Programmable money is one of the technologies to have emerged from blockchain. In fact, its origins in the trustless promise of primitive blockchain are not hard to discern. It is, in essence, tokenised cash controlled by a smart contract rather than a bank or central bank. The smart contract decides, for example, to make a payment automatically when an invoice is received, and nobody can stop the payment from being made or reverse it once it is made. This creates an obvious hazard – if a smart contract can move money, it will be attacked by hackers – which some crypto-currencies experienced. Significant sums were lost or stolen as a result of vulnerabilities in smart contracts. There is a view that the current DeFi token boom, also driven by smart contracts, will end the same way. Yet programmable money is not dependent on blockchain technology and the possible applications are too intriguing to be constrained by any label. Payments could be triggered as soon as goods arrive at the factory or the doorstep. Digital services could be switched on as soon as a payment is received or postponed to a future date when payment will be received. VAT could be routed directly to HMRC at the point of sale rather than collected and paid on quarterly basis by a complicated accounting process. Programmable money has a multitude of applications to the Internet of Things, from refilling the empty refrigerator to paying for temporary insurance on a motor car. In theory, these benefits can be obtained by programming alternatives to fiat currency running on public or private networks, and the use of programmable money for peer-to-peer transactions on permissionless networks is a dream that has yet to die. But the adoption of programmable money would almost certainly be accelerated by the issuance of a central bank digital currency (CBDC) on a permissioned network. Central banks would not want to be involved directly in the operation of smart contracts, though they could set standards, and build them into a programmable CBDC. So the programmable money revolution could take more than one form, and happen sooner rather than later. The panellists at this Future of Finance webinar will explore what programmable money could do to our existing financial system and what sort of system or systems it might create.

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