Nobody’s using CBDCs – India’s piloting one anyway(techmonitor.ai)
techmonitor.ai
Nobody’s using CBDCs – India’s piloting one anyway
https://techmonitor.ai/policy/digital-economy/nobodys-using-cbdcs-indias-piloting-one-anyway
159 comments
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 was a good discussion here on CBDC sometime back -
https://news.ycombinator.com/item?id=27805709
There was a good discussion here on CBDC sometime back -
https://news.ycombinator.com/item?id=27805709
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.
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.
UPI has been highly successful.
But please, let’s not credit demonetization with any of it. To the extent demonetization helped, it was an unplanned accident. And it was a result of the fact that the previous administration had begun the Aadhar project (which to its credit the current govt continued and even took credit for).
Demonetization was nothing more than a massive destruction of wealth and growth, done for only one reason. To starve the political opposition of funds over the next few elections.
But please, let’s not credit demonetization with any of it. To the extent demonetization helped, it was an unplanned accident. And it was a result of the fact that the previous administration had begun the Aadhar project (which to its credit the current govt continued and even took credit for).
Demonetization was nothing more than a massive destruction of wealth and growth, done for only one reason. To starve the political opposition of funds over the next few elections.
> 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).
So poor, but well-off for paying for mobile phones/laptops and internet, and educated enough to understand the app interface/language?
So poor, but well-off for paying for mobile phones/laptops and internet, and educated enough to understand the app interface/language?
> So poor, but well-off for paying for mobile phones/laptops and internet
Yup — physical infrastructure is often mind-bogglingly expensive in both capex and opex (and implicitly subsidized in developed countries, so it appears cheap).
> educated enough to understand the app interface/language?
They might be illiterate, but they’re not stupid. As humans, they’re perfectly capable of learning (especially social learning) when it’s important to them.
Yup — physical infrastructure is often mind-bogglingly expensive in both capex and opex (and implicitly subsidized in developed countries, so it appears cheap).
> educated enough to understand the app interface/language?
They might be illiterate, but they’re not stupid. As humans, they’re perfectly capable of learning (especially social learning) when it’s important to them.
Yes! Second hand mobiles are extremely cheap and most people do know how to operate one. The UI is quite easy actually
+1 for the expression "trust calculus" as it seems quite apposite.
CBDC (along with its less august bitcoin sibling) are ultimately questions rather than answers: what are the fundamental building blocks of trust in society (whether analog or digital), how invariant are they under cultural transformations and what might be optimal or at least stable designs (that do no depend on a perpetual pool of "low information" crowds).
CBDC (along with its less august bitcoin sibling) are ultimately questions rather than answers: what are the fundamental building blocks of trust in society (whether analog or digital), how invariant are they under cultural transformations and what might be optimal or at least stable designs (that do no depend on a perpetual pool of "low information" crowds).
excellent points. thanks for sharing.
govt / RBI might be able to give a boost to the CBDC by giving some Sec80c benefits. historically that's been a good channel to 'nudge' people into putting money where the govt wants towards.
govt / RBI might be able to give a boost to the CBDC by giving some Sec80c benefits. historically that's been a good channel to 'nudge' people into putting money where the govt wants towards.
You don't need CBDC to operate a cashless economy. Digital payments are ubiquitous already and cash is merely an alternative that is available. CBDC changes nothing for end consumers. It is primarily a tool for the central bank to apply monetary policy easily.
This is absolutely true. On the flip side, digital currency has also led to much more reliable disbursement of funds to the actual beneficiaries of those funds. This has been a dramatic change.
Western (and even a lot of Indian) media likes to paint a lot of Modi’s support based on his religious discrimination, but in reality that’s only a tiny fraction of the support he enjoys. Most of his support comes from the fact that, for example, even as demonetization has probably led to India’s GDP being far smaller than it would have been otherwise, many poor people are still better off because funds and services that would in the past have largely been eaten up by political and administrative intermediaries actually make it to the people.
And a large part of that is the result of some of the problematic measures like the central identification numbers and the digitization of money.
Western (and even a lot of Indian) media likes to paint a lot of Modi’s support based on his religious discrimination, but in reality that’s only a tiny fraction of the support he enjoys. Most of his support comes from the fact that, for example, even as demonetization has probably led to India’s GDP being far smaller than it would have been otherwise, many poor people are still better off because funds and services that would in the past have largely been eaten up by political and administrative intermediaries actually make it to the people.
And a large part of that is the result of some of the problematic measures like the central identification numbers and the digitization of money.
The question should be: with the track record of wild debt countries are showing, the Twitter leaked mails shpwing political control behind and the raise in taxes, what makes you think they will do something good?
Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something?
Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something?
Because in the context of India the digitization of money and centralization of data has been a massive boon to the people.
For example, with the creation of a national identification number (which, thanks to the initial poor security measures has already been hacked), government welfare schemes which involved the distribution of money to people now actually results in the poor benefitting from them, since the money gets deposited in their bank accounts directly. In the past over 80-90% of the money would be stolen by intermediaries.
This is entirely the result of the creation of a massive identity database which by any angle is a security nightmare.
Further, the digitization of money has led to tremendous benefits to the population. Not having to carry around cash greatly reduces the risks of loss or theft. A lot of abuse faced by vendors in the unofficial sector (which is the bulk of the economy) has also reduced because a customer promising to pay cash later because they wouldn’t have it on them, and then either “forgetting” to do so, or delaying it and effectively getting an interest free loan from people who were least able to afford it, is something that has reduced dramatically because the vendor can demand the customer pay them directly using any of the digital means whose receipt they will get confirmation of instantly.
Digital currency has also led to a reduction in fraud and claims of fraud. If a vendor sends a product to a customer with a delivery person, for example, in the past they’d bring cash. This opened up a lot of opportunity for abuse against the largely powerless delivery person where either the customer would not pay enough, and the vendor would blame the delivery person for stealing the money, etc. But now, that simply doesn’t come into play. The customer pays the vendor directly and the vendor sends the delivery person a confirmation and they hand over the product to the customer.
A whole class of exploitation tactics have basically been eliminated.
For example, with the creation of a national identification number (which, thanks to the initial poor security measures has already been hacked), government welfare schemes which involved the distribution of money to people now actually results in the poor benefitting from them, since the money gets deposited in their bank accounts directly. In the past over 80-90% of the money would be stolen by intermediaries.
This is entirely the result of the creation of a massive identity database which by any angle is a security nightmare.
Further, the digitization of money has led to tremendous benefits to the population. Not having to carry around cash greatly reduces the risks of loss or theft. A lot of abuse faced by vendors in the unofficial sector (which is the bulk of the economy) has also reduced because a customer promising to pay cash later because they wouldn’t have it on them, and then either “forgetting” to do so, or delaying it and effectively getting an interest free loan from people who were least able to afford it, is something that has reduced dramatically because the vendor can demand the customer pay them directly using any of the digital means whose receipt they will get confirmation of instantly.
Digital currency has also led to a reduction in fraud and claims of fraud. If a vendor sends a product to a customer with a delivery person, for example, in the past they’d bring cash. This opened up a lot of opportunity for abuse against the largely powerless delivery person where either the customer would not pay enough, and the vendor would blame the delivery person for stealing the money, etc. But now, that simply doesn’t come into play. The customer pays the vendor directly and the vendor sends the delivery person a confirmation and they hand over the product to the customer.
A whole class of exploitation tactics have basically been eliminated.
I get your point and things are nuanced depending on the situation.
But the amount of control this tracking can create is potentially evil. We have to be careful with this.
I'd rather work for less and keep control than doing this. But what this is going to generate is massive govt. control. Worse than before. Not telling about India specifics though.
But the amount of control this tracking can create is potentially evil. We have to be careful with this.
I'd rather work for less and keep control than doing this. But what this is going to generate is massive govt. control. Worse than before. Not telling about India specifics though.
But, India is so far behind, it may need a little bit of "evil" for a little while to clean up all the layers of intermediary corruption before getting better.
It's already awful to live there for a large part of the population, and they have so little, that the government really has no use tracking them: yes, they re starving, going to work for $5 a month, and sleeping... like, okay they knew that already, maybe having some sort of better grasp on the currency flow could help direct it better.
"Working for less" in India is not the same as in California, just yet.
It's already awful to live there for a large part of the population, and they have so little, that the government really has no use tracking them: yes, they re starving, going to work for $5 a month, and sleeping... like, okay they knew that already, maybe having some sort of better grasp on the currency flow could help direct it better.
"Working for less" in India is not the same as in California, just yet.
At the end there is no replacement for responsible people. It is just a matter that with great power comes great responsibility.
I would not bet my safety on more govt. control. Of course my situation is different from many of those people.
At the same time, promoting long-term govt. and state dependence is, IMHO, the wrong choice. As a temporary situation it could be useful, but to promote autonomy when ppl get wealthier, not to make them depend on power.
I would not bet my safety on more govt. control. Of course my situation is different from many of those people.
At the same time, promoting long-term govt. and state dependence is, IMHO, the wrong choice. As a temporary situation it could be useful, but to promote autonomy when ppl get wealthier, not to make them depend on power.
> Besides that: why should I put my effort at the management of people I do not trust so that they do what they deem appropriate without paying for their mistakes? Am I his slave or something?
Generally you are either directly or indirectly their elector so they are in fact accountable to you. But yeah, that's kind of how democracy works.
I'm personally only supportive of privacy-preserving CBDCs like the Rohan Grey e-cash proposal.
Generally you are either directly or indirectly their elector so they are in fact accountable to you. But yeah, that's kind of how democracy works.
I'm personally only supportive of privacy-preserving CBDCs like the Rohan Grey e-cash proposal.
The Twitter files had a lot to say to that response too...
Here is a bit more on the international efforts for CBDCs
https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm
https://news.ycombinator.com/item?id=33865185
https://www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm
https://news.ycombinator.com/item?id=33865185
At least from a US perspective, type 1 money also has a digital component, just one only available to banks. I'm not familiar enough with how India's central bank works to know if things are similar, but the concept note makes it sound like it might be.
The accounts that members banks have at the Federal Reserve are legally equivalent to paper money. The banks can exchange part of that account balance for paper money, or exchange paper money for that account balance at any time. To settle debts between banks they almost never cart truckloads of cash between each other, but simply ask the federal reserve banks to adjust their balances accordingly.
This looks a LOT like the layer 2 money that banks create, but it is layer 1.
If RBI works similarly, then it is not really apparent why a wholesale CBDC would have substantial value. Interbank settlement would already occur via balance transfers at the central bank. It is not even remotely clear to me how an "account-based" wholesale CBDC would differ from the status quo at all. The main thing they mention is allowing more conditions to be attached to transactions allowing "programming" the central bank money (presumably in ways similar to "smart contracts"). There is no mention of why that could not simply be done by enhancing the existing systems, but they also point out that it could be a new tech stack from ground up, which suggests that they feel the existing tech stack has flaws.
Retail CBDC would be potentially more interesting, but also far more controversial. Nobody really cares about a central bank keeping a close eye on how banks send money to each other, but a retail CBDC is effectively an attempt to replace cash. There are a lot of issues with that, like people want privacy in cash transactions, but there is no way the bank wants create a new means of money laundering or similar. The fact that many plans for retail CBDCs seem to want desperately to adopt as many crypto currency technologies as possible causes lot of worry. Thinks like losing private keys meaning loss of money (and if intermediaries hold keys instead, you better hope they have really good information security.)
The accounts that members banks have at the Federal Reserve are legally equivalent to paper money. The banks can exchange part of that account balance for paper money, or exchange paper money for that account balance at any time. To settle debts between banks they almost never cart truckloads of cash between each other, but simply ask the federal reserve banks to adjust their balances accordingly.
This looks a LOT like the layer 2 money that banks create, but it is layer 1.
If RBI works similarly, then it is not really apparent why a wholesale CBDC would have substantial value. Interbank settlement would already occur via balance transfers at the central bank. It is not even remotely clear to me how an "account-based" wholesale CBDC would differ from the status quo at all. The main thing they mention is allowing more conditions to be attached to transactions allowing "programming" the central bank money (presumably in ways similar to "smart contracts"). There is no mention of why that could not simply be done by enhancing the existing systems, but they also point out that it could be a new tech stack from ground up, which suggests that they feel the existing tech stack has flaws.
Retail CBDC would be potentially more interesting, but also far more controversial. Nobody really cares about a central bank keeping a close eye on how banks send money to each other, but a retail CBDC is effectively an attempt to replace cash. There are a lot of issues with that, like people want privacy in cash transactions, but there is no way the bank wants create a new means of money laundering or similar. The fact that many plans for retail CBDCs seem to want desperately to adopt as many crypto currency technologies as possible causes lot of worry. Thinks like losing private keys meaning loss of money (and if intermediaries hold keys instead, you better hope they have really good information security.)
> India's digital payments ecosystem (the "UPI") has been an unparallelled success at the second layer.
Hence the reason why the RBI will eventually use UPI to piloting their CBDC on top of it anyway and force all of India to use it.
That should scare us all.
Hence the reason why the RBI will eventually use UPI to piloting their CBDC on top of it anyway and force all of India to use it.
That should scare us all.
> That should scare us all.
Why?
Why?
This is why [0]. Some board members at the European Central Bank (ECB) are already considering suggesting spending and saving limits on CBDCs including the digital euro and that should tell you where these CBDC pilots are going to go if successful and how very dystopian that would be already.
Oh dear.
[0] https://reclaimthenet.org/digital-euro-spending-saving-limit...
Oh dear.
[0] https://reclaimthenet.org/digital-euro-spending-saving-limit...
That’s not what it says. It says there will be transaction amount limits above which transactions would be recorded. Again this information is already available to governments when required.
> That’s not what it says. It says there will be transaction amount limits above which transactions would be recorded.
Yet it also says in the same source about an ECB member; Fabio Panetta, mentioning in the video about introducing savings limits which I said earlier [0]: "What we are discussing is the possibility of introducing limits for individual users,” Panetta said. “For example, we have been discussing many numbers... €3,000."
> Again this information is already available to governments when required.
Of course. They always have been doing it out in the open for other governments to try out having their own CBDCs, which is still clearly dystopian and will press forward on it like it or not.
[0] https://reclaimthenet.org/digital-euro-spending-saving-limit...
Yet it also says in the same source about an ECB member; Fabio Panetta, mentioning in the video about introducing savings limits which I said earlier [0]: "What we are discussing is the possibility of introducing limits for individual users,” Panetta said. “For example, we have been discussing many numbers... €3,000."
> Again this information is already available to governments when required.
Of course. They always have been doing it out in the open for other governments to try out having their own CBDCs, which is still clearly dystopian and will press forward on it like it or not.
[0] https://reclaimthenet.org/digital-euro-spending-saving-limit...
We already live in a dystopia where transaction sabotage is being compensated with more money to sabotage.
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 that highly affected by how much money rich people (ie users of digital money) have?
One whould think paper money still is used by a good 50% of the worlds poorest, but they can't hold a candle to the amount hedge funds, banks and simply normal people from western countries move around compared to them.
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.hindustantimes.com/business/will-digital-currenc...
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.hindustantimes.com/business/will-digital-currenc...
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 .
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 .
I'm sorry to say that you are incorrect. There is not a specific number of itemized money units that define a fixed money supply. In fact, not even stock certificates work that way!
It's all elastic, and central banks have sophisticated mechanisms to tighten or loosen that elastic band. The entire financial industry exists to think of novel ways to create leverage, stitching together assets and promises into towering edifices of economic power... all founded on the idea/hope/prayer that nobody will call in all the bets at once.
Honestly, you might not want to look behind the curtain on this one. It's one of those existential risks you can't effect as a single human. It's a collective suspension of disbelief that allows the modern world to function. If/when the correction happens... it will not be fun to live through.
If you're a glutton for punishment, here's some reading:
"Chapter 2 studies leverage in the nonfinancial private sector before and during the COVID-19 crisis, pointing out that policymakers face a trade-off between boosting growth in the short term by facilitating an easing of financial conditions and containing future downside risks. This trade-off may be amplified by the existing high and rapidly building leverage, increasing downside risks to future growth. " https://www.imf.org/en/Publications/GFSR
https://research.macrosynergy.com/the-global-leverage-proble...
https://www.imf.org/en/Blogs/Articles/2021/03/29/confronting...
https://en.wikipedia.org/wiki/Fractional-reserve_banking
https://en.wikipedia.org/wiki/Money_multiplier
https://www.investopedia.com/terms/l/leverageratio.asp
https://www.investopedia.com/terms/r/rehypothecation.asp
It's all elastic, and central banks have sophisticated mechanisms to tighten or loosen that elastic band. The entire financial industry exists to think of novel ways to create leverage, stitching together assets and promises into towering edifices of economic power... all founded on the idea/hope/prayer that nobody will call in all the bets at once.
Honestly, you might not want to look behind the curtain on this one. It's one of those existential risks you can't effect as a single human. It's a collective suspension of disbelief that allows the modern world to function. If/when the correction happens... it will not be fun to live through.
If you're a glutton for punishment, here's some reading:
"Chapter 2 studies leverage in the nonfinancial private sector before and during the COVID-19 crisis, pointing out that policymakers face a trade-off between boosting growth in the short term by facilitating an easing of financial conditions and containing future downside risks. This trade-off may be amplified by the existing high and rapidly building leverage, increasing downside risks to future growth. " https://www.imf.org/en/Publications/GFSR
https://research.macrosynergy.com/the-global-leverage-proble...
https://www.imf.org/en/Blogs/Articles/2021/03/29/confronting...
https://en.wikipedia.org/wiki/Fractional-reserve_banking
https://en.wikipedia.org/wiki/Money_multiplier
https://www.investopedia.com/terms/l/leverageratio.asp
https://www.investopedia.com/terms/r/rehypothecation.asp
Paper money still has a very important role, because it can't simply be deleted from your account.
That's important, because central banks are considering negative interest rate policy, which would mean your bank account would drop by a percentage each month. This would drive people to spend or invest their money, supporting consumption and inflating asset prices.
The reason they can't do that right now is because many people would withdraw their funds and hold cash. That option needs to be removed for negative interest rate policy to be broadly implemented.
(There are a few places, like Europe, where interest rates already went negative, but only slightly and it only applied to institutions like banks).
That's important, because central banks are considering negative interest rate policy, which would mean your bank account would drop by a percentage each month. This would drive people to spend or invest their money, supporting consumption and inflating asset prices.
The reason they can't do that right now is because many people would withdraw their funds and hold cash. That option needs to be removed for negative interest rate policy to be broadly implemented.
(There are a few places, like Europe, where interest rates already went negative, but only slightly and it only applied to institutions like banks).
>That's important, because central banks are considering negative interest rate policy, which would mean your bank account would drop by a percentage each month.
Imagine the horror of having to pay a parking fee instead. Truly horrifying. How are we supposed to pretend that it is ours anymore and extort payments from other people by blocking all the free parking lots?
>This would drive people to spend or invest their money, supporting consumption and inflating asset prices.
You know, in neo classical economics the idea of not spending your money on consumption or investment or saving your money isn't even considered to be something that even happens (by that I mean in neo classics all saving happens at the bank anyway) So if you are against that then you leave central banks no choice other than to create exponentially growing quantities of money and use inflation to devalue all assets instead of only shrinking the type of balance you have the least of. The poor store most of their value in their body and need to trade their body for money that they spend quickly, only the rich who can block their withheld money from being available and thereby extort interest payments from the rest of the economy.
It is like you are arguing that the current system of exponential debt is somehow the height of morality.
Imagine the horror of having to pay a parking fee instead. Truly horrifying. How are we supposed to pretend that it is ours anymore and extort payments from other people by blocking all the free parking lots?
>This would drive people to spend or invest their money, supporting consumption and inflating asset prices.
You know, in neo classical economics the idea of not spending your money on consumption or investment or saving your money isn't even considered to be something that even happens (by that I mean in neo classics all saving happens at the bank anyway) So if you are against that then you leave central banks no choice other than to create exponentially growing quantities of money and use inflation to devalue all assets instead of only shrinking the type of balance you have the least of. The poor store most of their value in their body and need to trade their body for money that they spend quickly, only the rich who can block their withheld money from being available and thereby extort interest payments from the rest of the economy.
It is like you are arguing that the current system of exponential debt is somehow the height of morality.
That’s horrifying and I have a hard time imagining that sort of thing happening in any functional democracy.
You might, but the central banks don't! It's a recurring theme in published research papers by economists and by the central banks themselves. It's called "breaking through the zero bound" on monetary policy, or "removing the effective lower bound". The tone in these papers is universally that this would be desirable for the central bank, but hard for the public to accept.
For example from the Fed: "The Case for Unencumbering Interest Rate Policy at the Zero Bound", https://www.kansascityfed.org/documents/7033/GoodfriendPaper...
> With these advantages in mind, the final portion of the paper describes in detail three methods by which the zero bound on interest rate policy can be unencumbered completely. The three methods in turn would: 1) abolish paper currency, 2) introduce a market-determined flexible deposit price of paper currency, and 3) provide electronic currency (to pay or charge interest) at par with deposits.
Or the Bank of Canada's paper, "Is a Cashless Society Problematic?", https://www.bankofcanada.ca/2018/10/staff-discussion-paper-2...
> a cashless society could open the door to the prospect of negative interest rates to a greater extent than is currently possible. Most central banks are obligated by law to supply cash to the general public. To the extent that the economy becomes cashless, a central bank could request a change in its governing legislation to remove the obligation to supply cash to the public on demand (which is a significant step). In that case, in the absence of cash and of an obligation to supply it, a central bank would be able to lower interest rates to a more negative level than is currently possible to achieve stabilization or price stability goals.
For example from the Fed: "The Case for Unencumbering Interest Rate Policy at the Zero Bound", https://www.kansascityfed.org/documents/7033/GoodfriendPaper...
> With these advantages in mind, the final portion of the paper describes in detail three methods by which the zero bound on interest rate policy can be unencumbered completely. The three methods in turn would: 1) abolish paper currency, 2) introduce a market-determined flexible deposit price of paper currency, and 3) provide electronic currency (to pay or charge interest) at par with deposits.
Or the Bank of Canada's paper, "Is a Cashless Society Problematic?", https://www.bankofcanada.ca/2018/10/staff-discussion-paper-2...
> a cashless society could open the door to the prospect of negative interest rates to a greater extent than is currently possible. Most central banks are obligated by law to supply cash to the general public. To the extent that the economy becomes cashless, a central bank could request a change in its governing legislation to remove the obligation to supply cash to the public on demand (which is a significant step). In that case, in the absence of cash and of an obligation to supply it, a central bank would be able to lower interest rates to a more negative level than is currently possible to achieve stabilization or price stability goals.
> The tone in these papers is universally that this would be desirable for the central bank, but hard for the public to accept.
Yeah, that’s putting it mildly! Isn’t this basically a wealth tax on the middle and working classes?
Yeah, that’s putting it mildly! Isn’t this basically a wealth tax on the middle and working classes?
Yes, on anyone who works to earn a wage rather than owning appreciating assets, basically.
I don't know, maybe it won't happen. But the signs are all pointing in that direction, so I'm kind of resigned to it going that way eventually. Probably it will start by restrictions on large cash transactions, and on owning or carrying large amounts of cash. Then fees for withdrawing paper cash from bank accounts. Perhaps retailers will be allowed to add fees for cash transactions, too. The last step would be deprecating cash altogether, allowing banknotes to be deposited but not withdrawn (withdrawals will be as a CBDC).
Just my guess on how it will go.
I don't know, maybe it won't happen. But the signs are all pointing in that direction, so I'm kind of resigned to it going that way eventually. Probably it will start by restrictions on large cash transactions, and on owning or carrying large amounts of cash. Then fees for withdrawing paper cash from bank accounts. Perhaps retailers will be allowed to add fees for cash transactions, too. The last step would be deprecating cash altogether, allowing banknotes to be deposited but not withdrawn (withdrawals will be as a CBDC).
Just my guess on how it will go.
>Yes, on anyone who works to earn a wage rather than owning appreciating assets, basically.
People who work for their wage are utterly dependent on the benevolence of the rich who withhold their money from the market. Withholding money from being spent or saved is how you get unemployment and inequality. If anything people who work for money will appreciate that they are being paid and the people they pay will also appreciate it. The only people who won't appreciate are those who already have so much money they don't know what to do with it.
People who work for their wage are utterly dependent on the benevolence of the rich who withhold their money from the market. Withholding money from being spent or saved is how you get unemployment and inequality. If anything people who work for money will appreciate that they are being paid and the people they pay will also appreciate it. The only people who won't appreciate are those who already have so much money they don't know what to do with it.
A wealth tax on cash...? Are you kidding me? You can literally avoid it by going to the bank to save your money.
You misunderstand. The bank would be giving you a negative interest rate, so your account balance would always be exponentially decaying.
Cash would allow you to escape this, which is why it would be removed as an option.
Cash would allow you to escape this, which is why it would be removed as an option.
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.
nope. No way the modern economy could function if you had to lug around pallets of cash all the time. Similar to the reasoning for going off the gold standard.
The problem, of course, is that when the money is just a number on a screen, it's very difficult to ensure that the humans running the database don't magically decide they have a bigger number than they aught to. This is an unsolved problem.
The problem, of course, is that when the money is just a number on a screen, it's very difficult to ensure that the humans running the database don't magically decide they have a bigger number than they aught to. This is an unsolved problem.
Remind 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 banknotes by hospitals.[186][187][188]
> The exchange of banknotes was stopped completely on 25 November, although the government had previously stated that the volume of exchange would be increased after that date.
> The push for digital payments was one of the stated intentions of demonetisation.
So if someone missed this 17 days or has not managed to exchange their funds - then they would lost all their cash they were holding using demonetized banknotes.
> 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 banknotes by hospitals.[186][187][188]
> The exchange of banknotes was stopped completely on 25 November, although the government had previously stated that the volume of exchange would be increased after that date.
> The push for digital payments was one of the stated intentions of demonetisation.
So if someone missed this 17 days or has not managed to exchange their funds - then they would lost all their cash they were holding using demonetized banknotes.
> So if someone missed this 17 days
this sort of shit is what makes a gov't a low trust gov't.
It exacerbates the informal economy - people would not want to pay taxes to fund such a govt, because they don't see that the gov't is running with their interest in mind (despite india being a so called democracy).
It was a poorly thought-out policy.
this sort of shit is what makes a gov't a low trust gov't.
It exacerbates the informal economy - people would not want to pay taxes to fund such a govt, because they don't see that the gov't is running with their interest in mind (despite india being a so called democracy).
It was a poorly thought-out policy.
> people would not want to pay taxes to fund such a govt
that reminds me about another gem:
> The use of demonetised banknotes was allowed for the payment of municipal and local civic body taxes, leading to a jump in their revenue collections.
that reminds me about another gem:
> The use of demonetised banknotes was allowed for the payment of municipal and local civic body taxes, leading to a jump in their revenue collections.
> It was a poorly thought-out policy
It was robbing people. Poorly thought out policy is an expression for people with good intentions, I just don't believe in that when it comes to the Indian government.
It was robbing people. Poorly thought out policy is an expression for people with good intentions, I just don't believe in that when it comes to the Indian government.
> So if someone missed this 17 days or has not managed to exchange their funds
The first deadline of 17 days was to get rid of the demonetised notes by depositing them with banks.
The logistics of the demonetisation was a total clusterfuck. The banking infrastructure was kept in the dark so they were utterly unprepared to handle the rush. They were provided with zero information and SOPs so they were also totally clueless to handle different situations. To make matters worse the new weren't readily available. So the withdrawals were rationed. 500 and 1000 notes formed the bulk of notes in supply, something like 90% of notes in circulation. And this was at a time when digital payments weren't adopted by the masses. Most of the daily wage earners didn't even have a bank account. India is a large country with lots of remote, hard to access places. People were still clinging on to these old currency notes, as their primary savings, to discover that they were useless 2-3 years later. All of these lead to a cascading failures. Imagine removing 90% of circulating blood from a large animal. That's exactly what happened to Indian economy.
I'm sure there's like a dozen PhDs in there for humanities, economics students in there.
Here's a good (but hard to find) video on the topic: https://www.youtube.com/watch?v=qELSFa5NtYc
The speaker has researched on this topic for decades.
The first deadline of 17 days was to get rid of the demonetised notes by depositing them with banks.
The logistics of the demonetisation was a total clusterfuck. The banking infrastructure was kept in the dark so they were utterly unprepared to handle the rush. They were provided with zero information and SOPs so they were also totally clueless to handle different situations. To make matters worse the new weren't readily available. So the withdrawals were rationed. 500 and 1000 notes formed the bulk of notes in supply, something like 90% of notes in circulation. And this was at a time when digital payments weren't adopted by the masses. Most of the daily wage earners didn't even have a bank account. India is a large country with lots of remote, hard to access places. People were still clinging on to these old currency notes, as their primary savings, to discover that they were useless 2-3 years later. All of these lead to a cascading failures. Imagine removing 90% of circulating blood from a large animal. That's exactly what happened to Indian economy.
I'm sure there's like a dozen PhDs in there for humanities, economics students in there.
Here's a good (but hard to find) video on the topic: https://www.youtube.com/watch?v=qELSFa5NtYc
The speaker has researched on this topic for decades.
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.
In spite of all that, more than 98% of the demonetized bills made it back to the banks.
> They only had 17 days?
Yes. Unless this Wikipedia page is horrifyingly misleading.
But this alone would ensure that I would keep all my funds into something more trustworthy. Even freaking Bitcoin starts to be a sane solution, to say nothing about dollars/euro/gold.
Yes. Unless this Wikipedia page is horrifyingly misleading.
But this alone would ensure that I would keep all my funds into something more trustworthy. Even freaking Bitcoin starts to be a sane solution, to say nothing about dollars/euro/gold.
That is how you realize the intent is to oppress senselessly, not just oppress.
For comparison, in Poland the "old" and "new" functioned for 2 years.
After 2 years it was not legal to pay with them but you could still exchange them in national bank...
...for next 14 years
It's just WTF.
After 2 years it was not legal to pay with them but you could still exchange them in national bank...
...for next 14 years
It's just WTF.
Same in India for most cases when taking out old notes in circulation etc
This particular demonitisation was done as a shock move to ostensibly catch corruption, black money etc.
It was lauded and welcome when it was announced, including by yours truly.
It was quickly seen as a poor execution by most except the ardent supporters (which doesn't include me)
I am sure most in the govt would secretly agree it was a bad move.
This particular demonitisation was done as a shock move to ostensibly catch corruption, black money etc.
It was lauded and welcome when it was announced, including by yours truly.
It was quickly seen as a poor execution by most except the ardent supporters (which doesn't include me)
I am sure most in the govt would secretly agree it was a bad move.
https://archive.ph/ynouY
> India’s central bank has estimated that 99 per cent of the high denomination banknotes cancelled last year were deposited or exchanged for new currency, dashing government hopes that its contentious demonetisation exercise would wipe out huge amounts of “black money" ... complex money-laundering networks sprang up in the wake of the demonetisation to help wealthy Indians deposit huge volumes of previously undeclared currency without exposing themselves to tax authorities. Such people allegedly sold the old notes, at a discount, to brokers who then dispatched low-income Indians to deposit or exchange them at banks.
> India’s central bank has estimated that 99 per cent of the high denomination banknotes cancelled last year were deposited or exchanged for new currency, dashing government hopes that its contentious demonetisation exercise would wipe out huge amounts of “black money" ... complex money-laundering networks sprang up in the wake of the demonetisation to help wealthy Indians deposit huge volumes of previously undeclared currency without exposing themselves to tax authorities. Such people allegedly sold the old notes, at a discount, to brokers who then dispatched low-income Indians to deposit or exchange them at banks.
people were jumping into conclusions about this event without knowing about this context. it was still a net negative imo, but the way the restrictions existed because of "black money" reasons.
however, if you love the freedom of holding cash the way you want, then this was definitely not a good time.
however, if you love the freedom of holding cash the way you want, then this was definitely not a good time.
> The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after the announcement. The move reduced the country's industrial production and its GDP growth rate. It is estimated that 1.5 million jobs were lost.
Wow.
They should have gone back to the drawing board after seeing their announcement lop off a huge chunk of their equity market capitalization.
Wow.
They should have gone back to the drawing board after seeing their announcement lop off a huge chunk of their equity market capitalization.
What has this got to do with TFA?
Both are weird and suspicious and complex financial operations done by Indian government on their citizens.
What is “weird” or “suspicious “ about these? Please be specific, not just parroting something off a news article you’ve read. I’m interested to hear how much you’ve actually understood the motivations for these actions (the ultimate results notwithstanding).
> What is “weird” or “suspicious “ about these?
Lets go with simpler one.
Giving people 17 days to exchange all their cash under penalty of losing all of it is weird, suspicious and stupid. And evil or incompetent or both.
People responsible for that are responsible for massive amount of human tragedy without a good justification (no, good intentions do not count as one).
> Please be specific, not just parroting something off a news article you’ve read
Can you explain how/why this demonetisation would NOT be “weird” or “suspicious“?
Lets go with simpler one.
Giving people 17 days to exchange all their cash under penalty of losing all of it is weird, suspicious and stupid. And evil or incompetent or both.
People responsible for that are responsible for massive amount of human tragedy without a good justification (no, good intentions do not count as one).
> Please be specific, not just parroting something off a news article you’ve read
Can you explain how/why this demonetisation would NOT be “weird” or “suspicious“?
Incompetent? Most likely. Again I don’t see any convincing argument for why it’s “weird” or “suspicious” in the usual meaning of those words in the English dictionary. It’s fine to throw out a word salad if that’s your communication style, but don’t be surprised if people ask for specific reasoning for those words.
> Can you explain how/why this demonetisation would NOT be “weird” or “suspicious“?
No that’s not how this debate thing works :)
> Can you explain how/why this demonetisation would NOT be “weird” or “suspicious“?
No that’s not how this debate thing works :)
> No that’s not how this debate thing works :)
If you demand from me to spend time on more detailed explanation and you are unwilling to do the same, then I prefer to spend time on something else.
If you demand from me to spend time on more detailed explanation and you are unwilling to do the same, then I prefer to spend time on something else.
> If you demand from me to spend time on more detailed explanation and you are unwilling to do the same, then I prefer to spend time on something else.
So you got nothing. I suspected as much, thanks for confirming.
So you got nothing. I suspected as much, thanks for confirming.
Cashless 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.
https://www.frbservices.org/financial-services/fednow
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.
https://www.frbservices.org/financial-services/fednow
> 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".
We literally have just that. It is a lie that digital money is required for that
This is just side effect of them putting new system up just for that that allows that.
There would be nothing stopping them to do that for the "old" money. Hell, there are already systems for it, a bunch of banks in my country have it... of course they want extra for it (gotta pay for itself)
We literally have just that. It is a lie that digital money is required for that
This is just side effect of them putting new system up just for that that allows that.
There would be nothing stopping them to do that for the "old" money. Hell, there are already systems for it, a bunch of banks in my country have it... of course they want extra for it (gotta pay for itself)
Yes, everything is a lie and that's a fact. By the way, the sky is falling.
The fun is when, in the US, a customer needs access to a large amount of liquidity, they may or may not receive it, depending on the nature of their bank, their credit, and their relationship with their bank... beyond whether or not they have sufficient funds or not. "Daily withdrawal limits" (not just cash).
But we currently have the option to bypass those restrictions if we want. Isn't it concerning that these systems might become more or less "mandatory" at some point?
Anything imaginable *might* become "mandatory" at some point. As of right now, no one is proposing to change anything at the consumer level. The only impact will be faster, easier transactions.
So you put this becoming more or less mandatory in the future at roughly the same odds that wearing pink unitards will become mandatory? Any system like this that provides the capacity for heavy centralized control and censorship will at the very least have people attempting to leverage it to their own ends right? Not saying they will succeed but I think it rises above the level of "any random shit might become mandatory" right?
I put the odds in the same category as the military overthrowing the civilian government.
It has happened around the world, so we know the threat is very real --- people have leveraged the military to their own ends, right?
So by your same logic, we need to oppose, resist and abolish the military now before it's too late.
It has happened around the world, so we know the threat is very real --- people have leveraged the military to their own ends, right?
So by your same logic, we need to oppose, resist and abolish the military now before it's too late.
Does this change your opinion at all? https://news.ycombinator.com/item?id=33890625
Isn't FedNow separate from CBDC proposals? Some overlap in purpose but different in function.
https://www.pymnts.com/cryptocurrency/2022/cbdc-weekly-feds-...
https://www.pymnts.com/cryptocurrency/2022/cbdc-weekly-feds-...
Potato or po-tato.
FedNow is the solution the Federal Reserve is proposing for a "digital dollar". It will only be used for inter-bank settlements.
FedNow is the solution the Federal Reserve is proposing for a "digital dollar". It will only be used for inter-bank settlements.
FedNow seems to lack some of the juicier potential features of CBDCs, like negative interest rates for individuals in the same way a bank might have on it's account with a central bank.
I can hand my friend cash at the dinner table. And that's what I do. No central authority needs to be involved in things like this, nor should that be required.
Yes, you can do that. And no one is proposing to change it.
You can also get mugged in the parking lot by the waiter or accomplices once he sees your wad of cash. Carrying cash is risky and cumbersome. This is why banks exist.
Those who don't want to carry cash will now have the new found ability to pay anyone instantly without it.
You can also get mugged in the parking lot by the waiter or accomplices once he sees your wad of cash. Carrying cash is risky and cumbersome. This is why banks exist.
Those who don't want to carry cash will now have the new found ability to pay anyone instantly without it.
Any good implementation of a central bank digital currency should have some anonymity handling, or it's not really a good cash replacement (Unless the goal all along was monitoring, which of course will be the case in some countries). Being able to spend $500 on something without anyone knowing is important. As is not beig able to launder $5M without anyone noticing. "Tomatoes, not diamonds" is the key feature here.
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-krona...
It's bascically exactly how the bank+card+cash system works. When I purchase a car with a bank transfer, it's easily traceable. When I purchase a guitar with my card, it's traceable. But if I really want to buy something untracably I go to an ATM and get cash. Similarly in any CDBC that citizens shouldn't be protesting loudly about, you can simply grab cash-like tokens. They might have an amount cap, but so does cash. You could never really go and fetch an unlimited amount of cash without having authorities ask questions due to KYC requirements.
I was happy to see at least some footnotes from a recent pilot CDBC mentioning this. https://www.riksbank.se/globalassets/media/rapporter/e-krona...
It's bascically exactly how the bank+card+cash system works. When I purchase a car with a bank transfer, it's easily traceable. When I purchase a guitar with my card, it's traceable. But if I really want to buy something untracably I go to an ATM and get cash. Similarly in any CDBC that citizens shouldn't be protesting loudly about, you can simply grab cash-like tokens. They might have an amount cap, but so does cash. You could never really go and fetch an unlimited amount of cash without having authorities ask questions due to KYC requirements.
> 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.
Functioning democracies are sort of like spherical cows or frictionless surfaces: they don’t actually exist but we pretend they do as a simplifying assumption. Sometimes we are having more sophisticated discussions about bovine anatomy or the friction of ice; other times we discuss the principal-agent problem as it applies to the administrative state within a democracy.
Functioning democracies are sort of like spherical cows or frictionless surfaces: they don’t actually exist but we pretend they do as a simplifying assumption. Sometimes we are having more sophisticated discussions about bovine anatomy or the friction of ice; other times we discuss the principal-agent problem as it applies to the administrative state within a democracy.
From "Money and Payments: The U.S. Dollar in the Age of Digital Transformation"
"Identity-verified: Financial institutions in the United States are subject to robust rules that are designed to combat money laundering and the financing of terrorism. A CBDC would need to be designed to comply with these rules. In practice, this would mean that a CBDC intermediary would need to verify the identity of a person accessing CBDC, just as banks and other financial institutions currently verify the identities of their customers. In this regard, a CBDC would differ materially from cash, which enables anonymous transactions. While central banks are unable to fully prevent cash from being used for illicit purposes, a CBDC could potentially be used at much greater scale and velocity than cash, so compliance with laws designed to combat money laundering and funding terrorism is particularly important for CBDC."[1]
"Protecting consumer privacy is critical. Any CBDC would need to strike an appropriate balance, however, between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity."[1]
Privacy is somewhat considered, like in question 12, (How could a CBDC provide privacy to consumers without providing complete anonymity and facilitating illicit financial activity?) but to me it sounds more like privacy as in safeguarding information from third parties than privacy from traceability.
[1]https://www.federalreserve.gov/publications/files/money-and-...
"Identity-verified: Financial institutions in the United States are subject to robust rules that are designed to combat money laundering and the financing of terrorism. A CBDC would need to be designed to comply with these rules. In practice, this would mean that a CBDC intermediary would need to verify the identity of a person accessing CBDC, just as banks and other financial institutions currently verify the identities of their customers. In this regard, a CBDC would differ materially from cash, which enables anonymous transactions. While central banks are unable to fully prevent cash from being used for illicit purposes, a CBDC could potentially be used at much greater scale and velocity than cash, so compliance with laws designed to combat money laundering and funding terrorism is particularly important for CBDC."[1]
"Protecting consumer privacy is critical. Any CBDC would need to strike an appropriate balance, however, between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity."[1]
Privacy is somewhat considered, like in question 12, (How could a CBDC provide privacy to consumers without providing complete anonymity and facilitating illicit financial activity?) but to me it sounds more like privacy as in safeguarding information from third parties than privacy from traceability.
[1]https://www.federalreserve.gov/publications/files/money-and-...
> a CBDC would differ materially from cash, which enables anonymous transactions.
Anonymous transactions are possible with a CDBC too. For example as outlined in the link I posted in the message above.
The idea is similar to Gnu Taler: you withdraw CBDC funds onto some physical "cash card". The amount you can do would be limited, just like the amount of cash you withdraw from a a bank is usually limited. But it does mean that how you then spend the tokens on that "cash card" should be as hard or harder to pin to an individual than a cash spend - i.e. nearly impossible.
Anonymous transactions are possible with a CDBC too. For example as outlined in the link I posted in the message above.
The idea is similar to Gnu Taler: you withdraw CBDC funds onto some physical "cash card". The amount you can do would be limited, just like the amount of cash you withdraw from a a bank is usually limited. But it does mean that how you then spend the tokens on that "cash card" should be as hard or harder to pin to an individual than a cash spend - i.e. nearly impossible.
I don't disagree it's possible to have a CBDC and anonymity, but based on the fed's statements like the part you quoted it seems like from their perspective anonymity no longer being possible would be a feature.
I don’t doubt that some governments would see it that way (although I do doubt the fed would pull that off).
My argument is merely a) that there is nothing inherent to a CBDC making anonymous transactions impossible b) there are governments recognizing that this is an important feature of their planned CBDC - as they should.
My argument is merely a) that there is nothing inherent to a CBDC making anonymous transactions impossible b) there are governments recognizing that this is an important feature of their planned CBDC - as they should.
Gotcha, I agree with both points but am just less optimistic regarding implementation, Hopefully you're right.
the question becomes, are systems that are made up of humans making decisions, organisms themselves that make decisions against the humans within the system?
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 stuff unless that's your endgame.
Few reasons to implement this stuff unless that's your endgame.
You can do that now already. Only thing making it not legal is law.
Sure, with paper money you could just take it out of the bank and pay directly but you can do stuff to that too like making it more expensive to take out then track people who just take out big sums of money
Like, sure, all electronic makes it easier, but it is by no means impossible or even hard now. Again, only thing stopping it is the law, if that is fucked doesn't matter how money are transferred
Sure, with paper money you could just take it out of the bank and pay directly but you can do stuff to that too like making it more expensive to take out then track people who just take out big sums of money
Like, sure, all electronic makes it easier, but it is by no means impossible or even hard now. Again, only thing stopping it is the law, if that is fucked doesn't matter how money are transferred
Marginal sales taxes make more sense to me than marginal income taxes. You consume more resources, you pay more.
Especially since it's more common now to pay digitally and not get cash from the bank and then use it in every day shopping.
I've adopted it too when merchants strongly encouraged it during the lock downs, and it's just so easy, I've kept it. I do spend more, but I don't know if there's a causal relationship -- would handing over bank notes make me more aware of what and how much I'm buying?
I've adopted it too when merchants strongly encouraged it during the lock downs, and it's just so easy, I've kept it. I do spend more, but I don't know if there's a causal relationship -- would handing over bank notes make me more aware of what and how much I'm buying?
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.
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.
Payment processors being a near monopoly, this has a disproportionate effect.
It's never a problem if its one of many options.
It only becomes a problem if it's mandated. If you can only get paid/pay digitally, it becomes incredibly easy to track you.
There are some people who have a legitimate, non-criminal reason to hide their work.
It only becomes a problem if it's mandated. If you can only get paid/pay digitally, it becomes incredibly easy to track you.
There are some people who have a legitimate, non-criminal reason to hide their work.
Well you can still take cash out and hide it under the mattress ;)
How to generate unemployment 101.
It is one thing to be connected when it augments things and provides lots of benefits. But instead of adding we are moving many vital services into digital always connected realm to the point where they will not function without Internet connection. One day it will blow big time in our faces. I mean we already have warnings here and there like recent ROGERS outage disabling phone services including 911 emergency calls.
Yep. China is a prime example. If you don't have access to a handful of apps, you're effectively unable to eat or do anything else.
Elsewhere, when a business touts itself as cashless, I consider if they're discouraging armed robbery and/or hostile to the unbanked.
Elsewhere, when a business touts itself as cashless, I consider if they're discouraging armed robbery and/or hostile to the unbanked.
One of the greatest strengths that both China and India have is that the West will never understand them.
The West will think they understand them. They will assume they understand them. They will be sure they understand them. But they will never understand them.
Hence the implication in the headline (well-written headline, by the way), that if nobody else uses it, India is wasting its time.
The same people said about UPI (Modi's digital payments push):
- hardly anyone has cellphones in India
- it'll take years to train India's illiterate masses how to use an app on a phone
India now has 850 million cellphone users. And the government is creating incentives to put one in every hand.
UPI now conducts more digital payments than China or USA (I've heard that it handles more than both combined, but I don't want to make that claim without a reference, and am feeling too lazy to look for one right now).
The West will think they understand them. They will assume they understand them. They will be sure they understand them. But they will never understand them.
Hence the implication in the headline (well-written headline, by the way), that if nobody else uses it, India is wasting its time.
The same people said about UPI (Modi's digital payments push):
- hardly anyone has cellphones in India
- it'll take years to train India's illiterate masses how to use an app on a phone
India now has 850 million cellphone users. And the government is creating incentives to put one in every hand.
UPI now conducts more digital payments than China or USA (I've heard that it handles more than both combined, but I don't want to make that claim without a reference, and am feeling too lazy to look for one right now).
> The same people said about UPI (Modi's digital payments push)
It enrages me how quickly the opposition memory holed its nonsense criticism of UPI when it was first launched. And now they are doing the same thing to erupee
It enrages me how quickly the opposition memory holed its nonsense criticism of UPI when it was first launched. And now they are doing the same thing to erupee
This is going to be, literally, the biggest promotion for Bitcoin ever done when people start to understand the amount of control this hides behind.
It is the end of privacy and the beginning of telling you literally what you will be able to do or not with your own earnings abd for how long, if they decide it is appropriate. This is more of treating people like animals than individuals IMHO.
It is the end of privacy and the beginning of telling you literally what you will be able to do or not with your own earnings abd for how long, if they decide it is appropriate. This is more of treating people like animals than individuals IMHO.
Really wish they said what a CBDC is.
CBDC = What is central bank digital currency? see https://www.bankofengland.co.uk/research/digital-currencies
One payment system to rule them all and monitor a population
It’s there in the first sentence, though def not so clear as it’s not capitalized: Central Bank Digital Currency (CBDC).
Indian here - I had to read the article to find out what it was.
Then I remembered the RBI had made a ruckus about it a few months ago.
I doubt anyone cares since almost every one uses their mobile phone and UPI for money transfers.
Then I remembered the RBI had made a ruckus about it a few months ago.
I doubt anyone cares since almost every one uses their mobile phone and UPI for money transfers.
Does a term require more than 2 seconds of thinking? If yes, then describe it, otherwise it's unnecessary. This one seemed obvious.
Of course it's obvious its Centralized Big Dick Contest /s
It's customary to expand shortcut in full if it there is chance it might be unknown to the reader and this isn't even a financial blog but a tech one.
It's customary to expand shortcut in full if it there is chance it might be unknown to the reader and this isn't even a financial blog but a tech one.
That's inappropriate and unhelpful.
People with brains can infer meaning from the context.
If they can't, then they aren't smart enough to have around.
People with brains can infer meaning from the context.
If they can't, then they aren't smart enough to have around.
Really? It's right there in the second sentence:
> From China to the UAE, the Bahamas to Nigeria, countries around the world have started trialling the use of central bank digital currencies as a way to translate their national fiat currencies into a means of digital exchange.
CBDC = Central Bank Digital Currency.
> From China to the UAE, the Bahamas to Nigeria, countries around the world have started trialling the use of central bank digital currencies as a way to translate their national fiat currencies into a means of digital exchange.
CBDC = Central Bank Digital Currency.
I like CBDCs, and I’m a big privacy guy generally. I really do not see them as being significantly worse than the status quo of digital payments. For every horrifying what-if mentioned there’s already an example of it in our current system (in the US, at least). If having them means I don’t have to deal with ACH again, I’m all for it.
Yuan digital currency comes with expiry date.
https://bfsi.economictimes.indiatimes.com/news/policy/digita...
https://bfsi.economictimes.indiatimes.com/news/policy/digita...
India closely guards the rupee to prevent foreign exchange crises. A free CBDC challenges that regime because it lets anyone, anywhere, exchange rupees. So expect the sort of controls that would let New Delhi restrict that sort of activity, and then project that power domestically.
I 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...
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...
https://www.medianama.com/2022/11/223-petition-against-uidai...
> For 11 years now, Chaitanya has been working with retired Colonel Mathew Thomas to nullify the UIDAI’s contracts with foreign companies allowing access to Aadhaar data ... “Our major concern is: Did the citizens of India give express right to the government in the year 2010 to hand over their data to US. foreign companies? For sure, I did not give any consent,” said Chaitanya. Aadhaar data consists of citizens’ bank accounts, ration cards, addresses, mobile numbers etc.
> ... the High Court has advised Thomas to approach the Supreme Court again ... the Supreme Court in the Aadhaar judgment had clarified that “private entities shouldn’t have access to Aadhaar data.” The Supreme Court also said that before accessing biometric data even by the government, judicial authorisation must be a requirement.
> For 11 years now, Chaitanya has been working with retired Colonel Mathew Thomas to nullify the UIDAI’s contracts with foreign companies allowing access to Aadhaar data ... “Our major concern is: Did the citizens of India give express right to the government in the year 2010 to hand over their data to US. foreign companies? For sure, I did not give any consent,” said Chaitanya. Aadhaar data consists of citizens’ bank accounts, ration cards, addresses, mobile numbers etc.
> ... the High Court has advised Thomas to approach the Supreme Court again ... the Supreme Court in the Aadhaar judgment had clarified that “private entities shouldn’t have access to Aadhaar data.” The Supreme Court also said that before accessing biometric data even by the government, judicial authorisation must be a requirement.
I didn't give any consent to tax my income either, government still does it. Fact is that the relationship between citizen and state is not consensual in nature, at least in India. So it is futile to fight it case by case.
India has very successfully introduced infrastructure for mobile payments. This is one of the pieces to counter corruption and also to bring the "underground economy" into the mainstream. Digital currency is another such piece to help reduce "underhand" dealings.
CBDC in India will probably be used to curb hawala, black money and underground economy.
CBDC in India will probably be used to curb hawala, black money and underground economy.
They will use a major crisis to force adoption.
Thank the Lord this wasn't ready to deploy during covid. They are going to prepare it for the next crisis.
In some places long before covid. Go to swedish coffee shop in 2018 and try buying a cup of coffee with cash. No luck. Digital payments only.
there's no need for a cbdc, just invoke the emergencies act and you can do whatever you want with anybodies money
> As the popularity of physical money diminishes, however, that nexus could break down.
And if the "popularity" of physical money does not diminish, they will get rid of physical money. But physical money is still popular for people in many cases.
CBDCs need to be resisted with everything we have. They are not about convience, they are about control "on the fact that it provides another opportunity for the state to peer into private individual transactions."
India is hostile to crypto because its cannot be (as easily) controlled.
I am no fan of crypto either.
And if the "popularity" of physical money does not diminish, they will get rid of physical money. But physical money is still popular for people in many cases.
CBDCs need to be resisted with everything we have. They are not about convience, they are about control "on the fact that it provides another opportunity for the state to peer into private individual transactions."
India is hostile to crypto because its cannot be (as easily) controlled.
I am no fan of crypto either.
Build the following and I will use it.
- value pegged to some existing currency
- unforgeable and easily verifiable, preferably offline
- non-traceable, just like coins or banknotes without a serial number
- usable offline and without third parties, just like handing over physical moneyNon-traceablity defeats the purpose of a currency. Might as well trade in gold. For most transactions, physical money isn't really needed nor convenient.
Why does non-traceablity defeat the purpose of a currency? While physical money - besides the coins - is tracable in theory, this seems to be only used to limited extend. Nowadays it would not be to hard to do automatically but it would have been impractical to do at scale a few decades back. And even today you could not obtain a trace without gaps even if you wanted to.
It's surprising to see that there are liberal proponents of this. You don't have to be a raging libertarian to see the risks of unlocking this much financial reach for governments. We (in the West) may now mostly live under reasonable governments, but there's obviously no guarantee that this won't change (including towards your <current political opponents>), and implementing social credit score systems and other dystopian things would be much easier under CBDC than it currently is?
I never understood this argument. It is not like governments can't tell the banks and payment processor not to accept payments or freeze all funds of certain people. Courts can already order automatic confiscation in cases like bankruptcies and so on.
Friction in a process can be an amazing deterrent and prevents you from abusing power en masse. Whenever there is a cost to doing something, it demands prudence.
I wish this was more widely understood. It's relevant when talking about the danger of ubiquitous/dragnet surveillance; it's relevant to our habits around communication, and consumption of media. Friction is a key determining factor in human behavior.
The friction is already there and it is mandated by law.
Does it require 1 click?
Absolutely. If it remains an alternative, it's fine. But if they try to force out physical cash completely in favor of CBDCs, you better be wary.
Because societies function very differently in a dense & community driven country like India vs sparse nuclear nations like the US.
Once you reach a certain level of density, be that most of India or east-coast American cities, you have to rely on public services to facilitate most things in your life. The Govt. already has indirect financial veto power on you. This won't change anything the Govt. is already able to do everything that you claim CBDCs will facilitate.
Note that 90+% of India operates in a permanent survival mindset. All positives associated with libertarianism are much higher on Maslow's pyramid. These people are on the bottom rung, so the rights citizens would have to forfeit as part of CBDCs feel trivial.
Second, India is a low trust society. So, anything that increases tracking, surveillance and transparency is welcome. Trustless systems are welcome. Cash is easy (to launder) and cash is simple (to hide). The elimination of cash adds significant barriers to the most important facilitator of the low trust economy : cash.
Once you reach a certain level of density, be that most of India or east-coast American cities, you have to rely on public services to facilitate most things in your life. The Govt. already has indirect financial veto power on you. This won't change anything the Govt. is already able to do everything that you claim CBDCs will facilitate.
Note that 90+% of India operates in a permanent survival mindset. All positives associated with libertarianism are much higher on Maslow's pyramid. These people are on the bottom rung, so the rights citizens would have to forfeit as part of CBDCs feel trivial.
Second, India is a low trust society. So, anything that increases tracking, surveillance and transparency is welcome. Trustless systems are welcome. Cash is easy (to launder) and cash is simple (to hide). The elimination of cash adds significant barriers to the most important facilitator of the low trust economy : cash.
Do you realise that some of the people behind CBDCs are Bitcoin developers?
They get money to make some software but clearly aren't proponents of a totalitarian system
I don't know about totalitarian systems. They are involved with CBDCs. How do you know they aren't proponents of CBDCs?
Because CBDC are the complete opposite of bitcoin philosophy. Bitcoin is about personal freedom and separating state and money. CBDC is about centralised govt control and monitoring
So if you found out that a top pentagon official was working as a military advisor for the Taliban, that wouldn't ring any alarm bells to you. It's completely normal and there's nothing to worry about.
You obviously have your own theory so please go ahead and share it. The bitcoin devs working on CBDCs are a small minority
I don't have a theory (other that both CBDCs and cryptocurrencies are dumb). I'm merely pointing out that the idea that CBDCs are absolute evil while bitcoin is absolutely against evil is rather inconsistent in light of the fact that some of the people behind CBDCs are also involved with bitcoin.
It's not inconsistent when the designs are the opposite.
Bitcoin is permissionless and payments are uncensorable. A tool against govt power and individually empowering.
CBDC have central control and govt control in the name. The Chinese govt will be jumping at the chance to implement CBDC. Bitcoin is only a threat to their control
But I get the impression that most people's minds are already make up about bitcoin and it's be a while until people are open to new ideas
Bitcoin is permissionless and payments are uncensorable. A tool against govt power and individually empowering.
CBDC have central control and govt control in the name. The Chinese govt will be jumping at the chance to implement CBDC. Bitcoin is only a threat to their control
But I get the impression that most people's minds are already make up about bitcoin and it's be a while until people are open to new ideas
I'll leave you alone with your mental gymnastics.
I'll leave you alone with your smug ignorance. Highly doubt you know the technical details of these systems.
Classic crypto bro retort. The "technical details" of these systems were neither the topic nor had any relevance to these conversation, and at any rate you haven't got any clue whether I'm ignorant about them.
It's not surprising. Liberals want the government to take money from people to fund itself. A digital currency allows them to do that much more efficiently.
True. I hope you like negative interest rates on your savings account.
Negative interest is supposed to be applied on cash and bank reserves (this includes checking accounts). Not on savings accounts.
The entire point of negative interest rates is to get people to stop holding 70% of their balances at the bank in checking accounts. Because checking accounts cannot be used for loans, the bank creates new money which lands on another checking account which repeats endlessly like some sort of out of control recursive function resulting in a perpetual increase in the M1 money supply.
The entire point of negative interest rates is to get people to stop holding 70% of their balances at the bank in checking accounts. Because checking accounts cannot be used for loans, the bank creates new money which lands on another checking account which repeats endlessly like some sort of out of control recursive function resulting in a perpetual increase in the M1 money supply.
I dont think it really matters that nobody is using them
The current structure of central bank networks required governments to offer an incentive for banks to join it
In the US thats a 6% dividend every year for the past 100 years
The same tactic will work again
The current structure of central bank networks required governments to offer an incentive for banks to join it
In the US thats a 6% dividend every year for the past 100 years
The same tactic will work again
Central bank trials new database for their banking backend.
[deleted]
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]. India's digital payments ecosystem (the "UPI") has been an unparallelled success at the second layer. Beyond that, there are many motivations that make it potentially interesting to consider digital layer 1 money -- starting with the costs of managing paper money, reducing settlement risk, potentially smoothing cross-border payments, the possibility of setting negative interest rates, etc. There are definitely pros and cons, but I'm yet to find a comprehensive and well thought-out analysis (and would appreciate any links!), especially in the Indian context.
[1]: RBI Concept Note on CBDC: https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CONC...
[2]: https://brettscott.substack.com/p/casino-chip-cashless-socie...