If you haven't heard the term "CBDC" yet, you will.
Soon.
CBDC stands for "Central Bank Digital Currency" and is the digital version of a government-issued Fiat currency - like the dollar.
The purpose of CBDCs is to replace paper money with digital money.
And given the ever-increasing role that tech plays in our daily lives, I'm of the opinion that a change from bill and coin to CBDCs are inevitable for every developed nation.
Russia and China already have live CBDC pilot programs live - I'm told by a friend with family in China that paper money isn't even accepted at brick and mortar businesses anymore.
And 40 other countries, including the United States, are currently researching CBDC programs. Check out the global CBDC tracker below.
This shouldn't come as too much of a surprise. Digital representation of Fiat money isn't anything new.
Direct deposit has been around since 1975 Credit card machines have been in use since 1979.
Without getting into the nitty gritty details (we'll cover that in another piece) there's a feasible set of events that could play out, resulting in expedited development and deployment of CBDCs in nations across the globe.
Russia's recent expulsion from SWIFT is thought to be the latest domino in this particular chain of events.
But don't people love crypto because it's "digital money"? And with digital versions of Fiat on the way, isn't crytpo going to be useless?
Short answer:
Long answer: Let's break down the differences between crypto and CBDCs.
To keep things simple, we'll exclusively talk about crypto in terms of Bitcoin, but the same rules apply to cryptos on all decentralized blockchains, like Ether or Ada.
It's true that Bitcoin and CBDCs are both "digital money" but in reality, CBDCs exacerbate many of the problems with Fiat money that Bitcoin was specifically created to remedy.
Every advantage Bitcoin has over CBDCs is rooted in one key element: decentralization.
Let's take a look at the benefits of decentralization to understand why the distinction isn't just noteworthy -- it's paramount.
Freedom for everyone to send and receive money anonymously.
If you want to send or receive digital money, you'll need to send it across a network.
For example, that Visa card in your wallet only works at places that pay for access to Visa's network.
And since Visa controls the network, they know who you are and can see every transaction you make.
Do something they don't like and they can freeze your accounts. Or outright deny you from spending.
And if they wanted to identify and flag buyers of certain goods or services for any reason, they easily could.
That's a lot of power.
Now, replace "Visa" with "the government" and you'll have a CBDC.
None of this applies to Bitcoin.
{NOTE: The Above Point Should Be Enough For Anyone To Be Wary Of CBDCs}
Freedom from transaction fees.
In the last point, I mentioned that Visa charges fees to move money across its network.
And by doing so, they made $3.3 billion in Q2 of 2021.
Let me reiterate, Visa made $3.3 billion in three months by charging people and businesses to send and receive their own money.
For anyone who doubts that the US would levy usage fees on a CBDC network,
I have two words for you ... death and taxes.
None of this applies to Bitcoin.
Freedom to spend however you want.
CBDCs are issued by a centralized authority - the government.
So, if you want to spend CBDC it will have to be used in approved ways.
I realize that this may not feel like a big deal to people here in the US - I actually talked to someone about this today who said "who cares, I don't buy anything illegal."
Sure, but you also have no control over what the government may deem illegal in the future.
There are so many examples to give here, and they're not always far from home -- Canada just froze protester bank accounts a few weeks ago.
None of this applies to Bitcoin.
Freedom to send or receive money wherever you want.
P2P payment services - like Venmo and Cash App - are pretty sweet right?
Totally.
Unless you want to send money internationally, in which case they're literally useless.
And for CBDCs to work internationally, it stands to reason that your country's digital Fiat network would need to be compatible with CBDC networks from other countries.
And that assumes that there are no laws prohibiting you from sending money abroad.
None of this applies to Bitcoin.
Freedom from destructive monetary policies.
Back in 2013, banks in Cyprus raided the personal accounts of citizens to pay off international debt.
More recently in 2021, The Turkish Lira lost 48% of its value.
And before anyone replies "pfff, yeah well that would never happen here" keep in mind that inflation in the US just hit a 40-year high, and we've printed 80% of US dollars in existence in the past 22 months.
CBDCs don't solve these problems because the only fundamental thing they change about Fiat money is that instead of bill and coin, it's represented by digital ones and zeroes, ostensibly making the ability for a government to magically create more money (and take yours) easier.
None of this applies to Bitcoin.
Comentários