This Was Another Big Week for Central Bank Digital Currencies (CBDCs)

Another G-7 economy took a big step toward adopting a central bank digital currency (CBDC). At the same time, the first largish economy to have launched a CBDC, Nigeria, descends further into financial chaos.

This week, two big things happened in the CBDC arena. One of the world’s oldest central banks, the Bank of England, and the British government jointly confirmed that a digital pound would probably be necessary at some point in the none-too-distant future. While they were saying that, lengthy queues were forming at ATMs across Nigeria, the first largish economy to launch a central bank digital currency (CBDC), as most Nigerians struggle to access physical money following the government’s disastrous demonetisation campaign.

A New and Trusted Way to Pay”?

Let’s begin with the UK, whose latest Chancellor of the Exchequer Jeremy Hunt this week described CBDCs as potentially “a new and trusted (state-backed) way to pay” that is likely to emerge some time this decade. John Cunliffe, Deputy Governor for Financial Stability of the Bank of England (not to be confused with the creator of the children’s books and animated TV series, Postman Pat) said:

Our assessment is that on current trends it is likely that a retail, general purpose digital central bank currency — a digital pound — will be needed in the UK.

With cash usage in rapid decline in the UK, a digital pound would perform the “anchor function” which cash currently carries, allowing the holder access to Bank of England money, Cunliffe said. It would also counter the risks posed by so-called “stable coins”, which are relatively new forms of cryptocurrency that are pegged to the value of a fiat currency (e.g, the dollar or the euro), while also ensuring that certain tech firms are not able to monopolize areas of the online market with their own coins.

These are all classic justifications for launching a CBDC. But not everyone in the UK’s political establishment agrees that they constitute sufficient cause. For example, the former governor of the Bank of England, Mervyn King said in January, 2022: “By far the most important question is what is the problem to which a CBDC is the solution?” King said a number had been proposed but “none of them were terribly convincing”.

Also, the House of Lords’ Economic Affairs Committee recently concluded that it is “yet to hear a convincing case” for why the UK needs a retail CBDC. On the contrary, while a CBDC “may provide some advantages”, it could present “significant challenges” for financial stability and the protection of privacy.

But the Bank of England and the UK Treasury respectfully beg to differ.

“A digital pound would be a very substantial financial infrastructure project that would take several years to complete,” Cunliffe said in a speech to UK Finance, a trade association representing over 300 firms in the UK’s banking and financial services sector. “It would, as many in this audience know, have major implications for the way we transact with each other and, more broadly, for the financial sector and the economy in general.”

An Extra Layer of Operations

One major implication is the impact it could have on the current banking system. As the UK-based economist Richard Werner and author of the critically acclaimed book, Princes of the Yen, has noted, if central banks were to offer retail CBDCs directly to individuals and businesses, meaning they would all be able to hold the equivalent of a current account at the central bank (as long as they have a smart phone and don’t engage in the wrong sorts of behavior), it would more or less mean the end of banking as we know it:

“All you would need is a shock or a crisis. All the money would move from the bank deposits to the central bank and the banking system shuts down.”

This would lead to the creation of what Werner calls “mono-banking,” in which just one lender, the central bank, is able to operate.

To avoid this outcome, the BoE is considering imposing a limit on the holdings of the new digital pound of £10,000 to £20,000 ($12,017 to $24,033) once it comes into existence. The digital pound would also not bear interest.

The last thing the world’s central banks want to do is wipe out large private banks, whose interests they tend to serve above all else. In fact, central banks are working hand-in-glove with many TBTF lenders to set up the CBDC infrastructure. Instead, what the BoE and many other central banks are talking about doing is creating an extra layer of operations within the financial system. And while the BoE (with help from the private sector) will create the currency, private banks will be the main public interface for that new layer, as Cunliffe himself posited in a panel discussion last June:

We will produce the asset and the rails but the interface with the public would actually be done by private-sector payment providers. It could be banks that will have the customer accounts payable to integrate money into their digital applications…

There are other models. One model is we allow the private sector to do the tokenization, to provide their own money that we back one-for-one with central bank money.

So, CBDCs will probably not be used to supplant the entire private banking system, as some feared. But what they could — and probably will — end up doing is put out of business small, local banks and credit unions, which will not be able to cope with the added layers of regulatory costs, burdens and complexities. In the US, the National Association of Federally-Insured Credit Unions (NAFCU) warned last year that the issuance of a digital dollar could erode financial stability, arguing that the costs and risks associated with introducing a CBDC are likely to outweigh the touted benefits.

Other Implications of a CBDC

So, what other ramifications could a CBDC have for households and businesses? At the risk of repeating myself, here is a brief recap of some of the most important ones (please feel free to add more), taken from my previous post, Unbeknown to Most, A Financial Revolution Is Coming That Threatens to Change Everything (And Not for the Better).

CBDCs will grant central banks far more power over our payment behavior. As Agustin Carstens, general manager of the Bank of International Settlements, the central bank of central banks, famously admitted at a 2020 summit of the IMF:

We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control [over] 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.

Given the key role central bank policy has played in exacerbating wealth and income disparities in recent decades, the idea of central banks grabbing even more power should give serious pause. Indeed, one of the major risks highlighted by the House of Lords’ Economic Committee’s report on CBDCs is that it would grant central banks “greater power without sufficient scrutiny”.

Central banks will be able to “program” our spending. In June 2021, the Daily Telegraph reported (behind paywall) that the Bank of England had asked Government ministers to decide whether a central bank digital currency should be “programmable”. As the article noted, “digital cash could be programmed to ensure it is only spent on essentials, or goods which an employer or Government deems to be sensible.”

Tax evasion, money laundering, terrorist financing and other unapproved transaction would also become more difficult. Fines could be levied in real time. As NS Lyons, a Washington DC-based political analyst and blogger, notes in his article, Just Say No to CBDCs, “a CBDC would allow government to operate at much higher resolution. Targeted microfinance grants, added straight to the accounts of those people and businesses considered especially deserving, would be a relatively simple proposition.

By the same token, Lyons warns, CBDCs could be used to significantly curtail public choice. In a cashless CBDC-dominated world, less socially or politically desirable people or organizations could even be denied access to the financial system — something we already saw happen with the Freedom Convoy in Canada:

“The most dangerous individuals or organizations could simply have their digital assets temporarily deleted or their accounts’ ability to transact frozen with the push of a button, locking them out of the commercial system and greatly mitigating the threat they pose. No use of emergency powers or compulsion of intermediary financial institutions would be required: the United States has no constitutional right enshrining the freedom to transact.”

Other potential forms of programming applications include setting expiry dates for stimulus funds or welfare payments to encourage users to spend it quickly.

No limit on negative interest rates. Beyond providing central banks with greater control over people’s spending habits, CBDCs would also grant them the possibility of taking interest rates into far deeper negative territory. If there is no cash, there is no means for people to escape negative rates no matter how negative they go. This is one of the benefits often lauded by Harvard economist Kenneth Rogoff of a completely cashless society. Yet central banks continue to insist that physical cash will not be eliminated once the CBDCs are fully operational. But as I’ve noted previously, central banks are not exactly known for keeping their word.

Greater Government Surveillance of Your Personal Data. As I’ve repeatedly warned over the past year, including in my book Scanned, central bank digital currencies will almost certainly go hand in hand with digital IDs. In 2021, the FT wrote: “What CBDC research and experimentation appears to be showing is that it will be nigh on impossible to issue such currencies outside of a comprehensive national digital ID management system.” That will mean even broader and closer scrutiny of your most personal data.

Given as much, it is almost certainly no coincidence that last week — just days before the BoE underscored its interest in developing a digital pound — the UK government quietly unveiled a public consultation on draft legislation for the establishment of a digital identity framework. The government is also proposing subsidising private digital ID schemes. As readers may recall, it has also signed a digital trade agreement, or DTA (yes, they do exist), with the Urkainian government that includes a commitment to collaborate on digital identity.

The British government insists that any future digital ID will not be made compulsory for British citizens. But governments, like central banks, have an annoying habit of breaking promises, particularly on the important stuff.

Greater System Fragility. As the House of Lords report warns, a CBDC risks creating “a centralised point of failure that would be a target for hostile nation states or criminal actors.” It would also be vulnerable to power, telecoms and IT outages, which countries are experiencing with ever great frequency.

Meanwhile, the Bank of England bank and UK Treasury insist that the decision to go ahead with a CBDC has still not been taken, and won’t be until around 2025:

The Taskforce’s conclusion is that we are not yet at a point where a firm decision can be made to implement a digital pound.

And if you believe that, I’ve got a digital bridge to sell you.

As the BoE itself notes, the process of building the infrastructure for a digital pound will be painstaking, and will probably take a number years. Yet we are to believe that it won’t be until the infrastructure has actually been built that the decision will be made as to whether to use it. It’s a bit like sending troops halfway across the world to the border of a country you are thinking of invading, such as, say Iraq, but putting off the decision as to whether to actually invade until the very moment that all the troops are amassed.

Creating a Global Monetary Laboratory

“CBDCs could equip central banks with new tools to significantly help soften the impact of forthcoming financial crises, given they would provide a real-time view of risks and currency outflows,” Martin Hargreaves, chief product officer at blockchain firm Quant, told Bloomberg.

Martin Hargreaves is also a member of the steering committee of the Digital Pound Foundation, which describes itself on its website as an “independent organisation whose mission is to work with a variety of stakeholders and participants towards the implementation of a well-designed digital Pound and an effective and diverse ecosystem for new forms of digital money.”

The organization was incorporated less than two years ago, on June 22, 2021. On its home page, the foundation’s chairman, Jeremy Warner, says the following in a short video:

The world has become a global laboratory, trying to understand the ramifications of this fast growing phenomenon. Governments and private enterprises are developing something that will serve humankind better than any past or current forms of money. This new form of money is only possible because technology is transforming all the interactions between human beings, which themselves need money, and money must therefore adapt to serve those interactions. The ramifications of this will affect every one of us.

It is unlikely that we will see a global version of this form of money until we have a form of global government so nation states, regional governments and private enterprises are also working on their own versions.

So, unbeknown to most people, we are living in a global monetary laboratory. We are being steered through a financial experiment that threatens to change just about everything (and for most of us, not for the better).

According to the Atlantic Council’s CBDC tracker, 114 countries, representing over 95 percent of global GDP, are exploring a CBDC. That’s up from 35 countries in May 2020. Eighteen of the G20 countries are now in the advanced stage of development. Of those, 7 countries, including China and India, the world’s two most populous nations, are already in pilot. Eleven countries have fully launched a digital currency, with the latest being Jamaica, and China’s pilot is set to expand to most of the country in 2023.

A Warning from Nigeria

But only one largish economy has actually fully launched a CBDC, and that is Nigeria. And the results have so far been disastrous.

The eNaira has so far been a total flop, as I reported for NC in July and November last year. One year after its launch, in October 2021, fewer than 0.5% of the population had downloaded an eNaira wallet — a thoroughly underwhelming number in a country with an estimated population of 225 million people. Worse still, only 282,600 of those accounts were currently active. Meanwhile, interest in cryptocurrencies has surged.

To try to salvage its monetary experiment and essentially force people to use digital means of payment, preferably the so-called “eNaira”, Nigeria’s government launched an all-out assault on cash in December. Taking a leaf out of India’s book, the government began issuing redesigned high value notes from mid-December and gave residents until the end of January to turn in their old notes. When it became clear that the banking system wasn’t even close to ready to disburse the new notes, the deadline was extended to Feb 10 (i.e., today).

According to the Nigerian Central Bank and government, the demonetisation campaign is intended to mop up excess cash liquidity, stay ahead of counterfeiters and take greater control of Nigeria’s money in circulation, more than 85% of which is currently outside the vaults of the country’s banking system. But another key goal is to salvage Nigeria’s floundering central bank digital currency, the eNaira. And the result has been total chaos.

In a country that was already grappling with a currency crisis, soaring inflation and fuel shortages (despite being Africa’s largest oil producer) and whose sovereign rating was recently downgraded even deeper into junk territory, there is now an acute shortage of money. As in India, the result has endless lines at ATMs. Commuters in the capital and beyond have been left stranded with no cash to pay for transportation back home. Many small businesses, which represent the lion’s share of the economy, and predominantly rely on cash payments, have had to shut down as their customers have no money to pay.

Astonishingly, as the central bank has withdrawn the old notes from circulation, Nigeria’s mint has not come even close to replenishing the money supply with new notes. In fact, the central bank does not even know how much new currency is being printed. When grilled by members of the House of Representatives during a plenary session, Aishah Ahmad, the deputy governor of CBN, admitted she had no idea “how much was printed of the new naira notes”.

This is a monetary experiment going very badly wrong in real time, and one which other central banks will presumably be learning from. But even as Nigerians’ lives and businesses have been plunged into chaos, the government and central bank see it as a small price that is well worth paying. Godwin Emefiele, the CBN governor, has hailed the experiment as a success, given that 80% of the $7.2 billion previously held in private hands had been deposited with financial institutions. Finance Minister Zainab Ahmed concurred, saying: “The only sore point is the pain it has caused to citizens.”

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  1. Isla White

    Is Nigeria’s core problem in this matter the incompetent / inadequate roll out of new paper (plastic?) notes for old?
    Also, can we assume that it is the friends and families of the politicians and VIP’s whose wealth is in undeclared, old money who are messing this about by not front loading – funding – the printing of new notes ?

    This makes interesting reading for the enthusiasts of public funded broadcasting amongst us … :

    How di new CBN policy go impact Nigeria at dis time?

    No be coincidence say dem no dey wait until after di elections so all dis money need to come back so dat all dis politicians wey dey hoard naira for election go need to bring out di money back into di bank system so dem fit get idea of dat side too…..

    E say di CBN go destroy di old banknotes wey dem don retrieve, so dis way go give dem a better idea of di money wey dey in circulation as na dem dey print di new notes so dem know wetin dem dey exchange as dem dey see wetin dey come in as old notes and wetin dey go out as dem dey release di new notes.

  2. The Rev Kev

    A very informative post this but the abuses that digital currency can be put to use is epic in scale. So let me take one very large dump on this idea using probable scenarios. Suppose that you have your money in a bank and the managers of that bank drive it into a ditch through corruption and incompetence. So to get that bank on its feet the government decides not to use government money but a bail-in of depositors. So you log into your account and find that a major part of your money is G-O-N-E gone and given to the bank to help them out. Will you get your money back? Well, maybe. It depends. You might get bank shares in compensation. Non-voting shares of course. If this sounds unlikely, just ask somebody from Cyprus.

    With all money being digital currency, what if the government clips out a few percent of your money as a ‘donation’ to Zelensky and the Ukraine. If you resist, you will be shamed on digital media. Another scenario. Suppose some do-gooder PMCs decide that they will ban payments to sex-workers or too much booze & tobacco above a certain limit or pornography. There is form here so with digital currency the temptation would be far too great for them. Or suppose that some organizations did not approve of the subscriptions that you take out like maybe one for Seymour Hersh. So suddenly you will find that you will not be able to do so as he is on a blocked list. or bets of all, there is a recession so negative interest rates are introduced and if you do not send your money, it will disappear. Again, there is form here.

    The short and sweet of it is that when you have digital currency, that it is not your money anymore. You don’t really own it anymore – you are just using it.

    1. daniel larusso

      ummm … your money in a bank account can already be used for a bail-in, it’s not your property, I was informed that was being muted during the Cyprus crisis

      Trudeau already stopped you paying those truckers forming the blockade. So no news there.

      I don’t mind being shamed for not supporting Zelensky because I’m not on Social Media.

      I don’t mind some people not being allowed to buy certain foods/substances. Eg someone using valuable GP services because of obesity SHOULD have the food purchases restricted.

      1. rob

        some people didn’t “mind” jews being forced to wear (by both the nazi’s and the catholics) stars in public , either.
        So, no wonder the point was missed.

    2. flora

      “I owe my soul to the company store.

      Per wiki:
      Company stores were monopolistic institutions, funneling workers’ incomes back to the owners of the company. This is because company stores often faced little or no competition for workers’ earnings on account of their geographical remoteness, the inability and/or unwillingness of other nearby merchants (if any existed) to accept company scrip, or both. Prices, therefore, were typically high. Allowing purchases on credit enforced a kind of debt slavery, obligating employees to remain with the company until the debt was cleared.

  3. James Cole

    Regarding the ‘freedom to transact,’ in the US at least, the question will inevitably come up of whether a sanctioning or freeze of an individual’s CBDC account constitutes a ‘taking’ under the Constitution, entitling the sanctionee to due process? On the merits, I don’t see how it can’t be a taking, but, as we all know, the most meritorious legal arguments don’t always win, especially, these days, where state power is concerned.

    1. JTMcPhee

      We sure as heck have a “freedom of contract,” subject to regulation of course. Inherent in all the stuff about life, liberty and PROPERTY, and the fifth and fourteenth amendments and all those pronouncements of the Supremes about sanctity of contracts and the “rights” of individuals to contract away their other rights, such as may survive. Money transactions are the quintessential contracts under the common law and the laws of most states and even federal laws – subject to regulation that does not amount to a “taking,” as noted. But hell, the PTB do whatever they want any more, no?

      Maybe hacker collectives might fix things by disestablishing the code?

      1. JBird4049

        >>>Money transactions are the quintessential contracts under the common law and the laws of most states and even federal laws – subject to regulation that does not amount to a “taking,” as noted.

        Please. This will be bit of a rant, but it is connected to the push for digital money. I hope everyone understands that during the past thirty years the practice called civil asset forfeiture has made it both legal and common to seize not just cash, but everything a person owns, without every having been charged with a crime, or if they are, they no longer have the resources needed to pay for their defense. Since the government keeps the cash and other property, just as with tickets, fees, and fines, it becomes another way to fund the police department and other agencies like the local government, their police, and federal agencies.

        Also, with food stamps, aka SNAP, aka the card that you are given by the state, already itemizes every expenditure, which is available to any worker down at the county, what you get and keep depends on the state, not on the facts. Some rando can add or subtract from your account after a phone call or visit. They also have access to your IRS files as well. Not to mention, they often want detailed bank statements.

        The state government can and has taken money from my account because reasons. Reasons that are not necessarily obvious, nor easily fixable through the understaffed private contractor taking your money or the ill informed clerk at the county office. And the police especially if they are “working with” the Feds can still reach into my wallet although that has not personally happened, yet.

        I do not trust this digital cash at all especially as it will not affect the average millionaire or middling politico. Certainly not the likes of a Newsom, Pelosi, or London Breed or the average Billionaire. It really is just a better way to control the population especially as will have access to all your financial information and not just to how much you get or spend. A panopticon with very sharp teeth.

  4. James Cole

    Also, do we really think that the UK is going to subject the City of London to a financial infrastructure that will be *highly effective* at rooting out laundering and tax evasion? I predict this baby ends up getting tossed with the bath water.

      1. TG

        Just like a centralized digital ID a digital currency is a prerequistie for creating a social credit score. We can already see examples where these are tied to facial tracking. This is where it starts to sounds dystopian rather quickly, because of for example protest participant sanctions and so on.

        For some strange reason, I feel like watching Robocop again.

    1. rob

      do you not think people who “are of that type”/PMC and the like will not come up with some way to exclude their “class” from onerous rules, while doubling down on an easy tool to further oppress… everyone else?

  5. digi_owl

    I loved Hudson’s quip recently that money was already digital given that most of it existed as numbers in some banking database.

    It is really so frustrating how we keep trying to think of money as physical pieces of metal, when that has not been the case for the majority of it for almost a century.

    The only way a bank can run out of money these days is if there is a bank run, and that is exactly the kind of scenario modern central banks exist to avoid.

    1. JTMcPhee

      Central banks exist for a lot of reasons, including to strip away all vestiges of wealth and security from us mopes, concentrating wealth power into the hands of an ever smaller set of people.

    2. flora

      If the banks have to produce paper or coin upon demand (even if it takes a few days) that keeps the Central Bank somewhat honest, and lowers the chance of negative interest rates being imposed. Or, the central bank could impose negative rates openly instead of just keeping interest rates below the rate of inflation. When the idea of openly negative interest rates was seriously proposed a few years ago when the Fed was up against the zero interest rate boundary they dropped the idea. It was clear that imposing openly negative rates would drive people out of the banking system for their savings and destroy trust in the US banking system.

      So Hudson isn’t wrong, but he’s missing a larger social context on this issue, imo. It’s a matter of trust, I guess, and the US banking system doesn’t have a lot of that after the sub-prime mortgage meltdown, the Great Financial Crisis, and the zillion dollar bank bailouts while people lost their homes. Yeah, not much trust these days. People don’t forget that sort of thing for a generation or two. Really.

      1. GramSci

        No matter whether “they” impose negative interest rates or simply inflate my savings away, it will be hard for me to stop “them”. Especially since they’re in cahoots.

        1. flora

          I don’t disagree in general. However, there are still many options outside the official banking system: private lending/banking, various cryptos (of which I’m not a fan), various coinages and metals, etc. All of those alternate “banking” systems are either more cumbersome, requite friendly relations with the pb partners, or are less legally reliable (than the current system), but if push comes to shove with a CBCD we will see what happens. I can say that the “private banking” (loans at interest) system is growing, even for smaller transactions.

      2. skippy

        One problem with all this is the notion of a immutable store of value/labour via some token … when there as never been any other than some post hoc eg propter hoc narrative.

        Hence the noted above – “that money was already digital given that most of it existed as numbers in some banking database.” – leaves out that most of the worlds Wealth[tm] is actually in undersea data cables and not banks per se. One needs to remember that equity is a form of money to satisfy contracts and the whole thing can be quite complicated – see Adani et al. This then hearkens back to the old NC Richard Smith posts IMO about flows of funds.

        Then again the form issue is not as imperative as the distribution or the socioeconomic productivity which precedes any questions about form of token or its quantity. I would also put it behind the people that run these sorts of businesses and what rolls around in their collective heads or what kind of collective reality they are seeking for the future.

    3. hunkerdown

      Tokens of value don’t work well unless they’re tangible. Fully digital money and ration coupons are equally unsatisfying in their psychological and socological aspects.

    4. Wukchumni

      I’ve not heard of any central banks buying up large stores of paper money, er ‘all that gilters’.

  6. flora

    Thanks for staying on this story.
    There’s a big (and imo unwarranted) assumption by all the major proponents of CBDC: their banking systems won’t be, can’t be hacked. That’s what all the Cyber Polygon exercises are designed to prevent – testing, training, and examining each participating country’s Central Banks’s digital weaknesses. (Which becomes known to all the other exercise participating countries.) Of course, one can only train against already known, yesterday’s weaknesses. And nevermind the intel agencies in the US have force demanded backdoors into most US/Western hardware for whatever reasons. (The West seems worried the Chinese Huawei hardware company is doing the same thing on their platforms.)

    If the financial, political, or military prize is big enough for a govt to want to hack and disrupt another country’s payments system then that other country’s payments/banking system will be hacked. I have no doubt.

    But, sure, let’s put the entire banking and payments system online and only online. Because surely the West is way smarter than the rest of the world when it comes to IT stuff. What could go wrong? (Besides internal political or financial mischief, outages on the electric grid, lost or hacked credentials, etc.) Hubris much?
    OK. I’ll stop now.

    1. ambrit

      Or how about automated “comment tracking” algorithms that debit your Central Bank Account every time you are linked to “unapproved speech” in the comments section of a blog, or for even linking to any “unapproved site” on the Internet?
      This is the Panopticon writ large. The Central Bank Digital Currency is the enforcement mechanism for the Panopticon.

      1. skippy

        The problem with this perception is its the result of prior influences and not that of this specific agenda/policy e.g. reacting to output and not the original input.

        Btw one needs to remember all this stuff goes through black box nodes which save the latest information so if anything were to happen would be the reset/go back point to all contracts.

        1. skippy

          Basically its just a snap shot of all the transactions/contracts before any sort of event which would stop or corrupt them. So in this case it has nothing to do with resetting anything, just the most accurate fall back date on currant transactions is all.

          Probably one of the most secure sites on the planet.

          1. flora

            Unless the fall back data has also been corrupted. Yep, it happens. See for example MS Windows restore point corruptions. / ;)

            1. skippy

              This is nothing like that flora. You would need to look into to understand it in more detail, put it this way they are built to withstand just about anything because their function is critical to the international market functioning, more important than any big bank/s.

              BTW physical tokens are just as subject to information loss due to the same factors that you suggest above. In the past the pace/speed of change mitigated a lot of factors but now days the speed of everything creates less certainty over a shorter span of time.

    2. c_heale

      Agreed. Due to global warming, and resource depletion, imo we do not have sufficiently reliable infrastructure for long term digital currencies (regardless of any other issues, of which the main is crime).

      I suspect any digital currencies that are introduced, will have similar but much more wide ranging consequences as things like Indian demonetization, the eNaira, and El Salvador’s bitcoin, as the financial infrastructure collapses. I expect the financial systems of at least one country, or region of the world, to collapse beyond repair.

      This will be followed by a return to some kind of physical currency.

      The people managing the world financial system should be making it more robust and less dependent or 24/7/365 electricity, and other resources.

      But since they have in the main, completely ignored the problems of the legacy systems/software which still underpin the world’s financial system, they are not likely to do anything sensible.

      1. Anon

        Bitcoin is the absolute opposite of a CBDC as it has no central entity that can confiscate your funds nor block your transaction. So, in fact, it’s the only way one could bypass CBDC’s if they are forced upon a population. Oh, and Nigeria is the second biggest user of Bitcoin in the world, do you think this is a coincidence? Learn about what you say, please.

  7. Synoia

    On reading this interesting post — With digital currencies the Banks appear reduced to assessing risks on originating some loan, and the banking sector employment is reduced to a collection of programmers.

    This appears to mean meant that digital banking is be implemented as a complex kluge of loan and collection requirements ?

    How many bankers are required when banking is further automated? Today the historical large amounts of retail bank floor space are lightly populated by a few customers, and one or too bank staff.

    The bulk of the Bank staff now appear to be housed in call centers, which must all be reducing in size as Banking is more and mire an inflexible – large amounts of programming, error prone on line process.

  8. Susan the other

    This is starting to look like a tool for separating the finances of two competing political systems. If it is possible to isolate an alliance of western nations by joining in an exclusive electronic international settlements “bank” which prevents the brics from commingling their currencies – and ours from theirs – it might make some sense. As it is, it doesn’t make any sense because it adds no utility to banking. So this would be an elaborate protectionist measure. But it could backfire if countries just decided to trade value for value, like basic bartering.

    1. skippy

      Concur and would add that in a dual system like USD/Bricks the aforementioned would negate some floating currency dynamics = commingling. Hence the push to have national users forced to use it for internal transactions to maintain some VoM flows lost to choices[tm] ….

  9. Savita

    Just as a data point to contribute.

    National Australia Bank, recently rebranded to the refreshingly candid ‘NAB’

    ’21st-largest bank in the world measured by market capitalisation and 52nd-largest bank in the world as measured by total assets in 2019′

    ‘On 19 January 2023, NAB announced that it would create a stablecoin called the AUDN that would be pegged to the Australian Dollar, and that the digital asset would be on the Ethereum network. The objective is to streamline cross-border banking transactions, and will also be used for trading carbon credits. AUDN is expected to be live in mid-2023’

    That page also has a good list of the multiple controversies the establishment has been mired in.

    1. skippy

      The Free Banking Period was so good the first time and that was low tech …. imagine what the digital one will be like …

  10. Mark

    So they/you decide to go all in CBDC. Don’t worry it’s coming.
    If you break your phone, how do you buy a new one?

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