In the past
Credit between merchants acted as money.
The private sector creates money
How has the state treated money created by non-state actors?
Merchant credit/Private notes/Banknotes → Bank deposits/Stablecoins
Privately Issued Money in 3 Minutes
1See it
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In the past
Private notes and banknotes were also created.
In the past
The government went back and forth between incorporating them and banning them.
Today
Today, bank deposits are also a form of privately created money.
Today
Stablecoins are also a form of privately created money.
The difference
Banknotes promise they can be exchanged; stablecoins promise they are backed by assets.
The difference
If the promise is different, the way to verify it is also different.
A word of caution
Just because some examples worked out well doesn't mean we don't need regulations.
2What would you do?
If you were a government official, what would you do with a new currency created by a private company?
Pick one
Incorporate it into the national system.
Governments have chosen this path many times. And the path of banning it has also been chosen repeatedly.
Ban it.
This is also a path that has been chosen repeatedly. Governments have gone back and forth between incorporating and banning.
How to handle privately created money is a question that has been asked time and again throughout history. The answer is different for every era.
3Read more
Representative Historical Scenarios
- The London GoldsmithsOverview: the world The birth of finance the 17th century
- Washington, the TreasuryUnited States The national banking system 1863–1864
- The Bank of EnglandOverview: the world The birth of finance AD 1694
Contemporary Financial Scenarios
Situations from the book where this theme appears. We present a comparison with past situations for each case.
Central bank money and commercial bank money.
2-04 / Banks Present. Frankfurt. European Central Bank commentary.
- Similarities
- The two tiers—money with the state's mark and merchants' bills—are similar to the relationship between bills of exchange and silver coins in the Middle Ages. The upper tier settles the lower tier.
- Differences
- Medieval bills were backed only by the merchant's credit. Commercial bank money is supported by the bank's assets, regulations, and deposit insurance, and is settled with central bank money.
- Applications
- When you see the word "money," first distinguish whether it is central bank money or commercial bank money before reading on.
- Limitations
- Three, eighteen, and seventy-nine are the proportions for the United Kingdom in 2019, and they vary by country and year. The proportions for the Eurozone and Japan cannot be stated at this station.
Finance created outside of banks — Shadow banking
6-03 / Before 2008 1980s–2007 United States
- Similarities
- The phenomenon of entities appearing outside of regulation to do the same work as banks has existed since the time of goldsmiths and private banks.
- Differences
- Their scale rivaled that of banks, their funding was raised through overnight repos and MMFs, and they were outside of public guarantees.
- Applications
- It is neither "safe because it's not a bank" nor "irrelevant because it's not a bank." The question is who will ultimately backstop it.
- Limitations
- The figures are estimates based on the flow of funds as of 2011 and vary depending on the definition. The report itself notes the limitations of the measurement.
The balance on a transit card: whose liability is it?
8-01 / Digital Present, Tokyo, Act on Settlement of Funds
- Similarities
- The form in which value issued by a specific issuer circulates like money within a limited scope is the same as with han-satsu or private notes from shops.
- Differences
- It is recorded electronically, and the law provides a framework for its definition and protection. The limitation of its scope is determined not by law, but by the issuer's contract.
- Applications
- When you see a balance, ask three things: who is the issuer, where can it be used, and to what extent is it protected?
- Limitations
- The standard deposit amount (cabinet order) and the details of protection methods other than deposits (security contracts, trusts) are not covered. The accounting treatment should also be confirmed separately.
The law divides digital money into three boxes
8-03 / Digital Present, Tokyo, Act on Settlement of Funds, Article 2
- Similarities
- The role of the law in drawing a line between what is money and what is not is the same as ancient edicts that stipulated the presence or absence of a stamp on metal.
- Differences
- The criteria for the boundary lie not in the material, but in the nature of the contract and circulation: "whether it is denominated in a currency" and "whether it can be used by unspecified persons."
- Applications
- When you see a digital asset, check which of the three boxes it falls into according to the legal definition, and then read the risks.
- Limitations
- The content of the regulations (registration, protection, disclosure) imposed on each box is not covered at this stop.
Stablecoins: whose promise, and of what kind?
8-04 / Digital July 18, 2025, Washington, GENIUS Act
- Similarities
- The promise to exchange a receipt for gold at face value has the same structure as the receipts from the age of goldsmiths.
- Differences
- The backing is not gold but short-term government bonds, repos, and central bank accounts; the law specifies the breakdown and prohibits the payment of interest.
- Applications
- When you see a stablecoin, check who the issuer is, what backs it, and under which law it operates.
- Limitations
- The law's effective date, detailed rules from regulatory authorities, and the content of Japan's regulations on electronic payment instruments are not covered.
Reading the backing — opening the disclosure page
8-05 / Digital August 31, 2026 Boston USDC Reserves
- Similarities
- The method of gaining trust by disclosing backing is the same concept as when banks began publishing their balance sheets.
- Differences
- The backing consists of short-term government bonds and repos, with weekly disclosures and monthly attestations, making the frequency an order of magnitude higher.
- Applications
- When viewing the disclosure page, read the categories, frequency, and attesting party, and treat the amounts as the values for that day.
- Limitations
- This stop is based on the self-disclosure of one company. It does not evaluate other issuers or the difference between attestation and audit.
How to compare past and present
Similarities
Non-state actors have also created money. The state has repeatedly alternated between incorporating and prohibiting it.
Differences
Banknotes promise convertibility; stablecoins promise reserve assets. Their verification methods differ.
Applications
How to handle money creation by non-state actors is an age-old, recurring question, with answers that vary by era.
Limitations
⚠ When inferring the needlessness of regulation from successful examples of private currency.
To go beyond "they are similar," we also describe the differences, what can be applied today, and where past examples should not be applied to the present (limitations).
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