The only option that does not involve using another bank account is to buy bitcoins. Ola does not want to do this. Perhaps he is a little stubborn. He wants cash. The bank clerk is patient. He tells Ola that the bank can offer dollar or euro banknotes. Ola sees no alternative and withdraws euro banknotes. But he soon encounters another problem. In order 6/9  BIS central bankers' speeches  to use this currency to make purchases in Norway, the shop has to accept payment in euros. If not, Ola will have to deposit the euro banknotes in his bank account in order to make the payment – bringing him back to square one. What has been lost here? First, Ola has become completely dependent on a third party – the bank: payments can no longer be made directly between two parties, but must be channelled through a bank, a card company or an app. Today, you can settle a payment at a shop or with a neighbour in cash, without involving anyone else. Second, Ola has become dependent on the technology functioning as it should. Technology is not needed to settle payments in cash – as long as cash is available. Third, Ola is no longer anonymous when he makes a payment. All payment transactions using deposit money can be recorded. Anonymous payments are often associated with something negative, such as tax evasion or other criminal activity. But there is another side to anonymity – privacy.
Money must therefore also function as a store of value. The first coins to be struck, imprinted with the king’s mark as a guarantee of their weight, were produced in Lydia almost 2500 years ago – with the reverse bearing the mark of King Croesus. Since then, coins in a variety of metals have been widely used. The currency of Norway was directly linked to a metal for centuries, until the gold standard was abandoned in 1931. 1/9  BIS central bankers' speeches  Wealth in the form of silver and gold coins can – literally – be a heavy burden. The emergence of banknotes that could be exchanged for a specific monetary value in metal made it easier to manage large sums of money. A banknote is in reality a promissory note – an interest-free claim on the issuer. Its value depends on trust that the issuer will keep his word and that the banknote proves to have the promised value. The issue of banknotes by private entities was a fundamentally unstable system. The solution was to establish central banks in order to build abiding trust in the currency. The Swedish central bank, the Riksbank, the first central bank in history, was founded because the issue of banknotes by a private bank – Stockholms Banco – led to a banking crisis. The origins of the US Federal Reserve are similar: during the so-called “free banking” era, private banks could issue their own banknotes in various denominations.