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Swedish bankers face identity crisis over digital currency plans
- Daho0n 6y agoYet another plus in the book for Sweden. If banks as we know them today does start to die out it's another huge win.
- Mauricebranagh 6y agoYou might need to think about that in more depth
- krageon 6y agoThe core argument here genuinely seems to be that private banks don't want to become obsolete. The article spends a lot of time saying this is bad (or saying that they say it's bad), but it's not clear to me why this is (or even if it truly is). I must admit over some skepticism given the extreme loucheness of the banking sector.
- Blikkentrekker 6y agoIs the sector more louche than any other?
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- cm2187 6y agoWhat is bad news for banks is bad news for borrowers.
- im3w1l 6y agoIf banks are obsoleted, then how are mortgages supposed to work?
- imhoguy 6y agoLoans are mostly money printed by central banks and sold via consumer banks. Likely e-mortgage would be provided by central bank directly.
- im3w1l 6y agoWon't it lead to less accurate pricing of loans if there is only one central actor using rigid rules (needed to appear fair)?
- literallycancer 6y agoThe central actor can use the exact same rules that they currently make the lenders use.
- jeofken 6y agoFiat currency already means the supply side of capital is detached from anything in reality. Remember price is where supply and demand meet, and interest rate is the price of capital. Central planning of the currency market, just like DDR had central planning of the car market with the Trabant. With central banking, the supply can be infinite, and that’s what we Swedes are seeing with NEGATIVE interest rates. Jyske Bank in DK borrows to consumers house loans where you are paid to borrow. It can not end well, please someone show me logically/from first principle how it ever can.
- NoOneNew 6y agoAs much as I hate banks in general, you are hitting the nail on the head. Low interest mortgages and credit in general start to fly out the window. The huge stock piles of cash they have help mitigate their risks effectively. Lower volume of loans also means a whole lot of financial vehicles people invest in for their retirement, are going to wash up as well. Right now, I dont see a viable replacement outside of private lenders like pay cheque loan and car title loans. Huge interest rates and really predatory capital requirements. Sub 20% interest rates, like it or not, come from all the things digi coins want to get rid of.
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- Shadonototro 6y agobitcoin solves nothing, worse it empower the "wanting to become millionaire overnight" syndrome that plagues our society this world is horrible when you look into the details, working and helping other people is not rewarded at all profiting from other people is what best people can do to have a better time on this planet
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- fjiizrsdfjjj 6y agoYes. I think your comment points out a big issue in our societies. However, note that the article isn't about Bitcoin. Central bank digital currencies (CBDC) basically operate with a centralized database; no "mining", no pseudo-anonymity, most important, no gambling-like course changes. It represents the "offline money" 1:1, only is it managed centralized rather than federalized by many banks.
- StavrosK 6y agoWouldn't that also mean perfect visibility into the movement of money, and the death of cash? Seems to me that perfect visibility into funds will be as deleterious to society as perfect law enforcement. How are you going to lead the next BLM, or LGBTQ rights, or just a plain old revolution when you can't fund anything? There was a time, not long ago, when being gay was actually against the law. Imagine wanting to build a civil rights organization for homosexuals, but being unable to fund it because the government immediately and exactly knows which people associated with such a criminal enterprise.
- austhrow743 6y agoYes it would mean exactly that.
- fjiizrsdfjjj 6y agoI'm just diving into digital money to be honest, I'd be very happy if somebody had information on this topic. My gut feeling is that these are societal issues beyond the mere implementation of money. You could have policies that protect donors of societal organizations and automatically wipe associated records. I think the reality now is that big money is being laundered and stolen from society by big corporations. At the same time it's an illusion that citizens have anonymity in our daily endeavors. Look at Bitcoin. Pushed by anarcho-romantic illusions, it's the dream of non-regulated big money gambling that hurts society... We should focus on making our society robust, open and inclusive instead of thinking that we need some decentralized crypto solution.
- shinryuu 6y agoThis video explains pretty clearly why bankers in Sweden thinks this is a bad idea. https://www.youtube.com/watch?v=DK1DZlWaiLY https://www.youtube.com/watch?v=DK1DZlWaiLY
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- kasperni 6y agoMore details on e-krona at the official site [1]. [1] https://www.riksbank.se/en-gb/payments--cash/e-krona/ https://www.riksbank.se/en-gb/payments--cash/e-krona/
- bjeds 6y agoAs a Swedish person I don't see the point at all: Why would I want to use this? I would rather have a decentralized system of various banks and global companies (Mastercard, Visa, etc) track my transactions and spread out that risk, instead of one single state actor. I could also use, you know, cash. Digital cash is first and foremost an instrument for new ways to do monetary policy, as more countries (like Sweden and EU) are heading towards a Japanese situation. Playing it as a tool for consumers to fight banks is just marketing/storytelling to gain support and adoption.
- Mauricebranagh 6y agoAnd I believe the Swedish central bank has thought about you you could apply -ve interest rates to bank accounts as Sweden is so massively a non cash society.
- imtringued 6y agoI wonder about that. In theory it means you can have interest rates that are well below 0% (think of -2% or worse). The idea behind negative interest rates is that there is work to be done that cannot be financed at a 0% interest rate and that the interest rate has to be even lower. If you assume 2% bank fees and a -3% interest rate it would be possible for banks to hand out -1% loans and that would allow financially insecure consumers to acquire loans because you cannot default by definition. Your principal will shrink even if you do nothing. Will this work? I feel like it could work but it could also have unintended consequences.
- gruez 6y ago>because you cannot default by definition. Your principal will shrink even if you do nothing. That's not what default means. If you stop making monthly payments, you're in default. From wikipedia: > Default may refer to: Default (finance), failure to satisfy the terms of a loan obligation or failure to pay back a loan
- Mauricebranagh 6y agoNo they where talking about taking the -ve interest from the bank accounts
- AniseAbyss 6y agoI am not even that old and I remember a time when every small city had 4 banks right next to eachother. All gone. Now banking is an app. Haven't used cash since forever- you have to literally google maps the nearest ATM.
- tluyben2 6y agoCountry? Here (Spain) many places do take cards/contactless but it's usually 'broken' under E100 or they just simply refuse anything but cash. Eveyone has wads of cash etc. And not only 'the south', Berlin (Germany) has it too; many places don't take cards; they insist on cash.
- jeofken 6y agoIf you love freedom, like very few of us Swedes do, use non-traceable and uncensorable payments like cash.
- u678u 6y agoWhat happens when grandma can't figure out where her payment went, does she ring the central bank?
- jpttsn 6y agoI went to a presentation by the working group behind this. It seemed like a shitshow. Maybe they’ve gained a lot of competence in a short time. Or maybe they are accelerating this to cement the negative interest rates, which could be more urgent if they keep spending on the pandemic.
- razius 6y agoI see this as driven by the negative interest rates, this is very interesting to read: - https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Breaking-Through-the-Zero-Lower-Bound-43358 https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Bre...
- eswat 6y ago> “If you have a bank account but you can - at the click of a button - move your money to the central bank ... that could risk instability in the system,” Yazdi said. > Riksbank Deputy Governor Cecilia Skingsley has dismissed such concerns, saying people can already exit the banking system by buying treasury bills. Not sure about Sweden but I don't believe many retail banks make buying t-bills as easy as a click of a button, unless you were using their brokerage. Few laymen are excited about converting their cash to t-bills. But digital currencies like CBDCs are part of the cryptocurrency wave that has a lot more of the general population interested.
- mongol 6y agoI think you would not deposit your money at the Riksbank, they would issue it but you would need to store it somewhere? Existing banks could offer that, but for a service charge, which would basically mean negative interest. For that reason, this is a less attractive option for storing more than pocket-money and the fear that banks would lose business might be exaggregated.
- nly 6y ago> “Nothing you buy will be anonymous,” he said, adding a positive outcome would be that it is harder for criminals to evade detection or anti-money laundering controls But centrally issued digital cash can be anonymous. There exist cryptographic schemes where tokens can be exchanged peer-to-peer in a way where the issuing bank can't identify participants until tokens are double spent. Double spends can then be charged against the account of the double spender when the recipient of a transaction deposits the tokens. These schemes are far more efficient, natural progression to our current fiat monetary system than Bitcoin or any of the other "crypto currencies". The only reason we don't have this tech today is there are no incentives for our governments or banks to maintain the anonymity of cash. https://archive.org/details/CryptographyOfAnonymousElectronicCash https://archive.org/details/CryptographyOfAnonymousElectroni...
- areoform 6y agoI have been studying Real-Time Gross Settlement systems for the past two months, including questions of liquidity in settlement systems. The question at the heart of the banking system is quite simple, if banks take capital from customers and use it to provide debt to others, then how much money should they keep on hand for their customers' withdrawals and transfers? This question is hard to answer. As there is a conflict between what the bank does (i.e. provide debt), and how it is supposed to provide it (by taking savings etc.). Everything else, from central banks "offering cheap liquidity" is an add on. They are mechanisms that allow - for example, a bank to easily borrow this money so that they can cancel it out/repay it from transactions coming into their banks. What makes it all borked is that you can't trust bankers with their grandmas. If there is a flaw, they will exploit it. Every major change has led to an exploit. E.g. In 1918, the American Government introduced the Leased Wire System that used the telegraphs and a network of 12 Reserves to allow banks to transct with each other across CONUS. It reduced the average time for cheques to be cashed in at banks across the country from 5.4 days in 1912 to just 2.4 days. Theoretically, this reduced the risk taken by banks when they transacted with unknown banks across the country, with the Government acting as the escrow. It catalysed innovation and led to an explosion of financial services across the young country. The system was supposed to be foolproof by reducing the time "credit" was needed to make transactions. Essentially, until one bank sent the money and the other got it, they were operating on a system of credit. And they would "net" the books at the end of the day/week to physically transfer assets. FedWire (Leased Wire System) made everyone feel safe by sending notes of the transactions across great distances. But the netting still took time. All it took was one bank to fall behind on current obligations to other banks for all of the banks to collapse, leading to the Great Depression. Important people got together and made rule changes to fix the problem. But then they innovated again. The Federal Reserve started making Automatic Clearing Houses (ACHs) and Remote Check Processing Centres (RCPCs) to make settlement faster, starting in the 60s and precipitating in 1972. This made settlement faster therefore safer. And it led to great financial innovation. The magic of computers and innovation meant that people could use these same systems to transact across the world! Until in 1974, when the German lender Herstatt collapsed due foreign exchange investments based in the Dollar, which caused the bank to fail to meet its settlement obligations... > That day, a number of banks had released payment of Deutsche Marks (DEM) to Herstatt in Frankfurt in exchange for US dollars (USD) that were to be delivered in New York. The bank was closed at 16:30 German time, which was 10:30 New York time. Because of time zone differences, Herstatt ceased operations between the times of the respective payments. The counterparty banks did not receive their USD payments This is a simplified history. But the history of banking is the history of doing settlement while managing liquidity and counter-party risk. No one can predict how this will turn out. But we shouldn't cheer the government cutting out the middleman and going into the business of settlement and direct debt themselves. The Great Collapse of 2034 might be precipitated by it. https://fraser.stlouisfed.org/blog/2020/09/check-processing-and-the-fed/ https://fraser.stlouisfed.org/blog/2020/09/check-processing-... https://www.federalreserve.gov/newsevents/speech/bernanke20100408a.htm https://www.federalreserve.gov/newsevents/speech/bernanke201... https://en.wikipedia.org/wiki/Settlement_risk https://en.wikipedia.org/wiki/Settlement_risk