Organized Push For CBDC By IMF & Friends

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For the last few days as I browse through various crypto news headlines, I keep seeing "CBDC". This abbreviation kept appearing time and time again. At first I thought it was a ticker symbol for some random new token. After reading some of these articles it became apparent that CBDC stood for Central Bank Digital Currencies.

In the title I suggest that this is an organized effort by IMF, central banks, governments and perhaps media to push forward the idea of CBDC - central bank digital currencies. I don't know that for the fact. It is just an opinion based on my observations. Let me establish some dots and try to connect them, then you can come to your own conclusion.

While bitcoin adoptions keeps rising every year, it is still not a simple technology to understand fully. Because it is not one thing, it doesn't solve one problem. It is an innovation that addresses many issues, and its features allows it to be many things among which are money, store of value, currency, network, trustless & permissionless system, software, etc.

However, when someone asks us "What is bitcoin?", most of the time the simplest answer is - "It is a digital currency".

This alone doesn't fully describe what bitcoin. Being digital is not among its main innovative features. It only makes sense when concept like consensus protocol, decentralization, being permissionless are fully understood.

Many people do not realize that fiat currencies used on daily basis are also mainly digital. Paper form cash accounts for only small percentage of total fiat in circulation. The problem is the illusions created around the traditional financial systems to cover their flaws.

Today, in the US and around the world, main form of sending and receiving money is via banks, debit and credit cards. When we use credit cards it transactions happen instantly, however funds are not settled until days later. Usually we are also asked to sign the receipt, which gives sense of security. But nobody in really checking the authenticity of these signatures, all the provide is false sense of security.

They main problem with these transactions is the fees. These fees range from 1.5% to 3.5%. It may seem small but when used all the time they add up to significant amounts. Of course this is another illusion, these fees are not directly deducted from users/customers, but fees are paid by the merchants. Merchants would consider this a cost of doing business, hence these costs would reflect on the prices of the goods and services they sell.

Even newer technologies like paypal and amazon's merchant services apply fees to all transactions. All of these fees do not make sense in this day of age. Why should there be fees for financial transactions? I know decentralized blockchain solutions like ethereum and bitcoin also have transaction fees. But there are also decentralized networks like Hive that have zero transfer fees. At least decentralized solutions provide transparency, and fees are not hidden from the users/customers.

The point I am trying to make is, financial systems in the US and around the world are already digital. US dollars we use everyday are digital. Digital currency is not an innovation. We were lead to believe that all money exists in cash paper form, and perhaps banks are sending paper representation of cash every time we use credit cards. That is not the case. More people understand that now, because of bitcoin brought forward this discussion.

If we already have been using digital currencies, why IMF, governments, central banks are talking about creating digital currencies now? It is because the systems they have been using are outdated, slow, inefficient. While they control printing of money they fall behind in innovating, because they were happy with charing all kinds of fees and interests and enriching themselves.

So, yes perhaps they truly want to create new kind of digital currencies that will work better. I think it is driven by the fear of losing control over money. Remember, how bitcoin has been described as digital currency? Now if central banks make their currencies "digital", we shouldn't have a need for bitcoin anymore. Right? At least this seems to be the narrative they are trying to spread and confuse people.

Some of the big news in crypto came from China this year. Last spring China banned mining bitcoin and other crypto. Then just recently China banned trading bitcoin and crypto. There were many "experts" and analysts who tried to explain China's move against crypto. The most plausible one, in my opinion, is that China is clearing the path for digital yuan. China has expressed desires of creating digital yuan a while ago. Now it seems like they are getting ready to make this a reality.

On the other hand, a couple of days ago Federal Reserve chairman Jerome Powell said - "US has no plans to ban bitcoin and crypto." At the same time, crypto industry has been targeted in political arenas and by regulatory institutions. Most of the concern has been expressed against stablecoins which are usually pegged to USD.

Stablecoins has proven to have demand and serve a purpose, and maybe even do the job of USD is a more efficient manner. Are Fed and other central banks worried that stablecoins will replace the role of USD?

On October 1, 20021, IMF published a blog post titled - Crypto Boom Poses New Challenges to Financial Stability. The use a strategy of pretending they understand bitcoin and crypto and they like the solutions they provide and start out their article with:

Crypto assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem.

Then, they go on listing all the problems they see with crypto like hacking, money laundering, terrorist financing, tax evasion, energy used for mining, etc. In the end they offer two solutions: crypto regulations and central bank digital currencies.

Authorities should prioritize strengthening macroeconomic policies and consider the benefits of issuing central bank digital currencies and improving payment systems

A couple of months ago, on July 26, 2021, IMF published another blog post titled - Cryptoassets as National Currency? A Step Too Far in response to bitcoin becoming a legal tender in El Salvador. When they were trying to address consequences of having bitcoin as legal tender, they made a big mistake (intentionally or not) by generalizing all of cryptoassets and bitcoin. Such tactics only create confusion, and do not provide useful guide, and perhaps spread misinformation.

Now the interesting this time, in their post from October 1st, they avoid using bitcoin in their post completely. Feel free to go to the post and search for word "bitcoin" by pressing Command/Control + F.

They are either making the same intentional misinformation with generalizing bitcoin and crypto, or maybe now they think bitcoin is not the problem, but other cryptoassets are?

Coincidentally, there was another news on the topic. This time from the White House, a statement from president Joe Biden.

The United States will bring together 30 countries to accelerate our cooperation in combating cybercrime, improving law enforcement collaboration, stemming the illicit use of cryptocurrency, and engaging on these issues diplomatically.
source

2021 continues to be an interesting year for bitcoin and rest of crypto. Innovation is real. Secure truth machine is here to stay. Central banks can implement new technologies and continue printing their digital currencies but in a more efficient manner. That will not make them innovators in the space though. They key parts of this innovation are consensus protocols that allow open and decentralized networks to flourish and provide property rights to all, ability to transact in peer to peer manner, financial freedom without a need for permission from central banks or any other entities.

Have you seen CBDC in the news as of late? Let me know what you think in the comments.

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19 comments
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"Have you seen CBDC in the news as of late?"

Yes, @geekgirl, the digital yuan of China is the one to which I have paid the most attention. It appears China is way out in front of the rest of the countries talking about CBDCs, since they are already testing the use of it.

I've read about their plans for it during the upcoming Winter Olympics. I think we expect them to make a very serious run at "proving" how well it works ...

Very sobering ...


Are you still working on your programming skills? If so, what are your latest projects? I am working on building a database to handle my crypto transactions and figuring out what I owe in taxes ... 🙄😒


I hope all is well with you and your loved ones. It is a crazy, "new normal" world we are living in ...

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(Edited)

Hi @roleerob!

Good to see you as always.

Yes, talks about digital yuan has been going on for a while. Not sure why they saw a need in banning bitcoin though.

I haven't been doing much of programming lately. I was busy with travels during summer, and a little busy since then. I do want to get back to learning more and have some project ideas to work on. I hope to do so once I get an opportunity to allocate some time for that.

Tax project sounds interesting and there is a demand for that too. But taxes are too complicated, especially crypto ones.

Thank You. I hope you are doing great as well.

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"Not sure why they saw a need in banning bitcoin though."

Eliminate any competition. China will do everything in its considerable power IMHO to undermine any threat to their "virtual currency." Their people are not free to choose otherwise ...


With some programming experience myself, I have thought some day I may turn some time and attention to learning more about programming "in here." If that day comes, you will be one of those whose experience I will be very interested in.

For now, though, all my time and attention is focused on building a database and the programming needed to handle all of my crypto transactions ...


Take care! 👍🙂

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Eventually I see goverments issuing their own currency the issue is it's going to be YEARS before they do it. I don't expect it for honestly another 5+ years. They are going to waste all their time trying to regulate something they can't and then try and roll out their own digital currency which might flop or simply you have no other option which i really hope wont be the case. Non the less it's going to make for some VERY interesting years to come.

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Governments do move slow. Do nothing approach probably would be better when it comes to regulations. But since most already created confusion regarding taxes. Providing more clarity could be beneficial. I guess they can't come up with something useful until they fully understand what they are dealing with.

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I don't watch a lot of crypto news so I have not. Most things outside of Hive I'm oblivious when it comes to crypto.

Not that shocked other than it took them this long.

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Haven't you heard most interesting news is in crypto? :)

I don't always follow all the news either. But I do get notifications and sometimes read the most interesting ones. Usually it is the same stuff over and over.

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I think you can only push a CBDC in an authoritarian country like China as long as physical cash is around its pretty hard to enforce the CBDC rules!

So countries like my own would be near impossible as most people operate with cash and large unbanked population making it far more difficult to get people to switch

I can’t see this going down smoothly even the digital yuan hasn’t been well received in China hence the push to ban alternatives

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I would assume you can still have physical cash with CBDC. Central bank will just have to guarantee equivalent amount of CBDC when paper cash is presented. Just like they used to do with gold and silver in the past.

But with more and more people having access to mobile phones, governments can easily create wallets to make CBDC easily accessible.

You are right though without authoritarian powers, it would be difficult to implement when there are better alternatives. Question is whether central banks can compete with open networks.

Still, competition is good and hopefully this will lead positive outcomes, instead of banning the alternatives.

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That would defeat the purpose of a CBDC the whole point of it is to have it be programmable to add certain incentives and disincentives and to remove the anonymity of money, it would also break the fungibility of your medium of exchange as stores and people would value physical cash at a premium over the CBDC

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Programmable money sucks. Money should be fungible. And perfectly traceable money cannot be fungible.

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CBDCs are of course in the news. I see a ton of news about it and I do think it will come out eventually. I am just wondering how strict the regulations will be.

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Excellent insights in this article. Governments fear the lack of control they have over cryptocurrencies, but at the same time want to exploit the benefits of crypto technology. They spread FUD over Bitcoin, while paving the way for their own digital currency that will not be decentralized or democratized.

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It took me a long time to figure out what CBDC stood for too. You would think given the amount of stuff that I read on here it would have been clear to me much sooner than it was. Now that I understand them more, I can see the potential downfalls and issues with them.

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I also think that when bitcoin is described as a digital currency, they are not telling 90% of the story.

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Hey @geekgirl,
Sorry to jump in with something a bit off-topic.
I'm looking for support for the HiveBuzz proposal which went unfunded today.
Do you mind reviewing and supporting it if you find it valuable for the platform, or give me your feedback if you don't? Either way, that would be greatly appreciated.
https://peakd.com/me/proposals/147
Thanks.

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