Central Bank Digital Currency aka UK Govt Crypto
Discussion
As this was clogging up another thread I thought this subject warrants its own.
Would also allow automatic tax to be deducted - and the level of the tax could be related to the type of money being earned, not just the amount. And let's not get started on the privacy implications...
It is a hugely powerful idea which just now is in its infancy.On your first sentence you are of course correct; petrol and food was mentioned for some of the simpletons and trolls that drop in on this thread to aid their understanding.
Such a currency would change the fabric of banking. It will make profound changes to money.
First and foremost, it would mostly kill private money creation. The BoE recognises this, and its papers all indicate the participation of AISP providers (the interfaces) but limited use for banks and other payment providers' models. The BoE acknowledges that bank deposits will switch to CBDC (BoE will never fail and they make the point that the CBDC will provide better "safety"-in quotes because it doesn't necessarily give you better safety at all).
When bank deposits switch to CBDC, the banks would see a contraction of their balance sheets, and there would be contraction of M4 money. And then an inevitable reduction in credit as a consequence. The BoE "expects Banks to find different funding methods"... lol. How? A retail bank's business model is deposits. Without deposits a bank lending is no different to a credit licensed entity. It will mean consumers and businesses have less choice for obtaining loans/credit.
Expiring money could be a tool in the central bank box to force spend; similar to negative interest rates which have a much, much longer timeline to achieve the same result. I don't think negative interest rates are without their problems. Money will usually find assets to hog, rather than spending in the economy. The IMF published a report saying that most larger banks swapped profitability from certain lines to capital gains and fees on deposits but lost out on deposit funding. Smaller banks were the ones who suffered most from negative interest rates.
Money supply is very much dominated by broad money, a CBDC will inevitably shift that to the narrow supply. There is a whole argument surrounding the weaknesses of the current FIAT system, but I don't see the CBDC as the all in one saviour. It provides ultimate control to the government, via the central bank, of all monetary supply. Behaviour, consumption and alliance could potentially all be controlled by the CBDC. I can see it will be useful to implement the "net zero" policy/requirement though.
CBDC in the form being touted is scary. Monopolies are never a good thing in my opinion. This one will control how literally everything operates.My thoughts with any CBDC implementation is that then banking cartels will know the implications very clearly, and have a lot of cash and a lot of influence - so would do everything in their power to maintain the status quo rather than roll over and say "well chaps, we had a good couple of hundred years of making hay, our time in the sun has gone, oh well."
So whilst the Central Banks may talk about this, I'd imagine some lobbying, some massive bribes and the like will see a compromise where the existing banking corps get to keep their cake and eat it.
RemarkLima said:
gumshoe said:
EddieSteadyGo said:
gumshoe said:
...
The programmable aspect was lauded as great for controlling your kids from buying sweets. Ridiculous. It'll be used to restrict how much petrol, types of food etc that people can buy. CBDC are not needed unless you want that control of programmability. The money system works fine as it is.
I suspect it could be a lot more profound than petrol and food. Programmable money will allow the government to control the actual value of money, in a dynamic way, to almost an individual level. It opens up the opportunity for different types of money, all within the same currency. Different types of money could earn different interest rates - or certain types could only be used for specific purposes - it could even be given an expiry date...The programmable aspect was lauded as great for controlling your kids from buying sweets. Ridiculous. It'll be used to restrict how much petrol, types of food etc that people can buy. CBDC are not needed unless you want that control of programmability. The money system works fine as it is.
Would also allow automatic tax to be deducted - and the level of the tax could be related to the type of money being earned, not just the amount. And let's not get started on the privacy implications...
It is a hugely powerful idea which just now is in its infancy.
Such a currency would change the fabric of banking. It will make profound changes to money.
First and foremost, it would mostly kill private money creation. The BoE recognises this, and its papers all indicate the participation of AISP providers (the interfaces) but limited use for banks and other payment providers' models. The BoE acknowledges that bank deposits will switch to CBDC (BoE will never fail and they make the point that the CBDC will provide better "safety"-in quotes because it doesn't necessarily give you better safety at all).
When bank deposits switch to CBDC, the banks would see a contraction of their balance sheets, and there would be contraction of M4 money. And then an inevitable reduction in credit as a consequence. The BoE "expects Banks to find different funding methods"... lol. How? A retail bank's business model is deposits. Without deposits a bank lending is no different to a credit licensed entity. It will mean consumers and businesses have less choice for obtaining loans/credit.
Expiring money could be a tool in the central bank box to force spend; similar to negative interest rates which have a much, much longer timeline to achieve the same result. I don't think negative interest rates are without their problems. Money will usually find assets to hog, rather than spending in the economy. The IMF published a report saying that most larger banks swapped profitability from certain lines to capital gains and fees on deposits but lost out on deposit funding. Smaller banks were the ones who suffered most from negative interest rates.
Money supply is very much dominated by broad money, a CBDC will inevitably shift that to the narrow supply. There is a whole argument surrounding the weaknesses of the current FIAT system, but I don't see the CBDC as the all in one saviour. It provides ultimate control to the government, via the central bank, of all monetary supply. Behaviour, consumption and alliance could potentially all be controlled by the CBDC. I can see it will be useful to implement the "net zero" policy/requirement though.
CBDC in the form being touted is scary. Monopolies are never a good thing in my opinion. This one will control how literally everything operates.
So whilst the Central Banks may talk about this, I'd imagine some lobbying, some massive bribes and the like will see a compromise where the existing banking corps get to keep their cake and eat it.
This is a topic very difficult to wrap my head around but I’m absolutely fascinated in hearing people discuss it.
Strikes me as something that is presented as being clearly advantageous - with every advantage listed being an absolutely massive double edged sword with potential for terrible outcomes, and to solve a problem that I just don’t believe needs much solving.
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Strikes me as something that is presented as being clearly advantageous - with every advantage listed being an absolutely massive double edged sword with potential for terrible outcomes, and to solve a problem that I just don’t believe needs much solving.
Subscribed
The monetary system is broken, it failed in 2008 and we did not even kick the can. Interest rates are basically 0 and the printers are going "brrrrr". Several people in positions to know have talked about a "New Bretton Woods moment", e.g.
https://www.imf.org/en/News/Articles/2020/10/15/sp...
Any scarce resource can work as currency. We could go back to gold, or Bitcoin is just sat there hoping for it's opportunity. The central bankers would lose control and they don't want that. A central bank Bitcoin is being discussed all over -
UK - https://www.bankofengland.co.uk/paper/2020/central...
Canada - https://www.bankofcanada.ca/2019/04/the-road-to-di...
Australia - https://www.rba.gov.au/media-releases/2020/mr-20-2...
and it has some nasty possibilities -
Bank for International Settlements - "A key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that."
https://twitter.com/Excellion/status/1412977431258...
It's a fight, and a race.
https://www.imf.org/en/News/Articles/2020/10/15/sp...
Any scarce resource can work as currency. We could go back to gold, or Bitcoin is just sat there hoping for it's opportunity. The central bankers would lose control and they don't want that. A central bank Bitcoin is being discussed all over -
UK - https://www.bankofengland.co.uk/paper/2020/central...
Canada - https://www.bankofcanada.ca/2019/04/the-road-to-di...
Australia - https://www.rba.gov.au/media-releases/2020/mr-20-2...
and it has some nasty possibilities -
Bank for International Settlements - "A key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that."
https://twitter.com/Excellion/status/1412977431258...
It's a fight, and a race.
Venturist said:
This is a topic very difficult to wrap my head around but I’m absolutely fascinated in hearing people discuss it.
Strikes me as something that is presented as being clearly advantageous - with every advantage listed being an absolutely massive double edged sword with potential for terrible outcomes, and to solve a problem that I just don’t believe needs much solving.
Subscribed
Not sure who it is advantageous to though! Other than those trying to implement it! From a regular person point of view - I want to spend my money how I see fit, I 'earned' it after all! Programmable money is a bit of an alarm bell to me I have to say!Strikes me as something that is presented as being clearly advantageous - with every advantage listed being an absolutely massive double edged sword with potential for terrible outcomes, and to solve a problem that I just don’t believe needs much solving.
Subscribed
TypeRTim said:
Not sure who it is advantageous to though! Other than those trying to implement it!
There's yer bingo. And it's not as if we'll have any choice in the matter if they do make it mandatory. Cashlessness is questionable enough but this would be next level. They would be able to seep into every imaginable area of our lives and influence it in ways that weren't previously imagined.
They'll also be able to press a button and instantly make a change that no one will be able to avoid - negative interest rates, sanctions to a particular country or organisation, legal pursuit of your money might become immediate and irrevocable.
Chuck in some form of disguised and tarted up social credit and our lives will look very different when this becomes a thing, and it will.
Mrs ECB said she wasn't going to allow cryptocurrencies to become 'an escape' which perhaps reveals more than she intended to.
The computing power and infrastructure to have "programmable money" must be immense too. Bitcoin consumes 0.55% of the worlds electricity. There's probably quite a difference between the computing required for Bitcoin than for "Brit coin" however the scale of government digital currencies with various tracking and management/manipulation mechanisms would still be immense. Then we could probably look forward to the latest innovation of the Very Smart, a token of sorts, very difficult to replicate and with which you can exchange for goods and services if "the network is down"....
rodericb said:
The computing power and infrastructure to have "programmable money" must be immense too. Bitcoin consumes 0.55% of the worlds electricity. There's probably quite a difference between the computing required for Bitcoin than for "Brit coin" however the scale of government digital currencies with various tracking and management/manipulation mechanisms would still be immense. Then we could probably look forward to the latest innovation of the Very Smart, a token of sorts, very difficult to replicate and with which you can exchange for goods and services if "the network is down"....
That's a very good point, but... BitCoin uses a lot of resources due to 'mining' in order to 'create' the currency, no? I don't think there will be any 'mining' necessary for CBDC, but the computing power and storage needed for the BlockChain ledger. Also, currently all crypto blockchains are de-centralised which is the polar opposite of what they want to achieve here. With a decentralised system, transactions can not be removed from the system due to approval needed by all owners. But in a centralised one, where one 'entity' has control of the entire chain of information, entire transaction blocks can be removed from the ledger with a few keystrokes. That car you bought last week, no record of the transaction on file, you stole it...THIEF!
rodericb said:
The computing power and infrastructure to have "programmable money" must be immense too.
Bitcoin's power suckage is all because of competition between miners all trying to outgun each other. If no one was interested you could run Bitcoin just fine on a couple of laptops. With government coin there would be no one competing so no arms race.
I've no idea how they'll secure it, that's also what the mining's for, but I presume they can erase or reverse anything they don't like anyway.
rodericb said:
The computing power and infrastructure to have "programmable money" must be immense too. Bitcoin consumes 0.55% of the worlds electricity. There's probably quite a difference between the computing required for Bitcoin than for "Brit coin" however the scale of government digital currencies with various tracking and management/manipulation mechanisms would still be immense. Then we could probably look forward to the latest innovation of the Very Smart, a token of sorts, very difficult to replicate and with which you can exchange for goods and services if "the network is down"....
So, er, cash...?Given that Govts are just printing to infinity in 'paper' (electronic really), what's to stop them doing the same again with 100% electronic currency?
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
RSTurboPaul said:
So, er, cash...?
Given that Govts are just printing to infinity in 'paper' (electronic really), what's to stop them doing the same again with 100% electronic currency?
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
You cannot just "print" Bitcoin. No-one can. By design.Given that Govts are just printing to infinity in 'paper' (electronic really), what's to stop them doing the same again with 100% electronic currency?
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
https://www.investopedia.com/tech/what-happens-bit...
RSTurboPaul said:
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
Aye. That's probably the plan. The only aspect of Bitcoin this might adapt will be way it records and verifies each transaction. Beyond that there will be no resemblance whatsoever.
It won't be a government bitcoin, it'll be the GBP with added controls, backdoors and surveillance courtesy of some of the things cryptocurrencies have refined.
grumbledoak said:
RSTurboPaul said:
So, er, cash...?
Given that Govts are just printing to infinity in 'paper' (electronic really), what's to stop them doing the same again with 100% electronic currency?
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
You cannot just "print" Bitcoin. No-one can. By design.Given that Govts are just printing to infinity in 'paper' (electronic really), what's to stop them doing the same again with 100% electronic currency?
Unless they want a repeat of the system that has allowed 'the elite' to get rich, but this time with added control of the serfs?
https://www.investopedia.com/tech/what-happens-bit...
RSTurboPaul said:
Yes... but Bloomen, above, is thinking what I'm thinking
I don't think it is the money printing they are angling for. We are hard up against zero interest rates. That is what is broken. But they don't need negative interest rates if they can expire the money you already hold.
At the slight costs to us serfs of no social mobility. Ever.
Biggy Stardust said:
Don't we have enough problems, worries & uncertainties without dreaming up new ones?
Dreaming them up?They're already up and running with trials in China - that place that apparently the entire western world is now modelling their future on, courtesy of Herr Schwab and his well
https://www.eutimes.net/2021/04/china-reveals-digi...
website said:
“Beijing has tested expiration dates to encourage users to spend it quickly, for times when the economy needs a jump start,” according to an article by the Wall Street Journal which practically endorses the Keynesian ideology behind China’s experiment.
“…China’s version of a digital currency is controlled by its central bank, which will issue the new electronic money,” the article added. “It is expected to give China’s government vast new tools to monitor both its economy and its people.”
“…China’s version of a digital currency is controlled by its central bank, which will issue the new electronic money,” the article added. “It is expected to give China’s government vast new tools to monitor both its economy and its people.”
bloomen said:
Bitcoin's power suckage is all because of competition between miners all trying to outgun each other. If no one was interested you could run Bitcoin just fine on a couple of laptops.
With government coin there would be no one competing so no arms race.
I've no idea how they'll secure it, that's also what the mining's for, but I presume they can erase or reverse anything they don't like anyway.
Currency issued by a centralised bank could easily be secured by a digital signature regime currently ubiquitous on the web. Bitcoin's mining is a curiosity of its decentralised nature. It revolves around setting a difficult mathematical problem, and having people try to solve it - in order to ensure that there can only ever be a finite amount of the stuff.With government coin there would be no one competing so no arms race.
I've no idea how they'll secure it, that's also what the mining's for, but I presume they can erase or reverse anything they don't like anyway.
Digital currency would be no different to a promissory note, much as the quantity in your bank account is just a digital number- with the promise that you can make a withdrawal, and they'll cough up the cash.
Well, guess what. Banknotes are precisely the same!
Somewhere in a vault Clydesdale notes are backed by Giants and Titans - bank of england notes in the denomination of £1 million and £100 million respectively.
But look and your BoE note. "I promise to pay the bearer on demand the sum of fifty pounds". Until 1931 you could go to the cashier and demand the gold that backed your banknote. Of course, they still printed more notes than they had gold... and we left the gold standard.
Digital banknotes will be really no different. If the BoE wanted to they could print a load of money and give it to Boris Johnson. The pound would devalue accordingly, until Boris had effectively all the country's wealth, since he'd be the only one holding a reasonable quantity.
Of course it's easier to make digitally signed files than print a physical banknote, but I don't see why the same principles wouldn't apply.
I always thought that the main advantage of existing digital currencies was that they couldn't easily be inflated? If you switched to a currency that placed impediments on an individuals ability to hold or use currency people would just switch to holding money in another currency causing that currency to inflate. You see this all the time in those third world holes that issue dual currencies, the non-exchangeable or non-convertible currency inflates away in value. I don't see how a CBDC would be any different and consequently don't see what advantages it might confer. That said it sounds like we'll need a CBDC to be issued for them to work this out so I hope someone goes for it very soon.
As far as I can see the popularity of currencies like BTC is the response to a global problem and that problem is that Reserve Banks have been using excessive credit creation to try to promote consumer price inflation while ignoring the asset bubbles. So we've created asset classes that can be used as a currency.
As far as I can see the popularity of currencies like BTC is the response to a global problem and that problem is that Reserve Banks have been using excessive credit creation to try to promote consumer price inflation while ignoring the asset bubbles. So we've created asset classes that can be used as a currency.
Edited by speedy_thrills on Wednesday 6th October 18:32
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