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>I've not really understood the need for a "digital" pound, the pound is pretty digital already. The need isn't for the consumer. It's advantageous for the cen

>I've not really understood the need for a "digital" pound, the pound is pretty digital already. The need isn't for the consumer. It's advantageous for the central bankers. With it they can more easily control demurrage/inflation/deflation/confiscation (like the Chinese government plans to do with the e-RMB).

bobthepanda 5y ago
How is it different from what we currently have, assuming that digital pounds/dollars/whatevers are convertible with existing currency? Is existing currency not issued digitally? When central banks issue cash now are they literally sending billions of dollars to the mint, trucking it off to a bank, and then the bank records it on a digital ledger? Seems wasteful.
- JumpCrisscross 5y ago
  > Is existing currency not issued digitally? It is, but it's restricted. M0 is central bank money [1]. Currently, only financial institutions have it. If the public could open accounts at the BoE, they too could own M0. CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. That gives central banks powerful new levers. For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. Negative rates are feasible today. But were they to go sharply negative, they'd hit bank capital. Having the public directly hold M0 removes that side effect. [1] https://www.investopedia.com/terms/m/moneysupply.asp https://www.investopedia.com/terms/m/moneysupply.asp
  - neilwilson 5y ago
    Monetarist concepts have little place in a modern way world. Bank deposits are insured up to £85k, which means they are as solid and as good as cash. It’s well known that negative rates only bind on commercial bank deposits - if at all. Negative rates are just a tax on banks - which they recover by charging more for loans, and paying less for deposits like any other costs.
  - dragonwriter 5y ago
    > For example, cash limits how negative rates can go. No, it doesn’t. Cash with depreciation or expiration (both preannounced and ad hoc) has been used before. Politics, not technology, limits the use of that tool, and CBDC doesn’t meaningfully change the politics.
    - JumpCrisscross 5y ago
      > Cash with depreciation or expiration (both preannounced and ad hoc) has been used before Yes, if you changed the cash we're talking about, pounds sterling, it would be different. > CBDC doesn’t meaningfully change the politics Remember a few years ago, when IT would talk about getting long-needed projects greenly because they slapped "blockchain" on the proposal?Expiring cash is toxic. CBDC is not. Branding matters.
  - bobthepanda 5y ago
    I'm still not sure I understand. How would a citizen be issued CBDC if not through an account? Also, wouldn't this widespread use require in-kind withdrawal of cash from circulation to have any real effect?
    - aliyfarah 5y ago
      Why is cash withdrawals from circulation be important to CBDC? Btw I don't think OP argued citizens wouldn't need an account.
      - bobthepanda 5y ago
        > Why is cash withdrawals from circulation be important to CBDC? >> For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. This would only really be effective if CBDC became prevalent enough to actually make a dent in money supply. What proportion of money would have to be CBDC for this to actually have an impact, and would we get there by just pure issuance of CBDC or by taking cash out of circulation and replacing it with CBDC? > Btw I don't think OP argued citizens wouldn't need an account. >> CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. I don't know how you would avoid retail banking unless you were to issue it via a means other than an account.
        deleted 5y ago
        [deleted]
        aliyfarah 5y ago
        >I don't know how you would avoid retail banking unless you were to issue it via a means other than an account. There's a lot more that goes into retail banking than just having an account. Of course citizens would need an account, how else will they be tracked :) I think the OP meant that the central bank could give customers an account for the sole purpose of holding their digital "crypto" coins and sending/receiving money with it....without having to do provide all the other services that go with retail banking like loans, credit cards etc.
- TheBlight 5y ago
  The Chinese government explicitly states the new e-RMB will help them prevent money laundering, tax evasion, and "terrorism financing." The better question is, why is the current system insufficient for addressing these problems?
  - bobthepanda 5y ago
    Hm. I meant to reply to the parent, not you, so that's my bad; but I probably fat-fingered it. If they are in control of digital currency then they have a ledger of transactions, maybe? and if you have a 1:1 record of every single ledger then it's a bit harder to obfuscate? Banks & businesses keep ledgers like these, but you have to 1. get your hands on it and 2. in case of multiple sets of books, you need to find the correct one. And then you have to connect all the dots. Chinese capital and lending controls are very strict but this hasn't stopped Chinese and others to try and move money out of China. China has had repeated issues with things happening beyond regulators' reach until they become too big to hide and then have to be unwound, like excessive use of shadow banks for lending.
- aww_dang 5y ago
  It is about giving more control to central bankers. Going fully cashless will make negative rates impossible to avoid. UBI can be more specifically targeted as well. Generally speaking, the money supply exceeds the total amount of cash in most countries.
  - roody15 5y ago
    In other words a dystopian nightmare :/
  - Ericson2314 5y ago
    Yeah really looking forward for UBI being "one click away", and ditching privatized crap like Venmo.
treespace88 5y ago
I would imagine this could lead to interesting changes in how people are taxed. IE taxes based on savings instead of income.
- pharmakom 5y ago
  Digital currency makes negative interest rates possible, which is either exciting or terrifying depending on your view.
  - fab1an 5y ago
    I fear there is a curious feedback loop on the horizon, where stuff like this accelerates flight into decentralized crypto which then again accelerates further regulatory scrutinity, including bans.
  - mywittyname 5y ago
    This is possible now, since there's a practical limit on how much business can be conducted in all cash. Even if every bank account in the country started charging an account fee to cover negative interest rates, people would continue to use banks because they are just so damn convenient.
    - sneak 5y ago
      Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.
      - occamrazor 5y ago
        Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).
gscott 5y ago
e-RMB would let them send out money as stimulus to individuals without needed to count it as money creation publicly. The Chinese will have an unfair advantage with money printing without hitting the value of the currency. The US cash payments to individuals has had a huge positive effect on our own economy and now China can do the same but hidden from view. China could take and send payments to Iran and North Korea outside the traditional payments system. Everything will be hidden from view.
Barrin92 5y ago
it would also be pretty beneficial for consumers. Cutting every payment middleman out and having one consistent means of exchange across an entire currency zone would be great. Settle everything instantly, no charges, no withdrawal fees converting between cash and digital. The cost of running the system are probably minimal compared to what the entire consumer-banking sector collects.

bobthepanda 5y ago

How is it different from what we currently have, assuming that digital pounds/dollars/whatevers are convertible with existing currency? Is existing currency not issued digitally? When central banks issue cash now are they literally sending billions of dollars to the mint, trucking it off to a bank, and then the bank records it on a digital ledger? Seems wasteful.

JumpCrisscross 5y ago
> Is existing currency not issued digitally? It is, but it's restricted. M0 is central bank money [1]. Currently, only financial institutions have it. If the public could open accounts at the BoE, they too could own M0. CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. That gives central banks powerful new levers. For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. Negative rates are feasible today. But were they to go sharply negative, they'd hit bank capital. Having the public directly hold M0 removes that side effect. [1] https://www.investopedia.com/terms/m/moneysupply.asp https://www.investopedia.com/terms/m/moneysupply.asp
- neilwilson 5y ago
  Monetarist concepts have little place in a modern way world. Bank deposits are insured up to £85k, which means they are as solid and as good as cash. It’s well known that negative rates only bind on commercial bank deposits - if at all. Negative rates are just a tax on banks - which they recover by charging more for loans, and paying less for deposits like any other costs.
- dragonwriter 5y ago
  > For example, cash limits how negative rates can go. No, it doesn’t. Cash with depreciation or expiration (both preannounced and ad hoc) has been used before. Politics, not technology, limits the use of that tool, and CBDC doesn’t meaningfully change the politics.
  - JumpCrisscross 5y ago
    > Cash with depreciation or expiration (both preannounced and ad hoc) has been used before Yes, if you changed the cash we're talking about, pounds sterling, it would be different. > CBDC doesn’t meaningfully change the politics Remember a few years ago, when IT would talk about getting long-needed projects greenly because they slapped "blockchain" on the proposal?Expiring cash is toxic. CBDC is not. Branding matters.
- bobthepanda 5y ago
  I'm still not sure I understand. How would a citizen be issued CBDC if not through an account? Also, wouldn't this widespread use require in-kind withdrawal of cash from circulation to have any real effect?
  - aliyfarah 5y ago
    Why is cash withdrawals from circulation be important to CBDC? Btw I don't think OP argued citizens wouldn't need an account.
    - bobthepanda 5y ago
      > Why is cash withdrawals from circulation be important to CBDC? >> For example, cash limits how negative rates can go. If cash were to become scarce and most money were held as M0, the central bank could enforce negative interest rates by clawing back M0. This would only really be effective if CBDC became prevalent enough to actually make a dent in money supply. What proportion of money would have to be CBDC for this to actually have an impact, and would we get there by just pure issuance of CBDC or by taking cash out of circulation and replacing it with CBDC? > Btw I don't think OP argued citizens wouldn't need an account. >> CBDCs are a way to give the public M0 without putting the central bank into the retail banking business. I don't know how you would avoid retail banking unless you were to issue it via a means other than an account.
      - deleted 5y ago
        [deleted]
      - aliyfarah 5y ago
        >I don't know how you would avoid retail banking unless you were to issue it via a means other than an account. There's a lot more that goes into retail banking than just having an account. Of course citizens would need an account, how else will they be tracked :) I think the OP meant that the central bank could give customers an account for the sole purpose of holding their digital "crypto" coins and sending/receiving money with it....without having to do provide all the other services that go with retail banking like loans, credit cards etc.
TheBlight 5y ago
The Chinese government explicitly states the new e-RMB will help them prevent money laundering, tax evasion, and "terrorism financing." The better question is, why is the current system insufficient for addressing these problems?
- bobthepanda 5y ago
  Hm. I meant to reply to the parent, not you, so that's my bad; but I probably fat-fingered it. If they are in control of digital currency then they have a ledger of transactions, maybe? and if you have a 1:1 record of every single ledger then it's a bit harder to obfuscate? Banks & businesses keep ledgers like these, but you have to 1. get your hands on it and 2. in case of multiple sets of books, you need to find the correct one. And then you have to connect all the dots. Chinese capital and lending controls are very strict but this hasn't stopped Chinese and others to try and move money out of China. China has had repeated issues with things happening beyond regulators' reach until they become too big to hide and then have to be unwound, like excessive use of shadow banks for lending.
aww_dang 5y ago
It is about giving more control to central bankers. Going fully cashless will make negative rates impossible to avoid. UBI can be more specifically targeted as well. Generally speaking, the money supply exceeds the total amount of cash in most countries.
- roody15 5y ago
  In other words a dystopian nightmare :/
- Ericson2314 5y ago
  Yeah really looking forward for UBI being "one click away", and ditching privatized crap like Venmo.

treespace88 5y ago

I would imagine this could lead to interesting changes in how people are taxed. IE taxes based on savings instead of income.

pharmakom 5y ago
Digital currency makes negative interest rates possible, which is either exciting or terrifying depending on your view.
- fab1an 5y ago
  I fear there is a curious feedback loop on the horizon, where stuff like this accelerates flight into decentralized crypto which then again accelerates further regulatory scrutinity, including bans.
- mywittyname 5y ago
  This is possible now, since there's a practical limit on how much business can be conducted in all cash. Even if every bank account in the country started charging an account fee to cover negative interest rates, people would continue to use banks because they are just so damn convenient.
  - sneak 5y ago
    Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.
    - occamrazor 5y ago
      Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).

gscott 5y ago

e-RMB would let them send out money as stimulus to individuals without needed to count it as money creation publicly. The Chinese will have an unfair advantage with money printing without hitting the value of the currency. The US cash payments to individuals has had a huge positive effect on our own economy and now China can do the same but hidden from view. China could take and send payments to Iran and North Korea outside the traditional payments system. Everything will be hidden from view.

Barrin92 5y ago

it would also be pretty beneficial for consumers. Cutting every payment middleman out and having one consistent means of exchange across an entire currency zone would be great. Settle everything instantly, no charges, no withdrawal fees converting between cash and digital. The cost of running the system are probably minimal compared to what the entire consumer-banking sector collects.