Paper Money

Expert suggests smart bank notes could be used as future money

A money expert is recommending a “smart bank note” as a transition between traditional bank notes and electronic/crypto currencies.

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What exactly is a smart bank note and why would we ever need one? That is the question answered by Franklin Noll in a recent post on, a news website specializing in cryptographic technology, privacy, and financial technology.

Noll is far from a techie. His company, Noll Historical Consulting is an authority on the history of money, and has worked with the U.S. Treasury, the Bureau of Engraving and Printing, the Bureau of the Fiscal Service, the Office of the Comptroller of the Currency, the Federal Reserve, and the International Monetary Fund. He is considering the implications of what he calls the inevitable transition from traditional cash to payments by smart phone and similar devices, and his answer is the “smart banknote.”

A smart bank note would be a hybrid, one that, whether paper or polymer, would look and function as a traditional note, but with an embedded chip and electronic ink. With these, it could also communicate with an electronic network. It could then be used to make electronic payments and after being used that way, could be recharged and continue to circulate as a traditional note off-line if desired. Noll proposes that these smart notes would slowly replace regular currency.

Noll writes, “Imagine a $10 bill bearing a chip and an icon that displays whether the bill still retains its value or that the value was transferred out of it on a network. This smart $10 bill would circulate hand to hand like current $10s, with everyone knowing whether it had value or not.”

National banks, including the European Central Bank, are actively working on developing a Central Bank Digital Currency. Among the impediments to implementation of a strictly digital currency are:

(1) The many people who do not have the bank accounts required to use a crypto currency but who depend on cash for daily use. With the proposed smart notes, they could use the electronic aspects at retail locations.

(2) There are times and places where internet access is not available, so an electronic currency is useless. The smart bank note would work, however.

(3) The cash industry, for instance printers, transport companies, and recyclers, could be decimated by electronic payment systems. The smart bank note would give them time to adapt to a new business environment.

(4) There are people who prefer to use cash rather than electronic payments.

(5) Cash use is actually increasing, and physical notes are viewed as an element of security in troubled times.

Not a new idea

According to Noll, “The concept of a smart banknote is not all that revolutionary. The idea of a hybrid banknote has actually been around almost as long as Bitcoin. By 2010, thinking about putting electronic features on banknotes was already underway along with the idea of using such a note to act as a transition between traditional banknotes and cryptocurrencies.”

Noll added: “Such a perspective was developed in work performed for the Bill & Melinda Gates Foundation by Ignacio Mas and Consult Hyperion, represented by Paul Makin and Andrew Whitcombe, who are credited with creating the term “smart banknote.”

He added, “Since 2010, various companies have experimented with the smart banknote concept. However, these were actually attempts at transferable paper wallets of bitcoin (BTC) rather than a hybrid traditional currency denominated in dollars, euros, or pounds.”

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