Of course Scotland can use the pound without a currency union. Jersey does exactly that
Panama might do well in an informal currency union, but proponents of Scottish independence might prefer an example closer to home.
The British crown dependency of Jersey has just such an arrangement with the UK, and has been managing just fine since the pound became its currency in 1834.
A publication compiled by the European Union in 2006 states that Guernsey and Jersey are "sovereign with regard to their monetary regime".
You can use UK-printed notes there, as well as locally printed currency (they've been printing it since 1840), but that money isn't backed by the UK. Rather, local currency is backed "on the basis of an informal agreement with UK banks."
The government of Jersey says that "there is usually about £70 million of Jersey notes in circulation".
There is no Lender of Last Resort (LOLR)
Dollarized economies without LOLR
Panama also has no LOLR.
In April 2012 the International Monetary Fund reported that "Panama lacks both a traditional lender of last resort and a mechanism to mitigate systemic liquidity shortages."
As we've noted before, this might actually be a boon. Economist George Selgin has said that "by doing away with, or at least greatly limiting, any prospect of a bailout, it has caused creditors and banks to behave more prudently."
And the banks of Panama act accordingly, with authorities emphasising "that these features had contributed to the strength and resilience of the system", says the IMF report.
Despite having no formal safety nets, Panama's banks are ranked seventh in the world out of 148 countries for the stability, by the 2013-14 World Economic Forum Global Competitiveness Report.
The stability of Panama's financial sector "relies on banks holding high levels of liquidity beyond the prudential requirement of 30 per cent of short-term deposits."
What's the downside?
It's quite possible that Scottish banks won't be happy to operate without a LOLR.
Business secretary Vince Cable has suggested that banks will want to be based where they are "protected against the risk of collapse."
And no large bank is based in Jersey. That said, the island has a population of less than 100,000.
RBS chief executive Ross McEwan told Guardian readers that the bank could adapt if Scotland votes for independence.
It's really important that the Scottish people get the opportunity to vote, and then if I need to adapt my business to serve England, Scotland, Wales and both the Republic of Ireland and Northern Ireland, then I will.