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Canada’s MintChip May Replace Small Cash
By Richard Giedroyc, World Coin News
June 25, 2013

This article was originally printed in World Coin News.
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We’re a long way from when scrip was replaced with fiat money, and it looks like in Canada we might be moving even further away from scrip.

The Royal Canadian Mint is looking into what it calls its MintChip, a digital cash instrument meant to replace coins and bank notes in all transactions of less than $10.

David Everett is the British cryptographic expert hired by the RCM to develop the MintChip prototype. Everett said it all when he was quoted in the April 30 The Star newspaper as saying, “I would look on it very much as an alternative, and hopefully a replacement, for physical cash. Today, people obviously use coins. They use bits of metal and bits of paper. The future is obviously going to be much more electronic.”

MintChip has been under consideration by the RCM for some time. The mint began the process more than a year ago with its MintChip Challenge contest. Contestants were to create payment applications that demonstrate potential for digital cash to replace physical cash. Jan Hannemann from Victoria won the grand prize with his MintWallet concept.

Hannemann’s idea is to make virtual currency to be “like instant messaging for your wallet.” Hannemann suggested using cloud technology and push notifications, with users using MintChips for payments.

Hannemann said of his idea, “The concept of cash that’s peer-to-peer is very appealing,” adding “Communicating with people, we use social networks, instant messaging. The same can be true with money, using MintChip.”

According to the April 30 The Star article, “MicroSD cards loaded with money were sent to hundreds of developers a year ago by the Royal Canadian Mint. The tiny chips had logos on them, representing MintChip, and the recipients were some of the first people outside the mint to get a glimpse of Canada’s electronic currency prototype.”

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It would likely take an act of Parliament to introduce MintChip, but nonetheless there has been funding for a Canadian “eCoin” since 2009. The objective is for “improving the efficiency of Canada’s currency.” In other words, if the mint doesn’t have to produce, secure, and ship coins the government will save a lot of money.

Dave Birch is an electronic transactions specialist. He was recently quoted as saying, “To the best of my knowledge, Canada is the only mint that’s seriously experimenting with this sort of thing.”

Birch gave more details of his concept. “What I’d like to do is do exactly the same thing electronically ... I’d have my phone, you’d have your phone, we’d touch the phones together.”

The value would be transferred between chips. A question, however, which is not being addressed is if there would be a transaction fee, even on each small transaction.

Further questions that are not being addressed include how the poor would get access to the necessary electronic devices to use MintChip. There is the big question of privacy. Than there are hackers, the potential for espionage, and electronic warfare concerns to be addressed in a futuristic Canada in which all financial transactions are conducted electronically rather than physically.

Financial radio talk show host Dave Ramsey has previously noted there are studies that indicate people tend to spend less when they use physical cash than when they use other monetary instrument substitutes including checks and credit cards. The use of MintChip could benefit retailers at the expense of consumers who have trouble watching what they spend.

MintChip is not the first attempt to evolve our fiat money into a less physical digital money. Everett developed Mondex during late 1990, a smart card meant to be used as digital currency. Mondex failed, but according to Everett it was a matter of the product being ahead of its time. In a recent interview with The Star Everett indicated he believes there is now a “huge market” for low value payments online.

The bottom line for the mint is still to cut costs. Production of the 1-cent coin was recently terminated. RCM Chief Financial Officer Marc Brûlé has acknowledged the priority of cutting expenses.

He has also acknowledged MintChip technology could be sold to other countries for whom the mint now strikes circulation coins. At the same time Brûlé has also acknowledged the introduction of MintChip would also create security jobs. Could it be that hackers are already watching?

Image courtesy Royal Canadian Mint.

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