The Royal Canadian Mint has announced plans to create a new electronic currency called MintChip, which promises to be a digital yet anonymous way to complete small transactions, just like cash.
“MintChip is currency in a digital form,” explained a promotional video released by the Mint to explain the idea behind the chip. “Using a chip, you securely load value onto a smart phone, USB device, computer, tablet or cloud.” You can then use your mobile device to pay for items like a latté or a chocolate bar, or even easily transfer money to a friend from whom you borrowed $10 last week.
But it goes further than that – as the video boasts that users will be able to use the service to purchase items over the internet – such as a news article, music file or accessory for a character in an online game – some of which could cost as little as one cent.
Touted as “the evolution of currency,” MintChip is still in the research and development phase. The Mint has challenged software developers to create apps for it through a contest called The MintChip Challenge. The contest opened April 4 and participating developers have until August 1 to submit their apps. Prizes – in the form of gold from the mint – will be awarded “for the apps that best demonstrate the potential value of the MintChip technology and have the greatest potential impact on digital payment technology,” according to the MintChip Challenge’s website.
Digital currency isn’t a new or unique idea, as companies like Google, Mastercard and Visa already have systems that use Near Field Communication technology (NFC) to allow users to wave smart phones over devices in stores to make payments.
Nick Barbuto, vice-president of digital solutions at Dare Toronto, believes MintChip’s backing by a Canadian government institution is what makes it unique in the field. It’s possible, he said, that some Canadians who may be skeptical of other forms of mobile payments may be more trusting of something that comes from the Mint itself.
Barbuto himself has tried out several types of digital currency in the past and has been a big user of Google Wallet for several months. He doesn’t think he would have any more trust in the government than he would in Google or the credit card companies. “I trust MasterCard just as much as I trust the Canadian Mint,” he said.
The anonymity factor may be something that sways some skeptical Canadians toward trying MintChip, however. For those who find it creepy that Google or a credit card company could trace every little transaction they make, the idea that they can use “digital cash” for small transactions in the same way they were able to use physical cash may be quite appealing.
Bitcoin, a virtual currency introduced in 2009 that is not tied to any financial institutions, has a similar promise of anonymity and operates on a similar premise to the Mint’s endeavour. But MintChip’s connection to the Canadian dollar is likely to make it much more stable. “The problem with Bitcoin was that it was a fluctuating market,” said Barbuto. “Your Bitcoins could be worth a certain amount one day, and then you wake up the next day and they’ve lost a quarter of their value, half of their value, and even almost all of their value in some instances.”
Barbuto believes that for any digital cash systems to take off, a couple of things will be necessary: it has to be convenient, easy and cheap to load money onto the chip; and there have to be enough retailers out there accepting the chips as payment.
“If you walk into a Walmart and see that they accept this, that to me is going to do a lot more than the fact that it’s actually coming from the Mint itself,” Barbuto said. “It’s the number of people who take it, more so than the people who distribute it, that will lead to these inroads.”
Right now, Barbuto actively uses his Google Wallet in a variety of Canadian stores, from Tim Hortons to McDonald’s to No Frills. “With my NFC Google Wallet, I can walk into any place that accepts MasterCard PayPass and use it,” he said.
The reactions he gets when paying this way lead him to believe that many Canadians are indeed ready for a more widespread application of digital currency.
“Every time I pay with my phone, people are so astonished and amazed. And usually the question after that is, how do I get that for my phone?” he said. “There’s an interest there, at least for trial. So I think the opportunity is very, very high for digital currency as a whole, and I’m very interested to see how the MintChip approach will fit in there.”
