HYBRID CRYPTO-BANKNOTES PROPOSED

As central bank digital currencies (CBDC) become reality and the use of cryptocurrencies for payments becomes more mainstream, how do we make sure these new digital monies are available to everyone, everywhere, at all times? To date, the only payment technology that can do this is cash.

The pure physicality of banknotes presents problems in the digital age. International remittances are slow, holding banknotes can be costly and problematic, and cash can impede central bank monetary policy (such as by breaking the zero lower bound in interest rates).

It seems only logical that an ideal payment instrument would combine the advantages of banknotes and digital currencies. A hybrid banknote would use a universally accepted and robust payment technology – cash – to deliver the cutting-edge benefits of digital money. A hybrid banknote – for instance, a bill with a chip embedded – could routinely function as a banknote does currently, but have the ability to access an electronic network to transfer value.

A hybrid banknote would act as a transitional device between cash and digital monies such as CBDCs. It would gradually replace current banknotes and exist alongside current smartphone technology until no longer needed.

For people who want or need to use cash because they just prefer banknotes or they do not have a bank account, a hybrid banknote will allow them to continue using cash. It will also give users the option to use a hybrid banknote's electronic capabilities. At the same time, a hybrid banknote will fulfill the promise made by central banks that cash will exist alongside CBDCs.

Further, the continued use of banknotes will prevent the disintermediation of the cash industry. And hybrid banknotes will facilitate the application of new central bank policies that would require money with smart contracts.

Hybrid banknotes would also provide for offline, anonymous transactions. However, when connected to an electronic network, anonymity would be determined by the design of the digital side of the hybrid banknote.

There are currently three types of hybrid banknotes being worked on by developers, including myself and designer Andrei Lipkin: smart banknotes, cryptoNotes and crypto bills.

To read the complete article, see:
Hybrid Banknotes Can Bridge Cash and Crypto (https://www.coindesk.com/hybrid-banknotes-can-bridge-cash-and-crypto)

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