The positive side of central bank digital currencies (MNBC)

Christine Lagarde speaks out on the 2007 financial crisis...

After an article on risks that weigh about democracies Currently, I would like to bring up a subject that seems quite natural when talking about autocracy: central bank digital currencies – which we will call throughout this article MNBC for Central Bank Digital Currency.

The goal here is not to see in detail the technological operation of this evolution, but rather to reflect on what could result from it.

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Why MNBCs?

That’s an excellent question. Before starting to think about this point, it is worth remembering what the interest of this new form of payment is.

Already, MNBCs are not no new currencies. It’s e-euro, e-dollar, e-yuan. They are therefore digital and encrypted. They will probably use the blockchain, but they will be centralized.

Finally, I see this a little bit as a public alternative to a service that is, for the moment, private and managed by VISA or Mastercard, to name but a few. Concretely, a trustworthy network that allows credit card holders to pay at more or less any merchant. Except that this time, it is managed by the central bankers.

But then what interest ?

According to this little video from the BIS (considered the central bank of central banks), the main qualities of MNBCs are :

  • There speed transaction;
  • There security ;
  • THE low fees ;
  • I’accessibility to all.

I think the interest is elsewhere, and I think everyone can see the problems with this new type of currency.

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The position of central bankers

Obviously, the USA is at the forefront and seems determined to keep its precious hegemony after all these years. With a calm tone, Jerome Powell explains to us that the United States will have its MNBC and that the FED (the Federal Reserve) plays a leading role in its development. They are even looking for an engineer for their digital currency.

“Our goal is to ensure a safe and efficient payments system that delivers broad benefits to American households and businesses, while fostering innovation. »

Statement by Jerome Powell

At the same time, the FED seems to pay attention to the debates on the security of the private life. At this pageone can read in particular:

“2. Will a US MNBC replace cash or paper money?

The Federal Reserve is committed to ensuring the safety and continued availability of cash and envisions an MNBC as a means to expand secure payment options, not to reduce or replace [celles qui existent déjà]. »

Not really convinced, for my part, but I let everyone make their own opinion on the subject. I could make a compilation of the speeches of the central bankers who turned out to be false, but the article cannot be devoted to that alone.

Christine Lagarde speaks out on the 2007 financial crisis...
Christine Lagarde, European Central Bank (ECB), 2007

The Bank of England, meanwhile, recently explain it was likely that the digital book arrives during this decade.

Jon CunliffeDeputy Governor for Financial Stability at the Bank of England, declared :

“We believe that given current trends, MNBCs could become a more efficient means of payment. »

And this time, the English representatives seem a little more pragmatic. The Economic Affairs Committee of the House of Lords recently concluded that she had yet to hear convincing arguments as to why the UK needed an MNBC.

Indeed, if an MNBC “may offer certain advantages”it can also have adverse consequences for households, businesses and financial stability, such as:

  • There state oversight citizens’ spending choices;
  • I’financial instabilityas citizens would not convert their money into MNBC during times of economic stress;
  • A increasing the power of the central bank.

Although England seems more wary, there is clearly a need to prepare for the arrival of central bank digital currencies.

The progress of CBDCs by country
You can follow the progress of these with the site Atlantic Council

This tree that hides the forest

Yes, MNBCs pose a issue obvious about the private life vis-à-vis the government, for the simple reason that this financial product would come from them directly and that they do not intend to anonymize or decentralize it.

So, being linked to a digital wallet on your smartphone which is probably linked to your digital identity – or if it’s not from the start, it will happen later -, MNBCs will know your expenses On the fingertips. And it’s not just knowing what you’re doing. It is also potentially withholding, freezing or penalizing your money.

Take, for example, the protests in Canada.

At the end of January 2022, American heavyweights parade in Ottawa. They denounce the sanitary measures put in place by Justin Trudeau. So that citizens can lend their support to truckers, crowdfunding platforms are opening up.


Trudeau and his government are forced to support the protesters
Trudeau and his government are forced to support the protesters – Source: Twitter

Trudeau’s government decided so, purely and simply, make it possible to freeze or suspend accounts by the financial services with the motive of supporting the demonstrators.

Canada authorizes the freezing and suspension of funds by financial services on the grounds of supporting protesters
Canada allows the freezing and suspension of funds by financial services – Source: Twitter

Second example, this time in Lebanon.

A Lebanese woman has pointed his own bank, wanting to pay for the care of his sister with cancer. Indeed, Lebanese banks have been limiting cash withdrawals from their citizens since the country suffered a serious financial crisis.

image 2
The financial crisis in Lebanon leads citizens to perpetrate reckless acts – Source: Twitter

And this is not an isolated case, but a multitude of citizens who are obliged to rob their own bank to withdraw their money that they have earned. A completely lunar situation.

The question here is not whether you are pro-freedom convoy or consent to violence in the case of Lebanon. The question is: who is legitimate to prohibit the use of a currency and according to what? Is it legitimate to block the money earned by citizens?

The forest hidden by the MNBCs

The first thing, in my opinion, is that MNBCs seek to stifle cryptocurrencies.

The concept of alternative currency outside the system is a huge waste of power for sovereign institutions. MNBCs are probably a direct attack on freedom promised by cryptocurrencies, especially Bitcoin.

The second thing I see is that it is possible to impose negative interest rates.

Most countries are overwhelmed with debt, that they will never be able to face them. If citizens are forced to accept MNBCs to receive their pay and spend their money, then they will be obliged to submit to the rules of the central bank.

What if the central bank wants to impose negative interest rates, meaning you pay the banks to hold your money?

Sound dystopian? Yet, that’s a lot like the inflation we’re in right now, where interest rates are still negative – right now, inflation is outpacing interest rates.

Real interest rate in the USA in weekly time unit
Level of inflation and interest rates in the USA (1W)

This solution therefore seems to be a possibility for countries to be able to meet their debts.

A concrete example: the eNaira

I’eNairaa digital currency launched in Nigeriawas a unprecedented failure.

One year after its launch in October 2021, less than 0.5% of the population had downloaded the eNaira wallet, which is absolutely ridiculous for a country with an estimated population of 225 million. Of these downloads, only 270,000 wallets were active.

But the Nigerian government had a perfect idea to force people to use their eNaira. He just decided toprevent citizens from using their cash.

This decision-making led to demonstrations Through the whole Country. Angry citizens decided to attack ATMs, blocking roads just before the elections.

The country’s finance minister, Zainab Ahmedcapable declared :

“The only sore point is the pain it has caused to citizens, which is regrettable, but which is also very transient and temporary. »

But again, in every sad event, we find a glimmer of hope.

The two real advantages of MNBCs

Already, the first excellent news of MNBCis that they are doomed to collapse. MNBCs are nothing but Fiat money with the same problems who as a result. If the current monetary system is not viable, neither will MNBCs and will be doomed to failure.

Second, MNBCs are a amazing accelerator for cryptocurrencys. A little earlier, we were talking about a first example of citizens’ money freezing in Canada.

What happened immediately? The demonstrators immediately turned to bitcoin.

A crowdsourcing platform named TallyCoin took over, and the demonstrators were able raise $1 million in Bitcoin. The Tallycoin site does not intervene in the payment. It only makes it possible to connect donors and causes.

Bitcoin has (again) proven its worth: resisting censorship and seizure by governments.

And this type of decision-making by the Canadian government pushes citizens towards ever more distrust of their government. There only alternative currently known of a digital instrument without a trusted third party, accessible to everyone, everywhere and whatever happens, it is the Bitcoin.

Gold has also held up through the various currency crises for its immutable characteristics, but the Bitcoin is still necessary, because it has an incredible advantage: it is mobile. When Ukraine asked the world for funds to fight Russia, she did not ask for gold. She asked for bitcoin.

If Bitcoin fails, the chances of monetary freedom die with it.

Privacy is dying, with the end of an open and neutral network, to which anyone can join and have the right to pseudonymity. Censorship wins, and financial networks will be able to prevent citizens from enjoying their monetary sovereignty, as they did not hesitate to do in Canada.

Bitcoin’s survival is essential in a financial system where MNBCs are becoming common. And we must defend it (even though it is nearly impossible for governments to prevent the use of Bitcoin).

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Last Verdict

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