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> Countries will create and promote digital/crypto versions of their fiat currencies Why? I don't see what would be the benefit of that. Fiat currency already

> Countries will create and promote digital/crypto versions of their fiat currencies Why? I don't see what would be the benefit of that. Fiat currency already is digital. And - at least where I live - domestic transfers are instant.

petters 7y ago
Giving each citizen an account at the central bank. Then everyone will have access to "real" money digitally (not only via cash, which is currently the case).
- jayd16 7y ago
  What's the point? Why would countries bother?
  - buboard 7y ago
    tracking everything
- throwawayhhakdl 7y ago
  who exactly does that help?
magicsmoke 7y ago
Here's a possible reason for why a crypto fiat currency with a distributed ledger might be attractive. Currently, all fiat currencies operate with a central ledger at whatever central bank is authorized to print or destroy units of the currency. For example, every US dollar is linked through a chain of deposits and liabilities back to an account at the Fed since any bank operating in the US is required to hold an account with the Fed. However, this gives the US the ability to control the transfer of USD to use in sanctions. Suppose you were an Iranian company that wanted to buy goods from the EU, to be paid in USD. In normal times, an Iranian bank with an account at the Fed would ask the Fed to transfer USD from its account to that of the EU bank to complete the trade. However, since Iran is under sanctions, the Fed can freeze the assets and refuse to initiate the transfer or confirm that the Iranian bank has the required funds. Without assurance that you can actually pay for the goods in USD, the EU company decides not to sell any goods and you're stranded from the world market. Trying to bypass this by buying the goods with Euros doesn't work either, since the Fed can also threaten the USD accounts of EU banks too. Suppose the US catches an EU bank helping an Iranian company trade with a EU company in Euros. The US could then order the Fed to freeze the accounts of the EU bank or extract a fine for violating sanctions. EU banks get spooked away from helping Iranian companies deal with international payments due to the risk of getting themselves locked out of the USD system. All this is thanks to the power the Fed has over the one central ledger of USD that they can modify and freeze at will. But with a distributed ledger secured with cryptography, the Iranian bank wouldn't have to depend on the Fed to modify their central account book when performing money transfers. They could cryptographically prove that they had a certain amount of USD in their accounts and transfer it to the EU bank in a way that all bystanders can observe and confirm. You would have a currency system with unblockable and unsanctionable transfers, as if you had teleported containers of physically verifiable US dollar bills from Iran to the EU. This would be the key draw for countries trying to make their fiat currencies crypto. They could then advertise it as a currency that is impossible for the host country to use for sanctions. This boosts the cryptocurrency's viability as a reserve currency, and once enough countries begin using it then the host country could print money to improve their country's consumption, living standards, and economic clout without worrying about inflating the currency away.
- mdo91l 7y ago
  So what is the incentive for countries with geopolitical clout? Why wouldn’t they just make it illegal?
  - magicsmoke 7y ago
    The incentive is for countries with less geopolitical clout to use cryptocurrencies to pull more countries towards their bloc. I don't see the US moving towards cryptocurrencies anytime soon.
buboard 7y ago
Yeah, if anything, central banks have been clear that cryptocurrencies are the devil and they will be shot down. From today on , EU adopts stricter controls for transferring Gold as well. If anything, there will be a backlash to this extreme capital controls , but theres no way governments will loosen the leash on money on their own volition
deleted 7y ago
[deleted]

petters 7y ago

Giving each citizen an account at the central bank. Then everyone will have access to "real" money digitally (not only via cash, which is currently the case).

jayd16 7y ago
What's the point? Why would countries bother?
- buboard 7y ago
  tracking everything
throwawayhhakdl 7y ago
who exactly does that help?

magicsmoke 7y ago

Here's a possible reason for why a crypto fiat currency with a distributed ledger might be attractive. Currently, all fiat currencies operate with a central ledger at whatever central bank is authorized to print or destroy units of the currency. For example, every US dollar is linked through a chain of deposits and liabilities back to an account at the Fed since any bank operating in the US is required to hold an account with the Fed. However, this gives the US the ability to control the transfer of USD to use in sanctions. Suppose you were an Iranian company that wanted to buy goods from the EU, to be paid in USD. In normal times, an Iranian bank with an account at the Fed would ask the Fed to transfer USD from its account to that of the EU bank to complete the trade. However, since Iran is under sanctions, the Fed can freeze the assets and refuse to initiate the transfer or confirm that the Iranian bank has the required funds. Without assurance that you can actually pay for the goods in USD, the EU company decides not to sell any goods and you're stranded from the world market. Trying to bypass this by buying the goods with Euros doesn't work either, since the Fed can also threaten the USD accounts of EU banks too. Suppose the US catches an EU bank helping an Iranian company trade with a EU company in Euros. The US could then order the Fed to freeze the accounts of the EU bank or extract a fine for violating sanctions. EU banks get spooked away from helping Iranian companies deal with international payments due to the risk of getting themselves locked out of the USD system. All this is thanks to the power the Fed has over the one central ledger of USD that they can modify and freeze at will. But with a distributed ledger secured with cryptography, the Iranian bank wouldn't have to depend on the Fed to modify their central account book when performing money transfers. They could cryptographically prove that they had a certain amount of USD in their accounts and transfer it to the EU bank in a way that all bystanders can observe and confirm. You would have a currency system with unblockable and unsanctionable transfers, as if you had teleported containers of physically verifiable US dollar bills from Iran to the EU. This would be the key draw for countries trying to make their fiat currencies crypto. They could then advertise it as a currency that is impossible for the host country to use for sanctions. This boosts the cryptocurrency's viability as a reserve currency, and once enough countries begin using it then the host country could print money to improve their country's consumption, living standards, and economic clout without worrying about inflating the currency away.

mdo91l 7y ago
So what is the incentive for countries with geopolitical clout? Why wouldn’t they just make it illegal?
- magicsmoke 7y ago
  The incentive is for countries with less geopolitical clout to use cryptocurrencies to pull more countries towards their bloc. I don't see the US moving towards cryptocurrencies anytime soon.

buboard 7y ago

Yeah, if anything, central banks have been clear that cryptocurrencies are the devil and they will be shot down. From today on , EU adopts stricter controls for transferring Gold as well. If anything, there will be a backlash to this extreme capital controls , but theres no way governments will loosen the leash on money on their own volition

deleted 7y ago

[deleted]