The Tudors

Interesting times AS WE go to press we hear that the Chancellor of the Exchequer, Rishi Sunak, has “ordered” (the press’s word, not mine) to create a non-fungible token (NFT) to be issued in the summer. Now some of you will remember me mentioning NFTs back in March when the NFT of a Henry III gold penny sold for £18,000 at Spink. Back then I said the definition of this new “asset class” was “a unit of data stored on a digital ledger, called a blockchain, which can be sold and traded. The NFT can be associated with a particular digital or physical asset (such as a file or a physical object) and a license to use the asset for a specified purpose. An NFT (and, if applicable, the associated license to use, copy or display the underlying asset) can be traded and sold on digital markets”. Now the important thing here is that NFT are non-fungible (the clue is in the name) and that means they are not “something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account”; not “interchangeable (or capable of mutual substitution)” nor are they “readily changeable to adapt to new situations” (thanks Merriam-Webster.com). In other words an NFT is not, in any way, money. It is in fact the very opposite of money which is, by its very nature “fungible”. This is not a crypto currency (although we know the Bank of England is working on one of those too, with, it seems, the only question now being how it will work. There is talk that it will be programmable, i.e. the issuer, the Government, can restrict what you can and cannot use it to buy. This NFT is a different thing entirely, it’s not a currency but a digital representation of something and this begs the question as to why the Royal Mint is being asked to produce it. One can only assume there will be a physical coin too; a one off that will be minted and then have an NFT linked to it (as the Henry III penny was both an actual coin that was sold at auction and an NFT at the same time), otherwise why involve the Royal Mint? Ok, so Mr Sunak wishes, in his own words, to make the UK a “global crypto asset hub”, but the Royal Mint is not the first name that springs to mind when you think about blockchain and cryptoanything, be it currency or asset. They are manufacturers, they make coins and other metal goods both for currency and for the collector market, they are not crypto specialists as anyone who has been to the Royal Mint will tell you. For over 1,000 years they have worked in metal, producing coins and medals—so just why Mr Sunak decided to involve them in this new project is anyone’s guess. Is it, as some have suggested, the first move away from them producing any kind of coin at all? Is it another step on the road to the cashless society and a way to give them a role when they are no longer needed to make coins anymore? We shall see, it’s certainly tempting to view it that way, otherwise why not use a crypto specialist to produce this new token? Of course, whilst the Chancellor is busy looking to the new digital world, a world where metal and paper as a medium of exchange are things of the past, so at the same time we have the decision by Vladimir Putin to put the Russian Ruble back onto a gold standard, the first time a currency has been linked to gold since the Swiss dropped the standard back in May 2000. What exactly this will mean for the price of gold, if anything, is yet unknown and as we aren’t an economics magazine we won’t be positing any theories just yet! One thing we do know is that despite some people’s desire (looking at you Mr Sunak) to rush headlong into the New World, others would prefer to stick with what they know, and both gold and silver coins are proving extremely popular right now. Although the price of these precious metals isn’t particularly volatile at the moment (both went up in the early stages of Russia’s invasion of Ukraine but they have since dropped back a little and have stabilised), availability of bullion is an issue, with many dealers reporting that they are selling “standard” coins (as opposed to those with a more numismatic aspect to them) as quickly as they can get them. Indeed, in the US the Mint has announced that there will be no Morgan or Peace dollars in 2022, citing a shortage of silver blanks as the reason. There are, of course, those collectors happy with this decision, feeling that these modern strikes of heritage coins are nothing more than replicas of the originals (see last month’s “Comment” for views on that!) but others, keen to buy for their silver content are understandably disappointed. The simple fact is that bullion coins are being bought up as quickly as they can be produced! The same is true in the UK with the Royal Mint’s website showing the words “Sold Out” underneath a raft of their new issue products and special issues, such as the 2022 Platinum Jubilee Sovereign, already commanding high prices on the secondary market. So it is we have a very odd dichotomy in the world of money right now—on the one hand we have the Royal Mint being instructed to produce a brand new NFT, and some people are getting very excited about that indeed, whilst on the other traditional coins, both their new issues AND the ones they produced in the past, are being snapped up. We really are at a crossroads and it will be very interesting to see how this all plays out. We may not be an economic magazine, may not be The Economist or the Financial Times but it’s just possible all of these shenanigans will have a trickledown effect on our more cloistered world of numismatics too. I think it’s very much a case of “watch this space”. Interesting times are, I think, ahead, but we all know what the Chinese proverb says about them.