How Might Cell Phone Money Change the Financial System?

The emergence of cloud banking in developing economies from billions of cell phones transacting both legal tender and informal units of accounts has created a need to reconsider habits of thinking about the nature of money and banking in advanced societies. The dysfunctional nature of modern money and banking is revealed by considering cell phone units of account based on four historical forms of money: (i) the current form of synthetic or “fiat” legal tender that can earn interest, (ii) fiat money that does not earn interest but has a usage fee, (iii) “free-money” issued privately with a usage fee, and (iv) “natural” money redeemable into specified goods and/or services with a usage fee. The value of a “green” form of natural money, redeemable into units of renewable electricity, becomes fixed by the investment cost of generators to create an inflation resistant unit of account. This paper identifies green dollars as offering a competitive medium of exchange for the “invisible hands” of (i) investors, (ii) Islamic economies and businesses, (iii) green voters, (iv) governments seeking to reduce the need for carbon taxing or trading, and (v) those seeking a reserve currency in case the financial system fails.