So far in this series, I have talked about the practical implications of the introduction of Central Bank Digital Currencies (CBDC) as an alternative form of physical cash.
I found this blog just now, and I'm extremely pleased I did! I hope you enjoy your break! Apologies for the long comment :)
I personally think we are more likely to simply abolish cash in some of these nearly cashless societies, after making considerable efforts to include 'small businesses, poorer and older households'. This seems like the easier and less risky option, perhaps after trialling CBDC unsuccessfully.
I don't think cash is truly necessary in any other case and can therefore be considered an outdated technology if we can include these parties adequately. Instead, private bank deposits, which consumers mostly trust, can take its place.
In my opinion, the systems which govern the use of bank deposits mainly need to be made more flexible. For example, reducing international payment costs so that they are comparable to cryptocurrencies is a necessary step to fight the rise of crypto.
It also makes sense for legal and financial parties to collaborate on programmable contracts for deposits. As well as being possible to override - perhaps with consent of the CB - if mistakes are made, the contracts are legally valid, and thus any programmable crypto tokens are no match.
From this perspective, crypto tokens look extremely fragile to competition from deposits, if only the financial sector and the CB would incorporate some of the best crypto ideas into deposits.
N.B. I don’t think an ‘ultimate stable currency’ is something the CB should offer. It would probably cause severe and unpredictable changes to the investment industry. Indeed, a lot of the possible benefits of CBDC could hurt banks and the financial sector by giving it less flexibility. However, I can understand that deposits can never completely offer the reassurance of cash, but perhaps this is a necessary cost for the future financial benefits.
I found this blog just now, and I'm extremely pleased I did! I hope you enjoy your break! Apologies for the long comment :)
I personally think we are more likely to simply abolish cash in some of these nearly cashless societies, after making considerable efforts to include 'small businesses, poorer and older households'. This seems like the easier and less risky option, perhaps after trialling CBDC unsuccessfully.
I don't think cash is truly necessary in any other case and can therefore be considered an outdated technology if we can include these parties adequately. Instead, private bank deposits, which consumers mostly trust, can take its place.
In my opinion, the systems which govern the use of bank deposits mainly need to be made more flexible. For example, reducing international payment costs so that they are comparable to cryptocurrencies is a necessary step to fight the rise of crypto.
It also makes sense for legal and financial parties to collaborate on programmable contracts for deposits. As well as being possible to override - perhaps with consent of the CB - if mistakes are made, the contracts are legally valid, and thus any programmable crypto tokens are no match.
From this perspective, crypto tokens look extremely fragile to competition from deposits, if only the financial sector and the CB would incorporate some of the best crypto ideas into deposits.
N.B. I don’t think an ‘ultimate stable currency’ is something the CB should offer. It would probably cause severe and unpredictable changes to the investment industry. Indeed, a lot of the possible benefits of CBDC could hurt banks and the financial sector by giving it less flexibility. However, I can understand that deposits can never completely offer the reassurance of cash, but perhaps this is a necessary cost for the future financial benefits.