LETTER: Banks give fiat currencies credibility

Stuart Hayward is right that cryptocurrency will supplant fiat currency in due course, and for the same reason that any new technology wipes aside the old: cost and efficiency (“Bitcoin is the antidote to inequality caused by printing money”, May 26).

However, with money things are different. Ordinary users of money do not act out of anger about inflation or their governments’ printing of money. The greatest trauma is having all one’s life savings disappear through, say, online theft or a faulty algorithm — as with the UK’s postal service debacle — and then having no-one to turn to.

This fear has been allayed by the most powerful private-public partnerships in the world: the central-to-retail bank arrangement of advanced economies. It has been refined to provide unmatched security and trust for decades. Banks have them woven into their DNA: they specialise in risk management, are underwritten by governments and have a physical presence.

Try arguing with Facebook about your Libra mortgage, or phoning IT about recovering the crypto money from your Bitcoin wallet after losing your credentials. Only once the banking partnership, the foundation of money, has been re-engineered and proven trustworthy and flawless, will lifetime customers consider reaching for cybercurrency. Until then, inflation is a small price to pay, even if you are poor.

Jens Kuhn, Cape Town

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