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

Many countries', including the United States, central banks are trying to figure out Central Bank Digital Currency (CDBC). This move has accelerated after China introduced its digital currency (e-CNY).

But why do we need a digital currency when most of my transactions (presumably true for most people in a modern economy) is digital? I receive my salary via a bank transfer, make payments in grocery stores via credit cards, deposit checks via my phone by taking pictures of them, and split restaurant bills via Zelle. All that is digital - no cash is involved. Explain to me like I am 5 - What problem does a digital currency solve that is not solved by electronic (digital) transfer mechanisms of existing fiat money?

Links - US Federal Reserve working paper on CDBC https://www.federalreserve.gov/central-bank-digital-currency.htm - European Central Bank on digital currency https://www.ecb.europa.eu/paym/digital_euro/html/index.en.html - Details on Chinese e-CNY https://en.wikipedia.org/wiki/Digital_renminbi

Practically, it will make little or no difference to you.

Currently, central banks manage money supply by managing currency transfers to commercial banks and via managing the amount of cash in circulation. The commercial bank transfers are (almost) all digital. Cash, obviously, isn't.

There is reasonable reason to assume that cash will become less and less prevalent as digital payment flows become more ingrained. So central banks are looking at mechanisms to replace/supplement their retail money supply mechanism ie cash, with one that makes more sense for a more digital economy.

So, many central banks have been exploring digit fiat currencies, how they could be implemented, implications etc.

I think the answer is in your question: All forms of money you currently use online (bank-transfer, Zelle, credit card, etc.) are owned and operated by private entities. None of them are public money like cash is, backed by the central bank.

CBDC is intended to be a digital equivalent of cash, so that people have a public money option for digital purchases. It could mean anything from everyone having an account at the central bank to a card holding value that you can get from someone and tap to your phone to order an Uber.

One goal of e-CNY is to be an alternative to USD payment systems like SWIFT which the Western governments hve used to enforced sanctions.

China has a problem with the regular currency has a lot of restrictions on it. People can't just trade CNY for USD or something else because there are controls to prevent this. China wants e-CNY to be a platform for Chinese trade also third parties outside the USD umbrella, eg Brazil with Nigeria or Venezuela trading with Iran. I dont honestly know how that is possible to do both CNY with restrictions and e-CNY which is open, but its definitely important to China and much of the world. https://www.scmp.com/economy/global-economy/article/3191393/...

A CBDC system would radically simplify the current system of intermediaries approving/checking/extracting-fee/etc shifting 0 and 1 from one digital ledger to another [e.g. https://www.bankofcanada.ca/wp-content/uploads/2021/07/sdp20...]. Under CDBC a person has open account only with a single 'independent federal/global bank', making it the only liability to government not a private institution (technically Fed would is private institution, but that is topic on its own).

The abolition of an analogue payment system (cash) is from the first principles a tragic idea regardless of the actual implementation mechanism, despite the few pros one can but forward in this argument. The system with CBDC can make money have an 'expiration date' ! This is not a theoretical construct, but its discussed as a way to 'manage' economy (and private individuals). Inflation, spending, propping up economy is fully in the hands of a government entity and can be matter of coordinating policies and laws. This alone, this principle goes against all the progress of modern times from Babylon. The opportunity for tyranny (not used lightly) under such system is limitless (I will not enumerate it here, Im just outlining an argument on a important and complex issue).