The case against CBDCs

You know me. I’m tweeting about #digitalassets all day long. I’ve been involved in eight central bank digital currency #CBDC trials. I live and breathe “crypto,” as I shall no longer call it. (Digital asset with many classes)  I hold a ton of QNT from back when it was dirt cheap. 

And yet. Coming out of three meetings with the MIT, a Washington Thinktank, and a large hedge fund, I am more than ever skeptical that CBDCs are a good thing. At least not now. 

Here is the feedback from people who actually decide our financial future ) heads up: that’s not you!) 

1. Financial inclusion my arse

Electronic money is said to create greater inclusion. It only does so when people actually have money to buy devices and access to banking. Millions of refugees, immigrants, poor have no way to get proper KYC. 

• Privacy? What privacy? 

We can’t have citizens transactions in a public blockchain. I don’t what anything you know where I spend what. We need privacy for firms too. If everything is on a public blockchain  we no longer have these secrets nor competitive advantage. Business needs a certain amount of opacity. 

• Cybersecurity

Just because blockchains themselves are safe, the projects that use them are not. Few see DeFi projects have any kind of cybersecurity awareness. Not a week goes by without another hack. 

• Big brother

Digital assets give too much power to the government. They make it easier to respond to crisis, but I really don’t want to live in a world where the taxman knows my tax bills by simply going to a chain explorer. 

Let me rant on

None of these arguments make me quit my membership in the lobbying groups I’m working in. I won’t sell my Quant. But they make me think that perhaps there is a reason why repressive dictatorships and failed states like China are the first to adopt big brother money aka CBDC. And why the West has been extremely hesitant to move forward. You don’t want the people to trade on XRP – it’s a private company profiting from your daily booze buy.  Nor do I want Circle control my USDC spending. And after all, what is the difference between a CBDC and a Stablecoin pegged to the fiat at digital national currency is set to replace. There is none. 

What’s left are the less desirable features of a CBDC: control. And that goes against the grain of #crypto wisdoms and #web3. 

The payment rails we have can only be improved by smart token with algorithmic components like cash flow.  

What about a CBDC that includes sustainability and cashflow calculations or inflation targets in the algo.  Such a coin would be an algorithmic stablecoins by any other name but still be sufficiently pegged to be indistinguishable from fiat on a blockchain. 

And then there is Deloitte proposal of using Bitcoin as a CBDC. Hello Bitcoin Maxis. Feast on that. Expect nobody wants a national currency volatility largely unrelated to a nation’s economic output or transparency without accountability. 

Maybe what we need is programmable money with zk proof as Israel seems to think. But even that is something your average woman on the street won’t trust. At least not until you get a cashback or other benefits from it. 

The people clamoring most for national digital currencies are people whose fans to profit from their adoption. That alone makes me suspicious. Why is Ripple a sponsor at every CBDC forum? Why is Accenture so involved? It’s not for idealistic reasons. And not for #inclusion or #equality. It’s for profit. 

And the one thing the government shouldn’t profit from is your freedom. In my world view at least.  

The American idea of not trusting government and preferring private enterprise is rubbish. America has huge infrastructure deficits. Crumbling buildings and potholes everywhere. Collapsing bridges and overflowing sewers. Believe it or not, the government is actually good for something and removing it from the equation is a program. Where is the right balance?

The ultimate rationale why a government would want a traceable digital asset is money laundering and taxation 

The state of CBDC is like my Facebook status. It’s complicated man.