This is an opinion editorial by Pierre Guildenhuis.Co-founder of a Hong Kong-based social environmental tech startup.
Central Bank Digital Currency (CBDC) is being actively developed and discussed in many major countries of the world, including 19 of the G20 countries and around 105 others around the world, as of 2022. As shown by council figures. They are being upgraded rapidly and it is expected that some countries such as Australia, South Korea and the US will start implementing CBDCs in the near future led by China, who recently started their launch in early 2022. did.
It’s not recent news, but it’s something that should be mentioned from time to time, as it should scare us all or at least be a cause of concern for anyone who doesn’t have any issues in their daily lives. Uses money as There is only one potential benefit to CBDCs: essentially, governments cause the collapse of their currencies by liquidating many assets of money before people realize that they are not salable to anyone else in their own country or around the world. are becoming.
CBDCs are said to be inspired by bitcoin – of course, the countries that are rolling them out could make them the perfect adversary to the beautifully constructed bitcoin – the only possible parallel is a distributed public ledger. However, I maintain that in the eyes of many governments, “a public ledger” denotes ownership, and therefore can only be accessed by the state because they are (in theory) the voice of the people.
The expected magnitude of CBDCs has been discussed extensively by many bitcoiners on Twitter and elsewhere, but from what I’ve found, it has something good to say that I’d like to turn to.
CBDC will mainly apply Keynesian principles, as it seems to be the prevailing school of economics in most of the Western world. Whatever principle the United States CBDC adopts, it will likely serve as a blueprint for all others. Some of these principles could be money that could expire, be automatically taxed, spent only in certain areas and be a completely permission-based form of transaction, meaning that People will be forced to do specific transactions they don’t want. Increased time preference or being forced to give up investing in areas of their choice. Purchasing bitcoin using a CBDC will become impossible or at least increasingly difficult, as no government wants to compete with the money they control.
This is a frightening prospect. How will bitcoiners and new adopters get more bitcoins before they escalate into the collapse of the fiat system? Well, this would likely create a more circular economy, as fewer people would like to hold on to their transactional power as a fully centralized and supervised system. They are very likely to decide to start and accept bitcoin payments for each transaction. This way, they are not forced to spend their money in an effort to “stimulate economic growth” by spending their expired CBDCs, which they could have otherwise saved for a rainy day, or additional unjust taxes. To escape from. This is similar to the highly common practice of many businesses around the world that offer their services at a discount to cash payments to avoid paying taxes on those services.
This was especially prevalent in places such as Greece, where the practice reportedly began because the Greeks did not want to pay taxes to the “foreign” Turks who controlled the area at the time. This practice apparently continues as people feel that additional taxation on daily transactions from any power, whether local or foreign, is unjust and excessive. In the eyes of some it is a form of corruption; However, it should not be labeled as such because corruption means that those who are hiding these transactions are in the position of power they are exploiting, while their government is exploited by unnecessary taxation.
It is likely that CBDCs are probably going to eliminate the small amounts of paper currency that are still a part of the world economy today. This means that these countries will rely on technical education and mouth-to-mouth explanations of how it works. This will lead to an increase in technical know-how in these nations, which means it should be ever easier for reluctant members of society to indulge in bitcoin when they realize the false value they hold, rather than a hard money.
In other words, CBDCs could be the perfect trigger for mass adoption and boosting bitcoin’s circular economy. At the end of the day, it doesn’t matter how much someone loves their government or opposes its existence, controlling and limiting everyone’s transactions based on arbitrary metrics like carbon emissions scores or nutrient value scores. The sheer inconvenience of doing is enough to turn anyone away from that monetary means.
With people’s savings potentially being eaten up to promote increasingly more spending – as has been the case with the inflationary practices of the past several decades – people will realize how bad Keynesian theories are. These theories are today promoted and considered true by many modern economists. The average people in the modern world practically use those principles passed To invest all of their assets to make sure they are not bankrupted by inflation, running the risk of potentially bad investments. Many people would be significantly more productive to society by developing their own businesses and happier overall if they could store their wealth only in hard money that steadily appreciates in value with economic growth, rather than Its that we are forced to build a meme economy. experienced over the years. It could get worse with the implementation of CBDCs.
The implementation and adoption of CBDCs cannot change overnight. The time it takes for bitcoin to be adopted will largely depend on what awesome features the specific CBDC implements. These CBDCs will cause a lot of pain and suffering during the time they are actively used. The pain they will bring and the practices they will apply are nothing new, but a further extension of the practices currently in use. This will continue until people start interacting pseudonymously, using bitcoin to store their funds and move away from fiat currencies of any kind altogether.
Creating a vibrant, successful circular economy will accelerate adoption and encouragement for the use of bitcoin. Hard money with high marketability need not offer a better incentive for adoption than a currency that failed rapidly due to declining marketability and increasing inflation. If no one wants your money why do you keep it? Today, the Zimbabwean dollar has value only as collectors’ items, but is of no use for goods and services. In turn, this allowed several competing currencies to take their place (mainly the South African rand and the US dollar) until the dollar was essentially won over and became the Zimbabwean dollar. The same is likely to happen with the dollar, and bitcoin will take its place due to inflation and a potential CBDC that will decouple all good from the dollar.
Bitcoin will need to take several other steps to allow simplified adoption for a greater world population. Recent developments in South Africa will require more platforms and wallets to start offering the use of Lightning payments and SMS (text messaging) transactions. The outlook on the CBDC front is somewhat optimistic given their potential to push more people out of the fiat and into the world of bitcoin.
this is a guest post Pierre Gildenhuiso, The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.