Comment by walterbell | Hacker News Reader

Comment by walterbell | Hacker News Reader

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There was an IMF video clip with BIS director Carstens commenting on CBDCs last year, https://meetings.imf.org/en/2020/Annual/Schedule/2020/10/19/...

> With cash, we don't know who is using the 100 dollar bill today ... a key difference with CBDC is that the central bank will have absolute control on the rules and regulations that determine the expression of that central bank liability .. also we will have the technology to enforce that ... if an advanced economy issues a CBDC, and someone in a 3rd country wants to use it, it will require the consent of the central bank of the residence of that person, therefore the degree of control will be far bigger.

Video on the IMF site is not working, here's a YT copy (thanks @toomuchtodo): https://www.youtube.com/watch?v=mVmKN4DSu3g&t=1451s

In a March 2021 speech, Carstens made a similar point, https://www.bis.org/speeches/sp210331.pdf

> It is crucial to trace transactions, particularly large ones, to an individual or entity. For account-based CBDCs, issuing central banks would retain control over cross-border usage. Restricting non-residents’ access reduces the risk of volatile flows, and of currency substitution in recipient economies.

Well-intentioned initiatives like Linux Foundation https://www.goodhealthpass.org/ or EU digital health certificate or Apple iOS 15 digital driver's license (https://www.androidpolice.com/2021/06/07/apples-ios-15-walle...) can all be drafted into the service of CBDC initiatives which require digital identity for digital currency wallets.

I think people have to recognize that both digital technology and the process of "modernity" and state-formation of the 20th century make it a lot harder for unsurveiled spaces to exist because suddenly everyone is operating in the same "space", a single market.

There used to be a rough equilibrium that it was difficult to move large amounts of money around, especially internationally, but small amounts of cash were totally invisible to the state. This ensured a certain amount of stability; the state control could be exercised at the border, where anything of significant value had to be declared to customs, but inside the state you could go about your business. It was pretty difficult for a state to spin up a subversive organisation or competing industry inside another state's borders. Conversely, to commit a large crime required serious planning to move the money, and it was infeasible to move it overseas.

Technology is forcing the dichotomy towards either ubiquitous surveillance of absolutely every transaction, versus increasingly large "perfect" crimes carried out by people who are untouchably overseas.

> There used to be a rough equilibrium that it was difficult to move large amounts of money around, especially internationally

Apparently not that difficult with the active support of banks (the B in CBDC), https://www.buzzfeednews.com/article/jasonleopold/fincen-fil...

> A huge trove of secret government documents reveals for the first time how the giants of Western banking move trillions of dollars in suspicious transactions, enriching themselves and their shareholders while facilitating the work of terrorists, kleptocrats, and drug kingpins. And the US government, despite its vast powers, fails to stop it.

Even criminal convictions have little effect beyond fines, https://wallstreetonparade.com/2020/09/3-count-felon-jpmorga...

> Every American should be horrified by this latest report from the ICIJ; every American should be outraged that the U.S. is now second only to the Cayman Islands for hiding dirty money for criminals.

It's unclear how surveillance of mom & pop CBDC payments could help when trillions of dollars of suspicious Bank activity can continue unabated.

That article is dated 2020, while I'm referring more to changes throughout the 20th century, the Bretton Woods era etc. The UK had formal capital controls until 1979, for example.

> the US government, despite its vast powers, fails to stop it.

Yes, and so long as it fails to stop it there will be pressure to "do something".

And establishing a threshold below which there is no surveillance is unstable, because immediately you have to face "structuring", and the digital space makes this worse. If there were to be truly free no-surveillance payments of $1, say, people would move a stolen billion as one billion payments of $1. This is already happening with gift cards: https://www.napier.ai/post/prepaid-cards

The truly big money laundering is incredibly difficult to stop, because it can fund its own bribery zone that can extend to entire countries.

> can all be drafted into the service of CBDC initiatives which require digital identity for digital currency wallets

This is why initiatives like Decentralised Identifiers are so important. There's simply no government or organisation on the planet responsible enough to wield that power. At least it provides an alternative to centralised behemoths.

https://www.w3.org/TR/did-core/#abstract

This would integrate cleanly with a reputation economy, where folks who get "bad reviews" cannot do business.

Or folks who do business with "bad people" or spend their money on "bad things" find their transactions taxed more heavily.

I think we can all picture what the moralizing pro-social left and religious right incarnations of that look like.

This is supposed to be a commentary of the current state of affairs, yes? I mean we already have sin taxes.

You don’t really need absolute control of a currency to moralize above-board business.

It's currently in broad strokes, what's being enabled is micromanagement. You don't have enough calorie credits for that uber, better get hiking.[1] The global food council will also be prohibiting purchases of meat until your next birthday.

[1] https://www.youtube.com/watch?v=WSvb_ZTYS6A

But now in extra strength and without loopholes.

> sin taxes

Do we have taxes on gluttony? sloth? lust? anger? I never noticed.

What we have are taxes and other limitations on health-harming substances, like cigarettes, strong alcohol, and even on excessive sugar in certain places. This is not because the nicotine high, or inebriation, or feeling the sweetness are morally objectionable. This is because inhaled smoke, large quantities of alcohol, and large quantities of sugar lead to health problems, and treating these problems is expensive. It's more like a road tax, higher on heavy vehicles that damage roads faster.

>>This is because inhaled smoke, large quantities of alcohol, and large quantities of sugar lead to health problems, and treating these problems is expensive. It's more like a road tax, higher on heavy vehicles that damage roads faster.

This all assumes that the cost of medical expenses should be socialized.

The cost of medical expenses is socialized anyway

Exactly. The entire society had to shoulder the weight of the consequences of bad habits of some.

Were the costs not socialized, there'd be a bit less of a point to tax cigarettes so much: you want to get lung cancer and you are ready to pay for it, go ahead and smoke three packs a day! But this is not how it works today.

Not my point.

A phenomenon which affects a large fraction of a population has effects on the entirety of the population, ergo, it is socialized.

Every major category of goods/services has an effect on a large fraction of society. It doesn't follow that we should socialize the expense of every good/service that fits this criteria. It's absolutely not established that doing so, as a rule, does more good than harm, and we have plenty of empirical evidence that more free-market-based societies are more effective at developing themselves than more socialized ones.

the adult sector and the firearm sectors are already under pressure

Sin taxes are opposed by the argument that they disproportionately affect poor people. If they could target them based on your income bracket or something, they might get a lot more popular.

I think you're right but for the wrong reasons.

IME few people genuinely care about the poor beyond micromanaging them for their own good or getting them to be out of sight out of mind.

Sin taxes, generally speaking, are how the HN class incentivizes the landscaper class to behave more like them (to varying degrees and with various pretexts as needed per issue).

Currently they are mostly limited by the middle class's ability to exempt itself. Finer targeting will enable them to go hog wild.

bad people income tax +5%. raise slowly every year.

all normal sin taxes still apply.

China has already implemented this system. Why not head over and try it out?

Except you are too big to be hold accountable.

Yeah, good luck voting out your nation’s central bank. Even the politicians can’t.

Entire IMF video from that event is available at https://www.youtube.com/watch?v=mVmKN4DSu3g

Excellent, thanks for tracking that down.

Happy to help.

Not only that - a central digital currency could enact embedded transaction taxation automatically.

It's potentially a LOT of power centralized.

Central taxation at the transaction level could enable byzantine trade policy, e.g. new parties within supply chains claiming a right to tax.

> With cash, we don't know who is using the 100 dollar bill today

Some CBDCs like GNU Taler also have that property. Tokens are signed with blind signatures so the exchange doesn't know the identifier of the tokens you got, just how much of it gave you.

From https://en.wikipedia.org/wiki/GNU_Taler

> Stallman has described the program as "designed to be anonymous for the payer, but payees are always identified.

Taler is a pretty great system. It is anonymous for the payer, but doesn't facilitate money laundering because the receiver of the money can be identified. It's also fairly cheap to run. I hope it gets adopted as a digital currency.

Depends on the implementation details. If private keys are distributed only by central bank, then yes. But if they are created anonymously at the edges, with multiple private keys allowed per person, then they don’t necessarily know who controls what wallet.

Unsurprisingly, anonymity is not high on the list of CBDC policy objectives.

Transactional identity is valuable for social credit systems and kill-switch mechanisms.

One LF initiative: https://trustoverip.org/

In practice, we still require ID verification to participate in markets.

Some markets. All kinds of financial transactions are happening as we speak in various DeFi ecosystems on a permissionless basis - you don't need an account, just a wallet.

Before say "your wallet is your account", only sort of. You can have any number of wallets through any number of applications that support it, including rolling your own if you so chose. Certainly nothing like the KYC/AML required of, say, Robinhood.

Examples?

Loans, derivatives, providing liquidity to AMMs, lots of other things going on.

Here's a list of the big ones on Ethereum:

https://dappradar.com/defi

We’re talking about the government here, it’s entirely reasonable to assume they’re going to start regulating this kind of thing by imposing rules on citizens.

How are they going to regulate defi?

The most likely thing is to add onerous reporting rules on US citizens since they can’t directly change any of these protocols. Or, declare that participating in DeFi without a license is illegal. Again, they can’t ban DeFi because it’s decentralized but they can certainly regulate you and I’s interaction with said systems.

Not really. And for those cases that do, we only require it with the merchant, not the central bank.

That's not true for most markets in the world.

Makes me wonder the total volume of anonymous trades compared to ID-verified trades.

A lot of art trades probably happen anonymously or atleast behind brokers who keep their client identities hidden.

I bet that the vast majority of leaf node food purchases on Earth are in cash.

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