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The potential Orwellian horror of central bank digital currencies

317 points by DocFeind 5y ago

walterbell 5y ago
The US CBDC digital currency proposal is expected later this month from MIT and Boston Fed, including open-source reference code, https://dci.mit.edu/building-a-hypothetical-cbdc https://dci.mit.edu/building-a-hypothetical-cbdc
- toomuchtodo 5y ago
  https://www.federalreserve.gov/newsevents/speech/quarles20210628a.htm https://www.federalreserve.gov/newsevents/speech/quarles2021... The whole speech is worth the read, the synopsis is: "To conclude, I emphasize three points. First, the U.S. dollar payment system is very good, and it is getting better. Second, the potential benefits of a Federal Reserve CBDC are unclear. Third, developing a CBDC could, I believe, pose considerable risks. So, our work is cut out for us as we proceed to rigorously evaluate the case for developing a Federal Reserve CBDC. Even if other central banks issue successful CBDCs, we cannot assume that the Federal Reserve should issue a CBDC. The process that Chair Powell recently announced is a genuinely open process without a foregone conclusion, although obviously I think the bar to establishing a U.S. CBDC is a high one. The upcoming discussion paper that constitutes the first step in this process will importantly ask for input from the public. I look forward to reviewing public input on the discussion paper, which will inform the Federal Reserve's ultimate evaluation of a potential CBDC." Parachute Pants and Central Bank Money, Vice Chair for Supervision Randal K. Quarles at the 113th Annual Utah Bankers Association Convention, Sun Valley, Idaho
- nehan 5y ago
  This isn't a proposal for a US CBDC. It's research on technical tradeoffs that might need to be addressed in a hypothetical CBDC.
  - walterbell 5y ago
    Thanks for the response and clarification. What's the best way to discover papers on hypothetical US CBDCs? I've seen one international paper and one on US FedAccounts. 08 June 2021, "Central bank digital currency: the quest for minimally invasive technology", https://www.bis.org/publ/work948.htm https://www.bis.org/publ/work948.htm > Almost 50 central banks have already launched designs for central bank digital currencies (CBDCs) or prototypes ... The paper discusses ... what they imply for the financial system and the central bank of the future. It sets out the requirements for a “minimally invasive” CBDC design ... digital banknotes that run on “intermediated” or “hybrid” CBDC architectures show promise. Supported with technology to facilitate record-keeping by private sector entities of direct claims on the central bank, their economic design should emphasise the use of the CBDC as medium of exchange. 28 Jan 2021, "FedAccounts: Digital Dollars", https://www.gwlr.org/fedaccounts-digital-dollars/ https://www.gwlr.org/fedaccounts-digital-dollars/ > Congress should authorize the Federal Reserve to give everyone—individuals, businesses, and institutions—the option to maintain accounts at the central bank. We call these accounts FedAccounts. Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and be walled off from the existing system of money and payments, FedAccounts would be seamlessly interoperable with the mainstream payment system, relying on technologies that the Federal Reserve has used for decades.
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drpixie 5y ago
Quelle horreur - has Mr Adams not noticed that that vast majority of financial transactions are completely digital, with all the risks that he details? Not blockchain (thank god) but every card debit/credit/charge transaction is performed entirely without notes,coin, or gold and is recorded and tracked with similar detail to blockchain ledgers.
- ericd 5y ago
  Sure, most transactions are digital already. This is about the removal of physical cash as an alternative, and the downsides that presents. Especially interesting is the sudden feasibility of negative interest rates enforced across the board, and the inability to just "keep cash" as an alternative.
  - SubiculumCode 5y ago
    In terms of privacy, it IS possible. Look at Monero; but there it would be very very hard to get the government to accept a plan that included that level of privacy. I suppose that one may still have anonymous wallets, which could ensure a certain amount of anonymity absent requirements to the contrary. This whole phenomenon has the eerie likeness of Revelations, buying selling without a number, etc. Let's not intentionally make it come true guys.
  - crazygringo 5y ago
    > This is about the removal of physical cash as an alternative No it's not. Nowhere in the article does it suggest that, nor is it being contemplated in any serious current policy proposals. It's about having digital cash transactions handled directly via government ledgers rather than via private intermediaries like MasterCard and Visa and PayPal. Which has all sorts of benefits. After all, money is a public good -- why should digital money be handled exclusively by private corporations making a profit off of it? If government is in charge of printing the physical money people use directly, it's pretty logically consistent for it also to be in charge of digital ledgers in some form as well. We don't let MasterCard and Visa print up their own hundred dollar bills, after all.
bognition 5y ago
What happened to the comment about banks being the most powerful entities on the planet?
- HenryKissinger 5y ago
  Militaries are the most powerful entities on the planet. A man holding a bag of cash vs. a man holding a gun. The man holding the gun always wins.
  - organsnyder 5y ago
    The military needs to pay the troops somehow.
    - LadyCailin 5y ago
      Just shoot the guy holding the bag of cash, (or just threaten to) and now you have cash to pay the troops.
      - afrodc_ 5y ago
        I mean you eventually run out of people to shoot to take bags from if you can't reasonably create more of the currency through economic activity and war is prohibitively expensive. It's also not likely the persons holding the bags that can already pay for their own troops wouldn't do so.
    - Robotbeat 5y ago
      Yeah, reminds me of this: https://www.youtube.com/watch?v=noQsHiTJAXo https://www.youtube.com/watch?v=noQsHiTJAXo Money is the substrate of virtually all of society beyond a handful of your peers. If you utterly destroyed it, society would collapse.
    - lasagnaphil 5y ago
      In fact, Roman gold currency was invented primarily to pay the troops. As a result gold as a currency only circulated around regions where the military was fighting, and in peaceful areas far from warfare the usual methods of debts and IOUs were used to pay for things. If you’re still curious, read Graeber’s “Debt: The First 5000 years” which delves into the Roman monetary system in detail.
walterbell 5y ago
There was an IMF video clip with BIS director Carstens commenting on CBDCs last year, https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/imf-cross-border-payments-a-vision-for-the-future https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/... > With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger. Video on the IMF site is not working, here's a YT copy (thanks @toomuchtodo): https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s In a March 2021 speech, Carstens made a similar point, https://www.bis.org/speeches/sp210331.pdf https://www.bis.org/speeches/sp210331.pdf > It is crucial to trace transactions, particularly large ones, to an individual or entity. For account-based CBDCs, issuing central banks would retain control over cross-border usage. Restricting non-residents’ access reduces the risk of volatile flows, and of currency substitution in recipient economies. Well-intentioned initiatives like Linux Foundation https://www.goodhealthpass.org/ https://www.goodhealthpass.org/ or EU digital health certificate or Apple iOS 15 digital driver's license (https://www.androidpolice.com/2021/06/07/apples-ios-15-wallet-app-will-get-you-through-tsa-checkpoints-with-digital-ids/ https://www.androidpolice.com/2021/06/07/apples-ios-15-walle...) can all be drafted into the service of CBDC initiatives which require digital identity for digital currency wallets.
- naveen99 5y ago
  Depends on the implementation details. If private keys are distributed only by central bank, then yes. But if they are created anonymously at the edges, with multiple private keys allowed per person, then they don’t necessarily know who controls what wallet.
  - walterbell 5y ago
    Unsurprisingly, anonymity is not high on the list of CBDC policy objectives. Transactional identity is valuable for social credit systems and kill-switch mechanisms. One LF initiative: https://trustoverip.org/ https://trustoverip.org/
naveen99 5y ago
if you assume that the world order is controlled by the 1000 most powerful / wealthiest individuals in the world, they have more to gain from self custody enabled by bitcoin than everyone else. they also probably benefit more from financial privacy more than anyone else . Their incentives are aligned with bitcoin. Now they may not want to hold all their wealth in bitcoin, but surely some integer percentage, as big as 20%.
- SignalNotSecure 5y ago
  Completely disagree. They have even more to gain by being in absolute control, and bitcoin cannot be completely controlled, unlike a financial instrument which can be adjusted at the whim of the court systems and by decree from a central institution
  - naveen99 5y ago
    There is no central court or institution. Trillionaires don’t trust those things. The only absolute control is in themselves. The principal agent problem is not solvable at that level.
    - SignalNotSecure 5y ago
      Trillionaires still work in teams; they don't operate in a vacuum. Their influence extends throughout government, which is how they enforce their will, using the police, military, and court systems.
- knownjorbist 5y ago
  Wouldn't the incentives be the exact opposite? The "top" 1000 people on the planet currently benefit from the existing system's hegemony.
  - naveen99 5y ago
    There is no hegemony at that level. It’s anarchy.
seibelj 5y ago
Cryptocurrencies exist that preserve privacy somewhat - bitcoin if you are knowledgeable, pay fees, and are very careful; monero pretty much perfectly; and tornado.cash for obfuscating ETH if you are familiar with that ecosystem. However, there is an analog version of financial privacy that totally 100% breaks the chain of digital tracking - cash and gold coins. IMO, if you oppose financial privacy in digital assets, then it is hypocritical to not advocate for the total ban of cash and gold. I don’t see any way to square this circle. If you still support cash, then you should advocate for some dollar limit under which privacy is OK for crypto.
- mikewarot 5y ago
  Cash is anonymous for now, but all the notes are serial numbered, and recorded at some stops along the banking chain. Traffic analysis is possible with the system as it is. The very limited number of licit places to translate gold and silver coins into other forms of money are a huge barrier to avoiding tracking.
  - Robotbeat 5y ago
    Huh. Since Sacagawea dollars never took off (and therefore aren't always accepted as currency everywhere, and their presence would therefore be more traceable), that means that coins like quarters are the most untraceable US currency. That's something like $10-20 billion worth of quarters in circulation (who knows?). ...I wonder if that explains why there was a coin shortage in the depths of 2020 during the peak of the pandemic, when people were panic-buying lots of stuff? Maybe someone (or lots of people with the same idea) took out a lot of quarters and dimes (which have the same denomination-value-per-unit-weight) from banks with the idea they are untraceable, unlike paper cash. And nickels and pennies, although heavier for a given total value, actually have a metal melt value about the same as their denomination. I can totally see why people would panic-buy lots and lots of coins. The whole "people aren't going out to eat as much" argument didn't make sense to me. People panic-hoarding untraceable assets (some with actual metal value that has the added benefit of being inflation-proof, although illegal to actually melt down) does make sense.
davisr 5y ago
It is critical to pay for everything with cash, otherwise we will find ourselves without the freedom to pay anonymously.
- hypertele-Xii 5y ago
  How do you pay bills in cash though?
  - walterbell 5y ago
    Money orders.
    - deleted 5y ago
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    - 13of40 5y ago
      Or to the guy you're subletting from.
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- crazygringo 5y ago
  You can always conduct private payments anoynmously via physical exchange of goods. Whether gold, Tide bottles (not joking), packs of cigarettes, Amazon gift cards, whatever it is you want to effectively launder. There are tons of alternatives to cash.
  - swiley 5y ago
    Often it ends up being food, sex, and sometimes housing. Just saying: it's not a good situation.
    - crazygringo 5y ago
      ??? That is a... bizarre take on things. We don't live in a Mad Max dystopia or at the edge of nation-wide starvation. The things I mentioned are normal commodities. No idea why you feel the need to bring prostitution or odd choices like food (which spoils) into it?
rawtxapp 5y ago
Combine it with a "Social Credit System" [1] and some Black Mirror episodes don't seem that far fetched all of a sudden. 1: https://en.wikipedia.org/wiki/Social_Credit_System https://en.wikipedia.org/wiki/Social_Credit_System
- sellyme 5y ago
  At least one significantly more far-fetched Black Mirror episode has come to life, so I think that adjustment of expectations has already occurred.
  - dnautics 5y ago
    Well to be fair what was happening to Britney in large part preceded the writing of the episode (and IRL there was way less tech involved), so it's uncertain if the black mirror episode took inspiration from real life.
    - sellyme 5y ago
      I was talking about the pig episode.
      - dnautics 5y ago
        Come again? I haven't heard of a leader blackmailed into doing something by dark net agents... Did I miss something?
        trsohmers 5y ago
        Guessing he is referring to this: https://news.yahoo.com/british-prime-minister-reveals-put-000544785.html https://news.yahoo.com/british-prime-minister-reveals-put-00... There was a “no comment” denial evidently, for whatever that is worth. Also, hi Isaac.
      - kemiller 5y ago
        Wait what?
Barrin92 5y ago
There's not actually a lot of argumentation on that page concerning the disadvantages of central bank currencies other than fairly generic criticisms like >"the compelling of economic agents (businesses and individuals) to consume particular goods and services preferred by policy makers;" which as far as I can tell is already the case anyway through countless of policy tools, same goes for arguments about "cyber hacking" or regulation. It's also not actually a risk from an objective standpoint because that is very much an explicit goal of such a currency. Also I'm not exactly sure how seriously I'm supposed to take someone who advertises himself as a 'professional economist', but as far as I can tell does not actually work as an economist, has a bachelors degree and no publication history and tries to sell me gold and silver from his dealership on the same page he writes this piece about central bank currency.
- logicchains 5y ago
  >Also I'm not exactly sure how seriously I'm supposed to take someone who advertises himself as a 'professional economist', but as far as I can tell does not actually work as an economist, has a bachelors degree and no publication history and tries to sell me gold and silver from his dealership on the same page he writes this piece about central bank currency. Presumably an economist who runs a profitable business has demonstrated more economic understanding than the average academic economist, as academic economists don't face any feedback loop that penalises them for bad predictions. As Karl Popper said, a science is only a science when it makes falsifiable predictions that are proven correct.
  - Barrin92 5y ago
    >Presumably an economist who runs a profitable business has demonstrated more economic understanding than the average academic economist No, he hasn't demonstrated any understanding of economics the same way a bird doesn't demonstrate understanding of physics just because it can fly. I think you've misunderstood Karl Popper if you took away from his work that selling gold on the internet makes you an economist or a scientist. Someone could make ten million dollars running an MLM scheme but last time I checked that does not turn you into an authority on macroeconomics.
uncomputation 5y ago
This is a pretty good summary, but I do question what the Fed has to gain from a US digital currency. All of the “rationale” provided here boil down to “so the central banking system doesn’t ‘lose relevance.’” This argument doesn’t make sense to me at all. The Fed controls the supply and policy of money, so perhaps an instant digital currency would help them to implement their policies but is that really a concern of the Fed? This makes it seem like the Fed is worried about Venmo affecting the economy which I doubt it is. Given that the consequences of a shoddy or imperfect implementation would be catastrophic, it seems like something that would take decades of gradual movement.
- leohonexus 5y ago
  Looking at the positive benefits, it certainly allows mass distribution of relief funds to citizens much quickly than possible, essentially two-way transactions between government and citizens. In the future, can subsidies (e.g. medical, homeowner) be directly credited to CBDC accounts? Maybe.
  - jlokier 5y ago
    In a pandemic like situation, it facilitates mass distribution of relief funds to approved citizens. On the flip side, in a pandemic like situation, cash allows better off citizens to support their non-citizen friends fnancially from starving, while CBDC prevents citizens from doing that if the government chooses to control how the currency is used using technical mechanisms unique to CBDC. Judging by the various voter disenfranchisement programs being pushed for, I would expect that dividing line between the eligible and the prevented to be somewhere between one group of citizens and another in some states, too. I am not convinced governments should ever be trusted with deep and detailed control over what people do with personal levels of money, because we are a still a long way from the ideal of treating all people as created equal.
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- codehalo 5y ago
throw0101a 5y ago
Meanwhile, with regards to feedback on a digital Euro: > In the light of the views expressed by the citizens during the public consultation, the EDPB stresses that a very high standard of privacy and data protection is crucial to reinforce the trust of end users and shall be considered as a distinctive element in the offering of digital euro, representing a key factor of success of the project. Footnote 9: > A thresholded approach could be based on the monetary value of the transaction. For example, low value transaction of less than €1000 could enjoy full privacy as they are unlikely to entail AML high risks. Another possible limitation could cover use outside the Euro area. * https://edpb.europa.eu/system/files/2021-07/edpb_letter_out_2021_0105-digitaleuro-toec_en_0.pdf https://edpb.europa.eu/system/files/2021-07/edpb_letter_out_... * https://news.ycombinator.com/item?id=27791789 https://news.ycombinator.com/item?id=27791789
- dannyw 5y ago
  If a government wanted, they can use Zero knowledge proofs to provide every citizen with the ability to do say $100k/year in completely anonymous transactions with Monero-like technology.
  - kaliali 5y ago
    But they won't.
- deleted 5y ago
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- kergonath 5y ago
  €1000 is an awfully low threshold.
  - lnsru 5y ago
    That’s normal monthly wage in lots of places in Europe. And maybe half of average salary in Germany. So the limit is absolutely reasonable.
ilaksh 5y ago
At th core I believe this is a new variation of the same problem we have always had -- we need a system for cooperation that is powerful in some ways and yet not restrictive. I don't think humans have ever had a good solution to that problem. I think technologies like cryptocurrency provide advantages in achieving that. But factions operating in different paradigms (private vs public) are not able to see the benefits or necessities of the other one. And so it's fundamentally a lack of ideological information integration and missing technical solutions. Humans may not be smart enough to create a good solution to this problem.
mythrwy 5y ago
A thought experiment. Think back to what life was like 100 years ago, 1000 years ago, back through 10,000 years, then mentally draw a graph with two axis. On one axis put (potential) individual liberty and anonymity. On the other put health and safety and access to material comfort. I suspect there is an inverse correlation to some degree. 10,000 years ago you could do whatever you wanted, up to and including murder and as long as you were fast enough to escape those seeking revenge you were good. Even 100 years ago you could change your name, move to a different country and start your snake oil business (or whatever) fresh and it would take a long time for justice to catch up. Life was not highly controlled like it is now. There was always a place to flee, always the opportunity to escape. Most people farmed and eked out a living and their hours and activities were dictated by little but the seasons. Not now. You will be at your desk and 9:00 and go home at 5:00 and eat lunch for 1 hour at noon. There are million little rules for everything. We spend all our time following them (or not, but the consequences are more consistent and there is no place left to run). We accept this trade-off because it enables us to live longer healthier lives with more material comforts. I'd venture a primitive person from 10,000 years ago would scratch their head and wonder why any rational person would do this. Smart phones are a more recent example. Who in their right mind would carry a tracking, listening spying device? Well, anyone who wants instant access to information and a guide to the other side of town, obviously. Point is this. We give up what we consider liberty for efficiency and this has been going on for thousands of years. These currencies yes will track, yes maybe can only be used for certain things, yes allow a high degree of control. But what if they make the flow of goods and services more efficient? What if they help eliminate ruinous market cycles and depressions and poverty? What if they completely neuter corruption and large scale organized crime? Do we accept them then? Probably we do. Just to be clear I don't like the idea either. But probably efficiency wins irrespective of my personal biases and life is on the whole "better" for some definition of the word.
- CSactuary 5y ago
  Great depiction here. Economic ideologies undergo natural selection too. If one population is operating under principles that lead to more efficiency and thus greater production then it will dominate groups operating under less productive ideologies (e.g. the Cold War).
largbae 5y ago
To me, the biggest risk of CBDCs and other "smart" money ideas, is potentially mucking with the fungibility of our money. In the book Sapiens, one of the topics is that money is the greatest force unifying humanity, above empires and ideologies. Even the "enemy" North Korean Won has _some_ exchange rate against the US Dollar and other currencies of the world. If CBDC transactions can be turned off at will or forbidden by region or whatnot, then it might just have no exchange rate, and break the unifying bond of money. I know that there are ways to freeze bank assets or swift transactions, but CBDCs seem much more powerful at this early stage.
- BuyMyBitcoins 5y ago
  I’m not disagreeing with you, but I’m wondering if there have been cases in the past where central banks have broken fungibility based on region or bank assets. The thing that immediately comes to mind are those “HAWAII” federal reserve notes in WWII which were meant to become worthless should Japan have invaded successfully. That never came to pass, but I’m wondering if that historical event is similar to the kind of thing you are talking about?
  - largbae 5y ago
    Exactly, I didn't know about that case but it seems like the rules were presented up front. I think it would only take a few alterations of the deal to panic a smart currency.... And maybe that's why governments won't actually mess with it.
- jl2718 5y ago
  You raise an interesting point. What is the real effect of black market transactions? Is there any positive economic effect? Is fungibility actually necessary, or is it just a quick fix to the problem of value discovery?
joelbondurant 5y ago
Most of the tax objects using this communist site want central bankers to monitor their panties for moisture, for everyone else there's bitcoin.
thomascgalvin 5y ago
I think any kind of CBDC is dead on arrival in the US, for one simple reason: Turbo Tax. The federal government has all of the information to do everyone's taxes every year, mail you a postcard with the result, and offer you the chance to file an amendment if you disagree. This would make everything much simpler for everyone, and would solve a number of enforcement problems, too. It's a no-brainer. But Turbo Tax has paid enough money to enough politicians to prevent it from happening, because Turbo Tax makes billions of dollars from the old and broken system. If the Fed started moving toward a CBDC, and encroaching on the territory now occupied by banks, credit cards, and other entities, the skies would turn black from all of the jets flying lobbyists into Washington to kill that proposal dead.
- BuyMyBitcoins 5y ago
  The Federal Reserve is more powerful than congress. Heck, just saying that makes me sound like a conspiracy nut. But the Fed is supposed to act independently and not be beholden to Congress’ whims.
  - dragonwriter 5y ago
    > The Federal Reserve is more powerful than congress. Congress can eliminate the Fed or any and all of its powers at a whim, the reverse is not true. Ipso facto, Congress is more powerful. The Fed and the myth of its power are a convenient responsibility dodge for Congress, though.
    - baryphonic 5y ago
      Congress could have ended the Iraq War, the Afghan War, reined in domestic spying, broken up the banks, passed serious financial and bankruptcy reforms after the '08 crisis or even repealed the ACA. They did exactly none of these things. Why is that, since they have so much power? Congress has power theoretically, on paper. So does the Monarch in the UK or the National People's Congress or, historically, the Supreme Soviet. But Congress these days rarely exercises real power. Congress is mostly a rubber stamp with some third-rate acting and drama. The Fed has real power. They started paying interest on reserves in the wake of the financial crisis, and seemed to have no explicit authority to do so. They also started buying much riskier assets than they had before, and also seemed to just so it. They did the various iterations of QE with no real guidance or oversight. And the Fed controls the money, the lifeblood of any organization. Without the money, Congress does nothing, the president does nothing. That's a lot of power that is frankly unmatched in the US government.
seaourfreed 5y ago
The big reason the crypto industry is so big is because: 1) They are inventing crypto for a NO-MONEY-PRINTING currency. This article "forgot" to call out how this is the massive few making the crypto industry huge. 2) "bail ins", negative interest rates are the system STEALING from citizens. Governments could never pull this off from the wealthy or corporations. But they feel entitled to be able to do this to the masses. They don't understand how this won't be tolerated by citizens. 3) Crypto paying ~3% interest will be able to be made sustainable. This is DeFi interest when the deposits can be lent out, with risk nearly fully counterbalanced. Central banks have no clue how the above three are all that is needed to drive citizens to crypto and minimize their USD/CBDC holdings. The amount of crypto supporters shows that #1, #2 and #3 are getting market adoption today.
- andylynch 5y ago
  To your point about negative interest rates - these have been a real thing for years depending on where you are, but this can be overlooked because banks have generally avoided passing them to everyday users - however if you are a corporate or high net worth client in Europe these are absolutely a thing, eg Credit Suisse charges up to 0.75% on high CHF balances, but pays interest on smaller deposits.
jollybean 5y ago
The thrust of the article is that right now private banks effectively manage most of currency circulation and that a digital US dollar would make the Fed a giant 'MegaBank' that managed most of the currency directly in a way, giving them immense control. Side note: the 'transaction problem' that we have in payment settlements today has nothing to do with the type of currency, it's really just about legacy banks, standards and monopolies. If we wanted a complete transaction to be 50ms it could be that. Same thing for the 'unbanked' - there's nothing stopping us from having everyone 'banked' right now using the current system. SwissPost I believe is a bank, the USPS could provide basic digital banking as well if you really wanted. Also understand that most of the financial system is credit, not cash, so there's that. I think the Orwellian issue is real, as well as the issue with a central government entity getting into such granular problems. I just don't believe they should or can do it. The banks, which literally own the Fed(s) (they each have set share ownership) ... will also have something to say about it. It's such a gargantuan change I wonder if it could even ever really happen? How would it roll out? Rhode Island first? By the time it hits main street I wonder if we'll notice a difference.
x3haloed 5y ago
All of this is intuitive at first sight. The only question that matters is what powers do central banks have to fight cryptocurrencies? Because they are extremely powerful institutions, and they will fight to the death using every tool they have.
hohohmm 5y ago
Either you are controlled by the government, or you are controlled by the captilist oligarchs. In a system where capital speaks louder than the people, only a true leftist could see another way out.
neilwilson 5y ago
There’s another name for a central bank digital currency. It’s called “a bank account at the central bank”. Hardly Orwellian, but hardly innovative either. Traditional paper money is actually a zero interest bearer bond. Essentially a simple receipt for liabilities at the central bank that can be passed around like an endorsed cheque. Since regulators have steadily been eliminating the abilities of cheques to act as promissory notes rather than bills of exchange for decades, it’s hardly surprising to see their next assault on the “bearer transfer process” of traditional paper money. The whole point is to change it from a promissory note to a bill of exchange at the very least.
- nine_k 5y ago
  What would be Orwellian is the need for every citizen to have an account at the central bank to use the monetary system at all. Paper money leave much, much fainter trail of transactions than a centrally mandated and controlled digital currency. It's the pervasive tracking aspect the people find Orwellian.
  - neilwilson 5y ago
    A currency is a simple public monopoly. Therefore standard rules around monopolies apply. If you don't like that, then don't use it - and stand the inconvenience.
    - nextaccountic 5y ago
      > If you don't like that, then don't use it In many places, not accepting legal tender is illegal
      - neilwilson 5y ago
        Not really. Legal tender doesn't generally work like that as a concept. It's largely to do with settling of debts - in that you cannot insist on being paid in cows from somebody who doesn't have any cows. The law will permit the debt to be settled in a defined fungible numeraire and will consider that to end the matter. But where it does operate like that, that's another example of a public monopoly at work. You can always contract under the laws of another jurisdiction if it bothers you that much. As ever it is free as in freedom, not free as in beer. True freedom can be very inconvenient.
no_time 5y ago
These visions for the future are putting a serious strain on my mental health. The average person doesn't care. Not even the more educated. Perhaps I'm the coward, afraid of change. But I really don't see how this much control by those in power can benefit anyone other than themselves.
acd 5y ago
Central limitless money printing is putting almost everyone into debt.
DubiousPusher 5y ago
> and does not possess any underlying intrinsic value And I'm out. Gold has no intrinsic value. Nothing in the world has intrinsic value. The closest you get is maybe food. Gold gets its value from the same place paper money gets its value, belief. People believe that when they take it in exchange for something, they will be able to exchange it for something later. Period. End of story. Fin.
da39a3ee 5y ago
Complaining irrelevantly about "mandatory vaccinations" in your opening paragraph is a good way to get readers to assume you're an idiot.
- cgrealy 5y ago
  Honestly, I really couldn’t take him seriously after that paragraph.
tiku 5y ago
I wonder how government spending would go with a public/viewable chain.
- atoav 5y ago
  Oh it would use the other, non public chain.
- alkonaut 5y ago
  Isn't government spending with few exceptions public?
TX0098812 5y ago
You don't fear their control because you have nothing to hide. Then one day you want to speak up against them, but you don't because they control your money. So you never cross them. But one day, they seek you out and order you to do something. You have to comply because they own you. If you control your money, it's your money. If they control the money, it's their money -- you only have it as long as they let you.
qecez 5y ago
Others disagree: https://cryptohayes.medium.com/stablecoin-triptych-7a062e745925 https://cryptohayes.medium.com/stablecoin-triptych-7a062e745...
127 5y ago
If you don't have the right to determine how you will use your money, as you see fit, it's not your money anymore. Governments can just piggyback on your work as much as they want. The productive portion of the people can be enslaved for the benefit of the political and the managerial class, with some alms to the poor so they will vote for the right candidates.
- christophilus 5y ago
  Yep. It's rent-a-dollar. Even today's physical dollars are only rented. If the FED doubles the money supply overnight, they've essentially taken some of your wealth. But the difference is, with a digital currency, they can be selective and targeted. It's difficult for me to see this as anything other than a net negative.
andreykocevski 5y ago
Founder of a CBDC startup here. We do fully offline smartcard-based CBDC wallets and offline payment protocols, similar to what Mondex was doing in the 90s. This article is very well written, the potential risks stated are mostly true. Our product effectively mitigates most of the downsides and risks since it works completely offline. Its essentially like a credit card that doesn't need external networks such as internet or GSM to operate, its fully peer-to-peer (in this case card to card). If you want to cash out the funds on the card you can just go to the Central Bank (CB) or some Authorized Financial Institution (AFI) and tell them you want to get your money out. The cash control policies are literally the same as cash, there are some upper limits on what amounts you can pay without reporting, and how much you can hold per card. Also the cards are issued with KYC/AML procedures. CBDCs are a double-edged sword, they can be used by tyrannical governments to enforce surveillance and bigger control, or they can be used by Central Banks to enter the retail digital currency space (which can make digital transactions cheaper, more accessible, and can also make the difference between Retail Bank and Central Bank interest rates lower. To some extent Central Banks also feel threatened by Bitcoin and other decentralized digital currencies). I have no doubt countries will abuse this if implemented, but I also have no doubt that countries with protected liberties will make sure it doesn't cross into surveillance thats outside of the current standard... Also, its actually much worse with credit card payments. Even Bitcoin is traced significantly (there are multi-billion dollar companies that solely work with governments and financial institutions to trace cryptocurrencies). Also cash is not as anonymous as one might think. Bigger sums are always traced and recorded with the serial numbers on the banknotes, and theres always upper limits of 2K-10K eur of how much you can pay with cash without reporting.
- seriousquestion 5y ago
  > Also cash is not as anonymous as one might think. Bigger sums are always traced and recorded with the serial numbers on the banknotes, and theres always upper limits of 2K-10K eur of how much you can pay with cash without reporting. When cash is dispensed from an ATM, even at small sums, are the serial numbers associated with the account it was deducted from? Seems possible from a technical perspective.
  - 5y ago
ajkdhcb2 5y ago
No matter how much you hate cryptocurrencies, I don't know how you can't think about CBDC and realise there is a need for Monero. Cash can be even more restricted and phased out, so people will need anonymous digital transactions. It is incredible that so few people see this
- tootahe45 5y ago
  Monero can't be used effectively because you have to trade out of it as soon as you receive it, due to volatility. If the monero guys kicked out the idiot gamblers in their community and switched it to a stable-coin it would be the killer crypto . The question is how you peg something to the USD without a centralized party that can lock your funds.
  - ajkdhcb2 5y ago
    >The question is how you peg something to the USD without a centralized party that can lock your funds. It is impossible, it has nothing to do with "gamblers". Speculators are actually what keeps the price more stable by providing liquidity
rapjr9 5y ago
One issue that seems to be missing from the article is discussion of the ability to monitor transactions in other countries using a CBDC. If like dollars the cryptocurrency is used outside a countries borders, then an in-built traceability in the cryptocurrency compromises everyone who uses it, regardless of borders. This would be a good reason to fear a cryptocurrency from China and a good reason for the USA to have their own. It could also become a strong barrier to adoption if countries outlaw other countries CBDC's to protect their citizens privacy making trade payments via CBDC's impossible.
silexia 5y ago
Many special interests fund shills to write articles on their behalf. Oil companies do this to undermine climate change research and to halt nuclear reactors. Could this article be written by a commercial bank PR guy or a private digital coin fanatic?

317 points by DocFeind 5y ago

The US CBDC digital currency proposal is expected later this month from MIT and Boston Fed, including open-source reference code, https://dci.mit.edu/building-a-hypothetical-cbdc https://dci.mit.edu/building-a-hypothetical-cbdc

toomuchtodo 5y ago
https://www.federalreserve.gov/newsevents/speech/quarles20210628a.htm https://www.federalreserve.gov/newsevents/speech/quarles2021... The whole speech is worth the read, the synopsis is: "To conclude, I emphasize three points. First, the U.S. dollar payment system is very good, and it is getting better. Second, the potential benefits of a Federal Reserve CBDC are unclear. Third, developing a CBDC could, I believe, pose considerable risks. So, our work is cut out for us as we proceed to rigorously evaluate the case for developing a Federal Reserve CBDC. Even if other central banks issue successful CBDCs, we cannot assume that the Federal Reserve should issue a CBDC. The process that Chair Powell recently announced is a genuinely open process without a foregone conclusion, although obviously I think the bar to establishing a U.S. CBDC is a high one. The upcoming discussion paper that constitutes the first step in this process will importantly ask for input from the public. I look forward to reviewing public input on the discussion paper, which will inform the Federal Reserve's ultimate evaluation of a potential CBDC." Parachute Pants and Central Bank Money, Vice Chair for Supervision Randal K. Quarles at the 113th Annual Utah Bankers Association Convention, Sun Valley, Idaho
nehan 5y ago
This isn't a proposal for a US CBDC. It's research on technical tradeoffs that might need to be addressed in a hypothetical CBDC.
- walterbell 5y ago
  Thanks for the response and clarification. What's the best way to discover papers on hypothetical US CBDCs? I've seen one international paper and one on US FedAccounts. 08 June 2021, "Central bank digital currency: the quest for minimally invasive technology", https://www.bis.org/publ/work948.htm https://www.bis.org/publ/work948.htm > Almost 50 central banks have already launched designs for central bank digital currencies (CBDCs) or prototypes ... The paper discusses ... what they imply for the financial system and the central bank of the future. It sets out the requirements for a “minimally invasive” CBDC design ... digital banknotes that run on “intermediated” or “hybrid” CBDC architectures show promise. Supported with technology to facilitate record-keeping by private sector entities of direct claims on the central bank, their economic design should emphasise the use of the CBDC as medium of exchange. 28 Jan 2021, "FedAccounts: Digital Dollars", https://www.gwlr.org/fedaccounts-digital-dollars/ https://www.gwlr.org/fedaccounts-digital-dollars/ > Congress should authorize the Federal Reserve to give everyone—individuals, businesses, and institutions—the option to maintain accounts at the central bank. We call these accounts FedAccounts. Unlike the CBDC approaches currently under discussion, which would use complicated and inefficient distributed ledger technology and be walled off from the existing system of money and payments, FedAccounts would be seamlessly interoperable with the mainstream payment system, relying on technologies that the Federal Reserve has used for decades.

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drpixie 5y ago

Quelle horreur - has Mr Adams not noticed that that vast majority of financial transactions are completely digital, with all the risks that he details? Not blockchain (thank god) but every card debit/credit/charge transaction is performed entirely without notes,coin, or gold and is recorded and tracked with similar detail to blockchain ledgers.

ericd 5y ago
Sure, most transactions are digital already. This is about the removal of physical cash as an alternative, and the downsides that presents. Especially interesting is the sudden feasibility of negative interest rates enforced across the board, and the inability to just "keep cash" as an alternative.
- SubiculumCode 5y ago
  In terms of privacy, it IS possible. Look at Monero; but there it would be very very hard to get the government to accept a plan that included that level of privacy. I suppose that one may still have anonymous wallets, which could ensure a certain amount of anonymity absent requirements to the contrary. This whole phenomenon has the eerie likeness of Revelations, buying selling without a number, etc. Let's not intentionally make it come true guys.
- crazygringo 5y ago
  > This is about the removal of physical cash as an alternative No it's not. Nowhere in the article does it suggest that, nor is it being contemplated in any serious current policy proposals. It's about having digital cash transactions handled directly via government ledgers rather than via private intermediaries like MasterCard and Visa and PayPal. Which has all sorts of benefits. After all, money is a public good -- why should digital money be handled exclusively by private corporations making a profit off of it? If government is in charge of printing the physical money people use directly, it's pretty logically consistent for it also to be in charge of digital ledgers in some form as well. We don't let MasterCard and Visa print up their own hundred dollar bills, after all.

bognition 5y ago

What happened to the comment about banks being the most powerful entities on the planet?

HenryKissinger 5y ago
Militaries are the most powerful entities on the planet. A man holding a bag of cash vs. a man holding a gun. The man holding the gun always wins.
- organsnyder 5y ago
  The military needs to pay the troops somehow.
  - LadyCailin 5y ago
    Just shoot the guy holding the bag of cash, (or just threaten to) and now you have cash to pay the troops.
    - afrodc_ 5y ago
      I mean you eventually run out of people to shoot to take bags from if you can't reasonably create more of the currency through economic activity and war is prohibitively expensive. It's also not likely the persons holding the bags that can already pay for their own troops wouldn't do so.
  - Robotbeat 5y ago
    Yeah, reminds me of this: https://www.youtube.com/watch?v=noQsHiTJAXo https://www.youtube.com/watch?v=noQsHiTJAXo Money is the substrate of virtually all of society beyond a handful of your peers. If you utterly destroyed it, society would collapse.
  - lasagnaphil 5y ago
    In fact, Roman gold currency was invented primarily to pay the troops. As a result gold as a currency only circulated around regions where the military was fighting, and in peaceful areas far from warfare the usual methods of debts and IOUs were used to pay for things. If you’re still curious, read Graeber’s “Debt: The First 5000 years” which delves into the Roman monetary system in detail.

walterbell 5y ago

There was an IMF video clip with BIS director Carstens commenting on CBDCs last year, https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/imf-cross-border-payments-a-vision-for-the-future https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/... > With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger. Video on the IMF site is not working, here's a YT copy (thanks @toomuchtodo): https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s In a March 2021 speech, Carstens made a similar point, https://www.bis.org/speeches/sp210331.pdf https://www.bis.org/speeches/sp210331.pdf > It is crucial to trace transactions, particularly large ones, to an individual or entity. For account-based CBDCs, issuing central banks would retain control over cross-border usage. Restricting non-residents’ access reduces the risk of volatile flows, and of currency substitution in recipient economies. Well-intentioned initiatives like Linux Foundation https://www.goodhealthpass.org/ https://www.goodhealthpass.org/ or EU digital health certificate or Apple iOS 15 digital driver's license (https://www.androidpolice.com/2021/06/07/apples-ios-15-wallet-app-will-get-you-through-tsa-checkpoints-with-digital-ids/ https://www.androidpolice.com/2021/06/07/apples-ios-15-walle...) can all be drafted into the service of CBDC initiatives which require digital identity for digital currency wallets.

naveen99 5y ago
Depends on the implementation details. If private keys are distributed only by central bank, then yes. But if they are created anonymously at the edges, with multiple private keys allowed per person, then they don’t necessarily know who controls what wallet.
- walterbell 5y ago
  Unsurprisingly, anonymity is not high on the list of CBDC policy objectives. Transactional identity is valuable for social credit systems and kill-switch mechanisms. One LF initiative: https://trustoverip.org/ https://trustoverip.org/

naveen99 5y ago

if you assume that the world order is controlled by the 1000 most powerful / wealthiest individuals in the world, they have more to gain from self custody enabled by bitcoin than everyone else. they also probably benefit more from financial privacy more than anyone else . Their incentives are aligned with bitcoin. Now they may not want to hold all their wealth in bitcoin, but surely some integer percentage, as big as 20%.

SignalNotSecure 5y ago
Completely disagree. They have even more to gain by being in absolute control, and bitcoin cannot be completely controlled, unlike a financial instrument which can be adjusted at the whim of the court systems and by decree from a central institution
- naveen99 5y ago
  There is no central court or institution. Trillionaires don’t trust those things. The only absolute control is in themselves. The principal agent problem is not solvable at that level.
  - SignalNotSecure 5y ago
    Trillionaires still work in teams; they don't operate in a vacuum. Their influence extends throughout government, which is how they enforce their will, using the police, military, and court systems.
knownjorbist 5y ago
Wouldn't the incentives be the exact opposite? The "top" 1000 people on the planet currently benefit from the existing system's hegemony.
- naveen99 5y ago
  There is no hegemony at that level. It’s anarchy.

seibelj 5y ago

Cryptocurrencies exist that preserve privacy somewhat - bitcoin if you are knowledgeable, pay fees, and are very careful; monero pretty much perfectly; and tornado.cash for obfuscating ETH if you are familiar with that ecosystem. However, there is an analog version of financial privacy that totally 100% breaks the chain of digital tracking - cash and gold coins. IMO, if you oppose financial privacy in digital assets, then it is hypocritical to not advocate for the total ban of cash and gold. I don’t see any way to square this circle. If you still support cash, then you should advocate for some dollar limit under which privacy is OK for crypto.

mikewarot 5y ago
Cash is anonymous for now, but all the notes are serial numbered, and recorded at some stops along the banking chain. Traffic analysis is possible with the system as it is. The very limited number of licit places to translate gold and silver coins into other forms of money are a huge barrier to avoiding tracking.
- Robotbeat 5y ago
  Huh. Since Sacagawea dollars never took off (and therefore aren't always accepted as currency everywhere, and their presence would therefore be more traceable), that means that coins like quarters are the most untraceable US currency. That's something like $10-20 billion worth of quarters in circulation (who knows?). ...I wonder if that explains why there was a coin shortage in the depths of 2020 during the peak of the pandemic, when people were panic-buying lots of stuff? Maybe someone (or lots of people with the same idea) took out a lot of quarters and dimes (which have the same denomination-value-per-unit-weight) from banks with the idea they are untraceable, unlike paper cash. And nickels and pennies, although heavier for a given total value, actually have a metal melt value about the same as their denomination. I can totally see why people would panic-buy lots and lots of coins. The whole "people aren't going out to eat as much" argument didn't make sense to me. People panic-hoarding untraceable assets (some with actual metal value that has the added benefit of being inflation-proof, although illegal to actually melt down) does make sense.

davisr 5y ago

It is critical to pay for everything with cash, otherwise we will find ourselves without the freedom to pay anonymously.

hypertele-Xii 5y ago
How do you pay bills in cash though?
- walterbell 5y ago
  Money orders.
  - deleted 5y ago
    [deleted]
  - 13of40 5y ago
    Or to the guy you're subletting from.
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crazygringo 5y ago
You can always conduct private payments anoynmously via physical exchange of goods. Whether gold, Tide bottles (not joking), packs of cigarettes, Amazon gift cards, whatever it is you want to effectively launder. There are tons of alternatives to cash.
- swiley 5y ago
  Often it ends up being food, sex, and sometimes housing. Just saying: it's not a good situation.
  - crazygringo 5y ago
    ??? That is a... bizarre take on things. We don't live in a Mad Max dystopia or at the edge of nation-wide starvation. The things I mentioned are normal commodities. No idea why you feel the need to bring prostitution or odd choices like food (which spoils) into it?

rawtxapp 5y ago

Combine it with a "Social Credit System" [1] and some Black Mirror episodes don't seem that far fetched all of a sudden. 1: https://en.wikipedia.org/wiki/Social_Credit_System https://en.wikipedia.org/wiki/Social_Credit_System

sellyme 5y ago
At least one significantly more far-fetched Black Mirror episode has come to life, so I think that adjustment of expectations has already occurred.
- dnautics 5y ago
  Well to be fair what was happening to Britney in large part preceded the writing of the episode (and IRL there was way less tech involved), so it's uncertain if the black mirror episode took inspiration from real life.
  - sellyme 5y ago
    I was talking about the pig episode.
    - dnautics 5y ago
      Come again? I haven't heard of a leader blackmailed into doing something by dark net agents... Did I miss something?
      - trsohmers 5y ago
        Guessing he is referring to this: https://news.yahoo.com/british-prime-minister-reveals-put-000544785.html https://news.yahoo.com/british-prime-minister-reveals-put-00... There was a “no comment” denial evidently, for whatever that is worth. Also, hi Isaac.
    - kemiller 5y ago
      Wait what?

Barrin92 5y ago

There's not actually a lot of argumentation on that page concerning the disadvantages of central bank currencies other than fairly generic criticisms like >"the compelling of economic agents (businesses and individuals) to consume particular goods and services preferred by policy makers;" which as far as I can tell is already the case anyway through countless of policy tools, same goes for arguments about "cyber hacking" or regulation. It's also not actually a risk from an objective standpoint because that is very much an explicit goal of such a currency. Also I'm not exactly sure how seriously I'm supposed to take someone who advertises himself as a 'professional economist', but as far as I can tell does not actually work as an economist, has a bachelors degree and no publication history and tries to sell me gold and silver from his dealership on the same page he writes this piece about central bank currency.

logicchains 5y ago
>Also I'm not exactly sure how seriously I'm supposed to take someone who advertises himself as a 'professional economist', but as far as I can tell does not actually work as an economist, has a bachelors degree and no publication history and tries to sell me gold and silver from his dealership on the same page he writes this piece about central bank currency. Presumably an economist who runs a profitable business has demonstrated more economic understanding than the average academic economist, as academic economists don't face any feedback loop that penalises them for bad predictions. As Karl Popper said, a science is only a science when it makes falsifiable predictions that are proven correct.
- Barrin92 5y ago
  >Presumably an economist who runs a profitable business has demonstrated more economic understanding than the average academic economist No, he hasn't demonstrated any understanding of economics the same way a bird doesn't demonstrate understanding of physics just because it can fly. I think you've misunderstood Karl Popper if you took away from his work that selling gold on the internet makes you an economist or a scientist. Someone could make ten million dollars running an MLM scheme but last time I checked that does not turn you into an authority on macroeconomics.

uncomputation 5y ago

This is a pretty good summary, but I do question what the Fed has to gain from a US digital currency. All of the “rationale” provided here boil down to “so the central banking system doesn’t ‘lose relevance.’” This argument doesn’t make sense to me at all. The Fed controls the supply and policy of money, so perhaps an instant digital currency would help them to implement their policies but is that really a concern of the Fed? This makes it seem like the Fed is worried about Venmo affecting the economy which I doubt it is. Given that the consequences of a shoddy or imperfect implementation would be catastrophic, it seems like something that would take decades of gradual movement.

leohonexus 5y ago
Looking at the positive benefits, it certainly allows mass distribution of relief funds to citizens much quickly than possible, essentially two-way transactions between government and citizens. In the future, can subsidies (e.g. medical, homeowner) be directly credited to CBDC accounts? Maybe.
- jlokier 5y ago
  In a pandemic like situation, it facilitates mass distribution of relief funds to approved citizens. On the flip side, in a pandemic like situation, cash allows better off citizens to support their non-citizen friends fnancially from starving, while CBDC prevents citizens from doing that if the government chooses to control how the currency is used using technical mechanisms unique to CBDC. Judging by the various voter disenfranchisement programs being pushed for, I would expect that dividing line between the eligible and the prevented to be somewhere between one group of citizens and another in some states, too. I am not convinced governments should ever be trusted with deep and detailed control over what people do with personal levels of money, because we are a still a long way from the ideal of treating all people as created equal.
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codehalo 5y ago

throw0101a 5y ago

Meanwhile, with regards to feedback on a digital Euro: > In the light of the views expressed by the citizens during the public consultation, the EDPB stresses that a very high standard of privacy and data protection is crucial to reinforce the trust of end users and shall be considered as a distinctive element in the offering of digital euro, representing a key factor of success of the project. Footnote 9: > A thresholded approach could be based on the monetary value of the transaction. For example, low value transaction of less than €1000 could enjoy full privacy as they are unlikely to entail AML high risks. Another possible limitation could cover use outside the Euro area. * https://edpb.europa.eu/system/files/2021-07/edpb_letter_out_2021_0105-digitaleuro-toec_en_0.pdf https://edpb.europa.eu/system/files/2021-07/edpb_letter_out_... * https://news.ycombinator.com/item?id=27791789 https://news.ycombinator.com/item?id=27791789

dannyw 5y ago
If a government wanted, they can use Zero knowledge proofs to provide every citizen with the ability to do say $100k/year in completely anonymous transactions with Monero-like technology.
- kaliali 5y ago
  But they won't.
deleted 5y ago
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kergonath 5y ago
€1000 is an awfully low threshold.
- lnsru 5y ago
  That’s normal monthly wage in lots of places in Europe. And maybe half of average salary in Germany. So the limit is absolutely reasonable.

ilaksh 5y ago

At th core I believe this is a new variation of the same problem we have always had -- we need a system for cooperation that is powerful in some ways and yet not restrictive. I don't think humans have ever had a good solution to that problem. I think technologies like cryptocurrency provide advantages in achieving that. But factions operating in different paradigms (private vs public) are not able to see the benefits or necessities of the other one. And so it's fundamentally a lack of ideological information integration and missing technical solutions. Humans may not be smart enough to create a good solution to this problem.

mythrwy 5y ago

A thought experiment. Think back to what life was like 100 years ago, 1000 years ago, back through 10,000 years, then mentally draw a graph with two axis. On one axis put (potential) individual liberty and anonymity. On the other put health and safety and access to material comfort. I suspect there is an inverse correlation to some degree. 10,000 years ago you could do whatever you wanted, up to and including murder and as long as you were fast enough to escape those seeking revenge you were good. Even 100 years ago you could change your name, move to a different country and start your snake oil business (or whatever) fresh and it would take a long time for justice to catch up. Life was not highly controlled like it is now. There was always a place to flee, always the opportunity to escape. Most people farmed and eked out a living and their hours and activities were dictated by little but the seasons. Not now. You will be at your desk and 9:00 and go home at 5:00 and eat lunch for 1 hour at noon. There are million little rules for everything. We spend all our time following them (or not, but the consequences are more consistent and there is no place left to run). We accept this trade-off because it enables us to live longer healthier lives with more material comforts. I'd venture a primitive person from 10,000 years ago would scratch their head and wonder why any rational person would do this. Smart phones are a more recent example. Who in their right mind would carry a tracking, listening spying device? Well, anyone who wants instant access to information and a guide to the other side of town, obviously. Point is this. We give up what we consider liberty for efficiency and this has been going on for thousands of years. These currencies yes will track, yes maybe can only be used for certain things, yes allow a high degree of control. But what if they make the flow of goods and services more efficient? What if they help eliminate ruinous market cycles and depressions and poverty? What if they completely neuter corruption and large scale organized crime? Do we accept them then? Probably we do. Just to be clear I don't like the idea either. But probably efficiency wins irrespective of my personal biases and life is on the whole "better" for some definition of the word.

CSactuary 5y ago
Great depiction here. Economic ideologies undergo natural selection too. If one population is operating under principles that lead to more efficiency and thus greater production then it will dominate groups operating under less productive ideologies (e.g. the Cold War).

largbae 5y ago

To me, the biggest risk of CBDCs and other "smart" money ideas, is potentially mucking with the fungibility of our money. In the book Sapiens, one of the topics is that money is the greatest force unifying humanity, above empires and ideologies. Even the "enemy" North Korean Won has _some_ exchange rate against the US Dollar and other currencies of the world. If CBDC transactions can be turned off at will or forbidden by region or whatnot, then it might just have no exchange rate, and break the unifying bond of money. I know that there are ways to freeze bank assets or swift transactions, but CBDCs seem much more powerful at this early stage.

BuyMyBitcoins 5y ago
I’m not disagreeing with you, but I’m wondering if there have been cases in the past where central banks have broken fungibility based on region or bank assets. The thing that immediately comes to mind are those “HAWAII” federal reserve notes in WWII which were meant to become worthless should Japan have invaded successfully. That never came to pass, but I’m wondering if that historical event is similar to the kind of thing you are talking about?
- largbae 5y ago
  Exactly, I didn't know about that case but it seems like the rules were presented up front. I think it would only take a few alterations of the deal to panic a smart currency.... And maybe that's why governments won't actually mess with it.
jl2718 5y ago
You raise an interesting point. What is the real effect of black market transactions? Is there any positive economic effect? Is fungibility actually necessary, or is it just a quick fix to the problem of value discovery?

joelbondurant 5y ago

Most of the tax objects using this communist site want central bankers to monitor their panties for moisture, for everyone else there's bitcoin.

thomascgalvin 5y ago

I think any kind of CBDC is dead on arrival in the US, for one simple reason: Turbo Tax. The federal government has all of the information to do everyone's taxes every year, mail you a postcard with the result, and offer you the chance to file an amendment if you disagree. This would make everything much simpler for everyone, and would solve a number of enforcement problems, too. It's a no-brainer. But Turbo Tax has paid enough money to enough politicians to prevent it from happening, because Turbo Tax makes billions of dollars from the old and broken system. If the Fed started moving toward a CBDC, and encroaching on the territory now occupied by banks, credit cards, and other entities, the skies would turn black from all of the jets flying lobbyists into Washington to kill that proposal dead.

BuyMyBitcoins 5y ago
The Federal Reserve is more powerful than congress. Heck, just saying that makes me sound like a conspiracy nut. But the Fed is supposed to act independently and not be beholden to Congress’ whims.
- dragonwriter 5y ago
  > The Federal Reserve is more powerful than congress. Congress can eliminate the Fed or any and all of its powers at a whim, the reverse is not true. Ipso facto, Congress is more powerful. The Fed and the myth of its power are a convenient responsibility dodge for Congress, though.
  - baryphonic 5y ago
    Congress could have ended the Iraq War, the Afghan War, reined in domestic spying, broken up the banks, passed serious financial and bankruptcy reforms after the '08 crisis or even repealed the ACA. They did exactly none of these things. Why is that, since they have so much power? Congress has power theoretically, on paper. So does the Monarch in the UK or the National People's Congress or, historically, the Supreme Soviet. But Congress these days rarely exercises real power. Congress is mostly a rubber stamp with some third-rate acting and drama. The Fed has real power. They started paying interest on reserves in the wake of the financial crisis, and seemed to have no explicit authority to do so. They also started buying much riskier assets than they had before, and also seemed to just so it. They did the various iterations of QE with no real guidance or oversight. And the Fed controls the money, the lifeblood of any organization. Without the money, Congress does nothing, the president does nothing. That's a lot of power that is frankly unmatched in the US government.

seaourfreed 5y ago

The big reason the crypto industry is so big is because: 1) They are inventing crypto for a NO-MONEY-PRINTING currency. This article "forgot" to call out how this is the massive few making the crypto industry huge. 2) "bail ins", negative interest rates are the system STEALING from citizens. Governments could never pull this off from the wealthy or corporations. But they feel entitled to be able to do this to the masses. They don't understand how this won't be tolerated by citizens. 3) Crypto paying ~3% interest will be able to be made sustainable. This is DeFi interest when the deposits can be lent out, with risk nearly fully counterbalanced. Central banks have no clue how the above three are all that is needed to drive citizens to crypto and minimize their USD/CBDC holdings. The amount of crypto supporters shows that #1, #2 and #3 are getting market adoption today.

andylynch 5y ago
To your point about negative interest rates - these have been a real thing for years depending on where you are, but this can be overlooked because banks have generally avoided passing them to everyday users - however if you are a corporate or high net worth client in Europe these are absolutely a thing, eg Credit Suisse charges up to 0.75% on high CHF balances, but pays interest on smaller deposits.

jollybean 5y ago

The thrust of the article is that right now private banks effectively manage most of currency circulation and that a digital US dollar would make the Fed a giant 'MegaBank' that managed most of the currency directly in a way, giving them immense control. Side note: the 'transaction problem' that we have in payment settlements today has nothing to do with the type of currency, it's really just about legacy banks, standards and monopolies. If we wanted a complete transaction to be 50ms it could be that. Same thing for the 'unbanked' - there's nothing stopping us from having everyone 'banked' right now using the current system. SwissPost I believe is a bank, the USPS could provide basic digital banking as well if you really wanted. Also understand that most of the financial system is credit, not cash, so there's that. I think the Orwellian issue is real, as well as the issue with a central government entity getting into such granular problems. I just don't believe they should or can do it. The banks, which literally own the Fed(s) (they each have set share ownership) ... will also have something to say about it. It's such a gargantuan change I wonder if it could even ever really happen? How would it roll out? Rhode Island first? By the time it hits main street I wonder if we'll notice a difference.

x3haloed 5y ago

All of this is intuitive at first sight. The only question that matters is what powers do central banks have to fight cryptocurrencies? Because they are extremely powerful institutions, and they will fight to the death using every tool they have.

hohohmm 5y ago

Either you are controlled by the government, or you are controlled by the captilist oligarchs. In a system where capital speaks louder than the people, only a true leftist could see another way out.

neilwilson 5y ago

There’s another name for a central bank digital currency. It’s called “a bank account at the central bank”. Hardly Orwellian, but hardly innovative either. Traditional paper money is actually a zero interest bearer bond. Essentially a simple receipt for liabilities at the central bank that can be passed around like an endorsed cheque. Since regulators have steadily been eliminating the abilities of cheques to act as promissory notes rather than bills of exchange for decades, it’s hardly surprising to see their next assault on the “bearer transfer process” of traditional paper money. The whole point is to change it from a promissory note to a bill of exchange at the very least.

nine_k 5y ago
What would be Orwellian is the need for every citizen to have an account at the central bank to use the monetary system at all. Paper money leave much, much fainter trail of transactions than a centrally mandated and controlled digital currency. It's the pervasive tracking aspect the people find Orwellian.
- neilwilson 5y ago
  A currency is a simple public monopoly. Therefore standard rules around monopolies apply. If you don't like that, then don't use it - and stand the inconvenience.
  - nextaccountic 5y ago
    > If you don't like that, then don't use it In many places, not accepting legal tender is illegal
    - neilwilson 5y ago
      Not really. Legal tender doesn't generally work like that as a concept. It's largely to do with settling of debts - in that you cannot insist on being paid in cows from somebody who doesn't have any cows. The law will permit the debt to be settled in a defined fungible numeraire and will consider that to end the matter. But where it does operate like that, that's another example of a public monopoly at work. You can always contract under the laws of another jurisdiction if it bothers you that much. As ever it is free as in freedom, not free as in beer. True freedom can be very inconvenient.

no_time 5y ago

These visions for the future are putting a serious strain on my mental health. The average person doesn't care. Not even the more educated. Perhaps I'm the coward, afraid of change. But I really don't see how this much control by those in power can benefit anyone other than themselves.

acd 5y ago

Central limitless money printing is putting almost everyone into debt.

DubiousPusher 5y ago

> and does not possess any underlying intrinsic value And I'm out. Gold has no intrinsic value. Nothing in the world has intrinsic value. The closest you get is maybe food. Gold gets its value from the same place paper money gets its value, belief. People believe that when they take it in exchange for something, they will be able to exchange it for something later. Period. End of story. Fin.

da39a3ee 5y ago

Complaining irrelevantly about "mandatory vaccinations" in your opening paragraph is a good way to get readers to assume you're an idiot.

cgrealy 5y ago
Honestly, I really couldn’t take him seriously after that paragraph.

tiku 5y ago

I wonder how government spending would go with a public/viewable chain.

atoav 5y ago
Oh it would use the other, non public chain.
alkonaut 5y ago
Isn't government spending with few exceptions public?

TX0098812 5y ago

You don't fear their control because you have nothing to hide. Then one day you want to speak up against them, but you don't because they control your money. So you never cross them. But one day, they seek you out and order you to do something. You have to comply because they own you. If you control your money, it's your money. If they control the money, it's their money -- you only have it as long as they let you.

qecez 5y ago

Others disagree: https://cryptohayes.medium.com/stablecoin-triptych-7a062e745925 https://cryptohayes.medium.com/stablecoin-triptych-7a062e745...

127 5y ago

If you don't have the right to determine how you will use your money, as you see fit, it's not your money anymore. Governments can just piggyback on your work as much as they want. The productive portion of the people can be enslaved for the benefit of the political and the managerial class, with some alms to the poor so they will vote for the right candidates.

christophilus 5y ago
Yep. It's rent-a-dollar. Even today's physical dollars are only rented. If the FED doubles the money supply overnight, they've essentially taken some of your wealth. But the difference is, with a digital currency, they can be selective and targeted. It's difficult for me to see this as anything other than a net negative.

andreykocevski 5y ago

Founder of a CBDC startup here. We do fully offline smartcard-based CBDC wallets and offline payment protocols, similar to what Mondex was doing in the 90s. This article is very well written, the potential risks stated are mostly true. Our product effectively mitigates most of the downsides and risks since it works completely offline. Its essentially like a credit card that doesn't need external networks such as internet or GSM to operate, its fully peer-to-peer (in this case card to card). If you want to cash out the funds on the card you can just go to the Central Bank (CB) or some Authorized Financial Institution (AFI) and tell them you want to get your money out. The cash control policies are literally the same as cash, there are some upper limits on what amounts you can pay without reporting, and how much you can hold per card. Also the cards are issued with KYC/AML procedures. CBDCs are a double-edged sword, they can be used by tyrannical governments to enforce surveillance and bigger control, or they can be used by Central Banks to enter the retail digital currency space (which can make digital transactions cheaper, more accessible, and can also make the difference between Retail Bank and Central Bank interest rates lower. To some extent Central Banks also feel threatened by Bitcoin and other decentralized digital currencies). I have no doubt countries will abuse this if implemented, but I also have no doubt that countries with protected liberties will make sure it doesn't cross into surveillance thats outside of the current standard... Also, its actually much worse with credit card payments. Even Bitcoin is traced significantly (there are multi-billion dollar companies that solely work with governments and financial institutions to trace cryptocurrencies). Also cash is not as anonymous as one might think. Bigger sums are always traced and recorded with the serial numbers on the banknotes, and theres always upper limits of 2K-10K eur of how much you can pay with cash without reporting.

seriousquestion 5y ago
> Also cash is not as anonymous as one might think. Bigger sums are always traced and recorded with the serial numbers on the banknotes, and theres always upper limits of 2K-10K eur of how much you can pay with cash without reporting. When cash is dispensed from an ATM, even at small sums, are the serial numbers associated with the account it was deducted from? Seems possible from a technical perspective.
- 5y ago

ajkdhcb2 5y ago

No matter how much you hate cryptocurrencies, I don't know how you can't think about CBDC and realise there is a need for Monero. Cash can be even more restricted and phased out, so people will need anonymous digital transactions. It is incredible that so few people see this

tootahe45 5y ago
Monero can't be used effectively because you have to trade out of it as soon as you receive it, due to volatility. If the monero guys kicked out the idiot gamblers in their community and switched it to a stable-coin it would be the killer crypto . The question is how you peg something to the USD without a centralized party that can lock your funds.
- ajkdhcb2 5y ago
  >The question is how you peg something to the USD without a centralized party that can lock your funds. It is impossible, it has nothing to do with "gamblers". Speculators are actually what keeps the price more stable by providing liquidity

rapjr9 5y ago

One issue that seems to be missing from the article is discussion of the ability to monitor transactions in other countries using a CBDC. If like dollars the cryptocurrency is used outside a countries borders, then an in-built traceability in the cryptocurrency compromises everyone who uses it, regardless of borders. This would be a good reason to fear a cryptocurrency from China and a good reason for the USA to have their own. It could also become a strong barrier to adoption if countries outlaw other countries CBDC's to protect their citizens privacy making trade payments via CBDC's impossible.

silexia 5y ago

Many special interests fund shills to write articles on their behalf. Oil companies do this to undermine climate change research and to halt nuclear reactors. Could this article be written by a commercial bank PR guy or a private digital coin fanatic?