Cryptocurrencies

[John Hjorth]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....

SD

Sharperdigaan,

What's your source for posting this?

[SharperDingaan]

CBDC is doing very well thank you; the impediment is not the technology, it is the corporate social responsibility that goes with implementation. A very real restraint under Covid, as we need the work that existing systems generate.

A very narrow, sectoral, example.
Similar things would play out in other sectors as well, and at about the same time.

• Were a global CBDC in place (one ring that rules them all), ALMOST ALL securities transactions AROUND THE WORLD would settle almost immediately. Value changing hands at the CB wallets, beneficial interest changing hands in a ledger similar to that used by CBDC. To do this at scale, we need to use the hyperledger and private oracles/ledgers. At present we can only do parts of what is required, and don't have the armies of hyperledger coders necessary - a temporary limitation.
  
  Every 'financial' city around the world has thousands of clerks involved in transaction settlement, occupying floors of high priced real estate. Settle via CBDC and they are both instantly redundant AND obsolete. All those involved in credit card settlement, A/R, and A/P are gone as well. How on earth do you manage that scale of permanent mass layoff, without it blowing up on you? Corporate Social Responsibility.

   
Velocity of money is simply level of economic activity (as transactions value)/money supply. Covid materially reduced economic activity, and QE materially increased money supply. Hardly surprising that Velocity has dropped like a brick. In many places the solution has been to just give people a minimum payment every month. Incremental QE simultaneously distributed through mass payment, and withdrawn from the total money supply. Higher activity, on the same net supply of money, but hated by money centers as it deflates asset value bubbles.

If ever there was a silver lining to Covid, it is the forced rethink as to how crypto is going to be implemented.
Change management and Corporate Social Responsibility forced into front and center.
All good.

SD

[SharperDingaan]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....

SD

Sharperdigaan,

What's your source for posting this?

The Riksbank's e-krona project
https://www.riksbank.se/en-gb/payments--cash/e-krona/

Designing a CBDC for universal access
https://www.bankofcanada.ca/2020/06/staff-analytical-note-2020-10/

Riksbank is the best source for usage experience. Bank of Canada is the best source for principles.
There is also related material at both the Bank of England and the Bank of International Settlements. Much of it not public, and for obvious reasons. Point is that CBDC is implementable, it is here, and it works. 

SD

[Cigarbutt]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....
SD

Sharperdigaan,
What's your source for posting this?

The Riksbank's e-krona project...https://www.bankofcanada.ca/2020/06/staff-analytical-note-2020-10/
...

CBDC is doing very well thank you; the impediment is not the technology, it is the corporate social responsibility that goes with implementation.
A very real restraint under Covid, as we need the work that existing systems generate.
A very narrow, sectoral, example.
Similar things would play out in other sectors as well, and at about the same time.

• Were a global CBDC in place (one ring that rules them all), ALMOST ALL securities transactions AROUND THE WORLD would settle almost immediately. Value changing hands at the CB wallets, beneficial interest changing hands in a ledger similar to that used by CBDC. To do this at scale, we need to use the hyperledger and private oracles/ledgers. At present we can only do parts of what is required, and don't have the armies of hyperledger coders necessary - a temporary limitation.
  Every 'financial' city around the world has thousands of clerks involved in transaction settlement, occupying floors of high priced real estate. Settle via CBDC and they are both instantly redundant AND obsolete. All those involved in credit card settlement, A/R, and A/P are gone as well. How on earth do you manage that scale of permanent mass layoff, without it blowing up on you? Corporate Social Responsibility.

   
Velocity of money is simply level of economic activity (as transactions value)/money supply. Covid materially reduced economic activity, and QE materially increased money supply. Hardly surprising that Velocity has dropped like a brick. In many places the solution has been to just give people a minimum payment every month. Incremental QE simultaneously distributed through mass payment, and withdrawn from the total money supply. Higher activity, on the same net supply of money, but hated by money centers as it deflates asset value bubbles.
If ever there was a silver lining to Covid, it is the forced rethink as to how crypto is going to be implemented.
Change management and Corporate Social Responsibility forced into front and center.
All good.
SD

The Swedish central bank's project is only a pilot project which has skipped almost all controversial aspects, continues to be based on the traditional two-tier banking system and is simply a reflection of the general declining use of physical cash by Swedes.
Going to digital currencies will improve domestic and cross-border payments efficiency but traumatic mass layoffs are a wild stretch of the imagination. i would say the introduction of ATMs was much more potentially impactful on clerical jobs so..
The velocity-of-money comments are where the money is for public digital currencies and asset deflation has no direct effect on money supply. Centrally-based mass payments (virtual or helicopter) means crossing the Rubicon and fundamental laws would need to be changed although we're moving closer to that every day unfortunately, with the obvious risk that private cryptocurrencies may somehow represent an interesting alternative.

[Spekulatius]

Aren’t the e-currencies much more disruptive to banks? After all, if I can store my digital currency in any type of digital wallet, I don’t need a checking account any more. Assuming the Digital wallet has transactional features, what would the point of a checking account be, especially with banks offering no interest ?
How would the banks getting deposits in this scenario?

[SharperDingaan]

E-krona is hard evidence that the public is accepting of digital currency, and using their phone/device as their bank account. And it comes with 2 yrs+ of quant data, covering everything from adoption rate through to granular monetary velocity in whatever sector you would like to know about. If it is representative, incredibly valuable data and impossible to dispute.

If I use CBDC I don't need a checking account, and the CB sets the interest rate on my overnight balance of surplus funds. Hence, if a bank wants my money as a deposit - it has to outbid. It means NO negative interest rates, as why pay a bank to keep my money - when the CB with a better credit rating will do it for free? 

Obviously, this makes a lot of people very nervous - hence change management.
The best mouse-trap in the world is pretty useless, if nobody thinks they will survive the disruption.

SD


 

[Spekulatius]

E-krona is hard evidence that the public is accepting of digital currency, and using their phone/device as their bank account. And it comes with 2 yrs+ of quant data, covering everything from adoption rate through to granular monetary velocity in whatever sector you would like to know about. If it is representative, incredibly valuable data and impossible to dispute.

If I use CBDC I don't need a checking account, and the CB sets the interest rate on my overnight balance of surplus funds. Hence, if a bank wants my money as a deposit - it has to outbid. It means NO negative interest rates, as why pay a bank to keep my money - when the CB with a better credit rating will do it for free? 

Obviously, this makes a lot of people very nervous - hence change management.
The best mouse-trap in the world is pretty useless, if nobody thinks they will survive the disruption.

SD

I assume a central bank sponsored e-currency would run with a ledger at a de trial bank? that’s the only way this would make sense I assume.

Again, if so, why is the point of a bank collecting deposits? There is none, at least not with zero interest rates. The banks then would simply lend from the central bank directly and maybe that simply defines what a bank is going forward. lending still requires expertise in most cases, but such a system also could encourage direct lending from a central bank.

The central bank would have much more information  than it has now, since it had the ledger of any transaction. This would weaken the status of banks, credit record agencies and all sorts of financial intermediaries, money launderers etc.

[SharperDingaan]

Ledger at the CB only, and no trial bank. Everyone with a wallet at the CB, accessed via a phone/device.
There is a need for change management, but not a trial bank (CB can privately check the mirroring of existing bank accounts).

A bank, lender, or credit card company is an intermediary - and blockchain is at heart a P2P technology that eliminates intermediaries. The CB network, combined with P2P technology, creates a monopoly – that can be easily regulated, with 21st century tools. In a Canada, this is existing practice, and we still do everyday banking. If you do what the regulator (OSFI) tells you, when they tell you, you will enjoy a nice life. Don’t, and you will either be replaced, or permanently kicked out of the banking cartel. It works, it is effective, and it is robust.

Very different to the practices in many other places, that rely on both old plumbing, and the plumbing staying that way. Blockchain doesn’t rip out the old plumbing - it by-passes it, and makes it too expensive to use. Those other places can bitch all they want, but they either get with the program or go out of business, as economics is a bitch.

Of course, the underlying assumption is that the ruing CB isn't corrupt. We have Bitcoin as the antidote, it was designed for almost exactly this condition (zero trust), and it closes the circle. Next time you see an anarchist, give him/her a kiss!

Yin and Yang, alive and well.

SD

[rkbabang]

Ledger at the CB only, and no trial bank. Everyone with a wallet at the CB, accessed via a phone/device.
There is a need for change management, but not a trial bank (CB can privately check the mirroring of existing bank accounts).

A bank, lender, or credit card company is an intermediary - and blockchain is at heart a P2P technology that eliminates intermediaries. The CB network, combined with P2P technology, creates a monopoly – that can be easily regulated, with 21st century tools. In a Canada, this is existing practice, and we still do everyday banking. If you do what the regulator (OSFI) tells you, when they tell you, you will enjoy a nice life. Don’t, and you will either be replaced, or permanently kicked out of the banking cartel. It works, it is effective, and it is robust.

Very different to the practices in many other places, that rely on both old plumbing, and the plumbing staying that way. Blockchain doesn’t rip out the old plumbing - it by-passes it, and makes it too expensive to use. Those other places can bitch all they want, but they either get with the program or go out of business, as economics is a bitch.

Of course, the underlying assumption is that the ruing CB isn't corrupt. We have Bitcoin as the antidote, it was designed for almost exactly this condition (zero trust), and it closes the circle. Next time you see an anarchist, give him/her a kiss!

Yin and Yang, alive and well.

SD

Just a note that anarchists do not want you to kiss us.  A hug would do.