People in Scotland have started exploring different currency options following Brexit. There have been calls for the Scottish referendum in the past. While Scotland decided against leaving the United Kingdom in the past, the recent vote by Englanders to leave the European Union may soon have the UK witnessing renewed calls for the separation of Scotland.
The Common Weal think tank in Scotland has recently published a report with 9 different currency options for the region if it were to dissociate itself from the UK. The detailed report authored by Dr. Craig Dalzell, an activist and scientist analysed all the options before recommending an independent Scottish Pound which may help the country stabilize its economy after independence. He was quoted by one of the Scottish magazine saying,
“The political weight tends towards the recommendation of a newly independent Scotland adopting an independent £Scot, initially pegged to Sterling but with the option of moving, changing or floating the peg as and when required or desired.”
The report is created to prevent the country from facing confusion similar to the one it faced regarding its official currency during the previous referendum. The currency option played an important role in the decision of many voters who decided to choose the stay in the UK option.
During the Scottish Referendum of 2014, the government had proposed a formal currency union where Scotland will continue to use British Pound Sterling while maintaining a position in the Bank of England. While it may have been beneficial for Scotland at that time, it may not hold good anymore following Britain’s exit from the EU. The think tank has taken this opportunity to propose new currency alternatives. Among the options includes cryptocurrencies. Independent Scotland can choose between existing mainstream cryptocurrencies or the Scotcoin (a cryptocurrency).
Currency Options for Scotland, Post Independence
The report also lists some of the drawbacks of Scotcoin. The main concerns are the trust factor and ease of adoption. The digital currency industry is still in its nascent stages and people may not have the same levels of trust as conventional fiat currency connected to the banks. Also, people may not be willing to spend digital currency in the same way as conventional currencies.
Even though Scotcoin remains an option, other 8 possible currencies include
- The creation of a currency union with rest of the UK where the independent Scotland will have a representation in the Bank of England involving itself in the policy decisions (similar to the proposal made during the 2014 Scottish Referendum)
- Sterlingization , where Scotland will continue to use Pound Sterling independently as a medium of exchange. The Pound Sterling will be recognized as the country’s currency, but Scotland may not have much control over the monetary policies except for controlling the demand and supply of the currency inside its territory.
- Scot Pound, an independent currency whose value is pegged to that of Pound Sterling. In this case, the government will be creating a new currency whose value is same as the currency it has been using so far. There won’t be a considerable difference in the transactions, except for the government’s requirement to build foreign exchange reserves along with printing and circulation of a new currency across the geography.
- Similar to Scot Pound, the independent country can also peg its currency to Euro, of which it can continue to be part of , even after separating from the UK
- The Scottish currency can also be pegged to a set of currencies under some defined criteria to come up with a fixed value of different currencies. The criteria may be weighed against Trade Weight Index or relative GDP.
- Free floating currency, where the value of the currency is dictated by the market demand and supply.
- Scotland can adopt the euro as its currency if it continues to be part of the European union.
- Gold Standard or Oil Standard where the value of money is backed by its equivalent in gold or oil.
The choice of currency will be dependent on strategic geopolitical and trade decisions. Scotland is likely to opt for a currency that serves its future plans for development.
Ref: The Common Weal |Image: Tumblr