The settlement accounts of the GRS ensure that there is real value behind every global dollar issued by member institutions. The association of these products with settlement credits defines being ‘on the global dollar standard’ and ensures that the various global dollar forms are interchangeable. Each member institution maintains an account that fully covers its proprietary money supply, and these accounts adjust automatically through the settlement process as value moves from one form to another, from provider to provider.
Global dollars can be issued in any form that enables recording and transferring of the underlying rights. Typical examples might be crypto coins, over-the-counter notes, and bank accounts. While the GRS does not issue global dollars directly to the public, it ensures that money on the global dollar standard is secured by assets of known value.
Member institutions will receive redeemable bonus shares that reward participation with dividend and voting rights. These shares will be issued annually, in proportion with the average settlement account holdings of each member over the preceding year. Shares will be redeemed (cancelled) by the Global Dollar Company after ten years, so that collective member shareholding stabilises at two thirds of total shares on issue. Members will therefore have an incentive to increase their proprietary money supply in order to maximise share issue and future dividend revenue.
Customers are not able to redeem GRP assets directly, but benefit indirectly from the settlement mechanism that operates between members. As a result of this mechanism, members are able to accept global dollars from any other provider and transform them into their own proprietary money. A global dollar coin issued by crypto exchange might be presented to a stock broker by a customer. The coin effectively represents an obligation to settle within the GRS. The underlying global dollar credit is transferred from the crypto exchange to the stock broker through the settlement process, so that the crypto global dollar coin can be retired and a new OTC global dollar note issued. The customer might use this note for stock broker business, or withdraw it for use elsewhere. At each stage, the responsible provider holds a corresponding global dollar credit within the GRS.
Settlement will be daily, with each member institution notifying the GRS of its net bilateral obligations. Any two institutions will need to agree on these obligations in order for settlement to occur, but the GRS will not be concerned with the activity underlying these aggregates. Information security will be a minimal concern for such a system. The relevant figures could even be published on the internet, having very little significance beyond the question of net settlement.
Member institutions can also create global dollars for their settlement accounts by giving the GRS an amount of conventional money determined by the indicative value of the global dollar unit. Similarly, conventional money may be redeemed for excess global dollar credits, giving global dollars a transparent value.
This process allows for automatic expansion and contraction of the global dollar money supply without affecting unit price. The value of the global dollar, and its implicit rate of return, is therefore determined solely by the performance of the underlying portfolio, while supply adjusts to meet changes in demand. This is similar to the creation and redemption mechanism that applies to ETFs. The independence of price and supply makes the concept of ‘monetary policy’ redundant.