Take a Survey about CBDCs

Take a Survey about a Central Bank Digital Currency

This is actually an online survey being conducted by the European Union. But you don't have to be in the EU to take a look. The same issues arise with any forthcoming CBDC.

The survey is here and you are advised to read the Report on a digital euro, as some questions can get quite technical.

If any of those links don't work, then look at the references in The future of money – innovating while retaining trust.

This isn't a super-quick click-an-answer type of survey, but anybody concerned about the issues should find the questions themselves interesting - even if you may not know the answers or have a solution.

For example, from the Report on a digital euro:

The introduction of a digital euro could affect the transmission of monetary policy and have a negative impact on financial stability, for example by challenging banks’ intermediation capacity and by affecting risk-free interest rates. Depending on its characteristics as a form of investment, it might induce depositors to transform their commercial bank deposits into central bank liabilities. This might increase the funding costs of banks and, as a consequence, interest rates on bank loans, potentially curtailing the volume of bank credit to the economy.

What does that even mean?

That paragraph goes to the heart of the current relationship between central banks and other commercial banks, especially those that are allowed to trade directly with the CB.

I wrote a million years ago about how Steem was essentially an algorithmic central bank and every user had a direct monetary relationship with it - same with Blurt. Now, imagine you look at DLease for the cost of borrowing - the cost of buying a delegation - and compare that with the current vote-yield and rewards-yield. Now, also imagine that you can then re-delegate a delegation - you can't, and for a good reason - and thus you might borrow a very large amount for a long term and then parcel those delegations out into smaller chunks at a higher rate. That's what banks do.

So, if you could do all of this yourself directly with a central bank, then what's the point of all those other banks?

Why would you want to borrow at 5% compounded from a bank when you can borrow at a central bank rate of, say, 1%?

That's a problem.

Even better is if you then become the lender and drive up interest rates - don't forget that you depositing money are a lender to your bank. The fear expressed in the last sentence in the quote has it back-to-front; the fear is that you, the consumer, won't tolerate those shitty deposit rates and will take your money elsewhere. That will force the banks to increase their deposit rates and hence have to increase their lending rates to still keep a nice fat profit.

That's a problem too.