"In our design users interact with a central transaction processor using digital wallets storing cryptographic keys. ... Despite using ideas from blockchain technology, we found that a distributed ledger operating under the jurisdiction of different actors was not needed to achieve our goals. Specifically, a distributed ledger does not match the trust assumptions in Project Hamilton's approach, which assumes that the platform would be administered by a central actor."
The key words here are "central transaction processor". Being able to interact with the financial system without going through intermediaries would eliminate an incredible amount of waste in the form of most of the payments industry.
There's a reason why the saying goes as "follow the money" and not "follow the mail". Think about why and you'll understand why CBDC is Orwellian worst nightmare.
one secret there is, they can photo record every source addr<->dest addr from the post item face, for some or all of the delivery, for years and years without fail, keep those records, and then do investigative work from that.
They never open the package, and technically, they are quasi-public.
Public enough that they can't play fast and loose like everyone else, but private where it matters in terms of not having literal Federally administered databases all just eafer for the reaping.
The USPS isn't quasi-public, it's fully public, an “independent” (meaning it has an Presidentially-appointed, Senate confirmed board with limits on degree of single-party domination) federal executive-branch agency.
The fed is quasi public too? It’s actually less public than the postal service, the postal service is a fully public agency, the fed is partially governed by private banks.
Nonetheless, given that the individual regional banks are have directors that are elected by the member banks, control over certain levels of fed policy are in a sense private, whereas that is nowhere true for the postal service. At least not to my knowledge.
It is better for the government to run financial infrastructure. The restrictions imposed by PayPal and the banks on certain types of businesses can then be challenged in court.
Reading Matt Levine's latest column on this CBDC was sort of mind blowing. With a truly centralized digital currency the Fed would basically monopolize all bank deposits (why store money in the bank at all when your digital wallet is perfectly safe) and destroy the entire banking sector.
So they are forced to decentralize the currency to some extent, so that banks are the ones to actually issue the currency (after borrowing it from the fed).
Or couldn’t it force banks to offer better rates on accounts? If the Fed will store your money for free, then the banks would have to offer a few percent return to get you to lend to them.
Exactly. CBDC is not a response to cryptocurrencies. It is a (belated) response to the fact that the way cashless economies have evolved has basically privatized money-as-infrastructure.
The privacy implications of CDBC are a real problem, but the rapidly approaching end game of the current slippery slope is one in which, among other things, all participation in the economy is gated entirely by private banks. No sovereign country should accept that. And yes, any real implementation of a blockchain as a day-to-day cash replacement will have the same problem. These are legal problems requiring a legal solution, not a technical one.
I think you’re talking about his column from Tuesday [1], which talks about different research at the Fed [2] that suggested that there is a trade off between “credit provision” (i.e. private lenders taking a risk and extending credit to their customers who they have relationships with) and “stability”. In a credit crunch, investors could flee to a CBDC and make the crisis worse.
> why store money in the bank at all when your digital wallet is perfectly safe
Because banks lend the money out, earn revenue from that, and thereby pay you interest. Banks aren't vaults; they are money circulation machines. Their business is finding the best investments, which creates efficiency in allocation of capital in the economy.
Banks in the UK pay out a maximum of 1% interest on even the best savings accounts (i. e. the return doesn't even keep pace with average person's PoV inflation). I am skeptical of this explanation for why we should let the banks hold our money. Or indeed remain alive as anything but a source of borrowing.
> Banks in the UK pay out a maximum of 1% interest on even the best savings accounts (i. e. the return doesn't even keep pace with average person's PoV inflation).
Interest paid on deposits is a free market (generally speaking); if that rate isn't worthwhile to people, they will start leaving and the bank will raise its rates.
> I am skeptical of this explanation for why we should let the banks hold our money.
You aren't 'letting' them and it's not a collective decision. You personally choose to give them your money. Put it elsewhere if you like.
> Or indeed remain alive as anything but a source of borrowing.
They can't lend money without deposits. The deposits are the money they lend.
> if that rate isn't worthwhile to people, they will start leaving and the bank will raise its rates.
No, that is evidently not happening. When I said "banks", I meant "literally all banks" (minus tiny regional credit unions or the occasional fluke that might give you up to 1.2% - wow, that is so much money, I could retire on it). People generally don't move banks either. They tend to stay with whomever they started banking first.
> You aren't 'letting' them and it's not a collective decision. You personally choose to give them your money. Put it elsewhere if you like.
My main alternative to holding cash in a bank is cryptocurrencies (which are accepted ~nowhere), or holding my money as cash. Handling cash has been in decline even before the pandemic, and nowadays I very rarely see people pay cash. Assuming that cash remains on the current trajectory, banks will become the only mainstream option.
> They can't lend money without deposits. The deposits are the money they lend.
They have enough money saved up in their coffers for that. I also can't imagine that most loans for a higher value than a credit card account would be entirely unsecured. This is especially true for house purchases - it's generally impossible to buy the house you want without a mortgage, and the house is what you lose I'd you don't pay them back.
It’s somewhat true in the sense that banks need to keep some fraction of their deposits in cash as reserves (the “reserve ratio”). So if they lend money it needs to be backed to that extent by their deposits.
A FOIA request to the fed about their stimulus spending from 2008-2010 was just released, and in this period the fed spend nearly 30 trillion to bail out banks so there being a separation between it and the banks is questionable
Banks don't make any money from your accounts. In fact your money in cash accounts is a liability to the banks. Banks also do not hold mortgages, they sell them as soon as the ink is dry. There's a lot of misunderstandings about the current banking system in this subthread with knowledge of what banking was decades ago. No banks would go out of business from this.
To see how tyranny can be instituted by combining a non anonymous transaction system with vaccine passport look at the promo video for Bill Gates funded wallet Thales
