The foundations of modern Western finance were built by regulatory arbitrage - but around Church regulations, not governmental! The bill of exchange is the basic building block of what we can recognizably call banking and finance in the West. Why? Because it allowed for lending without being branded usurer. Usury, even when legal and licensed, kept you outside polite society and deprived you of certain rights. How bad this was depended upon where you lived. So how to lend out money today and be compensated for the use of that money tomorrow? Enter the bill of exchange. Ostensibly, it solved for settling transactions without hauling silver past bandits and pirates. It involved several parties and steps, but a typical transaction would be for Banker Bruno to pay 100 florins to Merchant Marvin in Florence, who orders his business partner in Brugges, Merchant Mike, to pay 103 florins’ worth of Flemish groats in two months to Banker Ben, who runs the local bank branch there. You can see that while the bulk of exchange solved a genuine need around moving money, it also embeds credit and a fee that can replace interest. So if you wanted a loan from the Spinelli Bank or Medici Bank, you didn’t walk in and ask for a straight loan to be repaid with interest. That’s usury! Bad! Sends you to hell. Must avoid. No, you construct credit with bills of exchange that charge a theologically friendly fee for the currency exchange. If you were really clever, you’d set this up twice to build a longer loan payable in the same city. Florence to Brugges and back to Florence gives you a longer term on your loan (the usance date where the bill comes due). With CLARITY still TBD and a hot topic with regards to stablecoin yield, it’s in some ways ironic that banks found workarounds to a prohibition on interest, while today the roles are reversed. This was really easy if you were a merchant genuinely trading between two cities. Y