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Bitcoin Government

CBDCs, Not Crypto, Will Be Cornerstone of Future Monetary System, BIS Says (coindesk.com) 71

Posted by BeauHD from the built-on-top-of-the-central-bank dept.
Crypto's structural flaws make it an unsuitable basis for a monetary system, according to the Bank for International settlements (BIS). Instead, monetary systems could be built around central bank digital currencies (CBDCs), which are digital representations of central bank money. CoinDesk reports: The BIS, an association of the world's major central banks, dedicates a 42-page chapter in its "2022 Annual Economic Report" to laying out a blueprint for the future of the global monetary system. In that vision, there is room for only some of crypto's underlying technical features, like programmability and tokenization, not for cryptocurrencies themselves. "Our broad conclusion is captured in the motto, "Anything that crypto can do, CBDCs can do better,'" said Hyun Song Shin, an economic adviser and head of research at the BIS, during a press briefing on Monday.

The chapter, which will be published Tuesday ahead of the full report, identifies a number of limitations of crypto, including the lack of a stable nominal anchor. In monetary policy that is a variable -- such as a currency peg -- that can be used to control price levels. Stablecoins, cryptocurrencies pegged to the value of assets like sovereign currencies, are the crypto world's search for such an anchor, Shin said. Stablecoins attempt to "piggyback on the stability of real money issued by central banks."

Shin said the recent crash of terraUSD, a dollar stablecoin with a market capitalization of $18 billion in early May that rapidly lost its peg, illustrated how stablecoins, despite their name, are unstable and don't make good units of account. Unlike other leading stablecoins, such as USDC and USDT, which are reportedly backed by dollar-denominated reserves, terraUSD is an algorithmic stablecoin backed by another cryptocurrency (in this case LUNA) with an algorithm in place to regulate supply and demand of the stablecoin and maintain its peg. "The second important finding is that crypto and stablecoins fail to achieve the full network effects that we normally expect of money," Shin said. Money, Shin said, is the perfect example of a virtuous circle of greater use and greater acceptance. Crypto's decentralized nature, on the other hand, achieves exactly the opposite, namely fragmentation.
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CBDCs, Not Crypto, Will Be Cornerstone of Future Monetary System, BIS Says More

CBDCs, Not Crypto, Will Be Cornerstone of Future Monetary System, BIS Says

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  • CBDC (Score:3, Interesting)

    by systemd-anonymousd ( 6652324 ) on Wednesday June 22, 2022 @06:19PM (#62643058)

    Central Bank Digital Currency--AKA social credit scores, 100% auditable transaction chains irrevocably tied to your identity, and instant reporting to a central agency for taxation and citizen monitoring.

    Keep that in mind whenever you see a questionable outlet saying that crypto is dead, long live centralized digital fedtokens

    • Re:CBDC (Score:5, Insightful)

      by taustin ( 171655 ) on Wednesday June 22, 2022 @07:27PM (#62643212) Homepage Journal

      While you are entirely correct, central banks aren't the enemy of crypto. Crypto is the enemy of crypto. BIS is the stopped clock, and this is one of the twice a day.

      • Hmm....can I just cash mine out in cash right now please?

        Maybe I'll take some of it in gold.

    • Let me guess, it's an inflationary fiat currency too?

      • Thank GOD all of my money was in Bitcoin the last 3 months. Otherwise, it would have seen 8% annualized inflation!

        • If your investment horizon is 90 days then you've probably got bigger problems to deal with than inflation. Deleveraging crypto crashes seem to happen pretty regular now, every 2-3 years.
    • You act like there's a better alternative. Right now we use credit cards, which have all of the problems that you mention above but now the privacy issues are not limited to the government. There's also the privately run bank that issued your credit card, as well as the financial services company which manages the card's transaction network. And, on top of that, these additional middle-men companies are taking a cut of every sale.

      There are other options, but none worth mentioning which avoid these issues

      • Re: (Score:2)

        by ceoyoyo ( 59147 )

        I've been waiting for digital cash for a long time, progress has certainly been frustratingly slow.

        Move? There is no way a central bank is going to set up a pile of servers and do their own transaction processing for everybody, if that's what you're imagining.

        On the other hand, you could have an organization that runs a non-credit based inter-bank transaction network that all retail banks use and has fees that are small enough many banks don't bother to charge them. Lots of places have this already.

        • There have been a few proposals, one is that central banks would indeed handle transaction processing. There's really nothing stopping them, other than the fact that it's beyond the scope of what they have handled in the past. Switzerland has been experimenting with this, though officially these are just experiments and not a prelude to an actual rollout.

          As for your suggestion: I don't know exactly what you're referring to, but I know Canada's Interac system and that is unsuitable for online payments. Yo

          • Re: (Score:2)

            by ceoyoyo ( 59147 )

            but I know Canada's Interac system and that is unsuitable for online payments.

            You don't know the Interac system then. It works just fine for online payments. You can send money to any e-mail address too.

  • Not "could" (Score:3, Insightful)

    by SuperKendall ( 25149 ) on Wednesday June 22, 2022 @06:21PM (#62643066)

    The plan for many years now is that we all get BIS CDBCs which are internationally run and managed. You will see a push for everyone on earth to use these things like you have never seen before...

    When the push comes (and it will come) resist it as hard as you can, because it's basically the end of humanity as a free species if it's widely adopted.

    Luckily I think there will be significant resistance to it across the world but I think the political landscape will look very different after that wind blows through.

    The very notion that they find BitCoin dangerous and unwanted is enough reason for me to support it. Eventually. Any sign of CDBC and I'll probably start buying some "free crypto" like BitCoin or ETH.

    • According to Wikipedia, China is already beta-testing its e-CNY [wikipedia.org]. However, the article is quite low on the technical aspects of the currency. My takeaway was that it somehow involves the use of smartphone apps:

      The currency could be transferred to bank accounts or used directly with certain merchants, and could be controlled via apps on one's smartphone. As of April 2021, more than 100,000 have downloaded such apps, which were developed by banks, including six state-owned banks.

      I suspect the backend would be

    • Resist harder than the criminal run bitcoin?

    • Re: (Score:2)

      by HiThere ( 15173 )

      You may be totally right about BIS CDBCs, but that doesn't make bit coins any better. I prefer cash to either of them, despite it's many flaws.

      • I prefer cash to either of them, despite it's many flaws.

        Very probably cash will not be an option when CDBCs are rolled out in earnest.

        That is why you want to resist as early as possible.

    • Re: (Score:2, Insightful)

      by taustin ( 171655 )

      I'm still trying to figure out who CDBCs are different from what we have now, with credit cards and a banking system that doesn't exist outside of computers.

      So I guess the world ended 30+ years ago, when that system went into place.

      Enjoy your bunker.

      • This might help:

        https://www.acheroninsights.co... [acheroninsights.com]

        For completeness, going to throw this link in too, an excellent layman's explainer on the Fed. It goes into the plumbing such as the difference between reserves and bank deposits, how money is created and destroyed in a fiat system, as well as their dual mandate:

        https://www.amazon.com/Central... [amazon.com]

        It's not really about "crypto" and it's not really about payment methods. Imo, it's much deeper. It's an attempt by central banks to create a tool for navigating th

    • Re: (Score:3, Funny)

      by dasunt ( 249686 )

      The plan for many years now is that we all get BIS CDBCs which are internationally run and managed. You will see a push for everyone on earth to use these things like you have never seen before...
      When the push comes (and it will come) resist it as hard as you can, because it's basically the end of humanity as a free species if it's widely adopted.
      Luckily I think there will be significant resistance to it across the world but I think the political landscape will look very different after that wind blows

      • Re:Not "could" (Score:4, Insightful)

        by SuperKendall ( 25149 ) on Thursday June 23, 2022 @03:03AM (#62643830)

        I can't imagine a world where instead of my employer giving me cash each payday, the "money" is transferred digitally to some account

        And in that same world it turned out a tweet you had posted was reported, so you couldn't access that paycheck...

        Or maybe the part you are looking forward to is if you don't spend any least 50% of your pay within three weeks it all vanishes.

        You think of CDBCs like digital transactions today but the deference is the level of control banks have over it directly without your authority, and the level of manipulation planned around the currency.

      • I'm already horrified by the people using direct deposit. When you give the rights to make deposits, you also give the rights to make withdrawals [sun-sentinel.com]. Problems are relatively rare, but the impact is very serious when they do happen, and we can expect the number of problems to go up as the economy degrades. And that's definitely going to happen now, because they raised the interest rate, which is going to increase unemployment. (And before anyone starts blathering about the unemployment rate being very low now,

      • Re: (Score:2)

        by zekica ( 1953180 )
        You are forgetting that CDBCs can have functionality equivalent to Ethereum smart contracts which means that someone can give you "money" that you can only spend to purchase groceries or whatever else someone in control of issuing said tokens decides. Also, no one can take your cryptocurrency unless they steal your wallet's private key, but on CDBCs the banks have your private key.
    • The more they squeeze, the more Monero slips through their fingers

  • Explain it to me like I'm five. (Score:5, Insightful)

    by PsychoSlashDot ( 207849 ) on Wednesday June 22, 2022 @06:25PM (#62643070)
    What is all of this "digital currency" faffery trying to accomplish?

    With the likes of Bitcoin, the draws were:

    Anonymous transactions - proven to not be anonymous and proven to be undesirable due to ransomware.
    Print Your Own Money - mining is now energy prohibitive and only profitable to people who have the money to recommission coal-burning power plants.

    I can send electronic transfers of my Canadian dollars to almost anyone in Canada with a bank account.

    So my question is... why would I want a "digital currency" to exist? I can work digitally with my existing currency now. Sure, other countries have more fractured banking systems where getting a bank account might be... racially difficult, but electronic funds transfers are a solved problem. Aside from get-rich-quick artists and politicians who don't want to be left behind by the fad train, what is the actual, tangible purpose behind all this?
    • More government control and surveillance, my dear Watson! Fiat cash is too free, too anonymous. All of your transactions must be accounted for. You've got nothing to hide, right? You've been a good citizen, right?
      • On the plus-side it would make it crazy easy to decipher child trafficking rings and CIA gun-running operations.

    • Because it's not cash. Many countries already scoff at real physical cash. Everything is a phone transaction, or a bank transfer, paypal, or some other electronic transaction.

      It is STILL crypto - you can't do this stuff without cryptographic methods. But it's not a bulky block-chain with a distributed database. Even now, bitcoin, ethereum, and others, all use a *centralized* broker for the majority of transactions (ie, coinbase.com). The real difference here is that it's tied to a central bank. Which ag

    • Re: (Score:3)

      by khchung ( 462899 )

      What is all of this "digital currency" faffery trying to accomplish?
       

      So that everyone can make a payment anywhere, including where there is no network coverage, to anyone near them, as long as both have a phone or other CBDC device, without relying on any third party or using cash.

      • Like that has actually happened or is going to happen...
        You know what did that for centuries (and still does)? Gold.

        • Re: (Score:2)

          by khchung ( 462899 )

          Like that has actually happened or is going to happen...

          You know what did that for centuries (and still does)? Gold.

          Gold have all the downsides of cash (easily stolen/robbed/lost, bulky to carry, risk of counterfeit/fake) PLUS additional downside of being difficult to count (do you like to bring a balance and a set of scales with you everywhere?). For making payment, gold have no advantage over a stable and widely recognised cash currency at all, except possibly taking up less room, a suitcase full of gold is probably worth more than a suitcase full of cash, but it still definitely weights much more. Unless you are the

          • "a suitcase full of gold is probably worth more than a suitcase full of cash"

            US paper currency is about 1 kilogram per 1,000 bills.

            Gold is about $59,000 per kilogram.

            So if you use $100 bills, cash weighs less than gold of the same value.

            • Your kilo of bills has ~68.9 in^3 volume, Your kilo of gold takes up ~51.75 cm^3 which is ~ 3.15 in^3. Thus you can fit 21.8 times as much gold into any suitcase as you can dollar bills, though the weight would probably destroy any normal suitcase you tried to move it in.
    • While I'm not going to try to explain the purpose of bitcoin because it's been explained so many times, I'll try to explain the purpose of CBDCs: they are an attempt by central banks to compete with bitcoin in order to keep their business in the long run. Why would anyone want to use that is another question, probably because they will force us.

      • While I'm not going to try to explain the purpose of bitcoin because it's been explained so many times, I'll try to explain the purpose of CBDCs: they are an attempt by central banks to compete with bitcoin in order to keep their business in the long run. Why would anyone want to use that is another question, probably because they will force us.

        Yeah, that's clear. "and politicians who don't want to be left behind by the fad train" covers that.

        Thanks for the response, but so far the answer appears to be "it's bunk".

  • duh... (Score:2, Insightful)

    by etash ( 1907284 )
    obivously. nobody serious cares about decentralization. fast and quick, centralized is the best option. and say a big fuck you to visa/mastercard with their thieving practices of 3% of every transaction. SWISH for example solves the problem in sweden. ..and yes I'd prefer the gov knowing where my money goes than a private company. private "decentralized" money is just an idiot's (=libertarian) wet dream which would lead to more corporatocracy.
    • If vista/mastercard is "thieving" by applying a 3% fee for every transaction, then wouldn't SWISH also be thieving for applying a 1–3 SEK fee per transaction in addition to a yearly fee?

      How exactly did SWISH solve the thieving practices?

      • Re: (Score:3)

        by tlhIngan ( 30335 )

        If vista/mastercard is "thieving" by applying a 3% fee for every transaction, then wouldn't SWISH also be thieving for applying a 1â"3 SEK fee per transaction in addition to a yearly fee?

        How exactly did SWISH solve the thieving practices?

        I don't see even why it's thieving, given it costs money to run a secure transaction network. Then again, maybe someone elash is willing to host a payment processor that costs users nothing and to maintain security and pay for server upkeep costs out of his own pocket.

        • Re: (Score:2)

          by etash ( 1907284 )
          it is thieving because it's way too much. SWISH achieves this with less than 1/10 of the cost.

      • Re: (Score:2)

        by etash ( 1907284 )
        2 SEK on average = 0.2 Euro. for a 100 Euro purchase, it's just 0.2% compared to 3% of visa. Elementary school arithmetics dear watson.

  • Say What Now? (Score:5, Insightful)

    by Voyager529 ( 1363959 ) <.voyager529. .at. .yahoo.com.> on Wednesday June 22, 2022 @06:55PM (#62643130)

    Instead, monetary systems could be built around central bank digital currencies (CBDCs), which are digital representations of central bank money.

    Last pay period, I got a direct deposit right to my checking account.

    I bought some stocks with an app using an account number and routing number.

    I donated to a nonprofit using the Stripe plug-in they use on their website.

    I made a bunch of purchases with my American Express card.

    I paid my American Express bill using their mobile app, which withdrew the money from my bank account, using a routing number and an account number.

    A friend of mine sent me money through Zelle. I sent some money to another friend via Venmo. Still another friend reimbursed me via Paypal.

    I went an entire pay period without using cash at all. It was all digital representations of dollars, and I am far from unique.

    Thus, I must ask: what is the difference between what the dollar is, right now, and a CBDC? Every transaction I performed was electronic, a digital representation of debits and credits. The value of a dollar is determined by a bunch of computers, and a bunch of computers determine how many dollars I have, based on what other computers tell it I should have.

    Maybe there's a difference in there somewhere, but I'm sure as hell not picking up on it.

    • Re: (Score:1)

      by x0ra ( 1249540 )

      Maybe there's a difference in there somewhere, but I'm sure as hell not picking up on it.

      The current system not run by the central banks / governments themselves, but by private banks.

      • Re: (Score:3)

        by taustin ( 171655 )

        Which are tightly regulated by . . . governments, operating on currency, the supply of which is controlled by . . . governments, creating extensive, deep, wide data about everything we do, which can be subpoenaed at will by . . . governments.

        What, exactly, and be detailed, does CDBC do that the current system does not?

    • Re: (Score:2)

      by taustin ( 171655 )

      The only thing I use cash for is haircuts, and that's only because the business model of barber shops (the barber is an independent business who merely rents the chair from the shop) makes credit cards impractical.

    • Exactly. Most money today is nothing, but entries in an electronic ledger. It has no physical existence. That is one of the chief reasons that standard monetary policies no longer work. When most money was physical (gold or certificates or whatever), the government could control the money supply by creating more or removing money from circulation. Now anyone can create money, by borrowing. When the British government wanted to buy the Suez Canal from the Khedive of Egypt, they did not have the money o

    • None of those transfers happened like it appeared to you. They all settled 1-3 days later and there could have been problems in the meantime.

      Ethereum will be bought by the Fed and used as a platform for CBDC's. 2.5 minute blocktime these days?

      Odds are it'll settle in under 15 minutes and for liquidity the Fed might just reimburse reorgs to effectively honor zero-conf.

      • Re: (Score:2)

        by Alcari ( 1017246 )

        None of those transfers happened like it appeared to you. They all settled 1-3 days later and there could have been problems in the meantime.

        Depends on where you live, in the Netherlands, I can send an instant-payment or instant-tranfer from my bank to any other bank at zero cost. it's processed in under 5 seconds, and that's the actual money, not some kind of advance or liquidity-cover.

    • Re: Say What Now? (Score:5, Insightful)

      by bradley13 ( 1118935 ) on Thursday June 23, 2022 @01:46AM (#62643764) Homepage

      As you point out, currencies are already effectively digital. However, the banking system, clearing houses, etc. are historically complex.

      As I understand it, the primary difference of a fresh, new CBDC would be the centralization. Transactions would run through a central clearing house. That clearing house would be run by the government.

      There may be lots of advantages to that centralization, but it also gives the government an incredible amount of both information and power. No need to subpoena bank records, when they already know every transaction you've ever made. Under suspicion? Your transactions can simply be refused.

      Cryptocurrencies may have so far failed to achieve it, but separating people's financial lives from their governments is important. Anecdote: I know a guy who got on the wrong side of the local IRS office. Despite crossing all t's and dotting all i's, his bank account would occasionally be emptied, causing all sorts of obvious problems. He would eventually get the money back, but only after a stupidly painful fight.

      Governments are made up of people. Some of those people like power, and like abusing power. CBDCs give the governments way too much power, just waiting to be abused.

    • probably just to make sure you can't use cash. Central banks can "stimulate" the economy with -10% interest on your digital account, or when too-big-to-fail bank has lent has lent out 10x for gambling or just stolen it with fraud, your money is always there to help...because it's "our money".
  • You know, if you hadn't tried to nerf legit legal industries (guns, weed, lewds, etc) by deplatforming them, maybe you wouldn't have to compete with decentralized crypto at all.

  • Sorry, but central banks may well be the right place to create currency in the first place, but there's ways to do electronic currency that doesn't involve anyone monitoring anything.

  • CBDC is just a term to differentiate unofficial cryptocurrencies from central bank crypto currency, they all use blockchain. The world is globalizing and at some point the US will have to relinquish control over the IMF through the US dollar. I think that will be a CBDC where each central bank in each country is a centralized "miner" in that country. This is of course decades away and there's alot to iron out but after we survive the ".com" bubble with crypto I think this will be what mature blockchain tech
  • " In that vision, there is room for only some of crypto's underlying technical features, like programmability and tokenization, not for cryptocurrencies themselves. "Our broad conclusion is captured in the motto, "Anything that crypto can do, CBDCs can do better,'" said Hyun Song Shin, an economic adviser and head of research at the BIS, during a press briefing on Monday."

    If there is no room for some of Cyrptos technical features, how can you turn around and say CBDCs can do better? This statement see

  • I like CASH (Score:3)

    by Rick Schumann ( 4662797 ) on Thursday June 23, 2022 @12:07PM (#62644802) Journal
    You should too. If you value your privacy, that is. Otherwise you won't be able to buy so much as a candybar without the government knowing, and probably every corporation on the planet, too. Cash=privacy.

  • Looking forward to OPEC selling Oil in Cryptocurrency
    Venezuela is already doing it https://archive.is/Zdhxe [archive.is]

  • There is no such solution yet; I believe it will appear in the near future, but you can only rely on dubious third-party intermediary solutions for now. You can find useful information about the cryptocurrency payment processor https://coinspaid.com/ [coinspaid.com]

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