They allow applying negative interest rate on everybody and they would facilitate neverending hyperinflation (no need to print new bills at great expense).
Hence they can't coexist with cash so say goodbye to cash.
I don't like where we're going.
[1] https://www.bloomberg.com/news/articles/2021-02-10/ecb-s-pan...
The only way out of this to getting money circulating in the real economy is to go after the giant concentrations of wealth that are distorting the situation so badly.
CBDC will co-exist with cash for years to come. Fully monitored CBDC will be at a high disadvantage by citizens specially in modern world, while fully private one would not be allowed by CBs due to need for transparency.
Here also comes the product builders. We could design a CBDC that is fully transparent, which is the easiest to build, these days mostly DLT based. The challenge is how to enable some TXNs to be private by design and not only policies.
A major country is taking the extreme case of full transparency, while ECB and others like Canada are strongly focusing on privacy as a feature.
Those are very different things, and from Europe's approach to the GDPR, I think it is the first.
The former is almost a given that it will in fact be possible. The latter was raised as an added benefit of the system either by BIS's Carstens or IMF's Georgieva -- can't recall with certainty currently. Both are promoted as weapons against black markets, corruption, and terrorism.
Yet those who are willing to give up liberty for safety, and all that.
The control of privacy should be in the protocol and not in the hands of the authorities, if there is going to be a trust built around it. Otherwise, we have what is there today, without the anonymous cash element.
There are different designs today to address this concern, see e.g. the one from Bank of Canada, as one of the frontiers of privacy for citizen: https://www.bankofcanada.ca/2020/06/staff-analytical-note-20...
I personally have absolutely no problem with them and I'd be very glad if I could settle every transaction with a digital Euro. I don't particularly enjoy the middlemen in the form of countless payment processors who all take cuts out of transactions, and I don't really see what privacy or tracking burden applies that existing firms don't already engage in.
To me the payment infrastructure consisting of countless of private firms seems more like a relic of the past. Free, instant financial services to me are ideally a public utility in the same way the water or transport infrastructure is.
Are we sure those digital currencies would be handled directly and fully by the central bank at no (direct) fee per transaction? Who's to say that the way things currently work won't stay exactly the same, except for your Visa card being denominated in dEuros instead of Euros?
I may be a pessimist, but the way I see it, the current end-user facing financial system (retail banks and payment processors) are much too big and much too greedy to stand idly by while the central bank takes their pie away.
The current state of merchant banks and payment providers can very well continue, without CBs having to assume new responsibilities.
After all, the trend is towards more privatisation, not less.
I share your pessimism. I'd say the central bank is the oven wherein the commercial banks bake their pies.
Me neither, not at all.
The idea of a digital Euro is already worked on:
https://www.ecb.europa.eu/euro/html/digitaleuro.en.html
Obviously, it's an "inclusive" system, a term that evokes in me strong feelings of mistrust, as it has no provisions of alternatives like not moving to a digital currency. "Inclusive" by mandate and without consent, or the possibility to opt out. (Somewhat reminds me the Onion's Google privacy village.)
Let's crack open the windows, so we can throw privacy and liberty right out.
side note, „inclusive“ here refers to unbanked population. Today they can use cash, but many people specially in poor countries have no access to banking. A no-smartphone no-bank-needed digital cash could enable big part of countries to be included in financial system (some up to 40% of population)
In the current climate, where we're all ever so slightly microbiophobic, it'll even be easier to push through as a good thing, handwaving any concerns with respect to privacy and centralised control as conspiratorial.
Indeed I am aware of the intended meaning of "inclusive" in their texts, I just played around with expanding it a bit.
- almost all CBDC designs are transparent (monitored and stored), since they sit on the ledger and has to be auditable by a third party. So, the only way to allow privacy is to give some „vouchers“ that those transactions are either not stored or stored with a different key. ECB has proposed one such designs, e.g. 300 euro vouchers a day.
- there are other models that do not use DLTs so they can provide means not to store specific txns, hence private.
If stored, it can be audited.
Cash can still exist in industries where we want trust to exist between different parties, those kinds of spaces are small enough that I doubt they'd be worth the effort to eradicate anyway.
Not to say that I like where all of this is going myself, but blockchain for large and official transactions + metal currency for local informal transactions is one direction I wouldn't mind at all.
This might also open up new markets, e.g. micropayments, because govt could choose to eat the cost of this to enable some industries that right now cannot exist because transactions are too expensive.
https://en.wikipedia.org/wiki/Blind_signature
https://docs.wasabiwallet.io/building-wasabi/TechnicalOvervi...
You'll own nothing and you'll be happy.
https://www.weforum.org/agenda/2016/11/how-life-could-change...
Video: 8 predictions for the world in 2030
This is an implementation detail. Merely adding “digital currency” in the sense of “personal accounts at the treasury” isn’t proper cash replacement.
It is however possible to make a more anonymous kind of e-cash in which your transactions are not tracked. Chaum E-cash and similar ideas are useful cash-replacements. They aren’t without their on problems so e.g the Swedish central bank appears to be eyeing a double system where you have both types of system: a centralized/non-anonymous store and a token based type which provides anonymity. The latter could be used with a cap on transactions because if it’s properties wrt double spending.
The central bank doesn't have hyperinflation as a policy goal though. If you are worried about hyperinflation ask yourself this: Will the economy will suddenly have a collapse in production capacity (nimbys cough cough)? If yes, then expect inflation higher than the policy goal.
Not exactly. The decoy inputs/outputs provide anonymity if you look at a transaction in isolation, but doesn't when you look at repeated transactions. This is a problem that any cryptocurrency with a transaction graph will have. There are cryptocurrencies that don't have transaction graphs, but those have other issues (ie. not being able to detect counterfeiting)
This is not how modern money supply works. The M2 has increased massively, and the number of new bills in circulation will not change materially.
Currency is already digital. And sometimes we use physical paper to represent it.