Just as here on HN we read from time to time about people being locked out of various online services (i.e. Google, Facebook etc.) for doing something a company doesn't like, a CBDC would allow governments the ability to effectively lock people/organizations out of their digital economy.[1] It would also allow for money that expires and can only be used for certain (government approved) purposes. (these both would have been desirable from the government's point of view for COVID stimulus payments, for example)

[1] This can already be done to a degree via the banking system, but a CBDC would provide for much more granular control.

I think this is the key concept over and above digital. It's the difference between http et al and AOL/Compuserve.

https://permissionlessinnovation.org/what-is-permissionless-...

So a US CBDC will be decentralized, permissionless, transparent, non-censoring, and run on open-source software based on an open specification?

Fees are currently as low as $0.03 on Ethereum layer-2 solutions (!= side-chain) [4]. The fees will further fall as the technology improves, and once L1 gets (data-/dank-)sharding and other L2-scaling oriented upgrades.

[1] https://makerdao.com/en [2] https://reflexer.finance [3] https://www.circle.com/en/usdc [4] https://l2fees.info

Fees in crypto fantasy land are irrelevant to most people.

How much does it cost to pay your rent or buy food in the real world?

Crypto is probably not going to beat domestic interbank dollar transfers for small amounts, these transactions can be regulated down to zero fees like we see in the EU and UK.

Thank you. It's probably not going to beat domestic interbank dollar transfers for ease of use either. With a CBDC, most consumers will only notice new capabilities and faster money transfers --- at zero cost.

Back to the original point: A CBDC will eliminate any argument for crypto --- except for paranoia.

And about paranoia --- imagine the outcry if government decided to store every transaction you ever did in an immutable public database?

Forcing citizens to use a CBDC is straight out of 1984 playbook.

FUD anyone?

Citizens won't be using a CBDC --- at least not directly. Everything *citizens* do will still be denominated in good ole USD just like always.

The CBDC will be used behind the scenes by banks and the Fed to speed up and modernize the banking system --- to replace the antiquated ACH system that was originally designed in the paper check era.

Basically, a CBDC will allow digital wallet like features to be seamlessly added to every existing US bank account.

Your landlord doesn't exist in crypto land either --- and he will quickly grasp the fact that doing business in crypto has real world costs.

The idea is that the benefits to the user are a more stable economy (lower inflation, higher employment), a more effective safety net (politicians more likely to approve payments that can't be spent on gambling), and greater peace (targeted sanctions as an alternative to war).

Whether any/all of these will work effectively is debatable of course, but there are legitimately good reasons to think they would. And no, there's no alternative that does them better, and crypto certainly doesn't. Again, the individual merits can be argued, but the idea that it is "all bad no good" is simply not the case here.

I could be wrong, but I don't think many citizens would vote for a policy that would give up so much of their privacy, autonomy, and civil rights for the hope that central banks and government officials will make the right economic decisions next time given the data a digital currency provides.

The central bank doesn't have a crystal ball to know with certainty where inflation will go. Much of that depends on historical events outside the US that are by definition unknowable -- how will food and energy prices be affected by war in Ukraine, for example?

But central banks are able to plan and then adapt appropriately as circumstances change. And citizens have long voted for effective central bank policy -- economic fears about inflation and recession are reliably the #1 popular concern. If a digital currency can help this, most voters will be very happy with it. After all, for people (like myself) who already make 99% of their purchases with credit cards, they're not giving up much.

That government officials are fallible and incompetent is (in my opinion) the weaker argument. Even if they were extremely competent and had a crystal ball that predicted the future (they don't), nobody should trust the intentions or the goals of government agencies with such ubiquitous and unchecked power.

> there's no alternative that does them better

State-run EBT cards exist and seem to be working OK.

Federalizing more things reduces people's ability to usefully vote with their feet by moving to a different State when people don't agree with State government policies.

> more stable economy (lower inflation, higher employment)

Speculative and seems unlikely. Do you have examples where a CBDC helps pay for projects better than the existing payment rails?

There is no good reason for the government to have complete control over all of your finances and purchasing decisions on a granular level (if you value human freedom, autonomy and dignity at all).

That's vague. Prove it.

The abolition of an analogue payment system (cash) is from the first principles a tragic idea regardless of the actual implementation mechanism, despite the few pros one can but forward in this argument. The system with CBDC can make money have an 'expiration date' ! This is not a theoretical construct, but its discussed as a way to 'manage' economy (and private individuals). Inflation, spending, propping up economy is fully in the hands of a government entity and can be matter of coordinating policies and laws. This alone, this principle goes against all the progress of modern times from Babylon. The opportunity for tyranny (not used lightly) under such system is limitless (I will not enumerate it here, Im just outlining an argument on a important and complex issue).

A digital currency, at least in the terms generally discussed by central banks at the sharp end, moves your bank account to the books of the central bank, so it is always money good without the need for a deposit insurance system. The commercial bank then operates it as agent rather than principal.

There's some other stuff to do with anonymity and quite a lot of hype about distributed ledgers and the like, but largely that is all just marketing BS. The conflict between Money Laundering/Proceeds of Crime tracking requirements and Privacy laws generally stop bearer tokens in their tracks. Bearer Tokens being the direct electronic equivalent of our current folding stuff.

> A digital currency, at least in the terms generally discussed by central banks at the sharp end, moves your bank account to the books of the central bank, so it is always money good without the need for a deposit insurance system. The commercial bank then operates it as agent rather than principal.

You can have Fed Accounts[1] without a CBDC.

[1]: https://www.slowboring.com/p/fed-accounts

It doesn't require it, though the existing structure uses this in part to allow banks to take excessive lending risk. It also allows depositors to not care about solvency of the bank.

The basic logic(from the perspective of the government) is that this is a further centralizing of economic power, and therefore adds efficiencies of scale.

The downside of that is basically that it closes off any remaining illusions of privacy from the state in one's financial matters. The banks were already cooperating in the existing framework, this just makes it easier. And really, I think I'm OK with this as a clarifying step. In the bad old days you were basically relying on a system that would get things wrong with no recourse: sometimes banks failed and you lost your deposit. If you actually wanted to maintain economic privacy under that system you were at the mercy of the bureaucracy, and if you wanted specifically to evade the law and taxation you would have to set up a semblance of alibi(thus laundering etc.)

The whole sphere of crypto/privacy coins doesn't really enter into this in any direct way, since the premise of those is to suggest economic ideas outside of the model of the nation state, which is actually different from a "for or against" position as is often imagined: it's just a different kind of economic technology for account and settlement, one that prioritizes keeping a consensus secure over installing a speedy arbiter.

CBDC is intended to be a digital equivalent of cash, so that people have a public money option for digital purchases. It could mean anything from everyone having an account at the central bank to a card holding value that you can get from someone and tap to your phone to order an Uber.

There has also been talk of this being an offering of retail banks in the US. In order to be truly cash-like these would be quite different from normal bank accounts. Under this approach these accounts would not be eligible for many normal banking services, because people who the banks would not normally deal with (due to terrible credit, or previous bank fraud) would need to be able to get an account. Currently the banking system actually extends credit to most people with normal accounts, since people expect to be able to the money transferred to them in a reasonable amount of time, rather than needing to wait for a transaction to become non-reversal which can take a really long time.

To be truly cash-like There would need to be a rapid non-reversible transaction mechanism. If transactions could be reversed for things like fraud, then it is not really cash-like, but more like one of the various forms of traditional banking. But of course, this makes it riskier for most consumers, to the point where organizations would be discouraging people from using it if they have any choice. If you have recently tried to do a wire transfer as an individual (perhaps as part of buying a house) both the bank and the receiving party make you jump through hoops, and want you to triple verify the number, and the bank will probably ask you to explain the transaction. Largely all of this is to protect you, as there are plenty of scammers who will send fake account numbers, plus plenty of headaches that can occur if the account numbers are off by even one digit.

And wire transfers are not actually fully non-reversible! Admittedly, banks will be reluctant to even try to reverse them unless: the bank messed up (sent the wrong amount, entered a different number than you told them, etc), the receiving party confirms the reversal (like might happen if an honest person receives a wire meant for someone else, Letting the initiating bank reverse it is safer than sending it back), or you can demonstrate that you did not authorize the transfer in the first place.

And this is not even considering the privacy concerns, since unlike paying by cash, law enforcement will likely be able to trace any transactions done with the CBDC, much like it is possible for them to trace credit card transactions. After all, I strongly doubt any such current will have the privacy protections of something like monero, even if it is crypto based.

In USA, dollars are not backed by central bank. Dollars are backed by the federal government.

People also seem to forget that banks do serve several key purposes (in addition to their anti-consumer and rent-seeking behaviors) that I don't think any central bank wants to be in the business of dealing with.

There is also a utopia side to that coin where money like UBI can be easily distributed to all but can only be used to buy necessities like food, shelters, etc but cannot be used to buy stocks and prop up a bubble in the stock market like a lot of the stimulus checks were during the pandemic. One could also easily target programmable money toward low income people without needing to wait a tax statement or having to double check at the end of the year.

Programmable money is a really powerful concept and I do think it is inevitable that we will come to it at some point since it lowers of the cost of implenting economic policies and increases the speed at which they are deployed. But we do need to make sure enough laws are on the book to prevent authoritarian use. In a stable and alive democracy that should not be too much of an issue, but elsewhere...

Really, if a country of 1.4 billion people where beneficiaries can number more than the populations of most countries, I don’t see why you would need CBDCs at all.

With programmable money (think ETH smart contracts for the government) a policy could be roll out to the entire population uniformly in a matter of days.

This is why this concept is so powerful and is inevitable IMHO.

And you know what, many jurisdictions have done exactly that, and brought massive improvements to their banking infrastructure in the last decades. Private actors either comply or lose their banking/credit/payment licenses, it's as simple as that.

The question is not if it can be done outside of the platform, it is how much time it takes. I would encourage you to try to code a smart contract even if you dont like the concept, it is eye opening.

The fact that would have a standardized VM for money where you can write small programs to implement your law is just another level frlm what we have.

Let’s not pretend that our governments are above abusing such power.

https://www.economist.com/finance-and-economics/2022/09/05/t...

https://web.archive.org/web/20220909015725/https://www.econo...

What makes the UPI system work *is* effectively a CBDC. It's not possible to have instant transfer without *something* that functions like a CBDC --- though it may be named something else. The EU calls theirs a "credit transfer scheme" --- same difference.

The word that seems to be confusing people is the word *currency*.

A CBDC will be used by *banks* to benefit consumers but it is not something that consumers will consciously partake of. Consumers won't carry CBDC in their pocket or in a special digital wallet.

One way to look at it is that a CBDC would be used to add the functionality of digital wallet to everyone's existing bank account.

That's why China implemented it first as the chinese communist party keeps the country under relative economic freedom with absolute population behavioral control.

Corollary?

Our societies in this other side of the world aren't supposed to be vulnerable to such totalitarian measures, but are suffering a sort of contagion of that very same driver, but implemented slowly and in a more covert way. Got accelerated and more overt lately and it will be more towards the self-evident status.

China has a problem with the regular currency has a lot of restrictions on it. People can't just trade CNY for USD or something else because there are controls to prevent this. China wants e-CNY to be a platform for Chinese trade also third parties outside the USD umbrella, eg Brazil with Nigeria or Venezuela trading with Iran. I dont honestly know how that is possible to do both CNY with restrictions and e-CNY which is open, but its definitely important to China and much of the world. https://www.scmp.com/economy/global-economy/article/3191393/...

Currently, central banks manage money supply by managing currency transfers to commercial banks and via managing the amount of cash in circulation. The commercial bank transfers are (almost) all digital. Cash, obviously, isn't.

There is reasonable reason to assume that cash will become less and less prevalent as digital payment flows become more ingrained. So central banks are looking at mechanisms to replace/supplement their retail money supply mechanism ie cash, with one that makes more sense for a more digital economy.

So, many central banks have been exploring digit fiat currencies, how they could be implemented, implications etc.

So when the fed reserve decides inflation is too high because they printed too much money and kept interest rates low- instead of trying to "soften the labor market"/drive unemployment up and more people into poverty - with a digital currency, they can simply zap your money away. No need for financial "austerity" for the poor's to endure. What could go wrong?

This doesn't get to the social credit scores we see in use in China, and how a solely digital currency lends power to that system. We are already doing it to the market with ESG scores, wait til you have an ESG score for your personal life.

But I'm just a guy that thinks that the federal reserve just needs to be abolished. It's just a clever mechanism to ensure that monetary system doesn't let the wealth spread out too much. It's all done through cycles of recessions and booms, where they take wealth from the pockets of poor people and hand it to the ultra wealthy to consolidate more assets.

Brazil did that in the 90s, digital currency wasn't needed.

It seems no Blockchain was able to overcome fundamental scalability issues, which are key to actual adoption.

Nothing stops them doing that with cash ie stopping extant currency being legal. Just happens that the US has never done that (to my knowledge). Other countries do it fairly regularly though.

I won't address your other points as they have nothing to do with digital currencies.

Thanks for nitpicking a loose use of the term ESG, and then dismissing everything else with the categorical label of right wing echo chamber nonsense.

I didn't get these ideas from a far right echo chamber either. The following paper comes from an advocate of banning cryptocurrency, and replacing it with federal coins, that can then manage monetary policy way more precisely than the current system we have. Part of that policy would be the ability to literally reduce people's ledgers as a form of inflation control. Oh, and the author was going to be tapped as a wall street regulator, but barely missed confirmation. While she didn't make the cut, seems like her ideas did.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3715735

A framework used to evaluate corporate investment candidates has nothing to do with social credit score boogaboos. It makes as much sense as saying: "Soon Big Government will be assigning buy/hold/sell ratings to you!"

> A framework used to evaluate corporate investment candidates has nothing to do with social credit score boogaboos.

Functionally, ESG _already is_ a social credit score for companies and a tool for compliance. Do you think companies are taking ESG measures because they want to?

There are 802 million Google results for "personal governance". I'm not redefining anything.

> Companies don’t have civil liberties and they don’t have the right to receive investments from anyone who doesn’t choose to invest.

When the investment (or not) comes through trillion dollar asset managers by way of the Fed, it looks a lot more coercive.

Examples: 1: Stable cash flow (why they want a stable coin --> to monotitor for policy) 2: future projections of the economy (finance needs backing --> data is key) 3: credit scores of people 4: long term investments 5: organisations need finance in good and bad times, otherwise it is survival of the fittest but that is not what society is about.

https://emmer.house.gov/2022/1/emmer-introduces-legislation-...

“Not only would this CBDC model centralize Americans’ financial information, leaving it vulnerable to attack, but it could also be used as a surveillance tool that Americans should never tolerate from their own government.”

Whether a regular person can get an CBDC wallet is another (orthogonal) question. It’s equivalent to whether regular people can open an account at the central bank, even without CBDC.

Your transactions seem to be digital, but there are actually many complex systems and institutions involved to guarantee they're backed by real stuff that's actually worth something.

Digital currencies are all about removing this complexity.

The cost of using a credit card is fees, and similarly splitting your bill with Paypal or Zelle means you are paying those firms. It would obviously be a boon to get rid of all those transaction costs somehow.

Out of sight, out of mind. You don't see it but private transaction processors (Visa and Mastercard) consume up to 3% of the transaction amount. Over the course of a year, this amounts to $50 billion removed from the economy. The merchant pays this --- and passes the cost along to you in terms of higher prices.

The money transfer system that deposits your check is old and slow and involves human labor. Unless you pay additional fees (banks love fees), it takes at least 24 hours for the deposit to be made and the system only operates during "banker hours" --- 8-5 on weekdays; no weekends, holidays or nights.

A CDBC will be fully electronic/automated with instant results and operate 24/7/365 at insignificant cost. Basically, it will speed up and put billions of dollars back into the economy.

Despite all the doomsday misinformation, no one has suggested replacing cash or checks. And no, crypto is no substitute for what a CBDC will do.

Visa and MC get only a fraction of the PSP fees. You can regulate this space and bring the fees down (like the EU did). But fundamentally, an electronic payment system isn't as simple as moving money from one bank account to another in an immutable way: that is extremely cheap already and further gains from using CDBCs would be marginal at best.

> The money transfer system that deposits your check is old and slow and involves human labor. Unless you pay additional fees (banks love fees), it takes at least 24 hours for the deposit to be made and the system only operates during "banker hours" --- 8-5 on weekdays; no weekends, holidays or nights.

> A CDBC will be fully electronic/automated with instant results and operate 24/7/365 at insignificant cost. Basically, it will speed up and put billions of dollars back into the economy.

No need for a CBDC to fix that. You just need to bring your banking infrastructure to the 21st century.

ACH is the central component of the banking infrastructure that needs to be brought into the 21st century. And a CBDC is how you do it.

The "serious ramifications" are all things that are not being proposed. No one is suggesting to make cash illegal.

Shifting retail banking to the central bank brings a lot more questions than just worry about what happens to cash.

   SCT Inst stands for SEPA Instant Credit Transfer scheme. It was introduced by 
   the Euro Retail Payments Board (ERPB) in order to enable rapid electronic 
   payments within the eurozone. In a nutshell, SCT Inst facilitates an instant 
   or near-instant clearing of a transaction between originator and beneficiary. 

ERPB = Central Bank

Credit Transfer Scheme = Digital Currency

Put them together and what do you get --- effectively a CBDC system denominated in Euros instead of Dollars --- minus all the hyperbola, misinformation and doomsday prophecy attached to CBDC on this side of the pond.

Shifting retail banking to the central bank

Nothing is being shifted. The existing system (ACH) is being modernized. No banks will be killed in the production of a CBDC.

The scope of CBDCs is way broader than that. If no commercial bank is impacted by a CBDC then it wouldn't be a central bank digital currency, just a digital currency, and that's already the case for most of the money supply. If you use the term CBDC you're implying that the central bank would oversee a much bigger part of the money creation.

Commercial banks will be impacted --- in a good way. Interbank transactions will take place instantly 24/7/365 at zero cost.

Consumers will be impacted too --- in a good way. They'll be able to transfer money from their bank account to merchants, friends and family instantly 24/7/365 at zero cost --- no delays, no fees, no processors, no paper forms, no middlemen --- something that never existed before --- at least not in the USA.

Basically, a CBDC will make it possible to add digital wallet functionality to all bank accounts.

Like it or not, a CBDC is coming. The financial case for it is overwhelming.

You'll still spend USD just like before --- not CBDC tokens. The only thing the consumer will see is new capabilities and transaction speed that didn't exist before.

Basically, a CBDC will be used to add digital wallet functionality to everyone's existing bank account.

Why would CDBC cost less if it is an improvement in value over the previous systems of credit cards, checks, and cash? From the TANSTAAFL perspective, debit, checks and cash aren't free, the cost is explicit in account maintenance fees or hidden inside the difference in interest rates between what the bank gets and what the account holder gets, plus the capital costs born by the receiver in facilities to handle pieces of paper. Since the fees are the same regardless of transaction volume, credit card has an advantage for consumers in that it is pay as you go and eliminates the personal facilities for check and cash handling.

CBDC transactions would not be costless, the question is how much, and form: flat fee, percentage, other socialization/cross subsidy. The question of how much will be driven by the cost of the service plus the transactors' perceived value of service over other mechanisms.

Likewise CBDC would not be truly instant but would have certain latency. On the payor side, for consumers the latency is an advantage--receive goods and service now, pay at the end of the settlement period or later if you pay for that service with interest charges. Why would a consumer choose CBDC if it doesn't include the loan to float between the transaction date-time and settlement date-time?

I'm not certain what the doomsday claims are, but there are tradeoffs to centralization. For example, getting de-banked becomes a heightened threat if there is no alternative. As an example, I'd offer the status of vendors psychoactive substances legal at the state but not federal level or those offering politically unfavorable goods and services [0]. Similar to the state of unbanked people everywhere, the increased reliance on more liquid payment forms brings increased risk of criminal predation since other market participants have de-risked though reduced cash holdings.

0. https://en.wikipedia.org/wiki/Operation_Choke_Point

Because it will be *truly* computer automated and operate 24/7/365 without middlemen processors charging outlandish fees that are hidden from the consumer.

Yes but let's fact facts --- simple accounting on a computer is very cheap. Cheap enough that banks and the Fed can write it off as overhead --- unlike crypto mining which is intentionally designed to waste energy and money.

> removed from the economy

This is untrue. Bank fees are not placed into landfills, figurative, literal or otherwise. At best you can say that dispositive decision making power for the money is changed from the transaction participants to the transaction facilitators. One might say that the leaders of banking orgs spend it on the frivolous, like large boats. The boatwright’s children might differ as otherwise they’d be beggars.

Who are in turn the consumers of other producers. The money doesn't get dumped into a never draining pool of gold in which "transaction middlemen" swim recreationally.

A CBDC is digital currency that banks will use to process transactions between each other behind the scenes.

Right now; if I use Bank A and you use Bank B, there is no way for me to transfer money to your account without going through ACH (Automated Clearing House) which can take days and despite it's name, isn't really "automated" --- it was originally designed to process paper checks.

A CBDC will change this and make instant account transfer 24/7/365 possible. It will be like Venmo for everyone without any sign up --- you know, Venmo only works if both parties have signed up for a Venmo account and have funds deposited in Venmo. With a CBDC in place, the sign up will be an automatic part of setting up an account with *any* bank.

A CBDC will make it easy for you to split the cost of dinner with a friend while you're sitting at the table. Just use your phone to sign in to your bank account and make the transfer. Likewise, your friend will be able to sign in to his/her account and see that it's done --- instantly --- like magic, something that has never been possible before.

Basically, a CBDC will speed up and modernize the banking system.

Micro: 1:Let´s say you need a small investment. Right now you need to apply for a finance structure at a bank or group of people with numbers about your projection. We have public insights right now, ´data-driven´ was the holy grail.

Meso: 2: What if you don´t have insights of the economy when crypto takes over? How is a local football club going to finance a new building? The wealth gap is increasing and clubs like that ore not self-suffienct.

Macro: 3: What happens is that the economy slows down at the economy due to indifference at the beginning of the supply chain. Many big online companies make money through adds, but if people don´t buy items to sell, then they don´t need to buy much adds, which means online companies make less money.

Meta: 4: Long-term investments are critical for any economy. You can´t hire people if you are not sure about future economic prospects. The central bank want to create stable economic growth. If they don´t know the numbers, they cant´t help. Small companies and big companies are in favour of a certain external stability, without that doing business projecting would be gambling. We don´t need that. ==

Why it is critical:

The big issue that needs prevention is that economics impact each other in a domino effect. Economies have movement up and down, the thing is that have accepted and dealt with the benefits over time much from a western perseptive and now that the global economy like america and china are more equall the impact of a downturn in china would impact america much more.

example: If war happens in another country in the world, we almost directly experience effect in other countries.

Classical economics and keynesian economics both argue about what is smart: More goverment or less goverment.

Goverment is in my eyes more a ethical motivator for the society. Goverments already impact economy through climate policy. I think that role of advocate of justice of society through economic policy could be right. That depands on the design of the decion making unit. === WHy: Tax in general is difficult, now with crypto it is going to be more difficult.

How: I think it is important that we should argue the cashflows of goverment in general.

What: I think all organisations should focus on being self-suffienct and let the goverment help those organisations with doing that for justice in society.

When & where: Less = more / more = less is my economic few. --> if something works self-suffient, try doing less = making time and capital available --> if somehting does not work = spend capital and time to make it self-suffient.

== I mean for example:

why are foodbanks not working together more effective? Why don´t we have more laws to help prevent food waste? Why don´t companies and locals sponsor foodbanks? Why are people volunteers without benefits?

I´m more worried about the people who suffer the most in economic downturns. == My point is that we can design the economy we would like to live in, we do that by developing crypto with it´s benefits, now we need to think about the impacts of the perspective from central banking. ==