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7 sats \ 15 replies \ @xz 19 Nov \ on: Will Chinas CBDC Yuan be more important than Bitcoin ? bitcoin
When the term cbdc is used in place of the term spreadsheet, little changes. The payment rails that compete with swift might be a bigger deal. But I don't see how phasing out cash and forcing populations to use digital paper makes for a better system.
CBDCs are hugely more efficient than traditional bank payments.
Hugely faster and cheaper.
And they deliver significantly increased centralised monetary power.
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I don't believe it.
If banks are the problem (traditional banks) we'd just reform the banks. I guess that is what 'new banks' were all about. Banking designed to be interacted with through technology specifically. Traditional banks have now updated most of their facilities to offer competitive banking services to compete wuth the new banks.
Why should the elimination of a host of regulated banks be worse than a singular central bank providing services? Clearing and transactions are not the issue (though that always could be improved) the problem is the supply and issuance of credit.
Is centralized monetary power a good thing?
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Whether centralised monetary power is a good thing depends on your perspective and how it is used.
The current global trade settlement protocol- SWIFT - is antiquated and hugely inefficient- and demands payments to US intermediary banks which many other nations and businesses strongly resent- understandably in todays digital age where SWIFT is simply a dinosaur- a slow and expensive dinosaur nonetheless crucial to the US global monetary hegemony.
Chinas CBDC Yuan can promise an alternative that is faster and cheaper.
Many nations are tired of US hegemony over trade payments.
All nations today need to trade with China, or suffer significant economic disadvantage.
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I said SWIFT is the bigger issue.
Basically, the proposed upgrade is the payment rail. Being a newer rail, it's undoubtedly going to be designed better than a system designed in 1977, just as that system was un upgrade on Telex. As I understand, there's CHIPS, CHAPS and now Faster Payment, incremental improvements perhaps. The lack of competition or exclusion of competition, has been the problem.
All of this is pretty academic. What I disagree with is the need for central banks to dictate futher monetary or fiscal policy and increasingly attempting to tie this to social policy.
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Payments via traditional domestic bank systems are also hugely inefficient and present friction and costs to consumers and businesses in many countries...
Banks have been very slow to fix this as they derive huge income from it.
Regarding SWIFT many nations will not want US to continue to be able to hold the threat of sanctions against them...as you point out the lack of competition has been a problem.
Yes CBDCs deliver even greater centralised monetary power to governments and central banks but they also offer potentially very much more efficient payments processing.
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So, the China payment system is basically borowing some of the stack from eth. Which is basically a tech stack with some interesting tech but lagely unusable for mass consumption due to its minumium system requirements.
It's the second C in cbdc that is the issue. The idea of a currency being digitally native, which already happened years ago. There is no further benefit from the currency aspect, because when you borrow or loan your currency to or from a bank, it is held and accounted for digitally. The notes in circulation make little difference to the digital aspect of which the physical note is a representation of (whilst the abstractation was once thought to be vice-versa.)
The potential loss of privacy and realtime inflationary creep, as digital currency is loaned into existence, is both neither a convenience nor bringing in any efficiency. The efficiencies you mention are all owed to the developement of digital currencies in the wild. Bitcoin, and ostensibly eth, which was a playground for contractual settlements.
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Simply not true.
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When a traditional bank creates a loan, do they print up more notes or borrow them from the central bank? When a central bank engages in QE stimulus, or QT measures, does it actually print or burn physical currency?
.. and when a consumer or TBTF bank loan is repayed, do those repayments get extinquished and written off a ledger, or burned?