While some countries have started a currency very quickly (even in a matter of months), they’ve not been advanced economies like Scotland’s, so we propose a slightly slower and more careful process which would take three years.
First we need to create an electronic currency – not real money but the shadow version that banks use to create all their systems. This allows banks to start setting up accounts (all banks work with multiple currencies so this is straightforward).
There are a number of options for when and how people move to these accounts, and how they deal with their standing orders, direct debits and their mortgages. Over the three years, everyone would be offered support to find the right option for them.
Then we need to start a central bank with a foreign currency reserve. This is the bank that will manage the currency and protect Scotland’s economic interests. Common Weal has published other work on how to set this up and establish the currency reserve.
The central bank would create a digital payment system, like the BACS system you’re already familiar with. There are straightforward international standards for how to do this.
Then, gradually, we need to start to let people spend the new money so they get used to it – for example by letting them pay their taxes in the new currency. This allows trouble-shooting of all the systems well in advance.
While this is happening we also need to support businesses so they can make sure that they can sell to customers in a Scottish currency. For businesses that mainly operate in Scotland this is straightforward, and those that are bigger are used to taking payments in different currencies anyway.
And then we need to hire the Royal Mint and companies like De La Rue to print and mint our new money – after we’ve had a competition to design what the notes and coins look like.
There are a number of routine technical things that need to be done like adapting vending machines and creating a clearing system (how banks send money to each other).
Then we just pick the day we want to shift to our new currency. The notes and coins are distributed to shops and banks and, come midnight, we simply swap over from one to the other.
And since the new Scottish currency would be pegged to Sterling (meaning it has the same value), prices would stay the same and no-one would have to learn new exchange rates.
Robin McAlpine is director of the Common Weal think tank