Digital Money Across Borders: Macro-Financial Implications
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But I'm very scared to see what those digital wallets for CBDC will turn into. If central banks get control over money flows they can do horrible stuff:
* set a maximum limit on the amount of money you are allowed to have/save in your CBDC wallet.
* give you an x amount of money and force you to spend it (by taking the excess away at the end of the month or topping it up to a limit). This will erode all incentive to save. If forces consumption instead of preservation.
* work with a whitelist of acceptable ways to spent the money. You want to sent some money to someone who is not a legal resident/lives abroad/is on a black list for xyz reason? Though luck...
* set a "transaction" price / hidden tax on less trustworthy or less "wanted" persons or company's. Like when you want to buy liquor/a gun/give to a church you pay 5% transaction costs, but when you pay your rent the transaction costs are 0%.
* in a very real sense untraceable money is privacy and making money traceable is taking privacy away. We may not have something to hide but there is nothing I want them to see either...
Revelation 13:16,17 says "It puts under compulsion all people—the small and the great, the rich and the poor, the free and the slaves—that these should be marked, and that nobody can buy or sell except a person having the mark"Going against the zeigeist again but if something gets pushed onto us for something silly like "pandemic preparedness" or "contact & trace" like 9/11 has brought onto us...that offers identity management that can be expanded into a system like this...
If that happens, can we please stop pretending like something about biology and infectious diseases has fundamentally changed because of COVID for a second and get back to our senses...
We as a global society are clearly prone to collective hysteria whether we have been brought here by a series of unfortunate events and coincidences or by malice pushing their agenda.
Science loves being proven wrong, science loves getting to the bottom of things. There is nothing wrong with worshiping science but scientist worship is a part of it. We are all humans with our egos, trouble admitting being wrong, or simply personal gain from acting a certain way. Many of us just go with things to fit in, or have a career or just to make ends meet.
Numbers can be fudged. Everyone should have the stance of "show me" before believing. And you can't just take what media shows you at the face value. Reenactments, B-roll footage, the whole thing is a lot less "real" than we are lead to believe.
It is not a pandemic if you need to be told it is a pandemic.
You are losing your rights and freedoms because people are scared.
If you were alive during 9/11, doesn't this feel eerily familiar?
Doesn't it feel exactly like it feels when the second plane hit on 9/11?
Scare me and take my rights and freedom.
Can't you see people have the same emotional reaction when you try to get people to question the official COVID narrative that you see when you try to get them to think outside the official 9/11 narrative?
We are a lot less free now than we were before 9/11. And we are not any safer.
The same is about to happen if not happening right now.
We are all being played. Open your eyes and question even the sources you trusted for years. Just because your views aligned with a source for years doesn't mean they are on your side. They can be fooled too. This isn't about intention. We are all human. We are all fallible and this is about to get worse unless we all open our eyes and stop repeating the narrative the media is feeding everyone.
I'm using that, thanks.
That is what happens already today, you just don't notice it as a consumer as the vendor pays the CC bill.
that could be an interesting one for Universal Basic Income .
About the whitelists? Already the case. My bank account in Portugal just got frozen 2 days ago for trying to buy crypto through Coinbase (we're talking about less than 100 EUR transaction here). This involved transferring money to an Estonian account, which according to support is "a blacklisted country" (even though it's an EU member state and an attractive European country for tech related businesses). I tried transferring money from my other EU fintech bank accounts which worked perfectly fine and almost instantly (so the blacklist excuse is bs). I still can't access my funds in that account 2 days later. Computer says no. Support can't help. I'm strongly suspecting this has nothing to do with Estonia and everything to do with banks not liking crypto.
So for everybody who wonders what problems crypto currencies are solving? Well, there ya go...
edit: i chuckled at the little britain reference :)
Furthermore, I'm not exactly the first person to buy crypto through the largest crypto exchange in the world (Coinbase) with such a Portuguese bank account. They know this Coinbase bank account, they know what it's for (buying crypto) and they know it's not a scam.
The potential for abuse here is enormous. If you think shadow banning is problematic from a free speech perspective. Imagine being silently shadow banned from your local grocery store. Imagine not being able to donate to a particular cause/political party. Imagine not being able to give a friend in need financial support because their social score is too low.
People have no actual freedom without economic freedom, and this system will create a sword of Damocles that will hang over each and every person.
You cannot use technology to fix a people (in this case, political) problem. Codify your rights in statute and executive governance authority. Using a distributed ledger ain't gonna fix your laws and courts.
This kind of direct interference with money never works. People just find ways around it, and if they can't, then the money loses its value.
presumably if they're going through that much effort to implement this, they'll prevent this from happening. eg. https://en.wikipedia.org/wiki/Executive_Order_6102
Arguably money should not be used for savings in the first place. Some problems of the modern monetary system arise from the fact that money conflate two functions: medium for trade and tool for savings. After doing something useful for economy and acquiring money for it, you have two options: either you buy someone else's work or you invest somewhere (effectively you lend your useful contribution to someone). The first option is a relatively short-lived, think of money as a reputation system, you are more likely to care about a favor done days ago, not decades ago. Another way of looking on it is that it is easier to compare merit of deeds which were done close in time. But the second option has all the risks and difficulties associated with investments.
If you are interested in this topic, I recommend works of Silvio Gesell, it's somewhat outdated, but still quite interesting even in modern times.
Deep in the footnotes comes the contorted logic,"According to the IMF Treatment of Crypto Assets in Macroeconomic Statistics, crypto assets such as Bitcoin do not meet the definition of a financial asset—and hence currency—in macroeconomic statistics." and presumably that's what lets them off the hook, nevertheless, the ONE payment-rail that BTC fits perfectly is precisely that of international settlements between Central Banks/countries - such settlements typically involve the large-scale transfer of assets, they're not especially time-sensitive, and the transfer cost is inconsequential (and in the case of BTC negligible against the values transferred).
So I'm still left wondering: Why the aversion?
Fear? Lack of control by recognised "authorities"? Their argument that it's "too volatile" is largely untrue over the past year or two, with Bitcoin showing no greater volatility than any of the world's fiat currencies, so I doubt that's the factor at play.
OP tried to compare Bitcoin to reserve currencies. Reserve currencies are more stable than average.
Have you looked at USD vol in the 1800's? Reichsmark vol? From that angle, vol of "proper currencies" in their early adoption days tend to start looking a lot like BTC vol. At a minimum, BTC today to USD today isn't an apples:apples take at all.
In my mind, this starts to damage vol = bad BTC arguments in terms of analyzing BTC's adoption. potential.
Ding, ding, ding!
Even if the technology would adapt cryptographic ledgers, there is no reason to use another currency for that. You use sovereign currencies as before.
You can argue that's a bad thing if you want, but just ignoring that it exists doesn't make much sense.
I can think of a few huge practical benefits:
1. Try to transfer money cross border within the EU/SEPA zone on a Friday. It'll be in the receiving account on Tuesday (and usually not in the morning). That's around 96 hours between sending and receiving. During weekdays this goes to 24 hours. Not even talking about intercontinental transfers. And this is assuming there are no national holidays in either the sending or receiving country during that period. And then there are people that complain that Bitcoin's < 15 minutes is slow, lol.
2. Transfers through central counterparty clearing and settlement sometimes get rejected/delayed for absolutely no reason at all. They can also be rejected/delayed for political or other (good) reasons. BTC doesn't suffer from this.
3. Transfers through central counterparty clearing and settlement can get stolen by attacking the IT systems themselves. Example:https://www.bankinfosecurity.com/another-swift-hack-stole-12.... BTC doesn't suffer from this. Yes, BTC can get stolen through phishing or by attacking end-points, but so can those transfers.
4. Going through central counterparty clearing and settlement requires both the sending and the receiving party to have some type of bank account in the locations that they want to send or receive money to/from. This means dealing with very time consuming local bureaucracy. Especially when the receiving party (for example) wants to receive money in a "new" country that they're not "set up" in yet. Setting this up can take days/weeks of turn around time and hours/days of man-hours. BTC doesn't suffer from this at all.
5. Transfer costs and high exchange rate spreads.
There are probably more issues that I didn't think of.
As a traveler only dealing with relatively tiny amounts of money across borders, BTC has already saved me a ton of time, money and frustration in trying to access my own money across borders. Even I as a nobody can see the benefit, I imagine those benefits only get greater for people dealing with larger amounts (as I assume the bureaucracy and problems go up with the amount of money transferred).
Here's one interesting angle in POS comparison that I never see mentioned anywhere:
VISA, MC, AMEX set a high-standard being able to very quickly process transactions even under high-load times like holidays.
But they did this in part, because they practically had to...Think of holidays shoppers at physical retail stores lined-up at a cash register -- they need approved or denied answer ASAP.
But with that sales model is dying a noticeable death -- no one doubts it will soon be gone -- which brings me back to BTC and and me finally making my point
If you're making a retail purchase from Amazon and choose Next Day for delivery, does it matter that BTC is going to take 15 minutes or even 30 minutes to clear?
Meanwhile the real big money-movers (legal or illegal) are still using bank accounts and paper companies in "business-friendly" jurisdictions.
A new digital, internet-native asset with the greatest monetary properties in history is monetizing before your eyes; meanwhile you're relying on your understanding of an old world to convince yourself it doesn't matter and the people who see something deeply interesting are kooks.
It's very interesting that a large contingent of smart software people on HN heard about Bitcoin extremely early, said it was a useless failure, and then had to re-justify their position for a decade as Bitcoin marches on. It's impossible for anyone to claim Bitcoin has no value at this point, but on every blockchain post on HN there is a core of haters that will make the same tired arguments against it. Meanwhile, no one cares!
You'll never hear that quote about actually revolutionary technologies, because their revolutionary nature is immediately apparent, even if the economic case for the technology is not (at the time).
Cryptocurrency isn't revolutionary. There isn't any use case for cryptocurrency that wouldn't be easier to address with normal cash or credit payment. Cryptocurrency solves none of the actual problems in the current financial or banking systems but introduces a host of new problems that weren't issues in the old system. It's a solution in search of a problem.
I also used to be heavily involved in cryptocurrency, when it first started, and what I saw then is a large part of why I don't see any usefulness in cryptocurrency now and why I'm convinced that it will never replace any part of the financial system.
A lot has changed in 10 years. Crypto has gotten worse. Multiple exchanges were hacked, or turned out to be entirely fraudulent. Black markets came and went. ICOs for non-existent and useless products. The discovery that major participants in the system were manipulating coin values and were engaged in multiple types of financial fraud. The uptake of cryptocurrency as the primary means of paying ransoms to hackers who have encrypted your website, database, or computer. Facebook attempting to introduce its own cryptocurrency. The Bitcoin Craze where awareness of bitcoin hit the general public and the techies who got in first exploited the rubes for everything they were worth(and cryptocurrency industry's response to the criticism: they should have known better!?!? That tarnished all cryptocurrency in the eyes of the public and they learned to avoid all of it, not just Bitcoin. That on its own was a fatal blow to the uptake of cryptocurrency in general use, anywhere, and it was only a few months later that Bitcoin started getting removed from e-commerce sites).
All in all, I'm glad I got out when I did.
Yes, maybe the popularity of BTC will overcome the issues, but I doubt.
I recommend taking a look at something like https://bitcointreasuries.org/
And don't just glance at it - try asking some probing questions, like "What does this mean?" and "What might I be missing concerning the underlying dynamic at play?"
You can also try reading The Bitcoin Standard for a good analysis of the dynamics and history of competition between different forms of money - the central thesis being: History has shown that you can't protect yourself from someone else holding money that's harder (better) than yours. Bitcoin is better money than anything else we have or have ever had.
That's not how money works, if by money you mean a currency. Currencies are issued by sovereign governments, and don't exhibit network effects within that sovereign jurisdiction, because they don't need to. They're legal tender; you're required to accept them, and everyone needs them to pay taxes.
If you mean money as in wealth, that's an entirely different topic.
Why is this important: note "public." To do this legally, they had to convince: - external auditors - internal compliance - external/internal legal - and where it gets interesting: the institutional investors who are large enough to matter, i.e. your big-money movers. This party says no at a shareholder meeting, the conversion isn't happening.
CFO who led this found that last party were all ok with the move given explanation, and most owned BTC already. 1 holdout took some convincing. These big money-movers hold BTC already, in short. Yeah it's not 100% of their assets, but this isn't an argument about that.
Students of central banking are familiar with central banking in the era of gold and why it was almost universally a disaster. (Most of Bagehot [1] concerns itself with bank runs.)
This paper’s audience is familiar with that history. Talking about Bitcoin would be like addressing why machine language wasn’t used in a CS paper.
[1] https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Descriptio...
Gold [https://goldprice.org/charts/history/gold_6_month_o_usd_x.pn...] is of course one of them, but costs of many other liquid commodities have shot up counterintuitively this time as well.
There is nothing "magical" that has happened to banks when they switched to fiat money.
Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort.
There is a lot of scholarship, originally from the turn of the last century but perennially refreshed, on the inherent failure modes of fixed-supply money systems amidst a growing, industrialising or industrialised economy.
Fixed-supply assets are good. Fixed-supply currencies cease, quickly, to be currencies.
So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state. Just before, it was much more likely led to more angry people with pitchforks than today.
No. The de facto currency was estimated mass of precious metal. The king could default, of course. But that is selective; inflation is not. Re-basing happened, but just as with money printing, it is tracked and accounted for and, in extreme cases, fled from.
Equating modern monetarism with gold-standard economics betrays, fortunately, a terrific opportunity to learn from works that have been peer reviewed, in many cases, for over a century.
If a gold standard was a disaster, I don't know what our current system is.
That wouldn't be proper Central Banking :)
BTC is also something that individuals can buy in extremely small increments. It is an escape valve for people in Argentina, Turkey, Venezuela, etc. to protect their wealth from horrible and corrupt central bankers.
Also I'm not claiming that the BTC will take over the dollar, I'm saying dedollarization will occur in general. This isn't a particularly controversial opinion at this point in the finance world. The average CNBC guest is willing to admit this at this point.
US Feds have gone overboard on tracking financial crime, but I really dont see people thinking Euro, Yuan or Yen is safer. Certainly non-CB cryptocurrencies are worthless as soon as sentiment turns.
> The average CNBC guest is willing to admit this at this point.
That really doesn't hold a lot of credibility with me though. :)
A digital currency that directly fits the digital use-case being described by these papers written by central banks, that is in turn ignored by these papers, is sort of like talking about WW2 without mentioning Germany's role.
I can definitely understand the aversion given the implications of a non-CB controlled digicoin, but just ignoring its existence really blows a hole in the intellectual rigor of these whitepapers.
Ultimately, the network adoption will play out as it plays out. We don't have USAweb and RUSweb (maybe moving toward that, but different topic), we have the decentralized, multi-party, ICANN/IETF/private sector/public sector-led The Internet. When you track how the Internet came to be, and how it's actually controlled now, it starts to look a lot like the Bitcoin network's growth plan at the moment. What will be will be. Once it gets analyzed as a network protocol with digital native payments, vs. a digital currency on the regular internet, the blind spots in BTC criticism start to show.
I really don't get what is the hate with the central banks getting control over the money. Yes they are not appointed by the Government but it does not matter, the moment they gain such power, they will become political.
At least, at allows countries to have complete control over their currency and cut the middleman when it comes to monetary policy. ECB and FED throw all this money into quantitative easing now, and the real economy gets nothing.
BTC as a global reserve is a pipedream, the only global and eternal reserve are big guns. BTC as a means of transaction is a dystopia ready to happen. No country is able to increase BTC supply, hence its a highway to unbelievable inequality, and no monetary policy control. Also, good luck enacting fiscal policy in an economy purely based on untraceable cash.
I would rather posit that central banks doing monetary policy tricks with fiat money are increasing inequality and give rise to crazy and detrimental financial schemes.
I agree about the big guns, though.
Because every single CB in the world devalues the currency they govern.
Bitcoin and other coins, on the other hand, are deflationary by design. Which means, while they can drop in value, they will not do so because somebody decided to turn the printer on and print a few trillion BTC. BTC is capped at 21 million coins. And some of it gets lost every day, so its cap is actually shrinking.
(not all cryptocurrencies are deflationary by design, in case I wasn't clear)
The CBDCs themselves have 0 to do with crypto. They are no more digital than your bank account in 1985 was and not using any technology newer than that. They are just normal dollars held directly by citizens at thhe central bank which is useful as a monetary policy tool.
Sure you can tokenize something to create a stable coin but that still had none of the interesting properties of a Blockchain. It just makes itt marginally easier to interact with that ecosystem.
I argue that it is on it's limits now. Long-term prosperity now depends on central banks making right decisions every time there is a hiccup. This should not be like that.
It should be more automatic. Ubi or not, relief funds should be in place when they are truly needed.
Short-term projects should be funded without borrowing excess funds from future generations.
Ultra long term projects should be possible without some crazy political effort.
Central banks can do all of above, if they have better visibility and, yes, control of how money moves, what ownership structure is