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Comment by anm89 | Hacker News Reader

You are fundamentally misunderstanding CBDCs here by conflating CBDCs with cryptocurrencies.

The concept of a CBDC is simply a digital currency where normal people hold digital accounts with the central bank instead of using a retail bank. That's it. No prescription for the storage mechanism. It could be a relational database, a block chain or memory on J Powell's old graphing calculator from highschool. A CBDC is digital in the same way that your credit card is digital. It's just that a computer tracks the Fed liability not a little green piece of paper.

Here's a piece of legislation proposing a US CBDC . https://www.congress.gov/bill/116th-congress/senate-bill/357...

Go look for the words cryptocurrency or blockchain in it. They aren't there. It's simply a mechanism for retail banks to hold "pass through" accounts for consumer accounts at the fed.

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It's not the implementation that is my concern, it is that a digital currency makes it even easier for banks to impose negative rates than cash.

I doubt that you really think central banks, retail banks and the imf have no intention to abolish physical cash. Abolishing it is all upside for them.

Well abolishing cash is almost all upside for everyone.

For retailers (companies that accept payments) it's easier, faster, cheaper and safer ( zero risk of theft by staff or robbery). For regular people that pay it's easier, faster, more linear ( if you have to spend X now, you don't have to have withdrawn it from an ATM or bank before).

The only downsides are underbanked people and companies, which is an issue in itself and needs to be fixed regardless of cash availability (I'm talking in general, but even more so for developing countries and the US(wasn't it in the news recently that the US Postal Service is going to be cashing checks at some ridiculously expensive rate? Way to get in to the 19th century!)), and of course privacy, for which regulation is needed ( who has access to your payment/transaction data and in what cases) and it's solved for 90% of cases.

Hold on, "cheaper"? Tell that to people paying 1-3% transaction fees on credit cards. Even square is 2.6%.

I distinctly remember articles about coffee shops and similar going cashless in a few different countries ( UK, France at the very least) because managing cash costs time and money ( it needs to be counted, stored, safely transported to the bank, etc.) and doing card-only payments comes out cheaper for them.

Banks usually charge .9-1.5% for cash deposits, plus staff time to count, insurance, safes, etc.

A debit card costs .10c and no %. A well implemented cryptocurrency would be even less.

Do you also believe negative interest rates, larger than people are facing now in spite of a wave of inflation, are almost all upside for everyone?

Yes, negative interest rates encourage long term thinking. Lower financing costs will result in less cost push inflation for manufactured goods and services. They remove the need for a post capitalism system. They most likely would have stopped the great depression and prevented world war 2. They reduce inequality by forcing rich people to spend and invest their money instead of sitting on it during times of economic uncertainty.

So are you in favour of both abolishing physical cash and negative interest rates?

(larger than now, how big a negative interest rate are you in favour of? Nevermind: I see from your other comment, 5%, immediate bank run territory.)

You realise lower financing costs do the opposite of encouraging long term thinking. The inflation cost is merely moved to deflation cost of cash.

What do you mean by a post capitalism system?

You realise that hyperinflation contributed to WW2, and that in the event of negative rates the rich move out of cash into another asset(like housing). See Roosevelt and the gold standard. I honestly doubt that negative rates would have avoided the Great Depression.

Wealth taxes also reduce inequality and can be more progressive than negative interest rates which hit middle income earners the hardest, who try to save for retirement.

Another big downside: when you pay something with cash, it hurts. It physically hurts. You give your hard earned cash and get back the goods. Cash is gone. But when you pay with a credit card, you give your credit card to cashier, she gives you goods and your card back. It doesn't hurt. Your brain registers this as not spending because you got your card back. As a result, people spend way more when they use cards in comparison with cash.

In the countries I've lived (Europe, both south and north), financial waste doesn't come from things you pay in cash, but from things we have not paid in cash for decades (rent/mortgage, car loans, monthly services, expensive travel...).

I agree, and that only reinforces my point! With the exception of buying home which is almost impossible to buy with cash, everything else would really hurt if one had to give cash for it! And I bet that a lot of financial waste would be no more if one had to count the bills for vacation, then for car loan (BTW, I bought a car outright), then for Netflix/Amazon Prime/whatever monthly subscription etc.

if your iq is above 80, after few months you will make the logical connection, i believe

It seems there are millions and millions of people that didn't make that connection. Credit card companies are thriving.

> Go look for the words cryptocurrency or blockchain in it.

Look at the BIS's annual economic report for this year [0]. They are absolutely talking about retail tokens based on a distributed ledger as one of two retail options, the other being as you describe.

[0] https://www.bis.org/publ/arpdf/ar2021e3.htm

I was also puzzled as to why Reuters had chosen a cryptocurrency stock photo for the article.

GP is talking about retail CBDC, which is user-facing in addition to being bank-facing only like current central banks. Not all CBDCs talk about retail, and it’s not clear if any would actually aim to provide that feature.

A vast majority of discussion about CBDC is about retail CBDC.

Interbank and internation transactions are already digital. The Fed already has wholesale digital liabilities

That's not true, and the point of a CBDC is not just that it's digital but that you easily join and use the network. Today interbanking is a mess.

Interbanking is as mess, but the standard everyone is settling on is ISO 20022 messages and the plumbing will slowly be refactored for pushing these messages around.

https://www.iso20022.org/iso-20022

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