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Money is just a belief

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We had a great session in Oslo last week focused upon: what is money?

The question comes up more and more in my thinking, especially when you look at cryptocurrencies, CBDCs, stablecoins and such like. We had many good presentations from MasterCard, the Norwegian Central Bank, Handelsbanken and even cameo Zoom appearances from Dave Birch and Ger Rottink, but I particularly liked a few slides from Sveinn Valfells, co-counder and CEO of Monerium (Iceland) and Benju Shah, Head of the Nordic BIS Innovation Hub for the Bank of International Settlements.

Sveinn picked up on the basics, which I actually covered in depth in Digital Human.

At its core, money is just a belief system.

If people believe it is money, then it is. This is well illustrated by the fact that the Bank of England is phasing out the old £20 note. I went to my commercial bank the other day with a pocket full of such notes. They said that they’re still legal tender. I said that from September, they’re not. We didn’t argue, but they made clear that they could only put them into my account as I had asked them to replace them with the new polymer notes.

It then struck me, as we had just been talking about What is money?, that I believed yesterday that piece of paper was worth £20 and yet, today, I don’t. It’s worth nothing.

This is they key to what’s been happening with crypto. With the issues around Terra-LUNA, Celsius, Binance and more, the believe in bitcoin has been shocked, along with all other crtypocurrencies. Their value has gone through the floor. So, why did these currencies gain value before? It’s all about that belief system.

If Elon says they’re good for the money, people believe it. If all your friends are investing in bitcoin, you believe in it. If you see that the market is exploding like a tulip bubble, you believe it. But then bitcoin might as well be a tulip … or a shell, token, bead, rock. Whatever you believe has value is what you believe.

Diamonds are the best example. Diamonds are inherently worthless. It’s only because they’ve been hyped and marketed is why they have value. It’s just about what you believe.

Then we move on to another item Sveinn raised, quoting Nial Ferguson:

The ascent of money is essential to the ascent of man, and this is because money sits at the heart of our economic systems. Without money, countries, businesses, organisations, worlds would not be able to trade. The fact we have created a global belief system that can trade is the essence of humankind.

Again, I blogged about these things when I was building the themes of Digital Human:

The thing you then realise is that money is the glue that allows progression and innovation of humankind. Underpinning this glue is the trust that you are good for the money. Replace trust with belief and you get the idea.

Money is meaningless unless you believe it has value. That’s the core point. But then, if you believe it has value, you can create infrastructures and mechanisms, like banks and bank networks, to enable the movement of funds fast, frictionless and now free. More on that tomorrow when I’ll summarise a few thoughts about the BIS presentation.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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