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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)?

#61

Post by adolph »

idiotsecant wrote: post #28
blihp wrote: post #19

People don't need it, but governments want it very badly. It would provide governments with greater visibility into and control over the money supply and flows. This would be both at the macro (arguably good) and micro (arguably bad) levels. Just as here on HN we read from time to time about people being locked out of various online services (i.e. Google, Facebook etc.) for doing something a company doesn't like, a C…

In short, permissioned digital currency is all the bad parts of crypto and none of the good parts, while simultaneously getting rid of all the good parts of cash. There's almost no benefit to the user that something else doesn't do better.

permissioned

I think this is the key concept over and above digital. It's the difference between http et al and AOL/Compuserve.

https://permissionlessinnovation.org/what-is-permissionless-...

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

#62

Post by jqpabc123 »

adolph wrote: post #59
jqpabc123 wrote: post #54

Earlier quoted context omitted.

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.

Yes, this is exactly what a CBDC will do.

You'll still spend USD just like before --- not CBDC tokens. The only thing the consumer will see is new capabilities and transaction speed that didn't exist before.

Basically, a CBDC will be used to add digital wallet functionality to everyone's existing bank account.

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

#63

Post by jqpabc123 »

hocuspocus wrote: post #56
jqpabc123 wrote: post #54

Earlier quoted context omitted.

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.

EU's SCT Inst

   SCT Inst stands for SEPA Instant Credit Transfer scheme. It was introduced by 
   the Euro Retail Payments Board (ERPB) in order to enable rapid electronic 
   payments within the eurozone. In a nutshell, SCT Inst facilitates an instant 
   or near-instant clearing of a transaction between originator and beneficiary.
Potato, po-tat-o.

ERPB = Central Bank

Credit Transfer Scheme = Digital Currency

Put them together and what do you get --- effectively a CBDC system denominated in Euros instead of Dollars --- minus all the hyperbola, misinformation and doomsday prophecy attached to CBDC on this side of the pond.

Shifting retail banking to the central bank

Nothing is being shifted. The existing system (ACH) is being modernized. No banks will be killed in the production of a CBDC.

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

#64

Post by PatentlyDC123 »

crazygringo wrote: post #46
idiotsecant wrote: post #28

Earlier quoted context omitted.

In short, permissioned digital currency is all the bad parts of crypto and none of the good parts, while simultaneously getting rid of all the good parts of cash. There's almost no benefit to the user that something else doesn't do better.

Incorrect. The benefits come from more informed macroeconomic policy, more targeted economic tools, and potential benefits around more targeted and effective sanctions against international bad actors. The idea is that the benefits to the user are a more stable economy (lower inflation, higher employment), a more effective safety net (politicians more likely to approve payments that can't be spent on gambling), and g…

That gives a lot of weight to the idea that officials in the Fed (or your country's central bank) and government will make the best decisions for everyone given increased data produced by a digital currency. History doesn't really show that officials make the right decision even with sufficient data. For a small example, until a few months ago many US Treasury and Fed officials insisted that any inflation would be "transitory" at worst. Now many admit they were wrong, but still argue about the state of the economy given such inflation and whether or not the US is in a recession. On a larger scale, many US officials were blatantly wrong about their conclusions regarding the markets going into the 2008 financial crisis, a few have even admitted as much. Even if we assume officials would only make the "right" decision given the right data, it seems unlikely that a digital currency would give officials sufficient knowledge of many factors for the 2008 crisis, e.g. swaps and other financial instruments used by large banks, and the so-called "shadow banking" system.

I could be wrong, but I don't think many citizens would vote for a policy that would give up so much of their privacy, autonomy, and civil rights for the hope that central banks and government officials will make the right economic decisions next time given the data a digital currency provides.

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

#65

Post by pavlov »

mizzack wrote: post #51
pavlov wrote: post #50

Earlier quoted context omitted.

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 tak…

> ”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.”

That’s not at all what governance means in the corporate context.

So you’re basically saying that ESG can be applied to individuals as long as you redefine it to something completely else.

As far as companies getting rated, well duh, there’s a giant industry around that. Companies don’t have civil liberties and they don’t have the right to receive investments from anyone who doesn’t choose to invest.

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

#66

Post by jqpabc123 »

adolph wrote: post #57
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 get…

Why would CDBC cost less if it is an improvement in value over the previous systems of credit cards, checks, and cash?

Because it will be *truly* computer automated and operate 24/7/365 without middlemen processors charging outlandish fees that are hidden from the consumer.

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

#67

Post by spaceman_2020 »

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…

The flip side of the argument is that it can also be easily weaponized and used to financially cut off “undesirables”. Throw in some digital identity, some secretive “social scores”, and you can have a situation that gives governments overwhelming power over individuals and their rights.

Let’s not pretend that our governments are above abusing such power.

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

#68

Post by jqpabc123 »

kamroot wrote: post #58
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.

So why would India need, or benefit from additional CDBC?

What makes the UPI system work *is* effectively a CBDC. It's not possible to have instant transfer without *something* that functions like a CBDC --- though it may be named something else. The EU calls theirs a "credit transfer scheme" --- same difference.

The word that seems to be confusing people is the word *currency*.

A CBDC will be used by *banks* to benefit consumers but it is not something that consumers will consciously partake of. Consumers won't carry CBDC in their pocket or in a special digital wallet.

One way to look at it is that a CBDC would be used to add the functionality of digital wallet to everyone's existing bank account.

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

#69

Post by crazygringo »

PatentlyDC123 wrote: post #64
crazygringo wrote: post #46

Earlier quoted context omitted.

Incorrect. The benefits come from more informed macroeconomic policy, more targeted economic tools, and potential benefits around more targeted and effective sanctions against international bad actors. The idea is that the benefits to the user are a more stable economy (lower inflation, higher employment), a more effective safety net (politicians more likely to approve payments that can't be spent on gambling), and g…

That gives a lot of weight to the idea that officials in the Fed (or your country's central bank) and government will make the best decisions for everyone given increased data produced by a digital currency. History doesn't really show that officials make the right decision even with sufficient data. For a small example, until a few months ago many US Treasury and Fed officials insisted that any inflation would be "t…

Central bank policy isn't perfect, because human beings aren't perfect. But it's far, far, far better than having no policy at all -- economies used to follow crazy harmful cycles of booms and busts, bank runs, runaway inflation, and so forth. It's easy to take for granted how effective central bank policy is because many of us haven't experienced the lack of it at home in our lifetimes.

The central bank doesn't have a crystal ball to know with certainty where inflation will go. Much of that depends on historical events outside the US that are by definition unknowable -- how will food and energy prices be affected by war in Ukraine, for example?

But central banks are able to plan and then adapt appropriately as circumstances change. And citizens have long voted for effective central bank policy -- economic fears about inflation and recession are reliably the #1 popular concern. If a digital currency can help this, most voters will be very happy with it. After all, for people (like myself) who already make 99% of their purchases with credit cards, they're not giving up much.

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

#70

Post by colinmhayes »

PatentlyDC123 wrote: post #64
crazygringo wrote: post #46

Earlier quoted context omitted.

Incorrect. The benefits come from more informed macroeconomic policy, more targeted economic tools, and potential benefits around more targeted and effective sanctions against international bad actors. The idea is that the benefits to the user are a more stable economy (lower inflation, higher employment), a more effective safety net (politicians more likely to approve payments that can't be spent on gambling), and g…

That gives a lot of weight to the idea that officials in the Fed (or your country's central bank) and government will make the best decisions for everyone given increased data produced by a digital currency. History doesn't really show that officials make the right decision even with sufficient data. For a small example, until a few months ago many US Treasury and Fed officials insisted that any inflation would be "t…

I don't believe that having more data will lead to worse decisions. I could be wrong, but I believe the vast majority of the population doesn't care about privacy and is willing to sacrifice marginally more than nothing to keep it.
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