advantages of central bank digital currency ,after resolution united states federal reserve From plans for a central bank digital cryptocurrency

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advantages of central bank digital currency
advantages of central bank digital currency ,after resolution united states federal reserve From plans for a central bank digital cryptocurrency
advantages of central bank digital currency

advantages of central bank digital currency last week the united states federal reserve finally released its initial plans for a central bank digital currency the highly anticipated paper is

packed with proposals that could have serious implications for cryptocurrencyy should they come to pass today i’m going to briefly explain what central bank digital currency are break down the federal reserve cbdc paper and tell you what adigital dollar could mean for the crypto market .

before i talk about the fed there’s something that needs to be said if you came here looking for financial advice you won’t find a shred that’s because entertainment and education are the only things i spread please contact a financial advisor if you need help getting that bread if this is the first time we cross paths my name is guy and fiat currency makes me mad.

that’s why i create quality crypto content to prove to the world that crypto is more than a fad coins tokens news reviews and other topics that will turn you into a crypto chad if this sounds rad subscribing to the channel and pinging that notification bell
is a good plan i’ve left timestamps .

below that you can use to skip around if you’re in a hurry it’s best if you watch until the end but if you can’t then no worries now i know my rhyme’s a baller but it’s about time we examined the digital dollar to fully understand the effects a digital dollar could have on the crypto.


market you need to know a few things about central bank after advantages of central bank digital currency digital currency or
cbdcs for starters cbdcs are not cryptocurrencies in fact they couldn’t be more different


this is because cbdcs are centralized permissioned private and closed source in plain english cbdcs are controlled by the central bank you must provide detailed personal information use a cbdc.

advantages of central bank digital currency and How to use a cryptocurrency all transactions

advantages of central bank digital currency cbdc

only you and the central bank can see your transactions and only the central bank knows how its cbdc works by contrast crypto currencies are decentralized permissionless public and open source

in plain english cryptocurrencies are not controlled by anyone you don’t have to provide any personal information to use a cryptocurrency all transactions can be viewed by anyone in real time and anyone can check to see how a cryptocurrencye works via its code
whereas cryptocurrencies are designed


from the ground up to maximize freedom cbdcs are designed from the ground up to
maximize control making it possible for central banks to do things like block
transactions freeze accounts alter account balances and even put limits on
account holdings

if this sounds like a conspiracy you must have missed my Post about a cbdc report by the bank for international settlements which explicitly states that cbdc’s will have these qualities that’ll be in the description for you to watch later


now despite the dystopian qualities of these cbdcs almost every central bank in the world is looking to develop their own and a few countries have already released theirs namely the bahamas and nigeria this is mainly because central banks want to have more control over their


monetary policy right now central banks can only create money and this has caused a lot of
inflation cbdc’s will make it possible for central banks to destroy money and this will help keep inflation under control at the advantages of central bank digital currency



expense of the average citizens advantages of central bank digital currency financial privacy and financial autonomy many countries are also using cbdc’s as a means of protecting their national currencies from the monetary policies of other countries namely the united states whose dollar is currently
the world’s reserve currency the federal reserve is the central bank of

the united states and it has been under extreme pressure from politicians to develop a digital dollar to ensure that the usd doesn’t lose that status to a currency issued by another country or company or even a cryptocurrency like btc this pressure began back in 2019 when


facebook now meta revealed its libra currency and has only increased as cryptocurrency adoption continues note that libra is not a cryptocurrencye it’s essentially a corporate cbdc after almost two years of sidestepping cbdc’s federal reserve chairman jerome
powell announced in may 2021 that


report detailing For advantages of central bank digital currency ,after resolution united states federal reserve From plans for a central bank digital cryptocurrency 2022
cbdcs

advantages of central bank digital currency cbdc

the federal reserve would be releasing a report detailing the pros and cons of a digital dollar jerome was pressed about this report during his recent nomination hearing and the report was duly released last week


as always i’ll give you my thoughts as we go along and if you’re curious about what happened at jerome’s nomination hearing you can find out using the link in the description
the federal reserve’s cbdc report is titled quote money and payments the us dollar in the age of digital transformation


and it was written by the federal reserve board of governors for context the fed board of governors currently consists of four people including chairman jerome powell jerome and two of the other board members have historically been skeptical of a cbdc though this aggregate opinion


may change once the remaining three seats on the seven seat board are filled more on that later the report begins with a short summary and introduction and there are a few things that stuck out to me there first quote in advantages of central bank digital currency
this paper is the first step in a public


discussion between the federal reserve and stakeholders about central bank digital currency if you’ve Read of any of my Posts about the world economic forum you’ll know
that the term stakeholder is often used in reference to corporations and governments not the average person to be fair it’s not entirely clear if stakeholder is being used in this


context during the report and it’s worth pointing out that the fed has invited u.s citizens to submit feedback about a possible cbdc on its website the second thing that stuck out to me was the very next sentence which reads quote for the purpose of this paper


a cbdc is defined as a advantages of central bank digital currency liability of a central bank that is widely


available to the general public if you’ve Read of any of my recent Posts about cbdc’s you’ll know that there are two kinds of cbdc a retail cbdc which will be used by regular people and a wholesale cbdc which will be used by select individuals and institutions as such this


second sentence specifies that everything the fed says in the report is relevant only to retail cbdc’s so keep that in mind as we go along the authors then go on to detail the six criteria that a digital dollar must meet first it must provide a benefit to the economy that outweighs the risks


second it must provide that benefit more effectively than any alternative methods
third it must complement rather than replace existing money fourth it must protect consumer privacy fifth it must protect against criminal activity and sixth it must have broad support from quote key stakeholders now besides that sixth criterion it’s

cryptocurrenccy stable coins are one of these alternative methods that are more effective

the second criterion that caught my eye and that’s because it’s clear that cryptocurrenccy stable coins are one of these alternative methods that are more effective than a advantages of central bank digital currency dollar as it so happens the world economic forum’s recent crypto report details

so-called synthetic cbdc which would consist of stable coins being leveraged by central banks more about that in the description anyways the last part of the introduction that caught my eye was quote the federal reserve does not intend to proceed with issuance of a cbdc without


clear support from the executive branch and from congress ideally in the form of a specific authorizing law put simply it’s up to the politicians as to whether a digital dollar sees the light of day the first part of the report provides a brief breakdown of the existing forms of
money in the u.s financial system these are


central bank money i.e money that commercial banks have at the fed commercial bank money i.e money that consumers have with the commercial banks and non-bank money i.e money that consumers have with non-bank entities like paypal the authors explain that each kind of money comes with its own risks


benefits and that central bank money is the safest form of money due to the regulations and insurance associated with it i would argue that it’s the highest risk form of money because of the extreme centralization associated with it but let’s not go there the second part of the report provides


similarly brief breakdown of the payment system in the united states and a few things stuck out to me here first quote systemically important payment firms are subject to heightened supervision and regulation if you watch my Post about the stablecoin report by the president’s


working group on financial markets aka the plunge protection team you might recall that the pwg said they might label stablecoin issuers as systemically important payment firms
this would bring stable coin issuers under the wing of the federal reserve and could foreshadow a synthetic


cbdc another thing that stuck out to me in this section is that the federal reserve will be releasing a new payment system called fed now in 2023 which will allow people to move money 24 7 the same way you can with cryptocurrencyi and many mobile payment apps
speaking of which the federal reserve


specifies that non-bank payment services such as these mobile payment apps could
pose a threat to the current financial system luckily the fed doesn’t see cryptocurrencies as a risk to financial stability at least not jerome powell though i will point out that this is not mentioned in the report


the authors then drop a crazy statistic i’ve mentioned before and that’s that five percent of the us population is unbanked and another 20 percent rely primarily on other financial instruments and services such as checks and mobile payment apps


the authors also explain that there are serious shortcomings in the realm of cross-border payments such as remittances whose middlemen take an average cut of around 5.5 percent from every transaction daylight robbery the third part of the report dives into digital assets which of course includes cryptocurrencies the authors start by effectively dismissing the entirety of the crypto industry due to its drawbacks


specifically the absence of individuals and institutions who accept crypto as payment the persistent price volatility the quote significant energy footprint of bitcoin and of course scams and hacks not surprisingly the only exception to their crypto critique is dollar-backed
stable coins which the authors confirm


quote could potentially support faster more efficient and more inclusive payment options
however the authors also note that there are a lot of risks associated with stablecoins such as bank runs this is where everyone goes to exchange their stable coins for fiat at the same time


only to find that the issuer doesn’t have the feared this is a very real risk because most of
the dollar-denominated stable coins in circulation are not backed by dollars but by government debt and corporate debt more about that in the description anyhow the fourth part of the report


concerns central bank digital currency the authors commence by reiterating quote the federal reserve is considering how a cbdc might fit into the u.s money and payments landscape a crucial test for a potential cbdc is whether it would
prove superior to other methods that


might address issues of concern outlined in this paper the authors then explain that a digital
dollar would be the safest form of money because it’s held at and issued by the federal reserve and they explain the four features a digital dollar must have and again this is very debatable in any case the first feature is privacy or rather privacy now i use finger quotes because quote


any cbdc would need to strike an appropriate balance however between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity the second feature is intermediated meaning that the big banks would provide the infrastructure including accounts


and digital wallets this is not because the fed wants them to but because the fed doesn’t have the capacity to provide these things without their help something that jerome admitted during that aforementioned hearing the third feature is transferability meaning that a cbdc could be seamlessly

transferred between digital currency all intermediaries cryptocurrency all transactions in the economy


transferred between all intermediaries in the economy this reminds me of something that’s been mentioned in many cbdc reports and that’s that the current infrastructure couldn’t support this degree of transferability even in developed countries the fourth and final feature is identity


verification meaning that the intermediaries would need to complete extensive kyc on anyone using a cbdc thereby killing any prospect of privacy and of course the authors note that quote governments could use a cbdc to collect taxes or make benefit payments directly to citizens


additionally a cbdc could potentially be programmed to for example deliver payments at certain times the authors then pivot to the potential benefits of a digital dollar and they



identify five the first is safety and efficiency the second is improved cross-border payments


the third is the preservation of the us dollar status as the world’s reserve



currency the fourth is financial inclusion and the fifth is basically all the above



what’s nice is that the authors emphasize quote the federal reserve is



committed to ensuring the continued safety and availability of cash and is considering

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