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The Fed released a paper outlining pros and cons of a “digital dollar”

dang 5y ago
Related: U.S. is considering a radical rethinking of the dollar for today's digital world - https://news.ycombinator.com/item?id=30239803 https://news.ycombinator.com/item?id=30239803 - Feb 2022 (101 comments)
deleted 5y ago
[deleted]
Qworg 5y ago
As a follow up, the first steps of Project Hamilton (the exploration of how to build said CBDC) were also posted. It is a collaboration between the Boston Fed and DCI@MIT: https://www.bostonfed.org/publications/one-time-pubs/project-hamilton-phase-1-executive-summary.aspx https://www.bostonfed.org/publications/one-time-pubs/project...
- deleted 5y ago
  [deleted]
- chairmanwow1 5y ago
  I hosted a paper reading talk on this paper a few weeks ago. I think there are some genuinely interesting ideas here.
cheschire 5y ago
I feel like this is the primary justification the US gov would have for issuing a CBDC. It's smack in the middle of the "potential benefits", so it's clearly the most important. >> Today, the dollar is widely used across the globe because of the depth and liquidity of U.S. financial markets, the size and openness of the U.S. economy, and international trust in U.S. institutions and rule of law. It is important, however, to consider the implications of a potential future state in which many foreign countries and currency unions may have introduced CBDCs. Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease—and a U.S. CBDC might help preserve the international role of the dollar.
- chomp 5y ago
  Not to be overly cynical, but this sounds like, "China's doing it so we need to do it too." I personally support the digital dollar but this paragraph stuck out to me: >Some have suggested that a CBDC could reduce common barriers to financial inclusion and could lower transaction costs, which could be particularly helpful for lower-income households. First, I have no idea who the "some" are that they are referring to. There's nothing more inclusive than a piece of paper that you can hold, regardless of socioeconomic status, condition, or location. There's no doubt that a digital dollar would do very little to be inclusive of vulnerable populations, especially if you need hardware to spend it.
  - majewsky 5y ago
    > There's nothing more inclusive than a piece of paper that you can hold How is a 100-dollar bill going to help you purchase goods on the internet? This is particularly significant for low-income rural communities where, if all you have is dollar bills, you get to spend them at the one supermarket within reach, or if you have the money to afford a car, you can drive to the next town to have some actual choice. A currency that you can spend on-line is going to be more versatile in this scenario because of the larger breadth of accessible merchants and goods.
sc68cal 5y ago
The majority of US money is already digital, it exists as "digital balances held by commercial banks at the Federal Reserve" This paper just is adding a new shiny coat of paint to an already existing mechanism, just with new terms to make people think they're hip.
- Aldipower 5y ago
  If you think one step further, there will be _only_ the digital dollar. No bills anymore. This means total control about your transactions and what you are doing with your money, because it is digitally tracked.
  - dlp211 5y ago
    I rarely use cash as it is. No one is controlling my purchases.
    - politician 5y ago
      Every financial institution that processes your banking activity is also making an allow/deny determination on every transaction. Sorry to break it to you.
      - dlp211 5y ago
        Hardly. If a merchant accepts VISA, VISA isn't about to deny my transaction because the determination of suitability has been made before hand (assuming that I have the available credit). There are certainly cash only markets and the unbanked, the latter a much larger issue than the former. But isn't the existence of crypto (digital currency) supposed to be the grand solution to the former problem? Or does the promises of crypto fall down when actually forced to be used as a currency in a mainstream sense?
        politician 5y ago
        Every transaction is subject to OFAC rules.
whoomp12342 5y ago
Just a more efficient way to inflate the currency!
- jbverschoor 5y ago
  No.. it’s a way to remove the current dollar and therefore the complete debt of the US
- rvense 5y ago
  That is not the motivation for CBDC. Cash as a technology is, like all other uses of paper, being replaced by digital solutions. And like all other paper replacements, this is leading to a significant shift in power and ownership. In this case, we are well on the way to have privatized a very significant piece of infrastructure, the payment system. Since mandating the use of cash is unlikely to work (much less be popular), if the central bank wants to maintain any form of relevant control over this infrastructure, it absolutely has to launch an alternative to paper that lives up to the expectations of modern users. This is not a matter of being able to do new things as much as it as a matter of maintaining the position that they previously had. A CBDC is a completely natural and necessary development for any democratic society in the 21st century. The alternative is the complete takeover of private actors.
  - randomhodler84 5y ago
    Disagree. CBDC is a way of hijacking a democratic society to enforce rigid economic engineering. It is vastly asymmetric for the state, who can delete your life savings with a click, or deflate your wealth to better accommodate debt. There will be far less democracy if we ceed control of the money supply to politicians.
    - rvense 5y ago
      The state have enough control over the banks they they can already freeze, seize and surveil assets as they see fit. Any legal constraints on this (human rights and such) can also be applied to a CBDC.
Madmallard 5y ago
If there was now digital currency economy wouldn't really work as it is now, right?
ajsnigrutin 5y ago
Wasn't this a conspiracy theory not that long ago? And this is bad. This means that one entity can take away everything from you with one click, so you can't even buy a pack of bubblegum, and on the other side, you can't even buy a dildo, without some entity tracking that somewhere.
- dlp211 5y ago
  No one in the government cares that you are purchasing a dildo. No one at Visa or Mastercard either. There are other forms of currency as well, specifically ETH, BTC, and other cryptos that will continue to power black market purchases. Your cash transactions also aren't as anonymous as you think they are. You need to be essentially completely analogue, and even then, you probably are still being tracked somehow.
  - ajsnigrutin 5y ago
    You sure it doesn't? Look at for example the ashley madison hack... in some countries adultery is punishable by death. Buying gay porn means you're gay... death. Maybe not in "developed countries", maybe not today, not tomorrow, but those records stay... If you pay in cash, and the political situation changes, noone will remember when you were there and what you bought two years ago. This is a thing that helps noone, except the people on top and wannabe dictators.
    - dlp211 5y ago
      The existence of shitty countries doing shitty things to their citizens is not enough reason to not do reasonable things in developed countries. And again, f'ing crypto. This is the entire reason for crypto, to execute black market purchases (even if no one wants to make that the headline use of crypto). And if you think that your all cash purchases aren't being tracked, I have some bad news for you. If you walk into a store with a cell phone, you are being tracked, transaction and all. Facial recognition is going to be used the same way in those shitty countries (see China), so even going analog isn't going to save you. There is no anonymity anymore unless you literally eschew all society and go live in the wilderness. Even then, it's not a guarantee.
jonathan-adly 5y ago
"Should the amount of CBDC held by a single end user be subject to quantity limits?" What a scary question to ponder...
- Smoosh 5y ago
  I find it a very interesting question to ponder. It may not play well with the crowd here, but ask what sort of society allows an individual to accumulate tens of billions of dollars while others have none? Now, I'm not (yet) advocating that we eat the rich, but isn't something fundamentally wrong when so much money (and power) can be held by an individual? What does that mean for a well-functioning economy? Or politics? Can you truly have a democracy with such wealth discrepancy?
  - jonathan-adly 5y ago
    You are confusing taxation with monetary policy. Given the context, this is more about stimulating spending/forcing investment into something other than “cash”. Something like that would have 0 effects on bezos or musk (where all the wealth in stocks). It’s about a tool to stimulate the economy by Keynesian logic. (Savings bad, spending good!)
  - fleddr 5y ago
    You're right that there's a point where somebody's wealth becomes unnatural or perverse. I think some people don't appreciate the difference between somebody rich and the ultra wealthy. They tend to be lumped together into one group, but they're not. In my small town there's a construction company that has been there for 50 years, and typically providing some 60 jobs to locals. The owner works day and night, carries all risk, is well connected in the community. Everybody loves him and people take no issue with him having the largest house in town or a more expensive car. This is reasonable wealth and well deserved, few would disagree. That romantic idea of wealth does not apply to billionaires. The idea that you worked harder, took more risk or had a good idea breaks down morally in light of such numbers. It is wealth typically accumulated by financial instruments, speculation, rent-seeking and underpaying armies of people. It's a complex discussion, but the way I see it, globalization is most responsible for enabling it. Globalization allows in particular big business to fully leverage the race to the bottom in wages, fully leverage favorable deregulation and tax avoidance by cherry picking nations most favorable, and dodge responsibilities, for example by externalizing environmental costs. They get all the upsides, the typical population of any country all the downsides, with no negotiation power.
Mountain_Skies 5y ago
A digital only dollar also seems like it would be key to implementing negative interest whenever the central bank wanted.
ncann 5y ago
Can someone explain to me how is this different from how money is in my bank account right now? Is the difference something like an int (just a pure number) vs something like an abstract data type like Money where you can have fields like source/destination/purpose/date issued/etc. for indexing and tracking purpose?
- kayamon 5y ago
  It would of course depend on the solution they go for, but if for example they used a cryptocurrency like Bitcoin, the difference would be that the 'int' in your account right now is forgable -- i.e. the bank can go in and just adjust it up/down as they see fit, with only regulations (i.e. messy human decisions) to stop them. A CBDC backed by a proof-of-work scheme is unforgable, meaning said currency could be transferred between multiple banks (even potentially abroad) without having to worry about whether said bank obeyed all the regulations correctly or not.
  - IncRnd 5y ago
    The Federal Government has no desire to run a proof of work system. A digital ledger is all they need for this.
- danielmarkbruce 5y ago
  This seems a little crazy, but, you don't actually have money in a bank account.... You are owed money by a bank. Everyone is actually passing back and forth IOUs from banks when they pay for things digitally (or by check). It's one reason why there is a lot of complexity behind the scenes when you pay digitally. It's also the reason FDIC insurance exists. If you think about the fact that my "money" is an IOU from Chase and your "money" is an IOU from Bank of America - how do I send you "money"? It's a complicated dance with lots of different database entries. A central bank digital dollar would be IOUs from the central bank. It's closer to cash.
- xmly 5y ago
  The bank can bankrupt. So your money in bank has credit risk and liquidity risk. But central bank(federal reserve) can "print" dollar, so they will never bankrupt, hence your CBDC has no credit risk or liquidity risk. However, it puts the central bank being the only bank that handles the clearance/settlement. So it has higher political risk for holders. For example, you can store your dollar bills into a bank which does not follow the order from US government. But if you have CBDC, the federal reserve can simply freeze your balance.
abeppu 5y ago
> Examples of current experiments include > building a hypothetical CBDC that would leverage existing technologies and systems: The Board's Technology Lab has been assessing the potential of a centralized CBDC design that leverages existing infrastructure and technology; > exploring a CBDC design that would leverage newer technologies, such as blockchain: The Federal Reserve Bank of Boston is collaborating with the Massachusetts Institute of Technology's Digital Currency Initiative to explore the development of alternative platforms; So, it could be centralized, it could be block-chain based. The potential range of what they could be talking about is so broad that it's hard to make anything specific of it. But an interesting area of concern that they kind of skate by is how to safeguard against future innovations in cryptography. Will quantum computers be effective enough in 10 years to break a lot of public key cryptography? How long should people have an expectation that their financial activity remains private?
UnpossibleJim 5y ago
So, if this goes through, would this make crypto-currencies competing currencies and therefore illegal? I'm unsure how the regulatory actions of counterfeiting and competing currency laws work, which is how I ask... would this have to be written into a separate law, to outlaw or regulate the current crypto market, or would it already be folder into the current legal structure when/if the USD became a "digital dollar" with a similar format? After a quick glance, it is mentioned that this form of digital currency is made in an attempt to cut down on financing illegal operations, so there would be some sort of ID'd blockchain tied into this... I would assume. Simple enough, put your social in with the block chain. Not a huge amount of memory more, I guess. My understanding of the block chain isn't extensive. I can only assume this is a backdoor route to exterminate uncontrolled currencies, which would make the above make sense... or are those just "traded goods" at this point, like baseball cards, or Beanie Babies? Or can those be, practically, made illegal?
timClicks 5y ago
It seems like many central banks are investigating this space. Here is a similar paper from the Reserve Bank of New Zealand https://www.rbnz.govt.nz/news/2022/02/innovation-key-to-the-future-of-money-and-cash https://www.rbnz.govt.nz/news/2022/02/innovation-key-to-the-...
atweiden 5y ago
> CBDC transactions would need to be final and completed in real time, allowing users to make payments to one another using a risk-free asset. Interesting choice of words for a monetary instrument which can be arbitrarily inflated or seized by third parties. And this doesn’t even touch on the political risk inherent to “national” monies.
cherrycherry98 5y ago
Unless it comes with safeguards regarding anonymity and protection from seizure, I feel that this will give the government too much power and surveillance. What will prevent the government from holding individuals accountable for making transactions deemed immoral or dangerous? It seems all you have to do is characterize a movement as terrorism and you can seize assets at will. A world with physical currency has a builtin "privacy mode" in that you can conduct business just using notes and keep it in notes. The US stopped printing notes larger than $100 in 1969. That $100 note in 1969 had the buying power of roughly $780 today due to inflation. I think it's well past due that the government print larger notes, allowing more economic freedom, but I understand why they don't. Even a $500 note doesn't bring us back to cash buying power parity with 1969.
flashfaffe2 5y ago
Given the current geopolitical events, I'm note sure to understand how any country would agree to jump into the use of this CBDC. My understanding is that with this new tool, the fed will be able to know where is the money in real time. Tough this makes a lot of sense from th FED side ( solutions implemented addresses in 2008 failed mainly because money received from th central banks failed to be re-injected in the real economy). Not sure to see a large enthousiasm from other countries to have this asset denominated in this USCBDC Being remove in one click....
fleddr 5y ago
The paper conveniently dodges a few critical items of attention. The first one is that the CBDC is a (crypto) currency to promote or maintain the dominance of the dollar in the world, as they openly state in the paper itself. This in itself is not unexpected but violates the idea of most cryptocurrencies, they are internet money, detached from national currencies, national interests or national rules. Only in the exchange back to fiat money do local interests play a role. So this is more like a stablecoin, with better backing. The paper self-congratulates current central bank money as the safest money in the world, which I'd say is not entirely false, but at the very least I would expect monetary expansion (inflation) to be deeply discussed, but it isn't. It mentions the current private cryptocurrencies and their many downsides, without listing upsides. Suspicious and biased. I don't care if you're pro or anti crypto, but its assessment cannot be this simplistic or binary. Another item that comes top of mind is anti-seizure legislation. Recent events as seen in Canada (using an emergency law to seize assets) and the Russia thing where reserves are simply frozen are raising some questions about the safety of digital money. If any emotional politician can just push a button and take your assets, people will feel unsafe. The authority question goes unanswered in the paper. The paper correctly establishes that privacy is critical but then also goes on to say that everything needs to be reported. A contradiction, so we'll find a "balance". Elaborate on this balance, because there is none. Every single transaction ever will be on record. Not a word on the dangers of cryptocurrencies being programmable. Under the pressure of ever-changing politics, these could make possible restrictions on money currently barely possible. For example, they can put an expiration on your money, forcing you to spend it. Or, block the buying of particular products directly from your wallet. It's a potential huge jump in authority, but it's barely mentioned. It dances around a lot of hot and inconvenient issues.
noodles_nomore 5y ago
Cool things to do with CBDCs: - Abolish filing your taxes. All taxes can be calculated and payed automatically from your bank account, you don't even have to check. No more tax evasion! - Manage the money supply more effectively. This is very complicated, you wouldn't understand, but it is very importing for achieving the Fed's mandate of price stability^H^H^H^H full employment^H^H^H^H 2% inflation^H^H^H^H 2% aggregate inflation^H^H^H^H climate change targets - Track exact carbon footprint of every citizen, track calorie intake, sugar intake, meat consumption, condom use, and leverage this capability to assess and promote your physical and mental health - Easily restrict specific individuals from certain purchases like guns, alcohol, sleeping pills, gasoline, lottery tickets, soft drinks, pornography, the book The Real Anthony Fauci, and other hate speech - Turn off payments for terrorist, fugitives, people at risk of fleeing, illegal occupants of infrastructure, or for quarantined people beyond a five mile radius from their homes
- foxyv 5y ago
  That sounds... terrible.
  - danielmarkbruce 5y ago
    I think most (/all) of it is tongue in cheek..
- ASalazarMX 5y ago
  That's sound awesome, but the bit about tax evasion would be hard to sell. Let's wait until we invent CBCD Pro, where your right to privacy is guaranteed, for a price.

dang 5y ago

Related: U.S. is considering a radical rethinking of the dollar for today's digital world - https://news.ycombinator.com/item?id=30239803 https://news.ycombinator.com/item?id=30239803 - Feb 2022 (101 comments)

deleted 5y ago

[deleted]

Qworg 5y ago

As a follow up, the first steps of Project Hamilton (the exploration of how to build said CBDC) were also posted. It is a collaboration between the Boston Fed and DCI@MIT: https://www.bostonfed.org/publications/one-time-pubs/project-hamilton-phase-1-executive-summary.aspx https://www.bostonfed.org/publications/one-time-pubs/project...

deleted 5y ago
[deleted]
chairmanwow1 5y ago
I hosted a paper reading talk on this paper a few weeks ago. I think there are some genuinely interesting ideas here.

cheschire 5y ago

I feel like this is the primary justification the US gov would have for issuing a CBDC. It's smack in the middle of the "potential benefits", so it's clearly the most important. >> Today, the dollar is widely used across the globe because of the depth and liquidity of U.S. financial markets, the size and openness of the U.S. economy, and international trust in U.S. institutions and rule of law. It is important, however, to consider the implications of a potential future state in which many foreign countries and currency unions may have introduced CBDCs. Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease—and a U.S. CBDC might help preserve the international role of the dollar.

chomp 5y ago
Not to be overly cynical, but this sounds like, "China's doing it so we need to do it too." I personally support the digital dollar but this paragraph stuck out to me: >Some have suggested that a CBDC could reduce common barriers to financial inclusion and could lower transaction costs, which could be particularly helpful for lower-income households. First, I have no idea who the "some" are that they are referring to. There's nothing more inclusive than a piece of paper that you can hold, regardless of socioeconomic status, condition, or location. There's no doubt that a digital dollar would do very little to be inclusive of vulnerable populations, especially if you need hardware to spend it.
- majewsky 5y ago
  > There's nothing more inclusive than a piece of paper that you can hold How is a 100-dollar bill going to help you purchase goods on the internet? This is particularly significant for low-income rural communities where, if all you have is dollar bills, you get to spend them at the one supermarket within reach, or if you have the money to afford a car, you can drive to the next town to have some actual choice. A currency that you can spend on-line is going to be more versatile in this scenario because of the larger breadth of accessible merchants and goods.

sc68cal 5y ago

The majority of US money is already digital, it exists as "digital balances held by commercial banks at the Federal Reserve" This paper just is adding a new shiny coat of paint to an already existing mechanism, just with new terms to make people think they're hip.

Aldipower 5y ago
If you think one step further, there will be _only_ the digital dollar. No bills anymore. This means total control about your transactions and what you are doing with your money, because it is digitally tracked.
- dlp211 5y ago
  I rarely use cash as it is. No one is controlling my purchases.
  - politician 5y ago
    Every financial institution that processes your banking activity is also making an allow/deny determination on every transaction. Sorry to break it to you.
    - dlp211 5y ago
      Hardly. If a merchant accepts VISA, VISA isn't about to deny my transaction because the determination of suitability has been made before hand (assuming that I have the available credit). There are certainly cash only markets and the unbanked, the latter a much larger issue than the former. But isn't the existence of crypto (digital currency) supposed to be the grand solution to the former problem? Or does the promises of crypto fall down when actually forced to be used as a currency in a mainstream sense?
      - politician 5y ago
        Every transaction is subject to OFAC rules.

whoomp12342 5y ago

Just a more efficient way to inflate the currency!

jbverschoor 5y ago
No.. it’s a way to remove the current dollar and therefore the complete debt of the US
rvense 5y ago
That is not the motivation for CBDC. Cash as a technology is, like all other uses of paper, being replaced by digital solutions. And like all other paper replacements, this is leading to a significant shift in power and ownership. In this case, we are well on the way to have privatized a very significant piece of infrastructure, the payment system. Since mandating the use of cash is unlikely to work (much less be popular), if the central bank wants to maintain any form of relevant control over this infrastructure, it absolutely has to launch an alternative to paper that lives up to the expectations of modern users. This is not a matter of being able to do new things as much as it as a matter of maintaining the position that they previously had. A CBDC is a completely natural and necessary development for any democratic society in the 21st century. The alternative is the complete takeover of private actors.
- randomhodler84 5y ago
  Disagree. CBDC is a way of hijacking a democratic society to enforce rigid economic engineering. It is vastly asymmetric for the state, who can delete your life savings with a click, or deflate your wealth to better accommodate debt. There will be far less democracy if we ceed control of the money supply to politicians.
  - rvense 5y ago
    The state have enough control over the banks they they can already freeze, seize and surveil assets as they see fit. Any legal constraints on this (human rights and such) can also be applied to a CBDC.

Madmallard 5y ago

If there was now digital currency economy wouldn't really work as it is now, right?

ajsnigrutin 5y ago

Wasn't this a conspiracy theory not that long ago? And this is bad. This means that one entity can take away everything from you with one click, so you can't even buy a pack of bubblegum, and on the other side, you can't even buy a dildo, without some entity tracking that somewhere.

dlp211 5y ago
No one in the government cares that you are purchasing a dildo. No one at Visa or Mastercard either. There are other forms of currency as well, specifically ETH, BTC, and other cryptos that will continue to power black market purchases. Your cash transactions also aren't as anonymous as you think they are. You need to be essentially completely analogue, and even then, you probably are still being tracked somehow.
- ajsnigrutin 5y ago
  You sure it doesn't? Look at for example the ashley madison hack... in some countries adultery is punishable by death. Buying gay porn means you're gay... death. Maybe not in "developed countries", maybe not today, not tomorrow, but those records stay... If you pay in cash, and the political situation changes, noone will remember when you were there and what you bought two years ago. This is a thing that helps noone, except the people on top and wannabe dictators.
  - dlp211 5y ago
    The existence of shitty countries doing shitty things to their citizens is not enough reason to not do reasonable things in developed countries. And again, f'ing crypto. This is the entire reason for crypto, to execute black market purchases (even if no one wants to make that the headline use of crypto). And if you think that your all cash purchases aren't being tracked, I have some bad news for you. If you walk into a store with a cell phone, you are being tracked, transaction and all. Facial recognition is going to be used the same way in those shitty countries (see China), so even going analog isn't going to save you. There is no anonymity anymore unless you literally eschew all society and go live in the wilderness. Even then, it's not a guarantee.

jonathan-adly 5y ago

"Should the amount of CBDC held by a single end user be subject to quantity limits?" What a scary question to ponder...

Smoosh 5y ago
I find it a very interesting question to ponder. It may not play well with the crowd here, but ask what sort of society allows an individual to accumulate tens of billions of dollars while others have none? Now, I'm not (yet) advocating that we eat the rich, but isn't something fundamentally wrong when so much money (and power) can be held by an individual? What does that mean for a well-functioning economy? Or politics? Can you truly have a democracy with such wealth discrepancy?
- jonathan-adly 5y ago
  You are confusing taxation with monetary policy. Given the context, this is more about stimulating spending/forcing investment into something other than “cash”. Something like that would have 0 effects on bezos or musk (where all the wealth in stocks). It’s about a tool to stimulate the economy by Keynesian logic. (Savings bad, spending good!)
- fleddr 5y ago
  You're right that there's a point where somebody's wealth becomes unnatural or perverse. I think some people don't appreciate the difference between somebody rich and the ultra wealthy. They tend to be lumped together into one group, but they're not. In my small town there's a construction company that has been there for 50 years, and typically providing some 60 jobs to locals. The owner works day and night, carries all risk, is well connected in the community. Everybody loves him and people take no issue with him having the largest house in town or a more expensive car. This is reasonable wealth and well deserved, few would disagree. That romantic idea of wealth does not apply to billionaires. The idea that you worked harder, took more risk or had a good idea breaks down morally in light of such numbers. It is wealth typically accumulated by financial instruments, speculation, rent-seeking and underpaying armies of people. It's a complex discussion, but the way I see it, globalization is most responsible for enabling it. Globalization allows in particular big business to fully leverage the race to the bottom in wages, fully leverage favorable deregulation and tax avoidance by cherry picking nations most favorable, and dodge responsibilities, for example by externalizing environmental costs. They get all the upsides, the typical population of any country all the downsides, with no negotiation power.

Mountain_Skies 5y ago

A digital only dollar also seems like it would be key to implementing negative interest whenever the central bank wanted.

ncann 5y ago

Can someone explain to me how is this different from how money is in my bank account right now? Is the difference something like an int (just a pure number) vs something like an abstract data type like Money where you can have fields like source/destination/purpose/date issued/etc. for indexing and tracking purpose?

kayamon 5y ago
It would of course depend on the solution they go for, but if for example they used a cryptocurrency like Bitcoin, the difference would be that the 'int' in your account right now is forgable -- i.e. the bank can go in and just adjust it up/down as they see fit, with only regulations (i.e. messy human decisions) to stop them. A CBDC backed by a proof-of-work scheme is unforgable, meaning said currency could be transferred between multiple banks (even potentially abroad) without having to worry about whether said bank obeyed all the regulations correctly or not.
- IncRnd 5y ago
  The Federal Government has no desire to run a proof of work system. A digital ledger is all they need for this.
danielmarkbruce 5y ago
This seems a little crazy, but, you don't actually have money in a bank account.... You are owed money by a bank. Everyone is actually passing back and forth IOUs from banks when they pay for things digitally (or by check). It's one reason why there is a lot of complexity behind the scenes when you pay digitally. It's also the reason FDIC insurance exists. If you think about the fact that my "money" is an IOU from Chase and your "money" is an IOU from Bank of America - how do I send you "money"? It's a complicated dance with lots of different database entries. A central bank digital dollar would be IOUs from the central bank. It's closer to cash.
xmly 5y ago
The bank can bankrupt. So your money in bank has credit risk and liquidity risk. But central bank(federal reserve) can "print" dollar, so they will never bankrupt, hence your CBDC has no credit risk or liquidity risk. However, it puts the central bank being the only bank that handles the clearance/settlement. So it has higher political risk for holders. For example, you can store your dollar bills into a bank which does not follow the order from US government. But if you have CBDC, the federal reserve can simply freeze your balance.

abeppu 5y ago

> Examples of current experiments include > building a hypothetical CBDC that would leverage existing technologies and systems: The Board's Technology Lab has been assessing the potential of a centralized CBDC design that leverages existing infrastructure and technology; > exploring a CBDC design that would leverage newer technologies, such as blockchain: The Federal Reserve Bank of Boston is collaborating with the Massachusetts Institute of Technology's Digital Currency Initiative to explore the development of alternative platforms; So, it could be centralized, it could be block-chain based. The potential range of what they could be talking about is so broad that it's hard to make anything specific of it. But an interesting area of concern that they kind of skate by is how to safeguard against future innovations in cryptography. Will quantum computers be effective enough in 10 years to break a lot of public key cryptography? How long should people have an expectation that their financial activity remains private?

UnpossibleJim 5y ago

So, if this goes through, would this make crypto-currencies competing currencies and therefore illegal? I'm unsure how the regulatory actions of counterfeiting and competing currency laws work, which is how I ask... would this have to be written into a separate law, to outlaw or regulate the current crypto market, or would it already be folder into the current legal structure when/if the USD became a "digital dollar" with a similar format? After a quick glance, it is mentioned that this form of digital currency is made in an attempt to cut down on financing illegal operations, so there would be some sort of ID'd blockchain tied into this... I would assume. Simple enough, put your social in with the block chain. Not a huge amount of memory more, I guess. My understanding of the block chain isn't extensive. I can only assume this is a backdoor route to exterminate uncontrolled currencies, which would make the above make sense... or are those just "traded goods" at this point, like baseball cards, or Beanie Babies? Or can those be, practically, made illegal?

timClicks 5y ago

It seems like many central banks are investigating this space. Here is a similar paper from the Reserve Bank of New Zealand https://www.rbnz.govt.nz/news/2022/02/innovation-key-to-the-future-of-money-and-cash https://www.rbnz.govt.nz/news/2022/02/innovation-key-to-the-...

atweiden 5y ago

> CBDC transactions would need to be final and completed in real time, allowing users to make payments to one another using a risk-free asset. Interesting choice of words for a monetary instrument which can be arbitrarily inflated or seized by third parties. And this doesn’t even touch on the political risk inherent to “national” monies.

cherrycherry98 5y ago

Unless it comes with safeguards regarding anonymity and protection from seizure, I feel that this will give the government too much power and surveillance. What will prevent the government from holding individuals accountable for making transactions deemed immoral or dangerous? It seems all you have to do is characterize a movement as terrorism and you can seize assets at will. A world with physical currency has a builtin "privacy mode" in that you can conduct business just using notes and keep it in notes. The US stopped printing notes larger than $100 in 1969. That $100 note in 1969 had the buying power of roughly $780 today due to inflation. I think it's well past due that the government print larger notes, allowing more economic freedom, but I understand why they don't. Even a $500 note doesn't bring us back to cash buying power parity with 1969.

flashfaffe2 5y ago

Given the current geopolitical events, I'm note sure to understand how any country would agree to jump into the use of this CBDC. My understanding is that with this new tool, the fed will be able to know where is the money in real time. Tough this makes a lot of sense from th FED side ( solutions implemented addresses in 2008 failed mainly because money received from th central banks failed to be re-injected in the real economy). Not sure to see a large enthousiasm from other countries to have this asset denominated in this USCBDC Being remove in one click....

fleddr 5y ago

The paper conveniently dodges a few critical items of attention. The first one is that the CBDC is a (crypto) currency to promote or maintain the dominance of the dollar in the world, as they openly state in the paper itself. This in itself is not unexpected but violates the idea of most cryptocurrencies, they are internet money, detached from national currencies, national interests or national rules. Only in the exchange back to fiat money do local interests play a role. So this is more like a stablecoin, with better backing. The paper self-congratulates current central bank money as the safest money in the world, which I'd say is not entirely false, but at the very least I would expect monetary expansion (inflation) to be deeply discussed, but it isn't. It mentions the current private cryptocurrencies and their many downsides, without listing upsides. Suspicious and biased. I don't care if you're pro or anti crypto, but its assessment cannot be this simplistic or binary. Another item that comes top of mind is anti-seizure legislation. Recent events as seen in Canada (using an emergency law to seize assets) and the Russia thing where reserves are simply frozen are raising some questions about the safety of digital money. If any emotional politician can just push a button and take your assets, people will feel unsafe. The authority question goes unanswered in the paper. The paper correctly establishes that privacy is critical but then also goes on to say that everything needs to be reported. A contradiction, so we'll find a "balance". Elaborate on this balance, because there is none. Every single transaction ever will be on record. Not a word on the dangers of cryptocurrencies being programmable. Under the pressure of ever-changing politics, these could make possible restrictions on money currently barely possible. For example, they can put an expiration on your money, forcing you to spend it. Or, block the buying of particular products directly from your wallet. It's a potential huge jump in authority, but it's barely mentioned. It dances around a lot of hot and inconvenient issues.

noodles_nomore 5y ago

Cool things to do with CBDCs: - Abolish filing your taxes. All taxes can be calculated and payed automatically from your bank account, you don't even have to check. No more tax evasion! - Manage the money supply more effectively. This is very complicated, you wouldn't understand, but it is very importing for achieving the Fed's mandate of price stability^H^H^H^H full employment^H^H^H^H 2% inflation^H^H^H^H 2% aggregate inflation^H^H^H^H climate change targets - Track exact carbon footprint of every citizen, track calorie intake, sugar intake, meat consumption, condom use, and leverage this capability to assess and promote your physical and mental health - Easily restrict specific individuals from certain purchases like guns, alcohol, sleeping pills, gasoline, lottery tickets, soft drinks, pornography, the book The Real Anthony Fauci, and other hate speech - Turn off payments for terrorist, fugitives, people at risk of fleeing, illegal occupants of infrastructure, or for quarantined people beyond a five mile radius from their homes

foxyv 5y ago
That sounds... terrible.
- danielmarkbruce 5y ago
  I think most (/all) of it is tongue in cheek..
ASalazarMX 5y ago
That's sound awesome, but the bit about tax evasion would be hard to sell. Let's wait until we invent CBCD Pro, where your right to privacy is guaranteed, for a price.