They clipped the coins: Newton’s Great Recoinage and the birth of trusted money Written by David Parsons and Jonny Fry, * London Digital Escrow

Written by David Parsons and Jonny Fry, * London Digital Escrow

Part 2 of 8: “The Case for the Singleness of Money”

In Part 1 of “The Case for the Singleness of Money”, we explored Bank of England Governor, Andrew Bailey’s, warning that “money must be singular” - a principle that has underpinned monetary stability for centuries. The concern is that a financial system cannot function efficiently if multiple forms of money circulate with different yields, risks and economic characteristics. History offers a powerful precedent. Gresham’s Law showed that when “good” and “bad” money co-exist, people spend the lower-quality currency and hoard the better one, fragmenting liquidity and undermining confidence. Today, the same risk is emerging as yield-bearing stablecoins, tokenised money market funds, tokenised deposits and central bank money begin to compete for capital. This week, we turn to 1696, when England faced a remarkably similar monetary crisis and where widespread coin clipping had destroyed confidence in the currency whereby paralysing trade and collapsing tax revenues. The government at the time turned to Sir Isaac Newton (newly appointed Master of the Royal Mint) who introduced reeded-edge coins, modern minting technology and rigorous quality standards to restore trust in money. His solution was not merely monetary, it was technological.

Comparison of Newton with today’s digital infrastructure

Source: London Digital Escrow

The lesson is profound. Every major evolution in money has depended on combining technology, law and trust - and Newton solved the challenges of physical money. Today’s policymakers face a different challenge: securing trust in digital money. The question is whether tokenisation, digital identity, programmable regulation and AI governance can become the modern equivalent of Newton’s reeded coin, providing the confidence required for the next generation of global commerce.

The critical decision: tax acceptance policy

Newton did not merely redesign coins. He redesigned the entire monetary ecosystem by aligning technology, taxation, law and incentives around a single trusted standard. But here’s the most important part of Newton’s solution - the part that actually made it work:

Newton convinced the Treasury to only accept reeded coins for tax payment. This was the key: clipped coins were no longer acceptable for paying taxes. If you owed taxes to the Crown, you had to obtain reeded coins and, therefore, this created universal demand for the new currency. Let’s think about the economic incentives this created - if you were a merchant or a landowner, you owed taxes to the Crown and you had two choices:

1. try to pay with clipped coins (which the Treasury would reject)

2. obtain reeded coins to pay your taxes.

The choice was obvious. You needed reeded coins, which meant that every person with tax obligations had to obtain reeded coins. What happened next was remarkable:

· immediate demonetisation - clipped coins became worthless overnight because they couldn’t be used to pay taxes.

· rapid currency replacement - within months, reeded coins replaced clipped coins in circulation.

· monetary singularity restored - there was now only one acceptable form of money.

· economic recovery - with a single, trusted currency, commerce resumed and the economy recovered.

The speed of this transition was remarkable. Within a year of implementing the ‘reeding system’ and the tax acceptance policy, the vast majority of clipped coins had been replaced by reeded coins. The monetary system had been restored.

Why Newton’s solution worked

Newton’s solution worked because it combined three elements:

1. technological superiority - reeded coins were technically superior to clipped coins because they were impossible to clip without detection

2. universal enforcement - the Treasury’s tax acceptance policy made reeded coins mandatory; everyone needed them to pay taxes

3. economic incentive - everyone had a direct economic incentive to obtain reeded coins; without them, you couldn’t pay your taxes.

This was the perfect solution to Gresham’s Law. By making the “good money” (reeded coins) the only acceptable form for tax payment, Newton eliminated the incentive to hoard it. Everyone needed reeded coins for taxes, hence they circulated. Unsurprisingly, clipped coins became worthless and disappeared. Moreover, the reeded coin system was self-reinforcing - as more people obtained reeded coins, merchants became more willing to accept them; and, as merchants accepted them, more people obtained them. The system created a positive feedback loop that rapidly drove out competing currencies.

The 330-year reign of singularity

Newton’s solution worked so well that it established a principle that lasted for 330 years: monetary singularity enforced through technological superiority and tax acceptance policy.

For three centuries, the British pound was singular - it was overseen by the Bank of England, was legal tender and was accepted for taxes. Furthermore, this singularity was maintained through:

· technological control - only the government could mint coins (and later, only the BoE could issue notes)

· tax enforcement - only the government’s currency was accepted for tax payment

· legal prohibition - competing currencies were illegal

· social enforcement - the public trusted the government’s currency because it was backed by the government’s authority.

This system worked remarkably well. It enabled: - Stable monetary policy an effective tax collection, an internationally regraded secure banking system, enabling economic growth and he rise of London as a global financial centre. Andrew Bailey inherited this system - he understood its power and he believed it could be maintained indefinitely. Indeed, Bailey recently outlined a clear strategic embrace of tokenisation as a core component of the future of money and payments. He highlighted the potential of tokenised bank deposits and programmable infrastructure to deliver faster, 24/7 settlement whilst maintaining regulatory oversight. He has also emphasised that the Bank is actively exploring how tokenisation can enhance efficiency in wholesale markets without compromising financial stability.

However, there exists a problem: technology has changed, and here’s where the story takes a dark turn. Newton’s solution depended on one critical assumption: the government could maintain technological superiority over potential competitors. In 1696, this was easy. Creating reeded coins required precision machinery that only the government possessed and hence counterfeiting was nearly impossible. Back then, the government’s monopoly on money creation was absolute. But technology has changed - today, anyone with a computer can create a digital currency, anyone with access to blockchain technology can issue a stablecoin and anyone with sufficient capital can create a competing form of money, programmable digital money. A dramatic example of this is Tether, which is arguably the most profitable company in the world per employee since each employee has generated the equivalent of $85million each. And in the case of Circle, the second biggest stablecoin after Tether, trust has been built from transparent reserves and regulation. Essentially, the technological monopoly that Newton established is gone; moreover, the barriers to entry for creating competing currencies have collapsed. In 1696, you needed:

· precision machinery (extremely expensive and rare)

· skilled metalworkers (years of training required)

· access to precious metals (controlled by the government)

· government permission (which was never granted).

Today, you need: a computer, knowledge of blockchain technology and some capital to back the stablecoin - that’s it. The technological barriers have vanished - anyone can create a competing currency. The government’s monopoly is broken.

The paradox: technology that enforces vs. technology that fragments

This reveals a profound paradox in monetary history. Newton had one competitor - clipped coins. Bailey faces hundreds, including:

· stablecoins

· tokenised deposits

· CBDCs

· tokenised MMFs

· tokenised Treasuries

· AI-generated money

· programmable collateral

Without doubt, Bailey’s challenge is harder...

Newton used technology to enforce monetary singularity - the reeded coin was so superior to clipped coins that it immediately became the only acceptable form of currency. Essentially, technology was the tool that enforced the government’s monopoly. But today, technology is being used to create monetary fragmentation. Blockchain technology allows anyone to create competing currencies and cryptographic verification allows multiple issuers to create competing stablecoins. The same tools that could enforce singularity are being used to create fragmentation. This is the central paradox that we’ll explore throughout this series; technology that was once a tool for enforcing monetary control is now a tool for undermining it. Then there is the looming challenge of AI-powered agents. Presently, humans choose money: potentially, tomorrow AI chooses money, but which type of money will AI choose?

· lowest cost?

· highest yield?

· fastest settlement?

· most trusted?

· best legal framework?

· programmable?

· available 24/7?

That completely changes monetary policy. One cannot help but wonder if blockchain technology and computing power had existed, then what would Sir Isaac Newton have done?:

· tokenised silver?

· created a CBDC?

· required taxes be paid in programmable money?

· used smart contracts?

· built a unified ledger?

What comes next?

This is where the story becomes truly interesting, and truly troubling. Andrew Bailey understands Newton’s solution. He understands that monetary singularity requires technological superiority and tax enforcement and he has tried to maintain both. But he is fighting against technology itself. And technology, as we will see, always wins. Arguably, the unit of competition has changed. In 1696, governments competed against counterfeiters. In 2026, they compete against private digital money, tokenised assets and, increasingly, AI agents that can choose which money to hold and transact with.

Next week: Article 3 in this series, “The Singleness of Money”: “Why yield-bearing bonds could never be money”. We’ll examine the technical barriers that historically prevented yield-bearing bonds from being used as currency and we’ll begin to understand why those barriers are crumbling in the digital age.

Series Overview

Andrew Bailey, Governor of the Bank of England, has warned repeatedly about the dangers of monetary fragmentation. This series explores whether his warnings came too late.

This is Part 2 of an 8-part series exploring “The case for the singleness of money”. Each week, a new article will build on the previous one, exploring why monetary singularity is essential, why it is being destroyed and what comes next.

Coming in this series:

Part 3: Why yield-bearing bonds could never be money (the technical barriers)

Part 4: How the GENIUS Act proved Gresham’s Law in real-time

Part 5: Why yield-bearing money destroys the banking system

Part 6: How tax payments became the ultimate monetary weapon

Part 7: The agentic USD threat to sterling sovereignty

Part 8: The twisted ending: why singularity is dead

*Jonny Fry is a director of London Digital Escrow