{"id":33011,"date":"2023-10-21T12:42:26","date_gmt":"2023-10-21T12:42:26","guid":{"rendered":"https:\/\/evaggelatos.com\/?p=33011"},"modified":"2023-10-22T12:43:28","modified_gmt":"2023-10-22T12:43:28","slug":"stop-central-bank-digital-currencies-under-any-means","status":"publish","type":"post","link":"https:\/\/evaggelatos.com\/?p=33011","title":{"rendered":"Stop Central Bank Digital Currencies under any means!"},"content":{"rendered":"<div class=\"article-headline-container\">\n<div class=\"header-content-container\">\n<h1 class=\"fs-headline speakable-headline font-base font-size should-redesign\">Central Bank Digital Currencies Are About Control \u2013 They Should Be Stopped<\/h1>\n<\/div>\n<\/div>\n<div class=\"top-contrib-block\">\n<div class=\"contribs\">\n<div class=\"contrib-container top-contrib bottom-padding\">\n<div class=\"fs-author-group-wrapper\">\n<div class=\"contrib-byline has-follow-button\">\n<div class=\"fs-author-wrapper\">\n<p><span class=\"fs-author-name\"><a class=\"contrib-link--name remove-underline author-name--tracking not-premium-contrib-link--name\" href=\"https:\/\/www.forbes.com\/sites\/norbertmichel\/\" data-ga-track=\"contrib block byline\">Norbert Michel<\/a><\/span><\/p>\n<div class=\"contrib-label-container\"><span class=\"contrib-byline-type\">Contributor<\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"contrib-byline has-follow-button\">\n<div class=\"fs-author-wrapper\">\n<div class=\"contrib-label-container\"><\/div>\n<\/div>\n<div class=\"short-bio\">I follow the evolution and devolution of monetary and financial policy<\/div>\n<\/div>\n<div class=\"top-contrib-block\">\n<div class=\"contribs\">\n<div class=\"metrics-channel light-text metrics-standard-topline with-border\">\n<div class=\"anchors-container\">\n<div class=\"open-web-placeholder\"><\/div>\n<\/div>\n<div class=\"content-data metrics-text color-body light-text standard-metrics-text\"><time>Apr 12, 2022,<\/time><span class=\"time\"><time>04:38pm EDT<\/time><\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"article-body-container show-iframes\">\n<div class=\"article-body fs-article fs-responsive-text current-article\"><\/div>\n<\/div>\n<figure class=\"embed-base image-embed embed-0\" role=\"presentation\">\n<div class=\"image-embed__placeholder\"><img decoding=\"async\" src=\"https:\/\/imageio.forbes.com\/specials-images\/imageserve\/6255e270caceff003c5ca2cd\/U-S--WASHINGTON--D-C--CENTRAL-BANK-DIGITAL-CURRENCY\/960x0.jpg?format=jpg&amp;width=1440\" alt=\"U.S.-WASHINGTON, D.C.-CENTRAL BANK DIGITAL CURRENCY\" \/><\/div><figcaption>\n<p class=\"color-body light-text\" aria-expanded=\"false\">Photo taken on July 15, 2021 shows the U.S. Federal Reserve in Washington, D.C., the United States. <span class=\"plus\" data-ga-track=\"caption expand\">&#8230; [+]<\/span><\/p>\n<p><small>Xinhua News Agency via Getty Images<\/small><\/p>\n<\/figcaption><\/figure>\n<p>Last week I participated <a class=\"color-link\" title=\"https:\/\/twitter.com\/search?q=%40SustanyCapital&amp;src=typed_query\" href=\"https:\/\/twitter.com\/search?q=%40SustanyCapital&amp;src=typed_query\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/twitter.com\/search?q=%40SustanyCapital&amp;src=typed_query\" aria-label=\"in an online forum\">in an online forum<\/a> called <em>US CBDC\u2014A Disaster in the making? <\/em>It was hosted by Sustany Capital\u2019s Christian Kameir, and we had a <a class=\"color-link\" title=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" href=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" aria-label=\"very productive discussion about the\">very productive discussion about the <\/a><a class=\"color-link\" title=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" href=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" aria-label=\"policy\"><em data-ga-track=\"ExternalLink:https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\">policy<\/em><\/a> aspect of central bank digital currencies (CBDCs).<\/p>\n<p>While <a class=\"color-link\" title=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" href=\"https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.cato.org\/multimedia\/media-highlights-tv\/norbert-michel-participates-event-forum-us-cbdc-disaster-making\" aria-label=\"our panelists agreed\">our panelists agreed<\/a> that there is very little chance the Fed will launch a fully functional CBDC in the next year or two, we did not necessarily agree on whether that was good or bad.<\/p>\n<p>I believe that the Fed should not launch a CBDC. Ever. And I think that <a class=\"color-link\" title=\"https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" href=\"https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" aria-label=\"Congress should amend the Federal Reserve Act\">Congress should amend the Federal Reserve Act<\/a>, just to be on the safe side. (Kudos to <a class=\"color-link\" title=\"https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" href=\"https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/emmer.house.gov\/2022\/1\/emmer-introduces-legislation-to-prevent-unilateral-fed-control-of-a-u-s-digital-currency\" aria-label=\"Rep. Emmer\">Rep. Emmer<\/a> (R-MN).) That position puts me at odds with the army of consultants who have been <a class=\"color-link\" title=\"https:\/\/www.oliverwymanforum.com\/future-of-money\/2022\/mar\/CBDCs-aligning-policy-objectives-and-technology-design.html\" href=\"https:\/\/www.oliverwymanforum.com\/future-of-money\/2022\/mar\/CBDCs-aligning-policy-objectives-and-technology-design.html\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.oliverwymanforum.com\/future-of-money\/2022\/mar\/CBDCs-aligning-policy-objectives-and-technology-design.html\" aria-label=\"churning out papers and proclamations on CBDCs\">churning out papers and proclamations on CBDCs<\/a>, most of whom seem only to question <em>when<\/em> the Fed will launch a CBDC.<\/p>\n<p>So, I was elated that our panel focused on the pure policy questions related to whether the Fed should launch a CBDC. And the experience only strengthened my resolve to keep writing about why the Fed should not. So, here goes.<\/p>\n<div class=\"halfway_hardwall_4\"><\/div>\n<p>As a starting point, I want to distinguish between a wholesale CBDC and retail CBDC.<\/p>\n<p>With a wholesale CBDC, banks can electronically transact with each other using a liability of the central bank. Because that is essentially what banks do now, transact and settle (electronically) using reserve accounts held at the Fed, there aren\u2019t very many new and interesting wholesale CBDC policy issues. (Basically, the Fed has had a wholesale CBDC for decades.)<\/p>\n<div class=\"recirc-module seo\" data-type=\"standard\">\n<div id=\"recirc-unit\" class=\"recirc-module-body\">\n<div class=\"recirc-module-title\">MORE FOR YOU<\/div>\n<div class=\"recirc-articles\">\n<div class=\"recirc-block\">\n<h3 class=\"recirc-headline\" data-ga-track=\"Most Popular - Automated Recirc - Link 1\">This Is \u2018Not Priced In\u2019\u2014A \u2018Huge Shift\u2019 Just Happened That\u2019s About To Blow Up The Bitcoin, Ethereum, XRP And Crypto Market<\/h3>\n<\/div>\n<div class=\"recirc-block\">\n<h3 class=\"recirc-headline\" data-ga-track=\"Most Popular - Automated Recirc - Link 2\">The Next Wave Is Coming Bitcoin Breaks 30 000 As 15 6 Trillion Wall Street Flood That Will Dwarf The Last Crypto Ethereum XRP Price Bull Run Is Revealed<\/h3>\n<\/div>\n<div class=\"recirc-block\">\n<h3 class=\"recirc-headline\" data-ga-track=\"Most Popular - Automated Recirc - Link 3\">How Hamas Crypto Fundraising Backfired<\/h3>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p>But <em>retail<\/em> CBDCs are another animal altogether.<\/p>\n<p>Retail CBDCs allow members of the general public to make electronic payments of all kinds with a liability of the central bank. As the Fed\u2019s <a class=\"color-link\" title=\"https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" href=\"https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" aria-label=\"recent CBDC report states\">recent CBDC report states<\/a>:<\/p>\n<h3 class=\"subhead3-embed color-body bg-base font-accent font-size text-align\">While Americans have long held money predominantly in digital form\u2014for example in bank accounts recorded as computer entries on commercial bank ledgers\u2014a CBDC would differ from existing digital money available to the general public because a CBDC would be a liability of the Federal Reserve, not of a commercial bank.<\/h3>\n<div class=\"article-body fs-article fs-responsive-text current-article\">\n<p>This feature\u2013making electronic transactions using a liability of the Federal Reserve\u2013is central to why Congress should make sure that the Fed never issues a retail CBDC. The problem is that the federal government, not privately owned commercial banks, would be responsible for issuing deposits. And while this fact might seem like a feature instead of bug, it\u2019s a major problem for anything that resembles a free society. (Paper currency is also a liability of the Fed, but that fact means very little with freely circulating fiat money, especially when private banks issue deposits.)<\/p>\n<p>Some CBDC supporters argue that privately issued money can coexist with a CBDC, but this view is extremely short-sighted. Even most central banks fear that providing accounts directly to consumers <a class=\"color-link\" title=\"https:\/\/www.cato.org\/sites\/cato.org\/files\/2021-05\/cj-v41n2-8.pdf\" href=\"https:\/\/www.cato.org\/sites\/cato.org\/files\/2021-05\/cj-v41n2-8.pdf\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.cato.org\/sites\/cato.org\/files\/2021-05\/cj-v41n2-8.pdf\" aria-label=\"risks disintermediating the financial system\">risks disintermediating the financial system<\/a>, a fear that surely helps explain <a class=\"color-link\" title=\"https:\/\/www.forbes.com\/sites\/norbertmichel\/2020\/06\/19\/digital-dollar-project-promotes-federal-reserve-digital-dollar\/?sh=7959ecc138ae\" href=\"https:\/\/www.forbes.com\/sites\/norbertmichel\/2020\/06\/19\/digital-dollar-project-promotes-federal-reserve-digital-dollar\/?sh=7959ecc138ae\" target=\"_self\" rel=\"noopener\" data-ga-track=\"InternalLink:https:\/\/www.forbes.com\/sites\/norbertmichel\/2020\/06\/19\/digital-dollar-project-promotes-federal-reserve-digital-dollar\/?sh=7959ecc138ae\" aria-label=\"Jay Powell\u2019s\">Jay Powell\u2019s<\/a> <a class=\"color-link\" title=\"https:\/\/bpi.com\/legal-authority-to-issue-a-u-s-central-bank-digital-currency\/\" href=\"https:\/\/bpi.com\/legal-authority-to-issue-a-u-s-central-bank-digital-currency\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/bpi.com\/legal-authority-to-issue-a-u-s-central-bank-digital-currency\/\" aria-label=\"public stance\">public stance<\/a> <a class=\"color-link\" title=\"https:\/\/sgp.fas.org\/crs\/misc\/R46850.pdf\" href=\"https:\/\/sgp.fas.org\/crs\/misc\/R46850.pdf\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/sgp.fas.org\/crs\/misc\/R46850.pdf\" aria-label=\"on retail CBDCs\">on retail CBDCs<\/a>. It also helps explain the Fed\u2019s fascination with an \u201cintermediated\u201d CBDC, whereby private banks have the privilege of servicing the consumers\u2019 needs even though the liability remains with the central bank. Ultimately that system is no better. (At best, it would slow the disintermediation while entrenching a group of privileged firms).<\/p>\n<p>Regardless, the two forms of money cannot peacefully coexist <em>unless<\/em> the government hands out special privileges or subsidies. The two electronic mediums would be near perfect substitutes, and the main difference for consumers and merchants is that the Fed\u2019s version would automatically come with zero credit or liquidity risk. Private firms can\u2019t compete on that dimension, and they (unlike the Fed) have to recover their costs to stay in business.<\/p>\n<p>The Fed\u2019s report even <a class=\"color-link\" title=\"https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" href=\"https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" target=\"_blank\" rel=\"nofollow noopener noreferrer\" data-ga-track=\"ExternalLink:https:\/\/www.federalreserve.gov\/publications\/files\/money-and-payments-20220120.pdf\" aria-label=\"acknowledges this high\">acknowledges this high<\/a> degree of substitutability:<\/p>\n<h3 class=\"subhead3-embed color-body bg-base font-accent font-size text-align\">Banks currently rely (in large part) on deposits to fund their loans. A widely available CBDC would serve as a close\u2014or, in the case of an interest-bearing CBDC, near-perfect\u2014substitute for commercial bank money.<\/h3>\n<p>The only problem with this statement is that it says nothing about the degree of substitution between a <em>non<\/em>-interest bearing CBDC and commercial bank money. Commercial bank money that serves as a medium of exchange generally earns little to no interest, so even a non-interest-bearing CBDC is a near-perfect substitute for commercial bank money.<\/p>\n<p>Still, the interest-bearing version is particularly relevant to the policy discussion.<\/p>\n<p>The Fed\u2019s current operating framework depends on paying interest to banks for their reserves. No version of reality exists without political pressure for the Fed to pay individual CBDC holders <em>at least<\/em> the same rate of interest as it pays banks on reserves, and even that level of payment increases the risk of disintermediation.<\/p>\n<p>Similarly, the political pressure will always be to expand the pool of people using the CBDC. While CBDC proponents currently speak of helping only the \u201cunbanked\u201d and the \u201cunderserved,\u201d there is absolutely no chance that those groups won\u2019t soon be more broadly defined. (Apparently, there\u2019s also no chance that CBDC proponents will acknowledge that broader economic problems, not a lack of digital money, keep these folks out of the banking system. But that\u2019s another column.)<\/p>\n<p>And the political reality is that CBDC advocates want to use public funds to provide something (money) at a lower cost than the private sector. Setting aside the incredibly rich irony that government rules and regulations are a primary driver of that cost in the first place, as well as the fiction that the government providing something means the cost is actually lower, this policy equates money with a public good. That is, CBDC advocates do not care if the private banking system is completely disintermediated\u2013they want the government to provide money.<\/p>\n<p>But money itself is not a public good. The fact that its production has been increasingly encroached upon by the government is irrelevant. And the fact that something called a CBDC even exists is only due to payment innovations that occurred in the private market. The CBDC itself is mainly the government\u2019s attempt to protect its privileged position and exert more control over money.<\/p>\n<p>The problem is that there is no limit to the level of control that the government could exert over people if money is purely electronic <em>and<\/em> provided directly by the government. A CBDC would give federal officials full control over the money going into\u2013and coming out of\u2013every person\u2019s account.<\/p>\n<p>This level of government control is not compatible with economic or political freedom.<\/p>\n<p>If Congress really wants to provide more access to financial markets and ensure more innovation in financial services, members should support more private innovation and competition. They should work to lessen government monopoly and regulation while ensuring that the Fed cannot issue a CBDC.<\/p>\n<div class=\"newsletter_signup_article\"><\/div>\n<\/div>\n<div class=\"sigfile article-body fs-responsive-text\">Follow me on\u00a0<a href=\"https:\/\/www.twitter.com\/@norbertjmichel\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Twitter<\/a>.<\/div>\n<div class=\"bottom-contrib-block\">\n<div class=\"fs-author-group-wrapper\">\n<div class=\"contrib-byline\">\n<p><a class=\"fs-author-avatar\" title=\"Photo of Norbert Michel\" href=\"https:\/\/www.forbes.com\/sites\/norbertmichel\/\"><img decoding=\"async\" class=\"fs-author-image\" src=\"https:\/\/secure.gravatar.com\/avatar\/33e02247af2969acd1110dfcbb7361db?s=400&amp;d=mm&amp;r=g\" alt=\"Norbert Michel\" \/><\/a><\/p>\n<div class=\"contrib-info\">\n<div class=\"author-wrapper\"><a class=\"author-name contrib-byline-author speakable-author\" href=\"https:\/\/www.forbes.com\/sites\/norbertmichel\/\" data-ga-track=\"contrib block byline\">Norbert Michel<\/a><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"bottom-contrib-block\">\n<p>I am Vice President and Director of the Cato Institute&#8217;s Center for Monetary and Financial Alternatives.<\/p>\n<\/div>\n<div class=\"article-footer\">\n<p>SOURCE:https:\/\/www.forbes.com\/sites\/norbertmichel\/2022\/04\/12\/central-bank-digital-currencies-are-about-control&#8211;they-should-be-stopped\/?sh=637ea52c6999<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Central Bank Digital Currencies Are About Control \u2013 They Should Be Stopped Norbert Michel Contributor I follow the evolution and devolution of monetary and financial policy Apr 12, 2022,04:38pm EDT Photo taken on July 15, 2021 shows the U.S. Federal Reserve in Washington, D.C., the United States. &#8230; [+] Xinhua News Agency via Getty Images &hellip; <\/p>\n<p><a class=\"more-link btn\" href=\"https:\/\/evaggelatos.com\/?p=33011\">\u03a3\u03c5\u03bd\u03ad\u03c7\u03b5\u03b9\u03b1 \u03b1\u03bd\u03ac\u03b3\u03bd\u03c9\u03c3\u03b7\u03c2<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[],"class_list":["post-33011","post","type-post","status-publish","format-standard","hentry","category-21","item-wrap"],"_links":{"self":[{"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/posts\/33011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33011"}],"version-history":[{"count":2,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/posts\/33011\/revisions"}],"predecessor-version":[{"id":33013,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=\/wp\/v2\/posts\/33011\/revisions\/33013"}],"wp:attachment":[{"href":"https:\/\/evaggelatos.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/evaggelatos.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}