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Comment by blihp | Hacker News Reader

People don't need it, but governments want it very badly. It would provide governments with greater visibility into and control over the money supply and flows. This would be both at the macro (arguably good) and micro (arguably bad) levels.

Just as here on HN we read from time to time about people being locked out of various online services (i.e. Google, Facebook etc.) for doing something a company doesn't like, a CBDC would allow governments the ability to effectively lock people/organizations out of their digital economy.[1] It would also allow for money that expires and can only be used for certain (government approved) purposes. (these both would have been desirable from the government's point of view for COVID stimulus payments, for example)

[1] This can already be done to a degree via the banking system, but a CBDC would provide for much more granular control.

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In short, permissioned digital currency is all the bad parts of crypto and none of the good parts, while simultaneously getting rid of all the good parts of cash. There's almost no benefit to the user that something else doesn't do better.

Incorrect. The benefits come from more informed macroeconomic policy, more targeted economic tools, and potential benefits around more targeted and effective sanctions against international bad actors.

The idea is that the benefits to the user are a more stable economy (lower inflation, higher employment), a more effective safety net (politicians more likely to approve payments that can't be spent on gambling), and greater peace (targeted sanctions as an alternative to war).

Whether any/all of these will work effectively is debatable of course, but there are legitimately good reasons to think they would. And no, there's no alternative that does them better, and crypto certainly doesn't. Again, the individual merits can be argued, but the idea that it is "all bad no good" is simply not the case here.

That gives a lot of weight to the idea that officials in the Fed (or your country's central bank) and government will make the best decisions for everyone given increased data produced by a digital currency. History doesn't really show that officials make the right decision even with sufficient data. For a small example, until a few months ago many US Treasury and Fed officials insisted that any inflation would be "transitory" at worst. Now many admit they were wrong, but still argue about the state of the economy given such inflation and whether or not the US is in a recession. On a larger scale, many US officials were blatantly wrong about their conclusions regarding the markets going into the 2008 financial crisis, a few have even admitted as much. Even if we assume officials would only make the "right" decision given the right data, it seems unlikely that a digital currency would give officials sufficient knowledge of many factors for the 2008 crisis, e.g. swaps and other financial instruments used by large banks, and the so-called "shadow banking" system.

I could be wrong, but I don't think many citizens would vote for a policy that would give up so much of their privacy, autonomy, and civil rights for the hope that central banks and government officials will make the right economic decisions next time given the data a digital currency provides.

Central bank policy isn't perfect, because human beings aren't perfect. But it's far, far, far better than having no policy at all -- economies used to follow crazy harmful cycles of booms and busts, bank runs, runaway inflation, and so forth. It's easy to take for granted how effective central bank policy is because many of us haven't experienced the lack of it at home in our lifetimes.

The central bank doesn't have a crystal ball to know with certainty where inflation will go. Much of that depends on historical events outside the US that are by definition unknowable -- how will food and energy prices be affected by war in Ukraine, for example?

But central banks are able to plan and then adapt appropriately as circumstances change. And citizens have long voted for effective central bank policy -- economic fears about inflation and recession are reliably the #1 popular concern. If a digital currency can help this, most voters will be very happy with it. After all, for people (like myself) who already make 99% of their purchases with credit cards, they're not giving up much.

You may be confusing USA Congressional fiscal policy with central bank monetary policy. Federal Reserve (private contractor with no federal government employees) could spend more resources on regulating banks instead of bailing out banks via purchases of bank's underperforming debts.

I don't believe that having more data will lead to worse decisions. I could be wrong, but I believe the vast majority of the population doesn't care about privacy and is willing to sacrifice marginally more than nothing to keep it.

>For a small example, until a few months ago many US Treasury and Fed officials insisted that any inflation would be "transitory" at worst. Now many admit they were wrong,

That government officials are fallible and incompetent is (in my opinion) the weaker argument. Even if they were extremely competent and had a crystal ball that predicted the future (they don't), nobody should trust the intentions or the goals of government agencies with such ubiquitous and unchecked power.

> more effective safety net (... payments that can't be spent on gambling)

> there's no alternative that does them better

State-run EBT cards exist and seem to be working OK.

Federalizing more things reduces people's ability to usefully vote with their feet by moving to a different State when people don't agree with State government policies.

> more stable economy (lower inflation, higher employment)

Speculative and seems unlikely. Do you have examples where a CBDC helps pay for projects better than the existing payment rails?

One might as well discuss the user-benefits of nerve stapling.

>but there are legitimately good reasons to think they would.

There is no good reason for the government to have complete control over all of your finances and purchasing decisions on a granular level (if you value human freedom, autonomy and dignity at all).

Totally upside down and backwards.

Crypto is all the bad parts of a CBDC and none of the good parts. A CBDC will eliminate any argument for crypto ... with the exception of paranoia ... which is unfounded since crypto keeps a public record of everything you do.

>A CBDC will eliminate any argument for crypto

So a US CBDC will be decentralized, permissionless, transparent, non-censoring, and run on open-source software based on an open specification?

No, it will a be a stable currency that people actually use without even thinking about it to make instant money transfers at zero cost.

Because stable currencies do not exist in the world of cryptos? Dai [1], Rai [2], and USDC [3] are some examples that are all stable, and all dramatically different from each other.

Fees are currently as low as $0.03 on Ethereum layer-2 solutions (!= side-chain) [4]. The fees will further fall as the technology improves, and once L1 gets (data-/dank-)sharding and other L2-scaling oriented upgrades.

[1] https://makerdao.com/en [2] https://reflexer.finance [3] https://www.circle.com/en/usdc [4] https://l2fees.info

Fees are currently as low as $0.03 on Ethereum layer-2 solutions

Fees in crypto fantasy land are irrelevant to most people.

How much does it cost to pay your rent or buy food in the real world?

Fiat transactions often carry fees. If you buy a product online or receive revenue from e-commerce the fees are around 2-5% + 50 cents.

Crypto is probably not going to beat domestic interbank dollar transfers for small amounts, these transactions can be regulated down to zero fees like we see in the EU and UK.

Crypto is probably not going to beat domestic interbank dollar transfers for small amounts

Thank you. It's probably not going to beat domestic interbank dollar transfers for ease of use either. With a CBDC, most consumers will only notice new capabilities and faster money transfers --- at zero cost.

Back to the original point: A CBDC will eliminate any argument for crypto --- except for paranoia.

And about paranoia --- imagine the outcry if government decided to store every transaction you ever did in an immutable public database?

There are reasons to use crypto aside from a domestic interbank dollar transfer: trading a digital asset, registering something on a globally shared ledger, international transfers or transfers to non-bank accounts, anonymous cash-like digital transactions, smart contract functionality, to name a few.

Forcing citizens to use a CBDC is straight out of 1984 playbook.

Forcing citizens to use a CBDC is straight out of 1984 playbook.

FUD anyone?

Citizens won't be using a CBDC --- at least not directly. Everything *citizens* do will still be denominated in good ole USD just like always.

The CBDC will be used behind the scenes by banks and the Fed to speed up and modernize the banking system --- to replace the antiquated ACH system that was originally designed in the paper check era.

Basically, a CBDC will allow digital wallet like features to be seamlessly added to every existing US bank account.

Governments are proven oppressors, Every single mass abuse of human rights, war, genocide has been carried out by government. Taking the power of the purse from government is the next big human rights issue of our age, rendering taxation by inflation impossible, and empowering individuals to hold government accountable.

Thank you for saving us from the evil of government. In the meantime, can I pay rent with crypto?

If your landlord decides to accept crypto, sure you could.

So in other words --- not likely --- not without charging you an additional fee.

Your landlord doesn't exist in crypto land either --- and he will quickly grasp the fact that doing business in crypto has real world costs.

permissioned

I think this is the key concept over and above digital. It's the difference between http et al and AOL/Compuserve.

https://permissionlessinnovation.org/what-is-permissionless-...

> This can already be done to a degree via the banking system, but a CBDC would provide for much more granular control.

That's vague. Prove it.

See Russia and SWIFT for the most extreme example to date.

What does that have to do with CBDC?

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