The Future of Money: CBDC

Our monetary system is being disrupted. Cryptocurrencies allow fast settlement, cross-border transactions for anyone with an internet connection and a mobile phone. Crypto and Decentralized Finance (Defi) offer great opportunities and risks. Governments are responding with regulations and a "crypto-like" alternative: Central Bank Digital Currencies (CBDCs).

Interested in content like this? Then check out The Free-Range Technologist from Prof C. https://frtech.substack.com/

Transcript

1. Future of Money: CBDCs J Scott Christianson
2. “Interbank payment systems such as SWIFT are old, inflexible, slow, and increasingly prone to cyberattacks at a time when banks are under tremendous pressure to cut costs and protect customer data from hackers, which blockchain could achieve,”
3. CENTRAL BANK DIGITAL CURRENCIES (CBDCs) A digital currency is issued and backed by a central bank, considered legal tender, and pegged against a fiat currency.
4. CENTRAL BANK DIGITAL CURRENCIES (CBDCs) • These are NOT cryptocurrencies but are digital dollars that exhibit some of the same features of cryptocurrencies. • Models include: • Wholesale: Issued by the central bank to banks (bank-to- bank transactions) • Retail: Issued by the central bank to the general public. •
5. Retail: Direct
6. Retail: Hybrid
7. Retail: Hybrid
8. Speeches on CBDCs have turned more positive since late 2018 Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS working papers, No 880, Number of speeches 80 60 40 20 0 –20 –40 2021 2020 2019 2018 2017 2016 Cumulative count of speeches: Retail CBDC Wholesale CBDC Positive stance: Negative stance: Net, positive–negative Speeches on CBDCs have turned more positive since late 2018 Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS working papers, No 880,
9. CBDC research and pilots around the globe Source: R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS working papers, No 880, 2 CBDCs research and pilots around the globe: a stock take • Draw on R Auer, G Cornelli and J Frost (2020), “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS Working Papers, No 880 (link to the data) BS = The Bahamas; ECCB = Eastern Caribbean Central Bank; HK = Hong Kong SAR; JM = Jamaica; SG = Singapore. The use of this map does not constitute, and should not be construed as constituting, an expression of a position by the BIS regarding the legal status of, or sovereignty of any territory or its authorities, to the delimitation of international frontiers and boundaries and/or to the name and designation of any territory, city or area. Source: R Auer, G Cornelli and J Frost, “Rise of the central bank digital currencies: drivers, approaches and technologies”, BIS Working Paper, no 880, August 2020. BS HK JM SG ECCB Live retail CBDC Retail pilot ongoing Retail pilot completed Retail research Retail research and wholesale project Wholesale project N/A Project phase:
10. “CBDCs now seem a matter of when, not if” Claire Jones, Financial Times. Gillian Tett, Financial Times. “The Fed’s digital currency could displace crypto”
11. What could we do with CBDCs that we can't do with today's dollars?
13. Airdrop money into wallets
14. Create money where it will be used
16. Money with an Expiration Date
17. Welcome to the world of programable money.
19. Real-time economic data
20. Public Ledgers = Public Knowledge
21. Transparency in Government/Non-profit/Education Internal-use-only stablecoin • J Scott Christianson
23. Public Ledgers = Public Knowledge
27. Fuse of Monetary and Social Policy
29. Fuse of Monetary, Geopolitical, and Trade Policy
30. Predictions • The momentum of crypto will carry it forward regardless of government regulation or fundamentals. Remember that momentum often beats fundamentals. Bitcoin might not be around in 5 years, but something will. I suspect Ethereum or Cardano. • Innovation and accelerated deployment of CBDCs will happen in countries without good monetary systems and in countries with authoritarian governments or with leaders with authoritarian aspirations. • Erdoğan and his ilk will be first in line to fuse social control with monetary control, assuming they can find a means to hide their own corrupt dealings.
31. Predictions • The US and the EU will be slow to adopt CBDCs due to entrenched interests (i.e. our friends in the banking industry). CBDCs in these locations will be unlikely to have some of the most interesting features. • In the US and EU CBDCs will used as an argument for regulating cryptocurrencies. • The drive to displace the US dollar as the world’s de facto currency will grow quickly, with China leading the way. China will use CBDCs to fuse foreign and monetary policy via Belt and Road partners and force them to use digital Renminbi, reducing the use of US Dollars and Euros.