13 ms·

Central Bank Digital Currencies are coming

170 points by sippingjippers 6y ago

globular-toast 6y ago
The Bank of England has been using a digital currency for years. When British banks settle up overnight, nothing physical is moving around. I'm pretty sure the same would be true of any developed country.
- FriendlyNormie 6y ago
  Good goy. Hopefully you’re this laid back when you get microchipped as well.
- danialtz 6y ago
  There are different types of CBDCs with various focus areas, e.g. wholesale CBDC (banking innovation, similar to what you mentioned) and Retail CBDC. The CBDC model that is gaining increasing momentum, despite expectations, is the retail CBDC, which due to some form of overlap with banking innovation, retail payment innovation and cryptocurrencies (as the extreme) makes it a hot debate topic. The interesting observation here is that numerous Central Banks are passing the “debate” phase and some already getting ready to release aka “production grade”, e.g. China.
- bootcampwhere 6y ago
  As usual HN has missed the point about digital currency. We dont mean physical fiat digitized, but a public ledger. I wish someone could tell me how such a smart group of people could be so consistently stupid about a topic.
- CyberDildonics 6y ago
  That is not the same thing. Having addresses with private keys that are the sole permission needed to make transfers is much different from having a bank account that the bank transfers electronically for you.
  - adament 6y ago
    How? Maybe it is because I live in Denmark where I would claim we are close to a de facto digital currency: a large group(most people under 40) use credit cards or a phone based payment solution for all purchases, use a phone based solution for settling smaller (<3,000$) amounts between persons, and use online banking platforms for transferring larger amounts. We are charged negative interest rates on deposits if they total more than 50,000$. Sure underlying this we have a physical currency, but for many it is more a historical curiosity than a practical consideration in day to day life. While I understand the technical differences, I cannot see why from a policy perspective the government or the central bank would be interested in a cryptocurrency like solution? Rather with the current system and Know Your Customer regulation for the banking system, they have tighter control with money transfers since they are all ultimately between bank accounts tied to named entities. I think it is more likely that we abolish physical cash than migrate to a more decentralised currency.
    - iso8859-1 6y ago
      Why this dichotomy between "non-physical cash" and "decentral currency"? These things are linked, but strictly speaking you don't have to choose between them. Abolishing physical cash does not imply migrating to a decentralised currency. But migrating to a decentralised currency is probably only possible by abolishing physical cash; I don't see gold coins coming back. So, how is it different to have your money controlled by a private key, and nobody having the power to seize those money? Ask every single person that has had their account frozen. Whether you think it happens for just reasons or not, surely you agree that it isn't the same as having an ecosystem of digital centrally issued money? Not just issued, but also seized, through courts and police.
      - adament 6y ago
        Yes but exactly because the decentralized currency is much more difficult to control and explicitly circumvents parts of current banking regulations, I have a hard time fathoming that policy makers and central banks would advocate decentralized currencies. The post that I was replying to seemed to suggest that CBDCs would be decentralized or in some way inherently different from the centralized digital settlement of transfers that exists in many countries today, and I want to understand why that should be the case? Why would CBDCs work more like decentralized cryptographic currencies than the current financial system? I am not passing a judgment on whether decentralized currencies are good, but I do not understand why central banks would move in that direction.
- rkagerer 6y ago
  That sounds a bit like Canada's LVTS [1]. On the retail side we also briefly played with something called MintChip [2]. [1] https://en.m.wikipedia.org/wiki/Large_Value_Transfer_System https://en.m.wikipedia.org/wiki/Large_Value_Transfer_System [2] https://en.m.wikipedia.org/wiki/MintChip https://en.m.wikipedia.org/wiki/MintChip
coding123 6y ago
This is going to end up as a giant hyperledger failure. Once the committee forms on how to do "this" it will be mired in indecision and eventually collapse on itself.
- bootcampwhere 6y ago
  Or, HN will continue to be wrong about digital currency.
- deleted 6y ago
  [deleted]
glerk 6y ago
Buy gold.
- joeyrideout 6y ago
  If CBDC issuance coincides with banning physical cash, what makes you think that they won't enforce capital controls on alternative currencies?
  - claydavisss 6y ago
    A "ban" on gold would only achieve multiplying the spot price by ten overnight. It would be the final signal that fiat currencies should be avoided at all costs.
    - octoberfranklin 6y ago
      ... and incentivize people to smuggle their gold out of the country. International trade is far too large these days to stop gold-smuggling. Look at the great job we're doing with drug smuggling. Most cocaine enters the US hidden in shipping containers.
  - est31 6y ago
    And there is precedent to this, see Executive Order 6102: https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
  - cblconfederate 6y ago
    There is a universe of alternative currencies. If people truly start trading gold its not going to stop until they barter in peas or clams
  - jmnicolas 6y ago
    IMHO gold will hold value longer than their ability to enforce the ban. The question is, will you live long enough to see the end of the ban. If you have children it may very well be worth it.
- 6y ago
joeyrideout 6y ago
European banks recently started toying with the idea of passing down negative interest rates to customer bank deposits, so that banks are less squeezed by reserves yielding negative returns (breaking the typical bank business model). Just think, if CBDCs pass down the negative interest rates to everyone's cash, inside or outside of banks. That's not a currency I would be happy to hold.
- cm2187 6y ago
  And that's the very goal of the monetary policy. Pushing you to invest into something riskier (including selling the currency).
  - deleted 6y ago
    [deleted]
- A4ET8a8uTh0 6y ago
  I did not hear of this, but this is interesting. Doubly so given that in the old country, you are required to have a bank account to run a business ( as I understand it, that requirement technically does not exist in US -- technically ). So now apart from fees that require specific amount of balance, negative interest rate will ensure people won't hold too much.
- jmnicolas 6y ago
  I think I read somewhere an Austrian bank is already charging negative interest rates on customer accounts (-0.5% IIRC).
jasonrodrigues 6y ago
ICYMI, earlier this year, the cLabs team wrote this paper that outlines not just how CBDCs can increase the efficiency of the global financial system, but also how it creates a new transmission channel for monetary policy. https://celo.org/papers/cLabs_CBDC_Velocity_v3.pdf https://celo.org/papers/cLabs_CBDC_Velocity_v3.pdf
bartvk 6y ago
The mandate of the European Central Bank is to maintain price stability. Raoul Pal says "They can give, for example, restaurant owners a direct payments for stimulus whilst at the same time, charging negative interest rates on larger savers". But I don't see how this fits in the mandate of the ECB. Raoul Pal says "(if they get the powers by the Governments, which will come)". But that's a prediction, nothing more, and he doesn't further support it.
- sippingjippers 6y ago
  > The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, that is, central bank digital currency (CBDC). Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments https://www.clevelandfed.org/en/newsroom-and-events/speeches/sp-20200923-payments-and-the-pandemic.aspx https://www.clevelandfed.org/en/newsroom-and-events/speeches...
  - jmnicolas 6y ago
    What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?
    - Barrin92 6y ago
      the most obvious case is that people don't have a bank account or are 'underbanked' in the US that amounts to about a quarter of the population[1]. I think covid has shown what a mess it is to get everyone their relief money. If everyone had a digital account with the FED it'd literally be a few clicks of a button. [1]https://www.cnbc.com/2019/03/08/25percent-of-us-households-are-either-unbanked-or-underbanked.html https://www.cnbc.com/2019/03/08/25percent-of-us-households-a...
    - bboygravity 6y ago
      Because central banks have no direct control over regular bank accounts? Regular bank accounts are not held at central banks (yet).
DethNinja 6y ago
I agree with this, Central Banks will try to influence the public through military backed/forced digital currencies but considering that I’m not stupid, I’ll just move to another country that accepts Bitcoin and try to accumulate it in legal ways. Their fiat system is about to crash and the exactly same people that caused the crash is saying that they will solve the problems they created through centralised digital currencies? Oh please, fool me once, shame on you. Fool me twice, you can't get fooled again.
xxxxxxxx 6y ago
This is the best explanation I have seen : https://youtu.be/uX7VpTqXJhY https://youtu.be/uX7VpTqXJhY
- ivalm 6y ago
  That’s very biased. Importantly the fed wallet is interest free, banks should compete with it in the same way they compete with cash under the mattress — by providing interest.
povik 6y ago
Are these proposed central bank “digital currencies” anything more than a centralised or federalised database of who-owns-how-many? And if so, how does that differ from what we have now? That is, in a European country, I have an account with my bank, and my bank has an account with the central bank (or the two interact in some other way). My understanding of the current system is limited, I merely know some large portion of the issued currency today is without physical representation.
- PeterisP 6y ago
  Well, the current system as you describe is a two-level system with your bank in between; a CBDC allows you to "have an account" directly with the central bank directly and make/receive payments without needing a retail bank intermediary. It also enables central banks to achieve policy goals that they could not earlier - for example, in the last big crisis all the quantitative easing did not result in as much actual lending to people in the economy as central banks expected; the retail banks between you and the CB had other interests. A CBDC enables a central bank to inject money in the economy directly to people and companies, bypassing the major retail banks.
  - riffraff 6y ago
    I feel the payment side is pretty relevant here: governments and central banks are starting to realize that as currency dematerilializes the VISA, MasterCard etc of the world are going to drain a significant part of the economy, which they would rather keep, being in the business of, well, managing those currencies.
  - dageshi 6y ago
    Hmmm, wouldn't the CBDC be safer than any other place to put your money? So in a crisis, wouldn't you sell everything and put it in the CBDC including potentially government bonds precisely at the time the government probably needs to borrow cheaply? That seems like a recipe for disaster to me.
    - danialtz 6y ago
claydavisss 6y ago
The Fed Digital Dollar will be a purchasing instrument that exists only in an app or website. They will be added and subtracted as the government sees fit. If, for example, the government should want to spike consumer spending, they need only tell you that your account will have a maximum value of $100 as of midnight. Either spend the rest or it will be deleted. Show up at a political rally for a group that is currently out of favor, your balance is deleted. Break the speed limit and your balance is deleted. Be home by 10pm or your balance is deleted. Pledge 10% of your balance to the poltical party currently in power and you can buy yourself forgiveness on your next potential balance deletion. Buy gold.
- vikramkr 6y ago
  So what you're describing is the complete collapse of our current system of government. If the US becomes a failed state like you describe, turning into a totalitarian wasteland where not even the pretense of democracy is maintained, do you really think the secret police are going to let you buy things with gold? The fed introducing a cryptocurrency will not cause the US to become a failed state, and if the US is on the path to becoming a failed state, then the federal reserve not introducing a cryptocurrency isn't going to change anything. You cant eat gold. Buy productive assets. If you think society is going to collapse like that into a totalitarian state, then, I dunno, move to some country that you think is not on the path to giving up democracy, or go full prepper and buy land and guns and stuff. Good luck holding off the US military though. Might be better to defect when you have the chance.
cuspy 6y ago
one frightening prediction I've heard is that we will have parallel economies. One for UBI consumer serfs who receive a monthly stipend that expires at the end of each month, another for people who work and receive payment perhaps in other independent currencies, and another, which already exists, for the very wealthy who hold wealth primarily in tangible assets like real estate and fine art. This will either fail spectacularly or it will be the beginning of an even more rigid caste system. Very worrying for a system like this to be produced and executed by institutions who have proven time and again that things like human dignity, civil liberties and a chance at upward mobility are no longer relevent.
- neural_thing 6y ago
  California already has laws for creating landed gentry (prop 13 inheritance)
  - qppo 6y ago
    And now Google is going to be leasing land to its employees. Which I find terrifying
    - octoberfranklin 6y ago
      Eh? Details?
- est31 6y ago
  The "UBI consumer serfs" already exist in Germany, because the government only pays you benefits if you don't have any property. The moment you start saving up your money, they stop payments and demand you to live from your savings instead.
  - chii 6y ago
    But is that not a good way to encourage people to work and produce goods/services? UBI isn't there so you can live a comfortable life off the taxpayers, but as a safety net for accidents, bad luck and other unfortunates so that they don't die. But once they're back on their feet, they should be capable of restarting their productive life and no longer need social welfare.
slickrick216 6y ago
All in chainlink.
ivalm 6y ago
But all of these CB backed digital currencies aren’t like crypto. CBs will presumably be roots of trust and just maintain entries in a normal database.
- deleted 6y ago
  [deleted]
- danialtz 6y ago
  Well, perhaps CBDC folks have learned a lot from Bitcoin and other cryptocurrencies, mostly on scaling and security, so literally not a database but abstract-wise a ledger like cryptos with different consensus and payment model. CBDCs today are mostly based on trusted nodes, e.g. CBs and Banks, with the goal of transforming the current monetary “backend” into a digital automated way without losing the control. Think of it as breaking a monolith into a microservice world, which offers “innovation” and lower barrier to entry (underbanked) among other features.
KasianFranks 6y ago
These are not the cryptos you're looking for. You don't want ones that trade like currencies, you want ones that trade like stocks.
- vikramkr 6y ago
  Unless you want to use them like a currency. Then you probably want ones that trade like a currency. Theres a reason you don't buy sandwiches with fractional google shares.
  - cosmojg 6y ago
    I actually very much would like the ability to do that.
    - vikramkr 6y ago
      It would be cool, but transactions are two way. Its technologically not gonna be too difficult to create a way to buy with stocks (cashapp could probably add the feature tommorow if they wanted) but its also about the other party's willingness to recieve payment in stocks. If the price is expected to go down, they're not going to want to receive it (inflation). If the price is going to go up, you're not going to want to part with it (deflation). But what if there was some sort of asset that had an agency backing it to try and control inflation and deflation to ensure that the value of the asset is stable over time, so it can be used as a currency? Wait a sec...
A4ET8a8uTh0 6y ago
It may come across as snark, but I happen to believe this quote of Bill Hicks truly captures most of my thoughts on the subject. “Rock stars against drugs – that's what we want, isn't it? Government-approved rock-n-roll? Woo! We're partying now!” The entire reason for crypto is the already ridiculous level of control exerted over various gatekeepers. How do I know? I am part of the system.
- jdsalaro 6y ago
  > The entire reason for crypto is the already ridiculous level of control exerted over various gatekeepers. How do I know? I am part of the system. Can you elaborate on the "ridiculous level of control over various gate-keepers"?
  - perardi 6y ago
    I assume credit card processors blocking transactions on, say, porn sites. Or maybe foreign money transfers?
  - A4ET8a8uTh0 6y ago
    Sure. None of it is secret. There are regulations in place that enforce specific agenda under the guise of AML, fraud, sanctions, etc. For banks and MSBs type businesses that typically are covered under BSA. But even if you think you are not covered by BSA, there is always FinCEN, where OFAC's strict liability is a pretty big stick. That was high level, but during a more recent conference I participated in ( ages ago now, but on that particular subject ), the discussion of AML professionals suggested something along the lines of 'we can already identify those illicit transactions, why can't we just stop them' ( and to a large degree it is true; your credit card, your bank, your msb knows to large degree what you are buying and what you may be into based on those purchases ). That particular conversation was about CBD products, which at the time were on a weird legal ground. I want you to think about it. Your bank is already capable of deciding a specific type of product is bad for you. Has been for a while and there are people would like to have a say on what is bad. And they are gaining ground. My point is, there is already sufficient amount of control each gate keeper has. All it really needs is a request from government to start gate keeping. Hope this answer the question. There are obviously things I should not be talking about on a public forum and company specific info I can't talk about.
Proven 6y ago
1) I don't give a crap, because I won't use them 2) I do give a crap to the extent that they will be used to hand out free shit (BNI, MMT and similar nonsense), so I'm going to minimize the use of any fiat and instead buy gold, silver and unregulated crypto All this will do is make fiat collapse sooner.
Barrin92 6y ago
Honestly long overdue in my opinion. I've always thought of access to payment systems the same way as I think of clean drinking water. it's basic infrastructure and it should be available to everyone at as little cost as possible, both literal cost and hassle. When I moved to the UK and healthcare basically worked by registering with a GP and that was it and I didn't have to deal with insurance any more it was extremely pleasant. I just want the same thing for payments tbh, just give me digital Euros, accepted everywhere and transfer it instantly between people.
deleted 6y ago
[deleted]
krmmalik 6y ago
I loved the discussion with Professor Richard Werner on a podcast lately. He talked about what the European Central Bank is planning and what this means for us as consumers and explains why CBDCs really mean for us. Here's the full interview https://youtu.be/OdYmdKUiQNw https://youtu.be/OdYmdKUiQNw
- chrisco255 6y ago
  Could you summarize what his thoughts are?
  - krmmalik 6y ago
    Sure, I'll do my best and hope I'm recalling this correctly. 1. Central banks are regulators, they set the monetary policy that commercial banks must follow 2. Debt is largely created by commercial banks 3. Now the regulator (ECB) wants to be the only creator of debt, thus the regulator is now in direct competition with those it regulates 4. ECB wants to wipe out all the banks and have the pie to itself. 5. Central banks say one thing but their actions often say another 6. CBDCs are not new or revolutionary. Currency is already largely digital and so is debt creation. The only difference here is that the central bank wants to now be the main bank. So the entire public will all bank with one bank. Everyone will have an account at the central bank rather than at a commercial bank of their choice. 7. History tells us this doesn't bode well. This model was run in the Soviet Union and failed terribly. The Central Banks think they are smarter this time but they will fail. 8. Community, non-profit banks are proven to be much better for the economy. Germany had this for a long time which is why it weathered the GFC of 2008, however those community banks are also now being wiped out which means it will struggle to weather this recession successfully. 9. China had a policy change in 1978 which resulted in more community banks and this has contributed significantly to their economic rise. 10. The ECB is not the only central bank with such intentions. Most central banks around the world have the same intentions.
I_am_tiberius 6y ago
Summary of the biggest problem with digital currency managed by central banks: Central banks can use negative interests in order to force people to buy stuff. In the current system people would just withdraw cash in order to avoid negative interest rates if they are too high/low. In the future people will be forced to pay the interests or buy stuff. Governments want to use this mechanism in order to control the economy. If digital currencies managed by central banks really do get approved, it is like being forced to use Facebook.
- drcode 6y ago
  The technical term for what you're referring to is demurrage, i.e. when money that is sitting unused automatically, in any account, has fees applied to it. It's similar to "inflation", but instead of making new money, you take people's existing money. https://www.investopedia.com/terms/d/demurrage.asp https://www.investopedia.com/terms/d/demurrage.asp
- cinquemb 6y ago
  That's what I like about CBDC's: They will incentivize more people to use non CBDC's than those who use them now the harder they try to enforce negative interest on savings on their CBDC's.
- afrojack123 6y ago
  If you had negative interest rates with digital currencies, then everybody buys stocks. This happens even without digital currencies.
- ramshorns 6y ago
  Point taken, but it might be a bit better than literally being forced to use Facebook, if the Libra currency becomes ubiquitous. Governments controlling the economy doesn't sound too bad if the alternative is one or two huge companies controlling the economy.
- beaunative 6y ago
  It doesn't have to be approved, central bank is the authority to issue currency, digital or not, it should be thought of as a more economical, convenient replacement for hard cold cash, rather than a replacement for decentralized currencies.
arminiusreturns 6y ago
They want to track everything you do in a totalitarian surveillance system which is already powered on. This was why I rejected bitcoin.... lack of anonymity.
- iso8859-1 6y ago
  There are many ways to tumble Bitcoin (e.g. Joinmarket), it is not very hard to stay anonymous. As long as you don't need to cash out, that is ;)
Temasik 6y ago
he wants you to buy he's bitcoin that's all
Krasnol 6y ago
I hope they make it work in a way where I don't have to get a PayPal account anymore.
monadic2 6y ago
There's a small chance this could (generally, not just in country) lead to online payments without going through centralized payment processors. That seems like it could be positive!
dalbasal 6y ago
So.... I'm lost. What is a Central Bank Digital Currency? The article he links is pretty corporate-speak. Can anyone translate? What's in the seeming boilerplate now that wasn't there before. Why are they excited about it and how does this mean they can do more stimulus?
- Capira 6y ago
  tl;dr: more surveillance and financial oppression because corona.
- afrojack123 6y ago
  A central bank digital currency is like the system China has in place now. International payments are a different and challenging issue for central banks because blackmailing, drug dealing, gun running, and hostage situations that occur between nations can not have their money cancelled by the opposing nation.
- anm89 6y ago
  These "digital currencies" are simply new types of bank accounts where retail consumers can hold money at central banks. They are no more digital than any other bank account. They have absolutely nothing to do with crypto either.
  - dalbasal 6y ago
    ..are are they a "currency" in any augmented way, or is it just currency as it is now?
    - anm89 6y ago
      The only currency involved in a digital dollar is USD. There is no new currency proposed here. The thing that makes an existing dollar digital is being in a new type of bank account that is held by the fed instead of a retail bank. So this is an new type of bank account, not a new type of currency. I do a youtube channel on monetary issues and my last video was specifically on this topic. Feel free to check it out if you are interested https://www.youtube.com/watch?v=n9qnhV9SAyg https://www.youtube.com/watch?v=n9qnhV9SAyg
fataliss 6y ago
I make the bet that "traditional" banks will steer to go cashless in the near future and start charging all kind of fees for things you never had to pay for back when you could hold money in your hand. This is why the utopia of a decentralized currency would be so needed and will be fought all the way. Side-note: I don't like the environmental impact of BTC, but I don't like being a victim of banks (who tend to have a terrible impact on the env in their own ways).
frankydp 6y ago
These blockchain investors are some grade "A" con-artist. They can sell anyone on this crap.
- anm89 6y ago
  This has absolutely nothing to do with block chain of you look at the actual legislation being proposed.
afrojack123 6y ago
Time to find a new job Visa, Mastercard, Paypal, Square employees.
raziel2701 6y ago
What is the difference between a digital currency and the digital money I see in my bank account online? It feels to me like I already transfer money digitally when shopping with a credit card. Later on that twitter thread he shares a poll by the IMF [0] where they ask you how will you be sending money to a family member in 5 years. The possible answers are cash in envelope, money transfer service, digital currency or other. Are venmo and similar services not already using a digital dollar? [0]https://twitter.com/RaoulGMI/status/1317836130788757504/photo/1 https://twitter.com/RaoulGMI/status/1317836130788757504/phot...
- xalava 6y ago
  There is a key difference in nature, with some practical consequences. You don't have money in your bank account, the bank has a debt toward you. When you wire money or pay with a credit card, it triggers a chain of intermediaries to move that debt. It is costly in part because of the counterparty risks. In most countries, an individual however is protected from a bank default up to a certain amount. Cash is directly minted by the central bank. In a trustless manner, if you exchange goods and services for cash, the settlement is instantaneous. Legally, this cash can be used anywhere in your country. For everyday use, it might not change habits overnight, but it will have a long term impact on the financial infrastructure.
- sippingjippers 6y ago
  At least in the case of the Digital Euro, one of the explicitly documented goals for the scheme is to alleviate dependence on US payment processors within Europe (that's buried somewhere in https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_... )
- enjeyw 6y ago
  A lot of existing digital money is more akin to a widely-redeemable voucher issued by a private company than it is to physical cash. You're free to use it in ways that are sanctioned by that issuing company, but if you want to do something like spend it with a competitor, you might run into road-blocks. In places like the US, this feels like an academic difference, but that's because non-bank digital payments haven't really consolidated yet. In Kenya, where one mobile phone company (Safaricom) has a 98.8% market share of digital payments, the situation is very different- effectively on private company has a monopoly on money. They can and do use this monopoly power to their advantage. A CBDC attempts to shift money back to being a public good like physical cash, by guaranteeing interoperability between issuers, rather than everyone paying with casino chips.
anm89 6y ago
So I've been tracking this fairly closely via the Banking for All Act and I think a lot of the issues around this are not what they seem to be although I think they signal a very profound shift in the world of monetary politics. For one this has NOTHING to do with crypto currency. This also has NOTHING to do with any kind of technological advancement at all. There is really nothing particularly more digital about the digital currencies being proposed than any other electronic bank balance or credit card database line item. I think the word digital here is an attempt to sneak in some radical changes to how the federal reserve works under the guise of doing something to modernize banking in the world of cryptocurrency. So then what is this about? What these digital currencies are about is the ability for normal people to hold deposit accounts that are held directly in the Central Bank although a normal commercial bank would still act as the custodian and you would still access them through your normal bank. So why go through all of the trouble to do this? I think it's basically an admission that Quantative Easing era is over and that monetary policy in general has run its course and are no longer useful in the age of 0% interest rates while we still face deflation. By having normal people hold central bank accounts, they will be able to implement a new kind of policy that they have wanted the power to do for decades: hybrid fiscal / monetary policy where the monetary policy outcome is deposited directly into the account of a normal person, not a bank. This is basically the Fed acknowledging that they are getting ready for MMT. https://www.congress.gov/bill/116th-congress/senate-bill/3571/text https://www.congress.gov/bill/116th-congress/senate-bill/357... Edit: I'm getting downvoted on this, maybe because this seems conspiratorial but I don't think I'm really saying anything that speculative here. Look at the title of the article linked to in the attached tweet from the IMF: "A New Bretton Woods Moment". The people involved clearly see this as a time when they need to completely rework the international monetary system (which is what Bretton Woods was in the 40's)
- xalava 6y ago
  The technology side is secondary. However, if it wasn't for cryptocurrencies, we wouldn't be discussing this topic today. Bitcoin has proven that it was possible to build an open financial infrastructure, and has inspired many similar projects. The hybrid fiscal/monetary policy is an interesting perspective, especially in those times. My understanding of ongoing debates is that there is no clear strategy yet.
lgats 6y ago
Worth reviewing the Banking for All Act, which could introduce a digital dollar: https://www.congress.gov/bill/116th-congress/senate-bill/3571/text https://www.congress.gov/bill/116th-congress/senate-bill/357...

The Bank of England has been using a digital currency for years. When British banks settle up overnight, nothing physical is moving around. I'm pretty sure the same would be true of any developed country.

FriendlyNormie 6y ago
Good goy. Hopefully you’re this laid back when you get microchipped as well.
danialtz 6y ago
There are different types of CBDCs with various focus areas, e.g. wholesale CBDC (banking innovation, similar to what you mentioned) and Retail CBDC. The CBDC model that is gaining increasing momentum, despite expectations, is the retail CBDC, which due to some form of overlap with banking innovation, retail payment innovation and cryptocurrencies (as the extreme) makes it a hot debate topic. The interesting observation here is that numerous Central Banks are passing the “debate” phase and some already getting ready to release aka “production grade”, e.g. China.
bootcampwhere 6y ago
As usual HN has missed the point about digital currency. We dont mean physical fiat digitized, but a public ledger. I wish someone could tell me how such a smart group of people could be so consistently stupid about a topic.
CyberDildonics 6y ago
That is not the same thing. Having addresses with private keys that are the sole permission needed to make transfers is much different from having a bank account that the bank transfers electronically for you.
- adament 6y ago
  How? Maybe it is because I live in Denmark where I would claim we are close to a de facto digital currency: a large group(most people under 40) use credit cards or a phone based payment solution for all purchases, use a phone based solution for settling smaller (<3,000$) amounts between persons, and use online banking platforms for transferring larger amounts. We are charged negative interest rates on deposits if they total more than 50,000$. Sure underlying this we have a physical currency, but for many it is more a historical curiosity than a practical consideration in day to day life. While I understand the technical differences, I cannot see why from a policy perspective the government or the central bank would be interested in a cryptocurrency like solution? Rather with the current system and Know Your Customer regulation for the banking system, they have tighter control with money transfers since they are all ultimately between bank accounts tied to named entities. I think it is more likely that we abolish physical cash than migrate to a more decentralised currency.
  - iso8859-1 6y ago
    Why this dichotomy between "non-physical cash" and "decentral currency"? These things are linked, but strictly speaking you don't have to choose between them. Abolishing physical cash does not imply migrating to a decentralised currency. But migrating to a decentralised currency is probably only possible by abolishing physical cash; I don't see gold coins coming back. So, how is it different to have your money controlled by a private key, and nobody having the power to seize those money? Ask every single person that has had their account frozen. Whether you think it happens for just reasons or not, surely you agree that it isn't the same as having an ecosystem of digital centrally issued money? Not just issued, but also seized, through courts and police.
    - adament 6y ago
      Yes but exactly because the decentralized currency is much more difficult to control and explicitly circumvents parts of current banking regulations, I have a hard time fathoming that policy makers and central banks would advocate decentralized currencies. The post that I was replying to seemed to suggest that CBDCs would be decentralized or in some way inherently different from the centralized digital settlement of transfers that exists in many countries today, and I want to understand why that should be the case? Why would CBDCs work more like decentralized cryptographic currencies than the current financial system? I am not passing a judgment on whether decentralized currencies are good, but I do not understand why central banks would move in that direction.
rkagerer 6y ago
That sounds a bit like Canada's LVTS [1]. On the retail side we also briefly played with something called MintChip [2]. [1] https://en.m.wikipedia.org/wiki/Large_Value_Transfer_System https://en.m.wikipedia.org/wiki/Large_Value_Transfer_System [2] https://en.m.wikipedia.org/wiki/MintChip https://en.m.wikipedia.org/wiki/MintChip

coding123 6y ago

This is going to end up as a giant hyperledger failure. Once the committee forms on how to do "this" it will be mired in indecision and eventually collapse on itself.

bootcampwhere 6y ago
Or, HN will continue to be wrong about digital currency.
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[deleted]

glerk 6y ago

Buy gold.

joeyrideout 6y ago
If CBDC issuance coincides with banning physical cash, what makes you think that they won't enforce capital controls on alternative currencies?
- claydavisss 6y ago
  A "ban" on gold would only achieve multiplying the spot price by ten overnight. It would be the final signal that fiat currencies should be avoided at all costs.
  - octoberfranklin 6y ago
    ... and incentivize people to smuggle their gold out of the country. International trade is far too large these days to stop gold-smuggling. Look at the great job we're doing with drug smuggling. Most cocaine enters the US hidden in shipping containers.
- est31 6y ago
  And there is precedent to this, see Executive Order 6102: https://en.wikipedia.org/wiki/Executive_Order_6102 https://en.wikipedia.org/wiki/Executive_Order_6102
- cblconfederate 6y ago
  There is a universe of alternative currencies. If people truly start trading gold its not going to stop until they barter in peas or clams
- jmnicolas 6y ago
  IMHO gold will hold value longer than their ability to enforce the ban. The question is, will you live long enough to see the end of the ban. If you have children it may very well be worth it.
6y ago

joeyrideout 6y ago

European banks recently started toying with the idea of passing down negative interest rates to customer bank deposits, so that banks are less squeezed by reserves yielding negative returns (breaking the typical bank business model). Just think, if CBDCs pass down the negative interest rates to everyone's cash, inside or outside of banks. That's not a currency I would be happy to hold.

cm2187 6y ago
And that's the very goal of the monetary policy. Pushing you to invest into something riskier (including selling the currency).
- deleted 6y ago
  [deleted]
A4ET8a8uTh0 6y ago
I did not hear of this, but this is interesting. Doubly so given that in the old country, you are required to have a bank account to run a business ( as I understand it, that requirement technically does not exist in US -- technically ). So now apart from fees that require specific amount of balance, negative interest rate will ensure people won't hold too much.
jmnicolas 6y ago
I think I read somewhere an Austrian bank is already charging negative interest rates on customer accounts (-0.5% IIRC).

jasonrodrigues 6y ago

ICYMI, earlier this year, the cLabs team wrote this paper that outlines not just how CBDCs can increase the efficiency of the global financial system, but also how it creates a new transmission channel for monetary policy. https://celo.org/papers/cLabs_CBDC_Velocity_v3.pdf https://celo.org/papers/cLabs_CBDC_Velocity_v3.pdf

bartvk 6y ago

The mandate of the European Central Bank is to maintain price stability. Raoul Pal says "They can give, for example, restaurant owners a direct payments for stimulus whilst at the same time, charging negative interest rates on larger savers". But I don't see how this fits in the mandate of the ECB. Raoul Pal says "(if they get the powers by the Governments, which will come)". But that's a prediction, nothing more, and he doesn't further support it.

sippingjippers 6y ago
> The experience with pandemic emergency payments has brought forward an idea that was already gaining increased attention at central banks around the world, that is, central bank digital currency (CBDC). Legislation has proposed that each American have an account at the Fed in which digital dollars could be deposited, as liabilities of the Federal Reserve Banks, which could be used for emergency payments https://www.clevelandfed.org/en/newsroom-and-events/speeches/sp-20200923-payments-and-the-pandemic.aspx https://www.clevelandfed.org/en/newsroom-and-events/speeches...
- jmnicolas 6y ago
  What I don't get is why wouldn't they be able to credit /debit regular bank accounts with money instead of creating a new "digital system"?
  - Barrin92 6y ago
    the most obvious case is that people don't have a bank account or are 'underbanked' in the US that amounts to about a quarter of the population[1]. I think covid has shown what a mess it is to get everyone their relief money. If everyone had a digital account with the FED it'd literally be a few clicks of a button. [1]https://www.cnbc.com/2019/03/08/25percent-of-us-households-are-either-unbanked-or-underbanked.html https://www.cnbc.com/2019/03/08/25percent-of-us-households-a...
  - bboygravity 6y ago
    Because central banks have no direct control over regular bank accounts? Regular bank accounts are not held at central banks (yet).

DethNinja 6y ago

I agree with this, Central Banks will try to influence the public through military backed/forced digital currencies but considering that I’m not stupid, I’ll just move to another country that accepts Bitcoin and try to accumulate it in legal ways. Their fiat system is about to crash and the exactly same people that caused the crash is saying that they will solve the problems they created through centralised digital currencies? Oh please, fool me once, shame on you. Fool me twice, you can't get fooled again.

xxxxxxxx 6y ago

This is the best explanation I have seen : https://youtu.be/uX7VpTqXJhY https://youtu.be/uX7VpTqXJhY

ivalm 6y ago
That’s very biased. Importantly the fed wallet is interest free, banks should compete with it in the same way they compete with cash under the mattress — by providing interest.

povik 6y ago

Are these proposed central bank “digital currencies” anything more than a centralised or federalised database of who-owns-how-many? And if so, how does that differ from what we have now? That is, in a European country, I have an account with my bank, and my bank has an account with the central bank (or the two interact in some other way). My understanding of the current system is limited, I merely know some large portion of the issued currency today is without physical representation.

PeterisP 6y ago
Well, the current system as you describe is a two-level system with your bank in between; a CBDC allows you to "have an account" directly with the central bank directly and make/receive payments without needing a retail bank intermediary. It also enables central banks to achieve policy goals that they could not earlier - for example, in the last big crisis all the quantitative easing did not result in as much actual lending to people in the economy as central banks expected; the retail banks between you and the CB had other interests. A CBDC enables a central bank to inject money in the economy directly to people and companies, bypassing the major retail banks.
- riffraff 6y ago
  I feel the payment side is pretty relevant here: governments and central banks are starting to realize that as currency dematerilializes the VISA, MasterCard etc of the world are going to drain a significant part of the economy, which they would rather keep, being in the business of, well, managing those currencies.
- dageshi 6y ago
  Hmmm, wouldn't the CBDC be safer than any other place to put your money? So in a crisis, wouldn't you sell everything and put it in the CBDC including potentially government bonds precisely at the time the government probably needs to borrow cheaply? That seems like a recipe for disaster to me.
  - danialtz 6y ago

claydavisss 6y ago

The Fed Digital Dollar will be a purchasing instrument that exists only in an app or website. They will be added and subtracted as the government sees fit. If, for example, the government should want to spike consumer spending, they need only tell you that your account will have a maximum value of $100 as of midnight. Either spend the rest or it will be deleted. Show up at a political rally for a group that is currently out of favor, your balance is deleted. Break the speed limit and your balance is deleted. Be home by 10pm or your balance is deleted. Pledge 10% of your balance to the poltical party currently in power and you can buy yourself forgiveness on your next potential balance deletion. Buy gold.

vikramkr 6y ago
So what you're describing is the complete collapse of our current system of government. If the US becomes a failed state like you describe, turning into a totalitarian wasteland where not even the pretense of democracy is maintained, do you really think the secret police are going to let you buy things with gold? The fed introducing a cryptocurrency will not cause the US to become a failed state, and if the US is on the path to becoming a failed state, then the federal reserve not introducing a cryptocurrency isn't going to change anything. You cant eat gold. Buy productive assets. If you think society is going to collapse like that into a totalitarian state, then, I dunno, move to some country that you think is not on the path to giving up democracy, or go full prepper and buy land and guns and stuff. Good luck holding off the US military though. Might be better to defect when you have the chance.

cuspy 6y ago

one frightening prediction I've heard is that we will have parallel economies. One for UBI consumer serfs who receive a monthly stipend that expires at the end of each month, another for people who work and receive payment perhaps in other independent currencies, and another, which already exists, for the very wealthy who hold wealth primarily in tangible assets like real estate and fine art. This will either fail spectacularly or it will be the beginning of an even more rigid caste system. Very worrying for a system like this to be produced and executed by institutions who have proven time and again that things like human dignity, civil liberties and a chance at upward mobility are no longer relevent.

neural_thing 6y ago
California already has laws for creating landed gentry (prop 13 inheritance)
- qppo 6y ago
  And now Google is going to be leasing land to its employees. Which I find terrifying
  - octoberfranklin 6y ago
    Eh? Details?
est31 6y ago
The "UBI consumer serfs" already exist in Germany, because the government only pays you benefits if you don't have any property. The moment you start saving up your money, they stop payments and demand you to live from your savings instead.
- chii 6y ago
  But is that not a good way to encourage people to work and produce goods/services? UBI isn't there so you can live a comfortable life off the taxpayers, but as a safety net for accidents, bad luck and other unfortunates so that they don't die. But once they're back on their feet, they should be capable of restarting their productive life and no longer need social welfare.

slickrick216 6y ago

All in chainlink.

ivalm 6y ago

But all of these CB backed digital currencies aren’t like crypto. CBs will presumably be roots of trust and just maintain entries in a normal database.

deleted 6y ago
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danialtz 6y ago
Well, perhaps CBDC folks have learned a lot from Bitcoin and other cryptocurrencies, mostly on scaling and security, so literally not a database but abstract-wise a ledger like cryptos with different consensus and payment model. CBDCs today are mostly based on trusted nodes, e.g. CBs and Banks, with the goal of transforming the current monetary “backend” into a digital automated way without losing the control. Think of it as breaking a monolith into a microservice world, which offers “innovation” and lower barrier to entry (underbanked) among other features.

KasianFranks 6y ago

These are not the cryptos you're looking for. You don't want ones that trade like currencies, you want ones that trade like stocks.

vikramkr 6y ago
Unless you want to use them like a currency. Then you probably want ones that trade like a currency. Theres a reason you don't buy sandwiches with fractional google shares.
- cosmojg 6y ago
  I actually very much would like the ability to do that.
  - vikramkr 6y ago
    It would be cool, but transactions are two way. Its technologically not gonna be too difficult to create a way to buy with stocks (cashapp could probably add the feature tommorow if they wanted) but its also about the other party's willingness to recieve payment in stocks. If the price is expected to go down, they're not going to want to receive it (inflation). If the price is going to go up, you're not going to want to part with it (deflation). But what if there was some sort of asset that had an agency backing it to try and control inflation and deflation to ensure that the value of the asset is stable over time, so it can be used as a currency? Wait a sec...

A4ET8a8uTh0 6y ago

It may come across as snark, but I happen to believe this quote of Bill Hicks truly captures most of my thoughts on the subject. “Rock stars against drugs – that's what we want, isn't it? Government-approved rock-n-roll? Woo! We're partying now!” The entire reason for crypto is the already ridiculous level of control exerted over various gatekeepers. How do I know? I am part of the system.

jdsalaro 6y ago
> The entire reason for crypto is the already ridiculous level of control exerted over various gatekeepers. How do I know? I am part of the system. Can you elaborate on the "ridiculous level of control over various gate-keepers"?
- perardi 6y ago
  I assume credit card processors blocking transactions on, say, porn sites. Or maybe foreign money transfers?
- A4ET8a8uTh0 6y ago
  Sure. None of it is secret. There are regulations in place that enforce specific agenda under the guise of AML, fraud, sanctions, etc. For banks and MSBs type businesses that typically are covered under BSA. But even if you think you are not covered by BSA, there is always FinCEN, where OFAC's strict liability is a pretty big stick. That was high level, but during a more recent conference I participated in ( ages ago now, but on that particular subject ), the discussion of AML professionals suggested something along the lines of 'we can already identify those illicit transactions, why can't we just stop them' ( and to a large degree it is true; your credit card, your bank, your msb knows to large degree what you are buying and what you may be into based on those purchases ). That particular conversation was about CBD products, which at the time were on a weird legal ground. I want you to think about it. Your bank is already capable of deciding a specific type of product is bad for you. Has been for a while and there are people would like to have a say on what is bad. And they are gaining ground. My point is, there is already sufficient amount of control each gate keeper has. All it really needs is a request from government to start gate keeping. Hope this answer the question. There are obviously things I should not be talking about on a public forum and company specific info I can't talk about.

Proven 6y ago

1) I don't give a crap, because I won't use them 2) I do give a crap to the extent that they will be used to hand out free shit (BNI, MMT and similar nonsense), so I'm going to minimize the use of any fiat and instead buy gold, silver and unregulated crypto All this will do is make fiat collapse sooner.

Barrin92 6y ago

Honestly long overdue in my opinion. I've always thought of access to payment systems the same way as I think of clean drinking water. it's basic infrastructure and it should be available to everyone at as little cost as possible, both literal cost and hassle. When I moved to the UK and healthcare basically worked by registering with a GP and that was it and I didn't have to deal with insurance any more it was extremely pleasant. I just want the same thing for payments tbh, just give me digital Euros, accepted everywhere and transfer it instantly between people.

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[deleted]

krmmalik 6y ago

I loved the discussion with Professor Richard Werner on a podcast lately. He talked about what the European Central Bank is planning and what this means for us as consumers and explains why CBDCs really mean for us. Here's the full interview https://youtu.be/OdYmdKUiQNw https://youtu.be/OdYmdKUiQNw

chrisco255 6y ago
Could you summarize what his thoughts are?
- krmmalik 6y ago
  Sure, I'll do my best and hope I'm recalling this correctly. 1. Central banks are regulators, they set the monetary policy that commercial banks must follow 2. Debt is largely created by commercial banks 3. Now the regulator (ECB) wants to be the only creator of debt, thus the regulator is now in direct competition with those it regulates 4. ECB wants to wipe out all the banks and have the pie to itself. 5. Central banks say one thing but their actions often say another 6. CBDCs are not new or revolutionary. Currency is already largely digital and so is debt creation. The only difference here is that the central bank wants to now be the main bank. So the entire public will all bank with one bank. Everyone will have an account at the central bank rather than at a commercial bank of their choice. 7. History tells us this doesn't bode well. This model was run in the Soviet Union and failed terribly. The Central Banks think they are smarter this time but they will fail. 8. Community, non-profit banks are proven to be much better for the economy. Germany had this for a long time which is why it weathered the GFC of 2008, however those community banks are also now being wiped out which means it will struggle to weather this recession successfully. 9. China had a policy change in 1978 which resulted in more community banks and this has contributed significantly to their economic rise. 10. The ECB is not the only central bank with such intentions. Most central banks around the world have the same intentions.

I_am_tiberius 6y ago

Summary of the biggest problem with digital currency managed by central banks: Central banks can use negative interests in order to force people to buy stuff. In the current system people would just withdraw cash in order to avoid negative interest rates if they are too high/low. In the future people will be forced to pay the interests or buy stuff. Governments want to use this mechanism in order to control the economy. If digital currencies managed by central banks really do get approved, it is like being forced to use Facebook.

drcode 6y ago
The technical term for what you're referring to is demurrage, i.e. when money that is sitting unused automatically, in any account, has fees applied to it. It's similar to "inflation", but instead of making new money, you take people's existing money. https://www.investopedia.com/terms/d/demurrage.asp https://www.investopedia.com/terms/d/demurrage.asp
cinquemb 6y ago
That's what I like about CBDC's: They will incentivize more people to use non CBDC's than those who use them now the harder they try to enforce negative interest on savings on their CBDC's.
afrojack123 6y ago
If you had negative interest rates with digital currencies, then everybody buys stocks. This happens even without digital currencies.
ramshorns 6y ago
Point taken, but it might be a bit better than literally being forced to use Facebook, if the Libra currency becomes ubiquitous. Governments controlling the economy doesn't sound too bad if the alternative is one or two huge companies controlling the economy.
beaunative 6y ago
It doesn't have to be approved, central bank is the authority to issue currency, digital or not, it should be thought of as a more economical, convenient replacement for hard cold cash, rather than a replacement for decentralized currencies.

arminiusreturns 6y ago

They want to track everything you do in a totalitarian surveillance system which is already powered on. This was why I rejected bitcoin.... lack of anonymity.

iso8859-1 6y ago
There are many ways to tumble Bitcoin (e.g. Joinmarket), it is not very hard to stay anonymous. As long as you don't need to cash out, that is ;)

Temasik 6y ago

he wants you to buy he's bitcoin that's all

Krasnol 6y ago

I hope they make it work in a way where I don't have to get a PayPal account anymore.

monadic2 6y ago

There's a small chance this could (generally, not just in country) lead to online payments without going through centralized payment processors. That seems like it could be positive!

dalbasal 6y ago

So.... I'm lost. What is a Central Bank Digital Currency? The article he links is pretty corporate-speak. Can anyone translate? What's in the seeming boilerplate now that wasn't there before. Why are they excited about it and how does this mean they can do more stimulus?

Capira 6y ago
tl;dr: more surveillance and financial oppression because corona.
afrojack123 6y ago
A central bank digital currency is like the system China has in place now. International payments are a different and challenging issue for central banks because blackmailing, drug dealing, gun running, and hostage situations that occur between nations can not have their money cancelled by the opposing nation.
anm89 6y ago
These "digital currencies" are simply new types of bank accounts where retail consumers can hold money at central banks. They are no more digital than any other bank account. They have absolutely nothing to do with crypto either.
- dalbasal 6y ago
  ..are are they a "currency" in any augmented way, or is it just currency as it is now?
  - anm89 6y ago
    The only currency involved in a digital dollar is USD. There is no new currency proposed here. The thing that makes an existing dollar digital is being in a new type of bank account that is held by the fed instead of a retail bank. So this is an new type of bank account, not a new type of currency. I do a youtube channel on monetary issues and my last video was specifically on this topic. Feel free to check it out if you are interested https://www.youtube.com/watch?v=n9qnhV9SAyg https://www.youtube.com/watch?v=n9qnhV9SAyg

fataliss 6y ago

I make the bet that "traditional" banks will steer to go cashless in the near future and start charging all kind of fees for things you never had to pay for back when you could hold money in your hand. This is why the utopia of a decentralized currency would be so needed and will be fought all the way. Side-note: I don't like the environmental impact of BTC, but I don't like being a victim of banks (who tend to have a terrible impact on the env in their own ways).

frankydp 6y ago

These blockchain investors are some grade "A" con-artist. They can sell anyone on this crap.

anm89 6y ago
This has absolutely nothing to do with block chain of you look at the actual legislation being proposed.

afrojack123 6y ago

Time to find a new job Visa, Mastercard, Paypal, Square employees.

raziel2701 6y ago

What is the difference between a digital currency and the digital money I see in my bank account online? It feels to me like I already transfer money digitally when shopping with a credit card. Later on that twitter thread he shares a poll by the IMF [0] where they ask you how will you be sending money to a family member in 5 years. The possible answers are cash in envelope, money transfer service, digital currency or other. Are venmo and similar services not already using a digital dollar? [0]https://twitter.com/RaoulGMI/status/1317836130788757504/photo/1 https://twitter.com/RaoulGMI/status/1317836130788757504/phot...

xalava 6y ago
There is a key difference in nature, with some practical consequences. You don't have money in your bank account, the bank has a debt toward you. When you wire money or pay with a credit card, it triggers a chain of intermediaries to move that debt. It is costly in part because of the counterparty risks. In most countries, an individual however is protected from a bank default up to a certain amount. Cash is directly minted by the central bank. In a trustless manner, if you exchange goods and services for cash, the settlement is instantaneous. Legally, this cash can be used anywhere in your country. For everyday use, it might not change habits overnight, but it will have a long term impact on the financial infrastructure.
sippingjippers 6y ago
At least in the case of the Digital Euro, one of the explicitly documented goals for the scheme is to alleviate dependence on US payment processors within Europe (that's buried somewhere in https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_euro~4d7268b458.en.pdf https://www.ecb.europa.eu/pub/pdf/other/Report_on_a_digital_... )
enjeyw 6y ago
A lot of existing digital money is more akin to a widely-redeemable voucher issued by a private company than it is to physical cash. You're free to use it in ways that are sanctioned by that issuing company, but if you want to do something like spend it with a competitor, you might run into road-blocks. In places like the US, this feels like an academic difference, but that's because non-bank digital payments haven't really consolidated yet. In Kenya, where one mobile phone company (Safaricom) has a 98.8% market share of digital payments, the situation is very different- effectively on private company has a monopoly on money. They can and do use this monopoly power to their advantage. A CBDC attempts to shift money back to being a public good like physical cash, by guaranteeing interoperability between issuers, rather than everyone paying with casino chips.

anm89 6y ago

So I've been tracking this fairly closely via the Banking for All Act and I think a lot of the issues around this are not what they seem to be although I think they signal a very profound shift in the world of monetary politics. For one this has NOTHING to do with crypto currency. This also has NOTHING to do with any kind of technological advancement at all. There is really nothing particularly more digital about the digital currencies being proposed than any other electronic bank balance or credit card database line item. I think the word digital here is an attempt to sneak in some radical changes to how the federal reserve works under the guise of doing something to modernize banking in the world of cryptocurrency. So then what is this about? What these digital currencies are about is the ability for normal people to hold deposit accounts that are held directly in the Central Bank although a normal commercial bank would still act as the custodian and you would still access them through your normal bank. So why go through all of the trouble to do this? I think it's basically an admission that Quantative Easing era is over and that monetary policy in general has run its course and are no longer useful in the age of 0% interest rates while we still face deflation. By having normal people hold central bank accounts, they will be able to implement a new kind of policy that they have wanted the power to do for decades: hybrid fiscal / monetary policy where the monetary policy outcome is deposited directly into the account of a normal person, not a bank. This is basically the Fed acknowledging that they are getting ready for MMT. https://www.congress.gov/bill/116th-congress/senate-bill/3571/text https://www.congress.gov/bill/116th-congress/senate-bill/357... Edit: I'm getting downvoted on this, maybe because this seems conspiratorial but I don't think I'm really saying anything that speculative here. Look at the title of the article linked to in the attached tweet from the IMF: "A New Bretton Woods Moment". The people involved clearly see this as a time when they need to completely rework the international monetary system (which is what Bretton Woods was in the 40's)

xalava 6y ago
The technology side is secondary. However, if it wasn't for cryptocurrencies, we wouldn't be discussing this topic today. Bitcoin has proven that it was possible to build an open financial infrastructure, and has inspired many similar projects. The hybrid fiscal/monetary policy is an interesting perspective, especially in those times. My understanding of ongoing debates is that there is no clear strategy yet.

lgats 6y ago

Worth reviewing the Banking for All Act, which could introduce a digital dollar: https://www.congress.gov/bill/116th-congress/senate-bill/3571/text https://www.congress.gov/bill/116th-congress/senate-bill/357...