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Ask HN: Why do we need central bank digital currency (CBDC)?

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Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#51

Post by mizzack »

pavlov wrote: post #50
yonaguska wrote: post #38

Earlier quoted context omitted.

Did I need to spell out more explicitly the connection between social credit scores and China implements them and ESG scores that have been brought to the rest of the world, and that maybe having digital, government managed currencies will allow our own western governments to follow the China experiment? Thanks for nitpicking a loose use of the term ESG, and then dismissing everything else with the categorical label…

It's not nitpicking when you're using the term in a completely inapplicable, absurd sense. A framework used to evaluate corporate investment candidates has nothing to do with social credit score boogaboos. It makes as much sense as saying: "Soon Big Government will be assigning buy/hold/sell ratings to you!"

It's absolutely nitpicking. The "G" just stands for governance, otherwise it'd be a "C". On an individual level that could mean paying taxes on time, maintaining employment, etc.

> A framework used to evaluate corporate investment candidates has nothing to do with social credit score boogaboos.

Functionally, ESG _already is_ a social credit score for companies and a tool for compliance. Do you think companies are taking ESG measures because they want to?

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#52

Post by hocuspocus »

Sytten wrote: post #42
hocuspocus wrote: post #37

Earlier quoted context omitted.

> I would argue that yes it can be done outside of a platform like this, but each time you want to implement a new policy you need to talk to all private actors and force them to implement your policy. And you know what, many jurisdictions have done exactly that, and brought massive improvements to their banking infrastructure in the last decades. Private actors either comply or lose their banking/credit/payment lice…

Ho I do not disagree but coming from Canada where we have been talking about open banking for the past 10 years without any progress I will take a smart contract any day over the big 5 banks that we have today. The question is not if it can be done outside of the platform, it is how much time it takes. I would encourage you to try to code a smart contract even if you dont like the concept, it is eye opening. The fact…

So you don't trust your government to come up with the right legal framework... but you want the central bank to take over the entire retail banking sector?

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#53

Post by hocuspocus »

jqpabc123 wrote: post #41
hocuspocus wrote: post #30

Earlier quoted context omitted.

> Out of sight, out of mind. You don't see it but Visa and Mastercard consume up to 3% of the transaction amount. Over the course of a year, this amounts to $50 billion removed from the economy. The merchant pays this --- and passes the cost along to you in terms of higher prices. Visa and MC get only a fraction of the PSP fees. You can regulate this space and bring the fees down (like the EU did). But fundamentally,…

You just need to bring your banking infrastructure to the 21th century. ACH is the central component of the banking infrastructure that needs to be brought into the 21st century. And a CBDC is how you do it.

It's just one way to do it. One unproven way at that, and with pretty serious ramifications.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#54

Post by jqpabc123 »

hocuspocus wrote: post #53
jqpabc123 wrote: post #41

Earlier quoted context omitted.

You just need to bring your banking infrastructure to the 21th century. ACH is the central component of the banking infrastructure that needs to be brought into the 21st century. And a CBDC is how you do it.

It's just one way to do it. One unproven way at that, and with pretty serious ramifications.

I'd love to see an alternative that doesn't look a whole lot like a CBDC.

The "serious ramifications" are all things that are not being proposed. No one is suggesting to make cash illegal.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#55

Post by jqpabc123 »

adolph wrote: post #44
jqpabc123 wrote: post #17

Explain to me like I am 5 Out of sight, out of mind. You don't see it but private transaction processors (Visa and Mastercard) consume up to 3% of the transaction amount. Over the course of a year, this amounts to $50 billion removed from the economy. The merchant pays this --- and passes the cost along to you in terms of higher prices. The money transfer system that deposits your check is old and slow and involves h…

Fees > removed from the economy This is untrue. Bank fees are not placed into landfills, figurative, literal or otherwise. At best you can say that dispositive decision making power for the money is changed from the transaction participants to the transaction facilitators. One might say that the leaders of banking orgs spend it on the frivolous, like large boats. The boatwright’s children might differ as otherwise th…

OK, removed from the *consumer* economy and placed in the hands of transaction middlemen.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#56

Post by hocuspocus »

jqpabc123 wrote: post #54
hocuspocus wrote: post #53

Earlier quoted context omitted.

It's just one way to do it. One unproven way at that, and with pretty serious ramifications.

I'd love to see an alternative that doesn't look a whole lot like a CBDC. The "serious ramifications" are all things that are not being proposed. No one is suggesting to make cash illegal.

UK's Faster Payments, EU's SCT Inst, Brazil's Pix, India's UPI, ...

Shifting retail banking to the central bank brings a lot more questions than just worry about what happens to cash.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#57

Post by adolph »

jqpabc123 wrote: post #17

Explain to me like I am 5 Out of sight, out of mind. You don't see it but private transaction processors (Visa and Mastercard) consume up to 3% of the transaction amount. Over the course of a year, this amounts to $50 billion removed from the economy. The merchant pays this --- and passes the cost along to you in terms of higher prices. The money transfer system that deposits your check is old and slow and involves h…

> A CDBC will be fully electronic/automated with instant results and operate 24/7/365 at insignificant cost.

Why would CDBC cost less if it is an improvement in value over the previous systems of credit cards, checks, and cash? From the TANSTAAFL perspective, debit, checks and cash aren't free, the cost is explicit in account maintenance fees or hidden inside the difference in interest rates between what the bank gets and what the account holder gets, plus the capital costs born by the receiver in facilities to handle pieces of paper. Since the fees are the same regardless of transaction volume, credit card has an advantage for consumers in that it is pay as you go and eliminates the personal facilities for check and cash handling.

CBDC transactions would not be costless, the question is how much, and form: flat fee, percentage, other socialization/cross subsidy. The question of how much will be driven by the cost of the service plus the transactors' perceived value of service over other mechanisms.

Likewise CBDC would not be truly instant but would have certain latency. On the payor side, for consumers the latency is an advantage--receive goods and service now, pay at the end of the settlement period or later if you pay for that service with interest charges. Why would a consumer choose CBDC if it doesn't include the loan to float between the transaction date-time and settlement date-time?

I'm not certain what the doomsday claims are, but there are tradeoffs to centralization. For example, getting de-banked becomes a heightened threat if there is no alternative. As an example, I'd offer the status of vendors psychoactive substances legal at the state but not federal level or those offering politically unfavorable goods and services [0]. Similar to the state of unbanked people everywhere, the increased reliance on more liquid payment forms brings increased risk of criminal predation since other market participants have de-risked though reduced cash holdings.

0. https://en.wikipedia.org/wiki/Operation_Choke_Point

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#58

Post by kamroot »

spaceman_2020 wrote: post #16

India's UPI system manages tens of billions of transactions without CBDCs. Pretty much proof that any potential benefits of CBDCs can already be achieved with existing systems.

This is the piece that complicates my thinking about CDBC and digital transfer systems. What UPI does is seamless and instant transfer of Indian Rupees between parties and it is widely adopted. So why would India need, or benefit from additional CDBC? I can see how CDBC's instant transfer scheme would benefit the US which does not have digital transfer systems that are both instant and close to zero-cost.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#59

Post by adolph »

jqpabc123 wrote: post #54
hocuspocus wrote: post #53

Earlier quoted context omitted.

It's just one way to do it. One unproven way at that, and with pretty serious ramifications.

I'd love to see an alternative that doesn't look a whole lot like a CBDC. The "serious ramifications" are all things that are not being proposed. No one is suggesting to make cash illegal.

An alternative to ACH need not push the technology down to the consumer but leave it at the interbank level.

Re: Ask HN: Why do we need central bank digital currency (CBDC)?

#60

Post by adolph »

jqpabc123 wrote: post #55
adolph wrote: post #44

Earlier quoted context omitted.

Fees > removed from the economy This is untrue. Bank fees are not placed into landfills, figurative, literal or otherwise. At best you can say that dispositive decision making power for the money is changed from the transaction participants to the transaction facilitators. One might say that the leaders of banking orgs spend it on the frivolous, like large boats. The boatwright’s children might differ as otherwise th…

OK, removed from the *consumer* economy and placed in the hands of transaction middlemen.

> transaction middlemen

Who are in turn the consumers of other producers. The money doesn't get dumped into a never draining pool of gold in which "transaction middlemen" swim recreationally.

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