A Primitive Currency Smart Contract

The creation of central bank digital currencies (CBDCs) will allow money to contain smart contracts that will adjust its value when certain conditions are met. This thought is not entirely new. A primitive smart contract was built into some US banknotes almost 80 years ago.

From 1942 to 1944, the US issued what collectors call Hawaiian Overprints. As can be seen in the image, certain notes had "Hawaii" overprinted on their faces and backs. The notes were $1 Silver Certificates and $5, $10, and $20 Federal Reserve Notes. They were issued only in Hawaii with some circulating in US military theaters in the far East.

The notes were issued after the start of World War II in the Pacific. And, the smart contract part of the notes was the "Hawaii" overprint. If the notes ever fell into enemy hands they would become worthless, not being recognized as legitimate US currency. Thus, like a smart contract, when certain conditions were met, the value of the note changed. In this case, it went to zero.

The possibility for the use of smart contracts in a CBDC are almost endless. And, the idea has been around a long time.