From the glorious times of the power of money, to the wonderful “DIGITAL ECONOMY” or so they want us to believe. Technology always brings us capacity, new technologies (in this case #Blockchain) allow us to develop new capacities and this is where the journey towards CBDCs seems to begin.
For some time central banks have been working on the idea of somehow bringing blockchain into their field, so that they can continue to issue everyone’s money, but let’s say in a new digital format or packaging, which makes it more attractive to the new generations. These “New Money” announcements will be accompanied by global marketing campaigns, designed to deliver messages such as a much cleaner, more efficient, faster, safer and interconnected money. But unfortunately I can see that they make the same basic mistake as 500 years ago, doing it to compete for their share, dominance and position. The bad thing is that they want to compete against something they neither know nor understand, leaving aside their responsibility to lead us as a society towards progress and evolution. They want to return to an Oligarchy that does not fit with the values that are settling in the network nor with the forms or ways in which this serious and important matter should be undertaken.
Error after error trying to tame what has no owner and lives in freedom, “The Digital Individual”
Bitcoin and cryptocurrencies aim in some way to become money, but not by imposition but by choice. This path was the one that began on January 3, 2009 with the first bitcoin block mined, to provide us with an alternative economic system. In 2013 financial sector considered the idea of issuing their own digital money and introduce it to the financial system, given the success and good acceptance that cryptocurrencies could have. But of course one thing is a CBDC and quite another a Crypto Asset.
At the moment cryptocurrencies and bitcoin have serious limitations to become an alternative to cash or bank deposits. Their value is unstable, the intermediaries for their distribution and custody have proven to be insecure. Their regulatory fit does not seem very clear. The user experience for their management is not simple (there is still high friction between technology and people), and the scalability to handle large volumes is limited.
“China overpopulated and always impassive to the delusions of many, but attentive to the changes has had the real need to take that first step.”
But an extremely curious and unusual change is taking place when we talk about finances and money. It is now the retailer and certain social tribes that are putting into practice, developing and creating a new culture regarding handling, management and responsibility with money.
The refusal of Facebook to go ahead with its social currency is due to the fact described above, sine we would be the minorities, the lower and middle social classes as well as all the “UNBANKED” who would take Diem and all its ecosystem to the maximum power, unseating from that power all those who stood up to such an important threat. To stop depending so much on cash, not being able to access financial services or that the distribution of cash is more costly than beneficial are issues that can give meaning to the debate of creating CBDCs, or as has been seen since 2017 and in parallel, to create in a secure, sustainable and technological way a crypto asset whose value would be linked to1 dollar in a stable way over time, either by depositing dollars as collateral in a bank or by depositing a crypto asset or basket of them to maintain that stable value to the dollar (algorithmic).
Bitcoin is not a threat, DAI is not a threat, Ethereum is not a threat, Diem is not a threat. The discourse of being new ways to finance terrorism, money laundering, endanger the consumer or be tools to destabilize the financial system. Bitcoin, Ethereum, Dai or Diem are technologies in the form of money, easily settled by internet that have the potential to reach billions of users around the world. It will provide a very attractive extra experience of its use and management, therefore we will be direct witnesses of how payment systems and financial services will become a form of social network, since we can pay and communicate at the same time.
There are more and more physical barriers, limitations, prohibitions and totalitarianism against money when we talk about its most important aspect, its payment system, and beware that it is a huge industry which we use every day and often innately. It is an industry that generates more income than Hollywood or the pharmaceutical industry, which is why the time has come for its inevitable democratization, freeing it from monopolies, terms and conditions, to provide it with service, hyperconnection and symbology between different digital social groups.
“Stablecoins have been one of the most compelling reasons to speed up the process of issuing CBDCs, I have no doubt”
The issuance of a CBDC has potential implications that require detailed analysis to assess the advantages and disadvantages, understand the current context or prepare for future developments. A CBDC is both a financial asset and a payment system, therefore it has a dual nature, which will modify to some extent operational aspects, access to central bank accounts or even modify the role of private banks. At present, everything surrounding CBDCs is confusing as it is a very broad concept that admits several variants with different implications.
We need to put ourselves in the position of understanding how difficult it is to put a third form of money, along with cash and reserves into a central bank, that way we can better understand why CBDC. I believe and understand that it responds to several concerns and problems to be solved, among them to satisfy our increasing digital and non-physical presence for many processes and procedures with money, but it is necessary to provide it with technology so that the magic appears and it can be automated and give veracity to these processes and procedures. Then there are still problems related to the use of cash, financial inclusion, certain limitations in payment systems, providing an alternative to the global distrust in the financial system as a whole and digital identity.
Thanks to the appearance of new technologies associated with crypto assets (blockchain) and stablecoins such as diem and others, we have been able to identify as a society the shortcomings and limitations of the current financial system, prompting us to be extremely creative, lucid and responsible to create and develop solution, alternative finance.