To continue driving the conversation on digital currencies, here is a news article detailing how the American Federal Reserve (FED) and other central banks are looking into launching digital currencies of their own to compete with Bitcoin and other crytocurrencies. Advocates of a CBDC say that this new type of money will allow any citizen to open a bank account directly with a country’s central bank which would theoretically speed up the process of future stimulus check payments. CBDC was also described in this white paper by the American FED as “complementing” already existing physical currency, not replacing it:
China has already launched its own CBDC and distributed access to its “eCNY” through a lottery system:
What’s interesting about eCNY is that it is not based on blockchain tech like crytocurrecy is. But even more interesting than this is that the people that used the trial version of eCNY liked it to private payment systems used in China similar to Paypal for those who live in the U.S… In my mind, this would mean that if a well functioning CBDC were to be introduced that any taxpaying citizen can use, it would mean the end of private payment systems almost overnight. However I wonder what the effect on crytocurrencies would be.
We should also consider that CBDC would be another form of government surveillance and control, but the benefits are also considerable. If governments were to place a ban on crytocurrencies like India has done in tandem with launching a CBDC, it could mean a massive reduction in tax evasion. According to the Tax Justice Network, $245 billion USD is lost each year globally from corporate tax evasion.
Would be nice to see that reduced significantly. Of course CBDC would not be a quick fix for this but it will make a significant positive impact on it. Also considering the CBDC would be pubically accountable through popularly elected representatives whereas crytocurrecy and private payment systems are not is also a big draw for me. As Peter has said “government may not be perfect, but government is just an extension of ourselves.” (Paraphrased)
What does everyone else think of CBDC? Anything else to add?
One thing to note is that the chinese digital currency is not based on blockchain tech, so it is not cryptocurrency like bitcoin. I would say Central Bank Digital Currency is the opposite of cryptocurrency in many ways. That convo you linked @Kees is interesting tho.
KEY POINTS
Cryptocurrencies should face more regulation, according to the Bank for International Settlements’ Agustin Carstens.
Tokens like bitcoin are being used as a “speculative vehicle” and aren’t a threat to central banks, Carstens says.
His comments arrive as various central banks around the world are exploring their own digital currencies.
*Study completed by Swedish central bank "the most advanced study on CBDC yet, and says the current rate that physical currency is being replaced by cashless payments may start presenting problems that a CBDC can address.
*Study looks into possibility of charging interest on CBDC, making it debt based like physical currency.
*The study also presents 3 options for implementing a CBDC, only one of which would directly offer CBDC thru the central bank, cutting out commercial banks and payment processing intermediaries such as paypal, thus giving more control of the currency to the central bank. However this is unlikely to happen since central banks are owned and controlled by commercial banks.
