CBDCs and the Future of Banking at Future Blockchain Summit with Professor Richard Werner

Summary

The transcript discusses the implications of Central Bank Digital Currencies (CBDCs), highlighting the potential risks and benefits. It emphasizes that while CBDCs promise a digital aspect, the centralization they bring is the real novelty. The speaker argues that central banks' power has historically been abused, and CBDCs could exacerbate this by enabling direct control over financial transactions, potentially leading to the end of democracy and increased surveillance. The speaker advocates for decentralized finance and the creation of small local banks as a counterbalance to the centralization brought by CBDCs.

Takeaways

• 🚀 Central Bank Digital Currencies (CBDCs) are being pursued by 90% of central banks, indicating a significant shift in the monetary system.
• 🌐 The novelty of CBDCs lies in their centralization, giving central banks more control over the monetary system, which could lead to increased power and potential misuse.
• 🤔 McKinsey's analysis suggests that there is no strong market value proposition for CBDCs, questioning the need for their introduction.
• 🔒 Trust is a major hurdle for CBDCs, with citizens often suspecting government motives such as monitoring and restricting financial activities.
• 🛠️ Technical challenges may prevent CBDCs from being successfully implemented in the short term.
• 📈 CBDCs could enable governments to freeze assets and control financial transactions without legislative oversight, as seen in the Canadian demonstration against policies.
• 🌐 The introduction of CBDCs could disrupt the traditional relationship between central banks and commercial banks, leading to a monopolistic central bank system.
• 🔄 The Bank for International Settlements (BIS) has proposed a digital ledger for all assets, suggesting a move towards asset tokenization and increased control over asset ownership.
• 🔢 The programmability feature of CBDCs allows for control over transaction details, potentially linking to social credit scores or climate agendas.
• 📉 Empirical evidence does not support the central banks' claims of delivering economic stability through interest rate adjustments; instead, business cycles have increased in frequency and amplitude.
• 🏦 Decentralization of money creation and support for small local banks are advocated as alternatives to the centralization of power through CBDCs.

Q & A

What is the main concern regarding the introduction of Central Bank Digital Currencies (CBDCs)?

The main concern is that CBDCs could centralize monetary power, potentially leading to increased control and surveillance over financial transactions, and possibly undermining democratic processes and individual financial freedoms.

What percentage of central banks are currently pursuing CBDC projects?

Approximately 90% of central banks are currently pursuing CBDC projects.

What does the European Central Bank emphasize as the new aspect of CBDCs?

The European Central Bank emphasizes the digital aspect of CBDCs as the new element, distinguishing them from existing forms of digital and electronic money.

What is the central aspect of CBDCs that makes them different from other forms of digital money?

The central aspect of CBDCs is that they are issued and controlled by central banks, unlike other digital currencies like Bitcoin or electronic money systems like credit cards and digital wallets.

What is one of the potential technical challenges mentioned in the script for CBDCs?

One potential technical challenge for CBDCs is the ability to overcome the existing infrastructure and systems, as well as gaining the trust of citizens and system participants.

What real-world example is given in the script to illustrate the potential risks of CBDCs?

The example given is the freezing of bank accounts, debit cards, credit cards, and Bitcoin addresses during peaceful demonstrations in Canada. This demonstrates how CBDCs could be used to restrict financial access and monitor individuals.

How does the speaker suggest CBDCs could be used in conjunction with digital IDs and social credit scores?

The speaker suggests that CBDCs could be combined with digital IDs to implement social credit scores, where the government could control and influence individuals' financial access based on their scores and compliance with government-set parameters.

What is the speaker's view on the historical use of power by central banks?

The speaker believes that central banks have historically abused the power given to them, using crises as opportunities to expand their influence and control, leading to more frequent and severe business cycles.

What alternative to CBDCs does the speaker propose for a more decentralized financial system?

The speaker proposes the use of decentralized finance, including Bitcoin and the establishment of small local banks, as alternatives to CBDCs to prevent the centralization of power and maintain a more democratic and equitable financial system.

What does the speaker claim about the relationship between interest rates and economic growth?

The speaker claims that contrary to the common belief that lower interest rates lead to higher growth and vice versa, empirical evidence shows a positive correlation between interest rates and growth, suggesting that higher growth leads to higher interest rates and lower growth leads to lower interest rates.

What is the speaker's stance on the central banks' ability to create inflation?

The speaker asserts that central banks have the ability to create inflation, as demonstrated by their actions in 2020, and that they have intentionally used this power to stimulate the economy, despite the potential for inflationary consequences.