CBDC Are Not Keen On The Benefits Of Decentralization, But Rather About Centralizing It
What comes in mind when you hear of the term CBDC (central bank digital currency) might be somewhat blurry if not vague in its entirety, yet there is an exponentially growing cock-fight undergoing behind the scenes, as to which government and/or state-backed financial institution will be the leading player in the field.
I mean, sure, a CBDC is just some sort of a central bank crypto right? Well…right and wrong. In fact, central bank digital currencies are not by default crypto-currencies, while in some cases, there is no mention or utility for blockchain technology or any other distributed ledger whatsoever.
Although the term CBDC is widely used in current technopolitical affairs, and especially when it comes to the digital economic systems and future economies, not every CBDC issuer-candidate talk about the same thing.
Who’s Actually Into CBDC?
Take China, for example, the most suited super-power to spearhead the blockchain revolution on a governmental level. China’s CBDC has been in the works for some five years, and still, there’s no actual sign of it.
The U.S. has showcased a significant increase in patent filings and legal citations subjecting the terms “digital dollar” and/or CBDC over the past 24 months, and you can expect the same from the EU, Canada, Russia, and Japan among other G7, and G20 economies.
So, considering everyone’s aware of the competition, and the fact some initial documentation suggesting a possible state-backed digital currency has been released by all the above geographical entities, we ask ourselves, why nobody has done it yet?
An easy to grasp answer would go like: Central Bank Digital Currency issuers are not keen on using public blockchains such as Bitcoin, and in combination with their lack of comprehension of a DLT system, they find their regime at a position where they have to actually research and understand the technology from scratch in order to create a tailored version for each state use-case respectively.
But the truth is typically, far more sophisticated than what we hear and see on the media and all the above for obvious reasons. Central banks and other state-backed mechanisms are not really interested in decentralization. Far from it, they’re trying to seize the opportunity to monitor, influence, and literally manipulate the future economy.
There Is Buzz About CBDCs, But There Is Not One Single CBDC Out There
One would think that even if so, why wouldn’t they release a CBDC already? It appears that to some extent all the countries involved in the development of some sort of digital currency are already more than just capable of deploying one in no time. The thing with such an approach would be that other countries could then study the first CBDC, and come up with superior solutions or even abuse potential flaws found in the first CBDC.
This is particularly clear when paying attention to the short history of CBDCs. Probably the most influential reason for government leaders going berserk on blockchain was Facebook’s announcement of its own digital currency dubbed “Libra” which is supposed to be a generic internet-based currency backed by a basket of fiat currencies in the name of diversification and centralized “decentralization”.
International monetary regulators bashed Facebook’s own fintech venture on a legal-level calling upon privacy, market manipulation, and money laundering accusations, but the true hatred toward’s Libra sourced from state-envy towards a private entity that was just a step behind snatching the global financial system under the governments’ noses.
A Matter Of Technopolitical Strategy
While throwing rotten tomatoes towards Facebook’s cryptocurrency, European Central Bank officials rushed to create a pan-European blockchain strategy which included a CBDC as a main component of the urge.
Other countries including the U.S., Australia, China, Sweden, Russia, Canada, Japan, and UAE among others, followed suit, and either announced they were already working on a CBDC for quite some time (China’s case) or announced the first national-scale blockchain strategy (Aussies case).
Yet, with all the factors that put CBDCs in the reward position, all competitors are hesitant of launching their own take on the matter, most likely in fear of being instantly eliminated by competition, or being ripped-off and reworked into a better version.
In the end, as Japanese financiers and economic commentators suggest, it’s not about who issues a CBDC first, but more about how each financial product will serve its purpose.
More specifically, Takahide Kuichi, a former Bank of Japan financier commented on Japan’s own CBDC in comparison with China’s DC/EP saying that none of the countries should be concerned due to the fact that both China and Japan have totally different reasons to issuing a central bank digital currency.
In his own words, China’s main goal is to set yuan on the international monetary map, while Japan is more interested in a digital currency that will help shift the country’s dependence on fiat money.
Furthermore, relevant research conducted by the Bank Of International Settlements (BIS) highlights the key characteristics of CBDCs among other monetary instruments, and the underscore here goes to the fact all forms of CBDC rely on centralized governance, similar to old, outdated economic models that still plague physical and digital reality due to their poorly balanced wealth distribution mechanisms.
Concluding, I am not sure whether CBDCs are something we should be thrilled about or completely forget, considering they’re still serving the outdated economic system that only gets a lifting in terms of digitalization.
Personally, I use exclusively digital payment means for over a decade now, and so a bank’s digital “app” isn’t the movie I’m waiting for. In this case.
I am more interested in Libra, DC/EP, and fintech ventures not affiliated with blockchain technology (see Tencent, WeChat, AliPay, etc.) as they already offer what CBDCs promise and much more centralized systems are not even aware of, including metaverse micropayments, in-game circular economies, loyalty tokens, and more.
What’s your idea of a CBDC? Does your country consider going financially digital soon? Hit me in the comments section below, or follow me on Twitter to stay in touch.