The MintChip: Mainstream Banking Tries to Get Digital

AMA6-1-14It sounds like a new kind of snack: the MintChip. But this product of the Royal Canadian Mint represents a new stage in the evolution of digital currency: digital money created and controlled by a state bank. And its demise in April 2014 serves as a cautionary tale about the efforts of governments and traditional banking institutions to horn in on the turf staked out by independent creators of digital currency like the Bitcoin.

Back in 2012, fueled by the emerging success of the Bitcoin, the Canadian government launched its own foray into creating digital currency. According to a recent report in The Wall Street Journal Canada about the MintChip’s fate, the new coin was hailed as the evolution of physical money, to be used for online payments like the Bitcoin and its competitors like the Litecoin and Dogecoin.

But the enterprise never took off, and the MintChip never went live. What derailed the process isn’t clear, although concerns about security were raised in the wake of the Bitcoin’s much publicized troubles with money laundering and associations with criminal enterprises like Silk Road.

That issue raises one of the biggest problems with the takeover of digital currency by traditional financial institutions and government bodies. The appeal of the Bitcoin and others like it lies largely in their anonymity and independence from issuing and governing bodies such as, say, the government of Canada.

A currency created by, and immediately traceable back to, an entity like the Royal Canadian Mint comes with built in security and circulation problems that independents like the Bitcoin don’t have. And with alternatives like the Bitcoin available, users looking for anonymity and freedom from banking intervention have no reason to use such a coin.

For now, the future of the MintChip is still in limbo. Canada has suspended work on the project, but it appears that the government may be turning further development of the coin over to a private company – and that may take some time.

Whatever happens to the MintChip, its story adds another chapter to the ongoing evolution of digital money and points up the problems that come when, as many observers of the Bitcoin including Jason Hartman have feared, “traditional” financial institutions try to claim a piece of the digital action. (Top image:Flickr/olihaus)

Source:
George-Cosh, David. “Canada Puts Halt to MintChip Plans; Dould Sell Digital Currency.” The Wall Street Journal Canada. wsj.com/canada 4 April 2014 .

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The American Monetary Association Team

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