly easier to use: it will provide greater accessibility and incorporate one-click payments from customer to customer. In addition, customer-to-business ‘digital banking’ will no longer rely on passwords.
4. More blockchain. Blockchain software vendors will attract the interest of organisations that want to accelerate their performance. With blockchain, they will achieve more cost-effective operations.
5. Next-generation cashpoints. It is expected that, in the not-too-distant future, we will be operating cashpoints without having to use a card, directly with our mobile phones. Some cashpoints around the world, in fact, already incorporate biometric authentication or iris recognition.
6. Security, security, security. This is a constant concern for financial institutions, which will be looking to include new protection services for their customers. Biometrics will be commonly used to access financial data.
7. Links between financial institutions. Experts have realised that financial institutions can reduce costs and facilitate customer services by partnering with each other. Working collectively advances innovation and establishes healthier cooperation.

11Onze is the community fintech of Catalonia. Open an account by downloading the super app El Canut for Android or iOS and join the revolution!

The cryptocurrency market continues to grow despite volatility. Their regulation is on the political agenda around the world. Some see these initiatives as an attempt to protect small investors, while others see them as an attempt to protect the traditional financial system.

After more than a decade of existence, cryptocurrencies have demonstrated their disruptive potential on monetary policy around the world. Benefits such as the creation of a more transparent and decentralised financial system or the control of inflation thanks to the limits set for the issuance of new currencies are evident. However, problems remain, such as high market volatility, which affects a token’s ability to serve as a medium of exchange.

In recent years, cryptoassets have evolved from being niche products to having a more widespread presence as speculative investments, hedges against weak currencies and potential payment instruments. Hence, efforts to regulate them are already high on the political agenda. 

A difficult market to control

Oversight of cryptocurrency markets is complicated because they evolve so fast. The term “cryptoasset” refers to a broad spectrum of products that can be stored and traded using mainly digital wallets and exchanges. But the terminology used to describe the many activities, products and actors involved is not harmonised globally.

It is difficult for regulators to police thousands of actors who may not be subject to typical disclosure or reporting requirements. And there are a number of cryptocurrency players, from miners to protocol developers, that are not clearly covered by traditional financial regulation.

Some countries, such as Japan and Switzerland, have already introduced specific legislation covering cryptoassets and their service providers, while in the European Union, the United States and other countries such regulations are still being drafted. 

The legal framework in Catalonia

The European Commission made public in 2020 a proposal for a regulation on cryptoasset markets, which aims to increase consumer protection, establish clear conduct in the cryptocurrency sector and introduce new licensing requirements in EU countries.

If this proposal is finally adopted, its implementation in Spain would grant supervisory and control powers to traditional institutions such as the Bank of Spain and the National Securities Market Commission.

For the time being, Law 11/2021, on measures to prevent and combat tax fraud, obliges cryptocurrency managers to report to the tax authority data such as the dates and transactions carried out by their clients. And Royal Decree Law 7/2021 requires cryptocurrency exchange and custody service providers to be registered with the Bank of Spain.

Little security for investors

At present, the high volatility of the market, the complexity of blockchain technology and the lack of transparency of issuers and intermediaries make cryptoassets a particularly risky investment for small investors.

In addition, most intermediary service providers are legally residents outside Spain, so legal proceedings in the event of fraud or loss of access codes to our cryptoasset account can be very expensive.

Classifying cryptocurrencies as an investment product could help protect small investors, as regulations would apply that only allow the sale of securities to small investors who understand all the features and risks associated with their potential investment.

Very disparate regulations

As the International Monetary Fund warns, the priorities of regulators in different countries when dealing with the current or planned use of cryptoassets are not always the same. Some prioritise consumer protection, while others focus on the integrity of the financial system.

Moreover, the approach to crypto-assets is very different from place to place. While some countries have been very receptive, others, including China, have gone so far as to prohibit the issuance or holding of cryptoassets by residents or the ability to transact with them or use them for certain purposes, such as payments.

Today, the fragmented global response means that industry players are migrating to countries with the most favourable jurisdictions, while remaining accessible to anyone with access to the internet. 

A global regulatory framework?

That is why the IMF has called for a global response that is coordinated, coherent and comprehensive, covering all actors and aspects of the crypto ecosystem. According to the IMF, “a global regulatory framework will bring order to markets, help instil consumer confidence, set the boundaries of what is permissible, and provide a safe space for useful innovation to continue”.

It is far from clear what the limits of such a regulatory framework should be. Many voices warn of the risk of distorting the original spirit of cryptocurrencies, which were born outside the traditional financial system. And the question also remains as to whether they should be considered legal tender so that they can be used without restriction as a means of payment in everyday life.

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Despite high inflation, we are still far from hyperinflation. Such a scenario would multiply the effects of the crisis and could open the door to the replacement of physical money by digital currencies controlled by central banks.

Annual inflation stood at 8.9% in September, after three consecutive months above 10 per cent, a rate not seen in almost four decades. With limited wage increases, purchasing power in the last year is estimated to have fallen by 7.5% in Spain and 6.2% in the euro area as a whole.

Although the situation in each country is nuanced, there are a number of common factors that have contributed to the rise in inflation. Energy and fuels are the main culprits. And the secondary luxury in this drama would be food and commodities, whose prices have also soared.

A recent World Economic Forum report indicates that in addition to high inflation, real wages and consumer confidence are in free fall, adding headwinds to growth and even raising the prospect of social unrest. As the agency’s survey of leading economists makes clear, “painful months lie ahead”.

The effect of rising interest rates on mortgage repayments and the fact that the global economy is still convalescing from the pandemic will also contribute, so the perfect storm is brewing. 

The threat of hyperinflation

Despite the severity of the inflation rates experienced so far, the current crisis can only be considered a minor setback compared to what would happen in the event of an inflationary spiral.

In general, hyperinflation occurs when prices increase by at least 50 % per month. This usually happens when central banks print a lot of money to service their debts or to counteract the effects of a depression, as has been the case in recent years, and this extra money is not offset by corresponding economic growth. By putting much more money into circulation, the real value of the currency can plummet.

Hyperinflation can also occur when individuals lose confidence in the currency in use or when demand for goods and services far exceeds supply. 

A vicious circle

As explained in another article, perhaps the best known example of hyperinflation occurred in the 1920s. After the First World War, Germany experienced a monthly inflation rate of close to 30,000%.

In such situations, the value of savings vanishes and people tend to spend money quickly because it depreciates rapidly. The latter forces the central bank to put more banknotes into circulation, thus entering into a vicious circle that further accelerates the rise in prices.

The impact on people’s lives is devastating. Purchasing power plummets and access to basic necessities becomes increasingly difficult: prices of essential goods such as bread can rise daily. In addition, shortages can occur, as part of the population tends to hoard basic goods in fear of further price increases. 

A step towards digital currencies?

Various remedies have been applied in the past to deal with hyperinflation, ranging from drastic tax reforms and public spending cuts to the introduction of new currencies.

Hence, some are already warning that the plausible hyperinflation scenario could facilitate the deployment of digital currencies promoted by various central banks. Given the crisis of confidence that fiat money would generate among the population due to its accelerated devaluation, receptiveness to a new currency could be greater.

As we explained in another article, several central banks are working on the development of digital currencies. A country such as China is well advanced in the testing process and more than 200 million people have already used the digital yuan.

In this context, the European Central Bank (ECB) is accelerating the development of its own electronic currency. The initial idea is that the digital euro should not replace physical money but complement it, although the approach could change depending on circumstances. The study phase should be completed by October 2023 and the currency could be operational by 2025.

Countries such as the United States, Sweden and Uruguay are also experimenting with centralised digital currencies. It is a trend that is gaining momentum in the face of the risk of their physical currency losing ground if hyperinflation triggers distrust of fiat money. This is why many central banks are considering issuing a more stable digital currency to rebuild lost confidence among the population.

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