Has Brazil Invented the Future of Money?
paulkrugman.substack.com
paulkrugman.substack.com
We do not need crypto, the technology is here and implemented, and bank transfer fees are archaic rent-seeking structures.
Well done Brazil, wake up America.
Cash is fungible. And cash in my wallet is not subject to being frozen like a bank account.
One can argue the merits of a digital cash for society. But a crypto-based digital cash is fundamentally different from a digital bank-based payment system.
Now I wish digital payments didn't require a server/ledger connection at all, but I understand that would risk double-spend attacks unless all the computation could be fully trusted, which we can't even guarantee for existing card payments.
In the UK we have bank transfers that settle in a maximum of two hours (much less usually, although I do not know whether it is as fast as the Brazilian system on average) and is free for individuals. It seems to be the norm globally. Is Krugman entirely unaware of how the rest of the world works?
The one things he is right about is that we do already have central bank digital currencies. Most currencies exist mostly in digital form (I cannot remember the exact number, but got GBP its well over 90%).
None of these are really comparable to Pix, which occupies a different place in the market (although it also covers these use cases). It absorbs almost all P2P payments as well as business payments, where cards and cash were previously dominant.
All my bank transfers are done via SEPA, including those that I do for my business.
Frankly, I could not care less. I just type in or select an IBAN or scan the QR code with IBAN+Name+Comment+Amount+Currency
It simply occupies a different market space and mindshare than Pix.
All of this is possible with Pix.
Bancontact in my case, which is a country-specific payment system.
Amazon knows my IBAN and I authorize the payments through Bancontact.
> Can you do your gym automatic subscription with SEPA?
Yes
> Can you buy stuff on Chrome with Google Pay with SEPA?
Nope, Google Pay only accepts credit cards.
These comments remind me of the infamous Dropbox comment. Pix is identical to SEPA except in all the ways that count to users, which is why it's wildly more popular.
Does it support every bank? It feels for me Bancontact feels like a Visa/Master thing?
The point about Pix is how it was created by the Central Bank. Between person, it's 100% free, no fees at all. Between business, they allow banks to charge a fee, but the cost it's super low, so a few banks don't have fees at all.
Pix it's just a way on how you can transfer money from your bank app.
About Google Pay thing, Google Pay here integrated Pix, by using open bank solution. So Google Pay basically becomes a 3rd party client for your bank, and thus, allows you use Pix with Tap to Pay, or... with every website on Chrome's.
As soon as you copy the Pix Code to pay, it invokes Google Pay, and you can pay seamless, without switching to any app.
And because every website, store, supports Pix... This basically delivered Google Pay to everything.
Many of my subscription services (from webhosting to internet to recurring hospital bills) are done using Sepa Direct Debit (SDD).
> Republicans say that they’re worried about invasion of privacy, that a CBDC would open the door to widespread government surveillance. But remember, these are the people who have handed over personal Medicaid data to ICE to facilitate arrests and abductions
Instead of providing an argument for why CBDC is not invading privacy and enables government surveillance he goes for ad-hominem of "they're bad and don't care about what they say they care about".
I don't need Republicans to care about privacy. CBDC would be a privacy and surveillance nightmare and if Republicans ban it, it's a good thing regardless of their motivations or thoughts.
Imagine a giant bank, potentially mandatory for citizens, run by government.
Today if government wants to look at your bank account and transactions they have to convince the judge to sign a warrant.
With CBDC they'll just have this information, they'll control your ability to send money which is essential to modern living.
We'll inevitably be one supermajority away from your ability to use money will vanish because you say something government doesn't like or call a politician fat.
This is not future dystopia, this is today dystopia.
In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
In Brazil the new government just made it criminal to do and share interviews with previous president.
In Germany they're prosecuting someone for calling politician fat.
Governments will abuse any power they get so it's best to give them as little power as possible.
Politicians love it because they love every tool of control.
I don't know why Krugman loves it but you should be against it.
Sending money is not a problem and it doesn't need government to provide a "solution".
¿Porque no los dos? This is is popular culture newsletter, not a peer reviewed journal. He can write articles that are more or less wonkish, geared more or less to academics or the general public, as he feels.
> In Canada during Covid protest the government gave itself emergency powers and shut down bank accounts of protesters.
They did not shut down bank accounts of protestors but of occupiers. Occupiers that did not disperse when ordered and were deemed a threat to public order. An inquiry mandated by the legislation found the events met the threshold for invocation:
* https://en.wikipedia.org/wiki/Public_Order_Emergency_Commiss...
Mandatory comment pointing out the "Nobel" in Economics is not a real Nobel Prize. It was made up by the central banking cartel to reward economists who say the things they like. From MMT to ideology stuff.
https://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Econom...
> established in 1968 by Sveriges Riksbank (Sweden's central bank)
> Some critics argue that the prestige of the Prize in Economic Sciences derives in part from its association with the Nobel Prizes, an association that has often been a source of controversy. Among them is the Swedish human rights lawyer Peter Nobel, a great-grandnephew of Alfred Nobel.
https://www.hsbc.co.uk/current-accounts/what-is-faster-payme...
Pix isn't really comparable to SEPA Instant or Faster Payments, and the adoption rate shows it.
is a very generous word to describe banking websites and apps!
Sending a payment to a new person with Santander is going to take at least 5 minutes and 3 round-trips through SMS 2FA.
Instant seems a good description.
Most, if not all, of the rest (such as smaller building societies) will take part indirectly through an account with one of the participants.
Regarding the use of a digital currency, what Pix is missing, and what a cryptocurrency has, is the decentralization mechanism. All the ops are still controlled by a centralized entity, in this case the Brazilian Central Bank. Am I missing something?
I also don't see the advantages of a central bank stablecoin, wouldn't it be exactly the same as the actual currency? When I pay with Pix/Twint/BTPay I'm not handling printed notes either, so behind the scenes it could transact anything for all what I care - dollars, stablecoins, gold, potatoes...
About Potato
Potato is a Revolutionary Meme token built on the Solana Network. Potato coin a dex build on solana, all fees go towards buying back and burning potatos
https://coinmarketcap.com/currencies/potato/
Related, there's also Potato Rounds, which are crispy, thin-sliced, and oven baked, with a sprinkle of sea salt.
https://recipeforperfection.com/olive-oil-and-sea-salt-oven-...
Before the release, when I read about the system, I was skeptical, but after its release (approximately 5 years ago), it has worked seamlessly, and adoption is now nearly 100% across the economy.
What does that have to do with any ---coins?
These middle men are not needed and their fees especially not. If I taxes pay for the SNB which is supposed to guarantee that payments can be made then they should also do that for digital transactions, not only cash.
BEKB offers a free account with free instant transfers. Hypothekarbank Lenzburg offers free instant transfers on their standard paid account.
Outside of Switzerland, instant SEPA transfers are typically free.
There is also another thing in the works based on SEPA instant payments - Wero ( https://wero-wallet.eu/ ) but it will take some time to implement all functionality and roll it out.
Last time I went to Brazil I remember that at least twice I asked if the person seeling me something would accept Pix in place of cash since I generally don't carry any cash, and they happily accepted even if they didn't advertise this.
This fragmentation of digital payment methods has had a... less than optimal effect on European payment traffic, with a lot of e-commerce going through American payment providers like credit cards (Visa, Mastercard mainly) and Paypal. A lot of internationally operating online outlets have added support for iDeal over time though, so hopefully Wero will be deployed very fast.
this may be a big angle, esp. for lots of poor people (which is a thing in brazil), as it gets them secure transfers.
getting cash remits from the gov was/is a huge challenge in india, for example. lots of people qualify but don't have a bank account or card or other basics.
This is huge because it allows for all kind of use cases that it is not really possible with IBAN. For example, I just bought 3Dmark to test my new PC in Epic Games store using Pix, and my transaction was authorized almost as fast as if I had used a credit card. People in Brazil use Pix in day-to-day transactions like you would do with physical cash, so Pix also reduces the friction if you just want to start a side hustle (e.g., instead of accepting just cash or going through the trouble of getting a payment terminal, you can accept either cash or Pix and almost everyone is happy).
I wouldn't object to standardized banking software in that case.
It's getting there. Some of my transfers are instant now.
Apparently someone decided they'll fix the existing system instead of creating a whole new system with a fancy name.
However, your description of Pix still doesn't explain the ---coin fetish in the original article.
I think the approach created by Pix is probably better to be honest. Yes, I know that some IBAN-to-IBAN is instantaneous, but since this depends on both banks supporting it and also this is not always clear that it is instantaneous (I think at least when I used N26 the way they advertised this feature the wording wasn't clear if it was guarantee that the transfer was instantanous or not).
Pix is not. Everyone in Brazil knows that it is fast, so if you don't get a notification that you received the money there is probably something wrong (it is really easy to forge a receipt showing that you "paid" something). Especially for a country that has lots of issues with scams, it is really important that the system is reliable so people can trust the system.
> However, your description of Pix still doesn't explain the ---coin fetish in the original article.
I wasn't trying to, I didn't even read the article to be honest. I was just trying to clarify why the Pix experience is different from IBAN-to-IBAN, even if in concept they're the same.
Iirc, it is now legally mandated to perform instant transfers but some banks are slow to implement this feature. I have an account in one of German neobanks, where it’s basically 4 steps: Face ID, click transfer, paste IBAN and enter the name, enter amount, and the recipient gets push notification from their bank within a few seconds.
If my bank goes under, €100K of my money is insured by the central bank for example.
Although funds are already being recovered, it has highlighted the opacity of Pix security, which has flown somewhat under the radar due to the closed nature of the system.
> Not much opacity here.
I think a black box implemented by a third party that can steal your funds is the definition of opacity.
> They shoud stop relying on poorly paid outside contractors.
A great deal of financial software is written by poorly paid contractors, but it's rare that one set of credentials can introduce systematic risk to a financial system.
Besides paying decent wages, they should get rid of single points of failure, being them silicon or meat based.
That is not the case, as it appears the attackers were able to use the Pix protocol to transfer funds from accounts not controlled by the attackers.
> There is nothing it can do with incoming valid but fraudulent transactions.
Well, we don't yet know the actual mechanism, but that is the opacity we're talking about.
It's certainly not impossible to ameliorate insider risk and it's definitely not a given that a single set of compromised developer credentials should be able to enact widespread fraudulent transactions across many banks.
[1] https://www.ecb.europa.eu/euro/digital_euro/html/index.en.ht...
The downside might be—depending on how they implement it, but currently it's not looking good—that the wallet is no longer anonymous. This is a huge issue, in my opinion.
GNU Taler [1] for example, might be a Software implementation that can be used for anonymous transaction with digital money (without blockchain).
- Standard well paid software engineer rails against the evils of capitalism
- standard bootlicker defends billionaires for free while they rob him blind
- Standard laid off software engineer dreaming about finding a well paid job again
Kidnapping people then forcing them to unlock their phones to make a Pix to the kidnapper is such a huge problem here in Brazil that banks have instituted layers upon layers of safety measures, such as reduced nightly transfer limits, different limits on whether you're sending money to someone you know vs someone you never sent money before vs businesses etc. So if a criminal sees you have a lot of money they keep you kidnapped for days until you transfer everything a piece a day. And their colleagues then withdraw the values or transfer them through several accounts, making it impossible to recover.
Part of that also involves forcing the kidnapped person to make all the loans their banks provide them, conveniently easy to do in the same app you use to make a Pix, and then send them the money.
Due to that we also have insurance specifically covering forced Pix transfers, but with limits above which the bank isn't responsible.
Some people defend themselves via alternative means. I myself, for example, keep a cheap phone exclusively for bank transactions at home, never installing the app on my main phone I carry with me. Which I also keep rooted, as that prevents baking apps from being installed (they refuse to run).
Oh! And there's fraud to in the form of replacing the fraudster's QR code for a business's, without the business noticing, so payments go to the wrong account.
And recently the government has started threatening big businesses that fail obeying arbitrary pressure due to this or the political reason with suspension from the Pix system, which due to how much it's used would severely cripple them as they'd lost tons of customers who have neither debit nor credits cards, so those businesses end up obeying. So there's that too.
TL;DR: Pix doesn't really solve those safety aspects the author talks about. But other than that, yes, it's extremely convenient and functional.
Fair if you’re already in his camp on Bitcoin being BS, but just a quick recall his epic misses:
- dismissing the internet as a fax-machine bubble back in ‘98
- his endless rants against stablecoins that keep proving him wrong.
Brazil seems to have introduced a system with low transaction fees that Krugman likes. Ok. If it has no trusted central authority then it is something that you can just bring over to the US, today, and use and an exciting future may be incoming. The Fed getting involved and researching CBDCs wouldn't do very much. But he seems to be selling the central role of the Brazilian government is playing here so I don't think that is what is happening.
If it has a centrally trusted institution then we've gone 50 or so years without discovering whatever this innovation is it which seems like it'd be bigger news than a blog post. The whole story here seems to be that Brazil has implemented something with marginally improved transaction costs in their financial system. That doesn't sound like a "future" to me; it sounds like the same technologies we've all known about for decades being used in ways we've known about for just as long. Whats the news in terms of novelty? Is he just saying he likes how Brazil manages their money? Why are CBDCs involved in this?
I know it seems like he's insulting Republicans here, but it's clear Krugman thinks so little of his readers.
Hopefully not for long.