Central bank trials new database for their banking backend.
Nobody’s using CBDCs – India’s piloting one anyway
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Re: Nobody’s using CBDCs – India’s piloting one anyway
#52I don’t see the need for a retail CBDC in India right now. India already has a TCS (tax collected at source) for outward remittances beyond Rs 700,000 in a financial year. This is a tax that’s collected first and refunded or adjusted later. The tracking of these transactions across all authorized forex dealers is already done by the Reserve Bank of India (RBI). So a CBDC isn’t going to add value here. But I think it will be made a case since CBDC for retail is a solution searching for a problem.
The CBDC being a zero interest instrument, only a scare created about lots of counterfeit paper currency could increase adoption, IMO (just like a fake bogeyman about “black money” was told when declaring more than 80% of the currency as invalid in 2016. [1]
Cash is simple. Cash is easy. Cash doesn’t need smartphones. Did you know that less than half (or half) the population in India has a smartphone? At least one major “too big to fail” bank [2] is distributing an Android app for the CBDC on its website as an APK file. [2]
[1]: https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis...
[2]: https://www.icicibank.com/personal-banking/online-services/f...
Re: Nobody’s using CBDCs – India’s piloting one anyway
#53Meh. The article expends zero effort in actually engaging with the Reserve Bank of India's motivations or the CBDC design [1], and is filled with shallow comments about the roll-out in other countries. This is a very important topic as it has the potential to reshape banking/economics on the timescale of decades. For a good down-to-earth understanding of "layer 1" -vs- "layer 2" money, refer the following post [2]. I…
Most examinations of CBDC paint a grim picture of things to come, mostly in terms of yielding absolute power to the central bank. As with any situation involving power, with good intentions you can do wonderful things, with bad intentions you can do equally horrifying things. In the Indian context, the latter is of particular concern, especially when one man can demonetise the whole country overnight on a whim. There…
Thanks for the link -- it is a nice discussion, and contains pointers to interesting content that I wasn't aware of. (likewise, for the sibling comment with links about mBridge)
I appreciate the privacy concerns, but for anyone reading, the tradeoffs have a completely different meaning in the Indian context.
1. A fraction of the Indian populace is so poor that the cost of operating a cash economy (printing currency, transporting it securely, stocking and operating ATMS and bank branches) might prove forbiddingly expensive to service rural areas -- leading to financial exclusion. So, for them, digital infrastructure (which reduces cost of transacting) is a matter of life support, rather than the luxury that it is in the developed world (where everyone has bank accounts, access to cheap credit, and can swipe plastic cards everywhere).
2. While demonetization might have been a horrible fiasco, India's digital payments system (UPI) has been a phenomenal success -- there is substantial evidence on the ground to support that. (The former was arguably used to drive adoption for the latter, but whatever.) The state derives substantial trust from its citizens for this and other developmental and sociopolitical factors.
3. To generalize from those two nuggets -- the Indian populace (with its distinct history and cultural context) has a different relation with the Indian state -vs- banks -vs- corporations, compared to the situation in other countries. Therefore, the factors influencing trust/distrust, the developmental needs & aspirations, the politics, etc are substantially different. It makes very little sense to try and understand Indian concerns and preferences with a perspective honed elsewhere. Eg: In a system where you might trust the state more than possibly corrupt intermediaries (for a complicated array of reasons), the trust calculus is completely inverted. I'm not saying this is necessarily the case, or that nothing generalizes across countries, but the point is that the ground realities are completely different, and they influence the tradeoffs one is willing to put up with.
4. On the specific theme of privacy: the RBI concept note devotes section 7.7 to it. I wish it were more thorough, maybe it's acceptable at this preliminary stage, and can be improved through iteration... but that's an example of the kind of thoughtful commentary that would be very useful -- an analysis of specific shortcomings and/or potential improvements.
Re: Nobody’s using CBDCs – India’s piloting one anyway
#54Earlier quoted context omitted.
Well, with most salaries going to bank accounts it's half way there already, isn't it ?
Also if you think of payment flows. I would guess that less than a dozen operators on average in each country cover nearly all of payments. And top 3-4 likely vast majority. For Europe I believe VISA+MC, SEPA and maybe one or two domestic solutions handle most of transactions.
This is already an issues when global/regional payment processors start to apply either their local law or questionable company policies in the whole region or globally.
Payment processors being a near monopoly, this has a disproportionate effect.
Re: Nobody’s using CBDCs – India’s piloting one anyway
#55Cashless societies terrify me. So easy to control people when you can decide what and with whom they can transact with.
So easy to control people when you can decide what and with whom they can transact with.
Surprise! Your bank and credit card company can do that now.
As being proposed in the USA, a CBDC will only affect settlement transactions between banks. Everything else will stay exactly the way it is now except transactions will be much faster with settlements taking place in real time, 24/7/365 instead of only during "bankers hours".
You'll be able to split the dinner check with a friend by putting money in his account instantly at the dinner table.
And this is all much closer than most people realize. It is in trials now and expected to go live in mid-2023.
Re: Nobody’s using CBDCs – India’s piloting one anyway
#56Earlier quoted context omitted.
That's the kicker; I don't believe there's any government that wants anonymous digital cash. If anything, they want to be the only ones that can track it.
Now you are assuming that "governments" and "citizens" are two disjoint groups with different agendas. That's a really bleak way of looking at it, at least in functioning democracies. I'd certainly protest loudly if some sort of anonymity wasn't part of the plan at every step. I was happy to see at least some footnotes from a recent pilot CDBC mentioning this. https://www.riksbank.se/globalassets/media/rapporter/e-kr…
the question becomes, are systems that are made up of humans making decisions, organisms themselves that make decisions against the humans within the system?
Re: Nobody’s using CBDCs – India’s piloting one anyway
#57Earlier quoted context omitted.
Paper money is a small percentage of total money, and a much smaller percentage in terms of actual transactions. Most of the money is already digital.
Maybe transaction wise paper money is still a small percentage. But my understanding (correct me if wrong) is that the total money running in the country at any momemnt is never more than what is printed. With digital money the central bank can issue it without the cost to print. As per (1) it costs around Rs 10 to Rs 17 to print Rs 100 note and have to be reprinted once they get damaged. (1) https://www.hindustantim…
This is not true, the total money in circulation is far more than what is printed.
For example, USA has ~$2T of physical cash printed (https://www.uscurrency.gov/life-cycle/data/circulation) ; the M1 money supply (effective cash in circulation, including account balances, etc) is ~$20T - https://tradingeconomics.com/united-states/money-supply-m1 .
Re: Nobody’s using CBDCs – India’s piloting one anyway
#58Earlier quoted context omitted.
Well, with most salaries going to bank accounts it's half way there already, isn't it ?
CDBC is way beyond that, it allows things like if someone has taken too many flights that year, bought too much sugar or alcohol that month you could make the offending purchases or all their purchases more expensive to penalize them. Or you know if they had a bad social credit score, too bad now your morning coffee costs 1.5X of the person next to you, maybe reconsider your actions. Few reasons to implement this stu…
Marginal sales taxes make more sense to me than marginal income taxes. You consume more resources, you pay more.
Re: Nobody’s using CBDCs – India’s piloting one anyway
#59Earlier quoted context omitted.
Paper money is a small percentage of total money, and a much smaller percentage in terms of actual transactions. Most of the money is already digital.
Isn't all money still paper behind the scenes, where the banks transfer to one another
Banks generally settle their accounts by digital transfers in their central bank accounts - no physical cash involved, they're trading IOUs from the central bank of the respective currency.
Re: Nobody’s using CBDCs – India’s piloting one anyway
#60Remind me about https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis... > On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes > Several people were reported to have died from standing in queues for hours to exchange their demonetised banknotes.[180][181][182][183][184][185] Deaths were also attributed to lack of medical help due to refusal of demonetised b…
They only had 17 days? That's ridiculous; normally they would just stop printing them and have them be taken out of rotation in a natural fashion (e.g. bank deposits, but that assumes cash is eventually deposited and converted to a number in a bank account).
The goal of that campaign was not to change which denominations are in circulation, but rather quite explicitly to confiscate unaccounted-for wealth stored as piles of cash - that's why there were all kinds of quantity limits, and also the time limit to ensure that those who had a lot of such cash could not effectively launder most of it.