Central Bank Digital Currency
Contents
Contextual Quote
"In the coming years, CBDCs will replace cash with digital currencies that are stored on a ledger maintained by central banks. Users download a digital wallet to their mobile phone to receive their salary and to pay for goods and services. With a global CBDC network, users would be able to transfer money instantly to other digital wallets anywhere in the world."
- Jan Krikke [1]
Status
Jan Krikke:
"China leads in the deployment of CBDCs. The e-yuan is now available in 17 Chinese provinces and 26 cities. More than 250 million people have downloaded the digital wallet from the People’s Bank of China (PBOC). Local governments and state-owned companies are paying salaries in digital yuan to encourage the use of CBDCs.
Tests are currently under way on internationalizing CBDCs. The PBOC, the International Monetary Fund (IMF), the Bank for International Settlements, and other monetary authorities are working on the “rails” that can make CBDC platforms interoperable. A global network of CBDC planforms would enable cross-border payments in real time and at no cost to the user.
CBDCs use a modified version of blockchain, the distributed (non-centralized) ledger technology used to validate transactions of crypto coins like Bitcoin and Ethereum. Unlike cryptocurrencies, CBDC platforms of central banks are centralized. CBDC platforms are under the control of national governments."
(https://asiatimes.com/2023/09/redesigning-global-finance/)
Discussion
Tokenization Strategies and unified ledgers for a a globally integrated CBDC platform
Jan Krikke:
"This year, the Bank for International Settlements published a speech by Hyun Song Shin, head of research at the BIS, titled “A Blueprint for the Future Monetary System.” The report included a chapter on tokenization and listed the key points:
A new type of financial market infrastructure – a unified ledger – could capture the full benefits of tokenization by combining central bank money, tokenized deposits and tokenized assets on a programmable platform.
Multiple ledgers – each with a specific use case – might co-exist, interlinked by application programming interfaces to ensure interoperability as well as promote financial inclusion and a level playing field. The picture that emerges from the combination of CBDCs, tokenization, and a unified ledger is a globe-spanning network of central banks, each with their own laws and regulations, but interoperable with CBDC platforms in all other countries that adhere to a common protocol.
The BIS was not the first to envisage a globally integrated CBDC platform. In 2021, China proposed a protocol for CBDCs that includes rules on how they can be used around the world and what information they can share.
A tokenized global financial system combines centralization (on a domestic level) with decentralization (on a global level). Domestically, the central government is the gatekeeper; globally, there is no gatekeeper except the commonly agreed-upon protocol.
A global interoperable CBDC platform would transform the concept of money. Multiple currencies and tokens of tangible assets could be traded seamlessly in real time. A unified ledger creates simplicity through complexity. It would have only two kinds of users: debtors and creditors.
Opponents of the digitization of the financial system fear that CBDCs would lead to an Orwellian world. They note that governments could track how, when, and where people spend their money. Proponents argue that CBDCs would create the hyper-transparency that is needed to combat fraud, corruption, and inequality.
On the plus side, each country can decide how to implement its CBDC platforms and how it interacts with foreign platforms. Autonomy and ethical governance are key. Opposition to CBDCs tends to be higher in countries where trust in government is low."
(https://asiatimes.com/2023/09/redesigning-global-finance/)
The Critiques
"Some public banking advocates are concerned about that development. One such advocate is British Prof. Richard Werner, who laid out his cautions five years ago in a paper presented at the 14th Rhodes Forum in Greece . Werner argued that central banks are in the process of consolidating their powers. Having achieved total independence from government and total lack of accountability to the people, they now want to eliminate competition in the form of both paper money and bank-created credit-money and control the issuance of money completely. To do this, he said, they are driving both cash and bank credit out of business by imposing negative interest rates, which have already been tested in some European countries. Werner argued that negative interest rates were designed not to stimulate the economy but to create deflation and wreak further havoc — “havoc that they intend to instrumentalise to accelerate their goal of becoming the complete masters of our lives, by allowing only digital currency that they issue and control – and that they can monitor in terms of all transactions, and that they can switch off, if, for instance, some pesky dissident criticizes them too much.”
In 2016, that may have sounded radically conspiratorial. But as libertarian commentator George Gammon observed in a podcast episode this past summer called the “The Future of America: Social Scores, CBDC, Health Passports,” the technology is now in place to take us to that very dystopian future. Federal governments already have the tools and legal framework to see everyone’s transactions and to order bank accounts closed. But a CBDC could facilitate the process, as Agustin Carstens, a member of the Financial Stability Board in Basel, observed at an annual meeting of the International Monetary Fund in October of last year. Carstens said that CBDC, unlike cash, gives the central bank absolute control over the rules and regulations respecting its use and the technology to enforce those rules."
