Do we need or want a CBDC?
Here is our pick of the 3 most important Stablecoin news stories during the week.
The risk is, or should be, obvious: As outlined in this Fed Research paper. We do not want to create a system that would give government access, in real time, to detailed information about every single transaction its individual citizens might conduct.
For the Chinese government, that’s not an issue. Beijing seems to see CBDC as a major step toward its goal of complete, digitally enabled social surveillance and control.
Not all privacy is about criminal behaviour, think about political organisation! If you and some like minded companions want to put your money behind a peaceful political movement that is not to the States liking, you should be able to do it privately.
But what is the risk to you and me if our Central Bank does not issue a CBDC?
In a report published Wednesday the ECB highlighted several. Domestic and cross-border payments could be dominated by non-domestic providers, for example “foreign tech giants potentially offering artificial currencies,” akin to Facebook’s Diem (formerly Libra) project that sent shockwaves through the financial world on its announcement in 2019.
Market dominance by such a privately issued currency would leave consumers and businesses vulnerable should it threaten the stability of the financial system.
“Issuing a CBDC would help to maintain the autonomy of domestic payment systems and the international use of a currency in a digital world,” the report concludes. No mention of new use cases and features to benefit the average citizen.
In the meantime in China they are continuing with more trials of their CBDC. Also, this CBDC does not seem to do anything new for citizens than challenge the incumbent payment processors Alipay and WeChat.
So in summary, the ECB and I suspect many Central Bankers in the West are more concerned about losing their monopoly than building us a value added currency whilst in China they also seem to be uninterested in new features and benefits. Who is really thinking about the consumer and the benefits this technology could really deliver for them? That’s where I will put my money!
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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