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Most examinations of CBDC paint a grim picture of things to come, mostly in terms of yielding absolute power to the central bank. As with any situation involvin

Most examinations of CBDC paint a grim picture of things to come, mostly in terms of yielding absolute power to the central bank. As with any situation involving power, with good intentions you can do wonderful things, with bad intentions you can do equally horrifying things. In the Indian context, the latter is of particular concern, especially when one man can demonetise the whole country overnight on a whim. There was a good discussion here on CBDC sometime back - https://news.ycombinator.com/item?id=27805709 https://news.ycombinator.com/item?id=27805709

ssivark 4y ago
Thanks for the link -- it is a nice discussion, and contains pointers to interesting content that I wasn't aware of. (likewise, for the sibling comment with links about mBridge) I appreciate the privacy concerns, but for anyone reading, the tradeoffs have a completely different meaning in the Indian context. 1. A fraction of the Indian populace is so poor that the cost of operating a cash economy (printing currency, transporting it securely, stocking and operating ATMS and bank branches) might prove forbiddingly expensive to service rural areas -- leading to financial exclusion. So, for them, digital infrastructure (which reduces cost of transacting) is a matter of life support, rather than the luxury that it is in the developed world (where everyone has bank accounts, access to cheap credit, and can swipe plastic cards everywhere). 2. While demonetization might have been a horrible fiasco, India's digital payments system (UPI) has been a phenomenal success -- there is substantial evidence on the ground to support that. (The former was arguably used to drive adoption for the latter, but whatever.) The state derives substantial trust from its citizens for this and other developmental and sociopolitical factors. 3. To generalize from those two nuggets -- the Indian populace (with its distinct history and cultural context) has a different relation with the Indian state -vs- banks -vs- corporations, compared to the situation in other countries. Therefore, the factors influencing trust/distrust, the developmental needs & aspirations, the politics, etc are substantially different. It makes very little sense to try and understand Indian concerns and preferences with a perspective honed elsewhere. Eg: In a system where you might trust the state more than possibly corrupt intermediaries (for a complicated array of reasons), the trust calculus is completely inverted. I'm not saying this is necessarily the case, or that nothing generalizes across countries, but the point is that the ground realities are completely different, and they influence the tradeoffs one is willing to put up with. 4. On the specific theme of privacy: the RBI concept note devotes section 7.7 to it. I wish it were more thorough, maybe it's acceptable at this preliminary stage, and can be improved through iteration... but that's an example of the kind of thoughtful commentary that would be very useful -- an analysis of specific shortcomings and/or potential improvements.
- tsqj 4y ago
  excellent points. thanks for sharing. govt / RBI might be able to give a boost to the CBDC by giving some Sec80c benefits. historically that's been a good channel to 'nudge' people into putting money where the govt wants towards.
- college_physics 4y ago
  +1 for the expression "trust calculus" as it seems quite apposite. CBDC (along with its less august bitcoin sibling) are ultimately questions rather than answers: what are the fundamental building blocks of trust in society (whether analog or digital), how invariant are they under cultural transformations and what might be optimal or at least stable designs (that do no depend on a perpetual pool of "low information" crowds).
- rhaway84773 4y ago
  UPI has been highly successful. But please, let’s not credit demonetization with any of it. To the extent demonetization helped, it was an unplanned accident. And it was a result of the fact that the previous administration had begun the Aadhar project (which to its credit the current govt continued and even took credit for). Demonetization was nothing more than a massive destruction of wealth and growth, done for only one reason. To starve the political opposition of funds over the next few elections.
- fractalb 4y ago
  > 1. A fraction of the Indian populace is so poor that the cost of operating a cash economy (printing currency, transporting it securely, stocking and operating ATMS and bank branches) might prove forbiddingly expensive to service rural areas -- leading to financial exclusion. So, for them, digital infrastructure (which reduces cost of transacting) is a matter of life support, rather than the luxury that it is in the developed world (where everyone has bank accounts, access to cheap credit, and can swipe plastic cards everywhere). So poor, but well-off for paying for mobile phones/laptops and internet, and educated enough to understand the app interface/language?
  - ssivark 4y ago
germandiago 4y ago
The question should be: with the track record of wild debt countries are showing, the Twitter leaked mails shpwing political control behind and the raise in taxes, what makes you think they will do something good? Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something?
- arcticbull 4y ago
  > Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something? Generally you are either directly or indirectly their elector so they are in fact accountable to you. But yeah, that's kind of how democracy works. I'm personally only supportive of privacy-preserving CBDCs like the Rohan Grey e-cash proposal.
  - TEP_Kim_Il_Sung 4y ago
    The Twitter files had a lot to say to that response too...
- rhaway84773 4y ago
  Because in the context of India the digitization of money and centralization of data has been a massive boon to the people. For example, with the creation of a national identification number (which, thanks to the initial poor security measures has already been hacked), government welfare schemes which involved the distribution of money to people now actually results in the poor benefitting from them, since the money gets deposited in their bank accounts directly. In the past over 80-90% of the money would be stolen by intermediaries. This is entirely the result of the creation of a massive identity database which by any angle is a security nightmare. Further, the digitization of money has led to tremendous benefits to the population. Not having to carry around cash greatly reduces the risks of loss or theft. A lot of abuse faced by vendors in the unofficial sector (which is the bulk of the economy) has also reduced because a customer promising to pay cash later because they wouldn’t have it on them, and then either “forgetting” to do so, or delaying it and effectively getting an interest free loan from people who were least able to afford it, is something that has reduced dramatically because the vendor can demand the customer pay them directly using any of the digital means whose receipt they will get confirmation of instantly. Digital currency has also led to a reduction in fraud and claims of fraud. If a vendor sends a product to a customer with a delivery person, for example, in the past they’d bring cash. This opened up a lot of opportunity for abuse against the largely powerless delivery person where either the customer would not pay enough, and the vendor would blame the delivery person for stealing the money, etc. But now, that simply doesn’t come into play. The customer pays the vendor directly and the vendor sends the delivery person a confirmation and they hand over the product to the customer. A whole class of exploitation tactics have basically been eliminated.
rhaway84773 4y ago
This is absolutely true. On the flip side, digital currency has also led to much more reliable disbursement of funds to the actual beneficiaries of those funds. This has been a dramatic change. Western (and even a lot of Indian) media likes to paint a lot of Modi’s support based on his religious discrimination, but in reality that’s only a tiny fraction of the support he enjoys. Most of his support comes from the fact that, for example, even as demonetization has probably led to India’s GDP being far smaller than it would have been otherwise, many poor people are still better off because funds and services that would in the past have largely been eaten up by political and administrative intermediaries actually make it to the people. And a large part of that is the result of some of the problematic measures like the central identification numbers and the digitization of money.

ssivark 4y ago

Thanks for the link -- it is a nice discussion, and contains pointers to interesting content that I wasn't aware of. (likewise, for the sibling comment with links about mBridge) I appreciate the privacy concerns, but for anyone reading, the tradeoffs have a completely different meaning in the Indian context. 1. A fraction of the Indian populace is so poor that the cost of operating a cash economy (printing currency, transporting it securely, stocking and operating ATMS and bank branches) might prove forbiddingly expensive to service rural areas -- leading to financial exclusion. So, for them, digital infrastructure (which reduces cost of transacting) is a matter of life support, rather than the luxury that it is in the developed world (where everyone has bank accounts, access to cheap credit, and can swipe plastic cards everywhere). 2. While demonetization might have been a horrible fiasco, India's digital payments system (UPI) has been a phenomenal success -- there is substantial evidence on the ground to support that. (The former was arguably used to drive adoption for the latter, but whatever.) The state derives substantial trust from its citizens for this and other developmental and sociopolitical factors. 3. To generalize from those two nuggets -- the Indian populace (with its distinct history and cultural context) has a different relation with the Indian state -vs- banks -vs- corporations, compared to the situation in other countries. Therefore, the factors influencing trust/distrust, the developmental needs & aspirations, the politics, etc are substantially different. It makes very little sense to try and understand Indian concerns and preferences with a perspective honed elsewhere. Eg: In a system where you might trust the state more than possibly corrupt intermediaries (for a complicated array of reasons), the trust calculus is completely inverted. I'm not saying this is necessarily the case, or that nothing generalizes across countries, but the point is that the ground realities are completely different, and they influence the tradeoffs one is willing to put up with. 4. On the specific theme of privacy: the RBI concept note devotes section 7.7 to it. I wish it were more thorough, maybe it's acceptable at this preliminary stage, and can be improved through iteration... but that's an example of the kind of thoughtful commentary that would be very useful -- an analysis of specific shortcomings and/or potential improvements.

tsqj 4y ago
excellent points. thanks for sharing. govt / RBI might be able to give a boost to the CBDC by giving some Sec80c benefits. historically that's been a good channel to 'nudge' people into putting money where the govt wants towards.
college_physics 4y ago
+1 for the expression "trust calculus" as it seems quite apposite. CBDC (along with its less august bitcoin sibling) are ultimately questions rather than answers: what are the fundamental building blocks of trust in society (whether analog or digital), how invariant are they under cultural transformations and what might be optimal or at least stable designs (that do no depend on a perpetual pool of "low information" crowds).
rhaway84773 4y ago
UPI has been highly successful. But please, let’s not credit demonetization with any of it. To the extent demonetization helped, it was an unplanned accident. And it was a result of the fact that the previous administration had begun the Aadhar project (which to its credit the current govt continued and even took credit for). Demonetization was nothing more than a massive destruction of wealth and growth, done for only one reason. To starve the political opposition of funds over the next few elections.
fractalb 4y ago
> 1. A fraction of the Indian populace is so poor that the cost of operating a cash economy (printing currency, transporting it securely, stocking and operating ATMS and bank branches) might prove forbiddingly expensive to service rural areas -- leading to financial exclusion. So, for them, digital infrastructure (which reduces cost of transacting) is a matter of life support, rather than the luxury that it is in the developed world (where everyone has bank accounts, access to cheap credit, and can swipe plastic cards everywhere). So poor, but well-off for paying for mobile phones/laptops and internet, and educated enough to understand the app interface/language?
- ssivark 4y ago

germandiago 4y ago

The question should be: with the track record of wild debt countries are showing, the Twitter leaked mails shpwing political control behind and the raise in taxes, what makes you think they will do something good? Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something?

arcticbull 4y ago
> Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something? Generally you are either directly or indirectly their elector so they are in fact accountable to you. But yeah, that's kind of how democracy works. I'm personally only supportive of privacy-preserving CBDCs like the Rohan Grey e-cash proposal.
- TEP_Kim_Il_Sung 4y ago
  The Twitter files had a lot to say to that response too...
rhaway84773 4y ago
Because in the context of India the digitization of money and centralization of data has been a massive boon to the people. For example, with the creation of a national identification number (which, thanks to the initial poor security measures has already been hacked), government welfare schemes which involved the distribution of money to people now actually results in the poor benefitting from them, since the money gets deposited in their bank accounts directly. In the past over 80-90% of the money would be stolen by intermediaries. This is entirely the result of the creation of a massive identity database which by any angle is a security nightmare. Further, the digitization of money has led to tremendous benefits to the population. Not having to carry around cash greatly reduces the risks of loss or theft. A lot of abuse faced by vendors in the unofficial sector (which is the bulk of the economy) has also reduced because a customer promising to pay cash later because they wouldn’t have it on them, and then either “forgetting” to do so, or delaying it and effectively getting an interest free loan from people who were least able to afford it, is something that has reduced dramatically because the vendor can demand the customer pay them directly using any of the digital means whose receipt they will get confirmation of instantly. Digital currency has also led to a reduction in fraud and claims of fraud. If a vendor sends a product to a customer with a delivery person, for example, in the past they’d bring cash. This opened up a lot of opportunity for abuse against the largely powerless delivery person where either the customer would not pay enough, and the vendor would blame the delivery person for stealing the money, etc. But now, that simply doesn’t come into play. The customer pays the vendor directly and the vendor sends the delivery person a confirmation and they hand over the product to the customer. A whole class of exploitation tactics have basically been eliminated.

rhaway84773 4y ago

This is absolutely true. On the flip side, digital currency has also led to much more reliable disbursement of funds to the actual beneficiaries of those funds. This has been a dramatic change. Western (and even a lot of Indian) media likes to paint a lot of Modi’s support based on his religious discrimination, but in reality that’s only a tiny fraction of the support he enjoys. Most of his support comes from the fact that, for example, even as demonetization has probably led to India’s GDP being far smaller than it would have been otherwise, many poor people are still better off because funds and services that would in the past have largely been eaten up by political and administrative intermediaries actually make it to the people. And a large part of that is the result of some of the problematic measures like the central identification numbers and the digitization of money.