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I find it interesting that the paper focusses on Central Bank Digital Currencies and Global Stablecoins, but pretends not to see/prefers not to deal with the el

I find it interesting that the paper focusses on Central Bank Digital Currencies and Global Stablecoins, but pretends not to see/prefers not to deal with the elephant in the room - Bitcoin. If anything is a candidate for a potential Reserve Currency, BTC is it, imho. Deep in the footnotes comes the contorted logic,"According to the IMF Treatment of Crypto Assets in Macroeconomic Statistics, crypto assets such as Bitcoin do not meet the definition of a financial asset—and hence currency—in macroeconomic statistics." and presumably that's what lets them off the hook, nevertheless, the ONE payment-rail that BTC fits perfectly is precisely that of international settlements between Central Banks/countries - such settlements typically involve the large-scale transfer of assets, they're not especially time-sensitive, and the transfer cost is inconsequential (and in the case of BTC negligible against the values transferred). So I'm still left wondering: Why the aversion? Fear? Lack of control by recognised "authorities"? Their argument that it's "too volatile" is largely untrue over the past year or two, with Bitcoin showing no greater volatility than any of the world's fiat currencies, so I doubt that's the factor at play.

jononor 6y ago
What do you mean by "Bitcoin showing no greater volatility than any of the world's fiat currencies"? I pulled up BTC/USD and EUR/USD https://www.xe.com/currencycharts/?from=XBT&to=USD&view=2Y https://www.xe.com/currencycharts/?from=XBT&to=USD&view=2Y https://www.xe.com/currencycharts/?from=EUR&to=USD&view=2Y https://www.xe.com/currencycharts/?from=EUR&to=USD&view=2Y In the last 1 year, I see BTC low of 5000 and high of 12000, a 40% difference. And EUR at 1.06 to 1.20, about 12% difference. The year before was worse for BTC and better for EUR. 3x the volatility is quite considerable.
- demosito666 6y ago
  Not that bitcoin is not volatile (it sure as hell is), but you're picking the most stable currencies in the world and comparing them to a crypto asset that is younger than a kindergarden class. Try building the same graphs for 3rd or even 2nd world currencies and observe that they might have even worse volatility. I live in a country whose currencies devaluated in order of trillion times in 20th century if you count multiple "monetary reforms" and "denominations".
  - notahacker 6y ago
    Sure, but nobody is pretending that the likes of the Venezuelan Bolivar show no more volatility than any of the world's [other] fiat currencies as they breathlessly hype its potential as a global reserve currency.
    - emteycz 6y ago
      The thing is that it's not that bad given its age, and it's improving.
  - JumpCrisscross 6y ago
    > you're picking the most stable currencies in the world OP tried to compare Bitcoin to reserve currencies. Reserve currencies are more stable than average.
- dogman144 6y ago
  You have to approach it with a pretty wide angle lens, but the better analogy IMHO is comparing BTC to other early day currencies. Have you looked at USD vol in the 1800's? Reichsmark vol? From that angle, vol of "proper currencies" in their early adoption days tend to start looking a lot like BTC vol. At a minimum, BTC today to USD today isn't an apples:apples take at all. In my mind, this starts to damage vol = bad BTC arguments in terms of analyzing BTC's adoption. potential.
RikNieu 6y ago
> Lack of control by recognised "authorities" Ding, ding, ding!
nabla9 6y ago
BTC has no benefit over central counterparty clearing and settlement. Even if the technology would adapt cryptographic ledgers, there is no reason to use another currency for that. You use sovereign currencies as before.
- javert 6y ago
  Obviously, if you are a user of the currency and don't want it to be inflated by the central bank, there's at least one thing in bitcoin's favor, as it has a fixed maximum supply. You can argue that's a bad thing if you want, but just ignoring that it exists doesn't make much sense.
  - biolurker1 6y ago
    I wrote the same message before seeing yours :)
    - javert 6y ago
      I see, happy to have someone who agrees with me. I don't know why so many people ignore the fixed supply issue with bitcoin, it seems like the "elephant in the room."
- biolurker1 6y ago
  Obvious difference that no one entity can control supply. If that's good or bad is another long academic discussion
- bboygravity 6y ago
  > BTC has no benefit over central counterparty clearing and settlement. I can think of a few huge practical benefits: 1. Try to transfer money cross border within the EU/SEPA zone on a Friday. It'll be in the receiving account on Tuesday (and usually not in the morning). That's around 96 hours between sending and receiving. During weekdays this goes to 24 hours. Not even talking about intercontinental transfers. And this is assuming there are no national holidays in either the sending or receiving country during that period. And then there are people that complain that Bitcoin's < 15 minutes is slow, lol. 2. Transfers through central counterparty clearing and settlement sometimes get rejected/delayed for absolutely no reason at all. They can also be rejected/delayed for political or other (good) reasons. BTC doesn't suffer from this. 3. Transfers through central counterparty clearing and settlement can get stolen by attacking the IT systems themselves. Example:https://www.bankinfosecurity.com/another-swift-hack-stole-12-million-a-9121 https://www.bankinfosecurity.com/another-swift-hack-stole-12.... BTC doesn't suffer from this. Yes, BTC can get stolen through phishing or by attacking end-points, but so can those transfers. 4. Going through central counterparty clearing and settlement requires both the sending and the receiving party to have some type of bank account in the locations that they want to send or receive money to/from. This means dealing with very time consuming local bureaucracy. Especially when the receiving party (for example) wants to receive money in a "new" country that they're not "set up" in yet. Setting this up can take days/weeks of turn around time and hours/days of man-hours. BTC doesn't suffer from this at all. 5. Transfer costs and high exchange rate spreads. There are probably more issues that I didn't think of. As a traveler only dealing with relatively tiny amounts of money across borders, BTC has already saved me a ton of time, money and frustration in trying to access my own money across borders. Even I as a nobody can see the benefit, I imagine those benefits only get greater for people dealing with larger amounts (as I assume the bureaucracy and problems go up with the amount of money transferred).
raverbashing 6y ago
What I love about the Bitcoin enthusiasts is how they picture it to be the be all/end all magical money that will solve everything Meanwhile the real big money-movers (legal or illegal) are still using bank accounts and paper companies in "business-friendly" jurisdictions.
- janoside 6y ago
  The "market" is always active and always looking to select the best of everything, including money. Bitcoin isn't be-all/end-all magical money - but it is a massive, order-of-magnitude improvement on history's greatest "hard money" (gold). The markets of the world are slowly coming to understand the value of this "best reserve asset and best collateral asset ever seen" (Raoul Pal). A new digital, internet-native asset with the greatest monetary properties in history is monetizing before your eyes; meanwhile you're relying on your understanding of an old world to convince yourself it doesn't matter and the people who see something deeply interesting are kooks.
  - seibelj 6y ago
    This is the history of all revolutionary technologies. At first it seems like a useless toy, then the establishment laughs at and denigrates it, then it's fought aggressively, then it takes over. I would say we are almost past the "fought aggressively" stage, at least for Bitcoin, and into the "taking over" stage as smart institutional money begins to get exposure. It's very interesting that a large contingent of smart software people on HN heard about Bitcoin extremely early, said it was a useless failure, and then had to re-justify their position for a decade as Bitcoin marches on. It's impossible for anyone to claim Bitcoin has no value at this point, but on every blockchain post on HN there is a core of haters that will make the same tired arguments against it. Meanwhile, no one cares!
    - janoside 6y ago
      I appreciate your perspective. I feel like I'm taking crazy pills these days on HN concerning BTC. This idea (early rejection, re-justification) is a helpful heuristic for understanding some of it at least.
JumpCrisscross 6y ago
> Why the aversion? Students of central banking are familiar with central banking in the era of gold and why it was almost universally a disaster. (Most of Bagehot [1] concerns itself with bank runs.) This paper’s audience is familiar with that history. Talking about Bitcoin would be like addressing why machine language wasn’t used in a CS paper. [1] https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Description_of_the_Money_Market https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Descriptio...
- baybal2 6y ago
  I doubt if anything made changed since the era of gold, just sizes of economies went up dramatically, more common people are banked, and there are more option to do bank run against. Gold [https://goldprice.org/charts/history/gold_6_month_o_usd_x.png https://goldprice.org/charts/history/gold_6_month_o_usd_x.pn...] is of course one of them, but costs of many other liquid commodities have shot up counterintuitively this time as well. There is nothing "magical" that has happened to banks when they switched to fiat money.
  - JumpCrisscross 6y ago
    > There is nothing "magical" that has happened to banks when they switched to fiat money Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort. There is a lot of scholarship, originally from the turn of the last century but perennially refreshed, on the inherent failure modes of fixed-supply money systems amidst a growing, industrialising or industrialised economy. Fixed-supply assets are good. Fixed-supply currencies cease, quickly, to be currencies.
    - baybal2 6y ago
      > Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort. So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state. Just before, it was much more likely led to more angry people with pitchforks than today.
andomar 6y ago
If Central Banks were to get into Bitcoin, they would make early investors in Bitcoin very rich. Like 1 person would own 25% of all the world's wealth. That wouldn't be proper Central Banking :)
- herendin 6y ago
  If that's true, then the longer they wait, the worse it gets. That's not good.
x87678r 6y ago
The USA is super strict on making sure every transaction they can control gets monitored and tracked. Any financial firm that touches dollars must comply or they'll get fined literally billions. There is no way BTC will be allowed to go mainstream unless the US regulators can track every user on the blockchain.
- seibelj 6y ago
  It becomes an asset that eats dollars. Print more dollars and BTC goes up. Just like gold sits in vaults, Bitcoin can sit in cold storage. BTC is also something that individuals can buy in extremely small increments. It is an escape valve for people in Argentina, Turkey, Venezuela, etc. to protect their wealth from horrible and corrupt central bankers.
- anm89 6y ago
  Our "exorbitant privelege" is not going to last forever. When the imf called. For a new Bretton woods moment last week, ending that system is what they were talking about.
  - x87678r 6y ago
    Yeah check out where IMF headquarters is and who pays for it then tell me again that the IMF is going to let BTC take over from the dollar.
    - deleted 6y ago
      [deleted]
    - anm89 6y ago
      The IMF already doesn't have a say in this. The USA isn't going to have a say in it either if 30 year yields go down any further. Also I'm not claiming that the BTC will take over the dollar, I'm saying dedollarization will occur in general. This isn't a particularly controversial opinion at this point in the finance world. The average CNBC guest is willing to admit this at this point.
anoraca 6y ago
Maybe because whatever entity created bitcoin controls what, like 9% of all bitcoin? And nobody knows who or what they are? Why would anyone want to be involved in a financial system that functions that way?
dogman144 6y ago
Yeah that's sort of silly. The implications of a non-BTC-based standard with the intent of enabling cross-border more effectively is: - IMFcoin, UNCoin(and the conspiracies around global banking cartel actually take flight because yeah actually that would be nuts) - EUcoin, USAcoin, ChCoin (imagine the geopolitics...) A digital currency that directly fits the digital use-case being described by these papers written by central banks, that is in turn ignored by these papers, is sort of like talking about WW2 without mentioning Germany's role. I can definitely understand the aversion given the implications of a non-CB controlled digicoin, but just ignoring its existence really blows a hole in the intellectual rigor of these whitepapers. Ultimately, the network adoption will play out as it plays out. We don't have USAweb and RUSweb (maybe moving toward that, but different topic), we have the decentralized, multi-party, ICANN/IETF/private sector/public sector-led The Internet. When you track how the Internet came to be, and how it's actually controlled now, it starts to look a lot like the Bitcoin network's growth plan at the moment. What will be will be. Once it gets analyzed as a network protocol with digital native payments, vs. a digital currency on the regular internet, the blind spots in BTC criticism start to show.

jononor 6y ago

What do you mean by "Bitcoin showing no greater volatility than any of the world's fiat currencies"? I pulled up BTC/USD and EUR/USD https://www.xe.com/currencycharts/?from=XBT&to=USD&view=2Y https://www.xe.com/currencycharts/?from=XBT&to=USD&view=2Y https://www.xe.com/currencycharts/?from=EUR&to=USD&view=2Y https://www.xe.com/currencycharts/?from=EUR&to=USD&view=2Y In the last 1 year, I see BTC low of 5000 and high of 12000, a 40% difference. And EUR at 1.06 to 1.20, about 12% difference. The year before was worse for BTC and better for EUR. 3x the volatility is quite considerable.

demosito666 6y ago
Not that bitcoin is not volatile (it sure as hell is), but you're picking the most stable currencies in the world and comparing them to a crypto asset that is younger than a kindergarden class. Try building the same graphs for 3rd or even 2nd world currencies and observe that they might have even worse volatility. I live in a country whose currencies devaluated in order of trillion times in 20th century if you count multiple "monetary reforms" and "denominations".
- notahacker 6y ago
  Sure, but nobody is pretending that the likes of the Venezuelan Bolivar show no more volatility than any of the world's [other] fiat currencies as they breathlessly hype its potential as a global reserve currency.
  - emteycz 6y ago
    The thing is that it's not that bad given its age, and it's improving.
- JumpCrisscross 6y ago
  > you're picking the most stable currencies in the world OP tried to compare Bitcoin to reserve currencies. Reserve currencies are more stable than average.
dogman144 6y ago
You have to approach it with a pretty wide angle lens, but the better analogy IMHO is comparing BTC to other early day currencies. Have you looked at USD vol in the 1800's? Reichsmark vol? From that angle, vol of "proper currencies" in their early adoption days tend to start looking a lot like BTC vol. At a minimum, BTC today to USD today isn't an apples:apples take at all. In my mind, this starts to damage vol = bad BTC arguments in terms of analyzing BTC's adoption. potential.

RikNieu 6y ago

> Lack of control by recognised "authorities" Ding, ding, ding!

nabla9 6y ago

BTC has no benefit over central counterparty clearing and settlement. Even if the technology would adapt cryptographic ledgers, there is no reason to use another currency for that. You use sovereign currencies as before.

javert 6y ago
Obviously, if you are a user of the currency and don't want it to be inflated by the central bank, there's at least one thing in bitcoin's favor, as it has a fixed maximum supply. You can argue that's a bad thing if you want, but just ignoring that it exists doesn't make much sense.
- biolurker1 6y ago
  I wrote the same message before seeing yours :)
  - javert 6y ago
    I see, happy to have someone who agrees with me. I don't know why so many people ignore the fixed supply issue with bitcoin, it seems like the "elephant in the room."
biolurker1 6y ago
Obvious difference that no one entity can control supply. If that's good or bad is another long academic discussion
bboygravity 6y ago
> BTC has no benefit over central counterparty clearing and settlement. I can think of a few huge practical benefits: 1. Try to transfer money cross border within the EU/SEPA zone on a Friday. It'll be in the receiving account on Tuesday (and usually not in the morning). That's around 96 hours between sending and receiving. During weekdays this goes to 24 hours. Not even talking about intercontinental transfers. And this is assuming there are no national holidays in either the sending or receiving country during that period. And then there are people that complain that Bitcoin's < 15 minutes is slow, lol. 2. Transfers through central counterparty clearing and settlement sometimes get rejected/delayed for absolutely no reason at all. They can also be rejected/delayed for political or other (good) reasons. BTC doesn't suffer from this. 3. Transfers through central counterparty clearing and settlement can get stolen by attacking the IT systems themselves. Example:https://www.bankinfosecurity.com/another-swift-hack-stole-12-million-a-9121 https://www.bankinfosecurity.com/another-swift-hack-stole-12.... BTC doesn't suffer from this. Yes, BTC can get stolen through phishing or by attacking end-points, but so can those transfers. 4. Going through central counterparty clearing and settlement requires both the sending and the receiving party to have some type of bank account in the locations that they want to send or receive money to/from. This means dealing with very time consuming local bureaucracy. Especially when the receiving party (for example) wants to receive money in a "new" country that they're not "set up" in yet. Setting this up can take days/weeks of turn around time and hours/days of man-hours. BTC doesn't suffer from this at all. 5. Transfer costs and high exchange rate spreads. There are probably more issues that I didn't think of. As a traveler only dealing with relatively tiny amounts of money across borders, BTC has already saved me a ton of time, money and frustration in trying to access my own money across borders. Even I as a nobody can see the benefit, I imagine those benefits only get greater for people dealing with larger amounts (as I assume the bureaucracy and problems go up with the amount of money transferred).

raverbashing 6y ago

What I love about the Bitcoin enthusiasts is how they picture it to be the be all/end all magical money that will solve everything Meanwhile the real big money-movers (legal or illegal) are still using bank accounts and paper companies in "business-friendly" jurisdictions.

janoside 6y ago
The "market" is always active and always looking to select the best of everything, including money. Bitcoin isn't be-all/end-all magical money - but it is a massive, order-of-magnitude improvement on history's greatest "hard money" (gold). The markets of the world are slowly coming to understand the value of this "best reserve asset and best collateral asset ever seen" (Raoul Pal). A new digital, internet-native asset with the greatest monetary properties in history is monetizing before your eyes; meanwhile you're relying on your understanding of an old world to convince yourself it doesn't matter and the people who see something deeply interesting are kooks.
- seibelj 6y ago
  This is the history of all revolutionary technologies. At first it seems like a useless toy, then the establishment laughs at and denigrates it, then it's fought aggressively, then it takes over. I would say we are almost past the "fought aggressively" stage, at least for Bitcoin, and into the "taking over" stage as smart institutional money begins to get exposure. It's very interesting that a large contingent of smart software people on HN heard about Bitcoin extremely early, said it was a useless failure, and then had to re-justify their position for a decade as Bitcoin marches on. It's impossible for anyone to claim Bitcoin has no value at this point, but on every blockchain post on HN there is a core of haters that will make the same tired arguments against it. Meanwhile, no one cares!
  - janoside 6y ago
    I appreciate your perspective. I feel like I'm taking crazy pills these days on HN concerning BTC. This idea (early rejection, re-justification) is a helpful heuristic for understanding some of it at least.

JumpCrisscross 6y ago

> Why the aversion? Students of central banking are familiar with central banking in the era of gold and why it was almost universally a disaster. (Most of Bagehot [1] concerns itself with bank runs.) This paper’s audience is familiar with that history. Talking about Bitcoin would be like addressing why machine language wasn’t used in a CS paper. [1] https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Description_of_the_Money_Market https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Descriptio...

baybal2 6y ago
I doubt if anything made changed since the era of gold, just sizes of economies went up dramatically, more common people are banked, and there are more option to do bank run against. Gold [https://goldprice.org/charts/history/gold_6_month_o_usd_x.png https://goldprice.org/charts/history/gold_6_month_o_usd_x.pn...] is of course one of them, but costs of many other liquid commodities have shot up counterintuitively this time as well. There is nothing "magical" that has happened to banks when they switched to fiat money.
- JumpCrisscross 6y ago
  > There is nothing "magical" that has happened to banks when they switched to fiat money Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort. There is a lot of scholarship, originally from the turn of the last century but perennially refreshed, on the inherent failure modes of fixed-supply money systems amidst a growing, industrialising or industrialised economy. Fixed-supply assets are good. Fixed-supply currencies cease, quickly, to be currencies.
  - baybal2 6y ago
    > Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort. So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state. Just before, it was much more likely led to more angry people with pitchforks than today.

andomar 6y ago

If Central Banks were to get into Bitcoin, they would make early investors in Bitcoin very rich. Like 1 person would own 25% of all the world's wealth. That wouldn't be proper Central Banking :)

herendin 6y ago
If that's true, then the longer they wait, the worse it gets. That's not good.

x87678r 6y ago

The USA is super strict on making sure every transaction they can control gets monitored and tracked. Any financial firm that touches dollars must comply or they'll get fined literally billions. There is no way BTC will be allowed to go mainstream unless the US regulators can track every user on the blockchain.

seibelj 6y ago
It becomes an asset that eats dollars. Print more dollars and BTC goes up. Just like gold sits in vaults, Bitcoin can sit in cold storage. BTC is also something that individuals can buy in extremely small increments. It is an escape valve for people in Argentina, Turkey, Venezuela, etc. to protect their wealth from horrible and corrupt central bankers.
anm89 6y ago
Our "exorbitant privelege" is not going to last forever. When the imf called. For a new Bretton woods moment last week, ending that system is what they were talking about.
- x87678r 6y ago
  Yeah check out where IMF headquarters is and who pays for it then tell me again that the IMF is going to let BTC take over from the dollar.
  - deleted 6y ago
    [deleted]
  - anm89 6y ago
    The IMF already doesn't have a say in this. The USA isn't going to have a say in it either if 30 year yields go down any further. Also I'm not claiming that the BTC will take over the dollar, I'm saying dedollarization will occur in general. This isn't a particularly controversial opinion at this point in the finance world. The average CNBC guest is willing to admit this at this point.

anoraca 6y ago

Maybe because whatever entity created bitcoin controls what, like 9% of all bitcoin? And nobody knows who or what they are? Why would anyone want to be involved in a financial system that functions that way?

dogman144 6y ago

Yeah that's sort of silly. The implications of a non-BTC-based standard with the intent of enabling cross-border more effectively is: - IMFcoin, UNCoin(and the conspiracies around global banking cartel actually take flight because yeah actually that would be nuts) - EUcoin, USAcoin, ChCoin (imagine the geopolitics...) A digital currency that directly fits the digital use-case being described by these papers written by central banks, that is in turn ignored by these papers, is sort of like talking about WW2 without mentioning Germany's role. I can definitely understand the aversion given the implications of a non-CB controlled digicoin, but just ignoring its existence really blows a hole in the intellectual rigor of these whitepapers. Ultimately, the network adoption will play out as it plays out. We don't have USAweb and RUSweb (maybe moving toward that, but different topic), we have the decentralized, multi-party, ICANN/IETF/private sector/public sector-led The Internet. When you track how the Internet came to be, and how it's actually controlled now, it starts to look a lot like the Bitcoin network's growth plan at the moment. What will be will be. Once it gets analyzed as a network protocol with digital native payments, vs. a digital currency on the regular internet, the blind spots in BTC criticism start to show.