CBDCs Will Not Compete (and the future of cryptocurrency)
Central Bank Digital Currencies (CBDCs) are being tested and prototyped by many countries. While slow to adopt a massive currency changeover, as would be a physical-to-digital economy, this is by design. As we know, government is slow and rarely is government initiative a catalyst for innovation.
CBDCs are no different. Digital currency initiatives, centralized (controlled by one entity, a bank) and applied to economy at scale are taking notes from private companies.
The State of Digital Money
The United States, China, Europe and others have publicly announced some form of research and or prototypes for digital money. China leads the world with 2021’s digital yuan trials.
Libra, Facebook’s attempt at positioning its own cryptocurrency as a global token of payment revealed the opinions of the G7, a group of seven leading financial officials from the world’s seven largest economies.
“The G7 continues to maintain that no global stablecoin project should begin operation until it adequately addresses relevant legal, regulatory, and oversight requirements through appropriate design and by adhering to applicable standards,”
In fact this came on the heals of a public announcement from a much larger body, the G20 where a public roadmap for cross-boarder “arrangements among authorities” will be established throughout 2023.
It is working with the International Monetary Fund (IMF), the World Bank and the Bank for International Settlements (BIS) to formalize the use of central bank digital currencies (CBDC) in banking systems.
Cash will become insolvent. There will be a day when cash becomes unusable. As with all technology cash will eventually become legally deprecated for its digital successor.
Think of the benefits from the standpoint of the agency bodies who govern money, the United States IRS, SEC, Reserve, Mint etc. A trackable digital dollar will not only disrupt but create paper trails everywhere leading to a major question about its legal precedent.
Will CBDC record be public information?
Could you subpoena this record from the government if you where to sue or be sued by them? What about if they could use this (their?) record against you or or your company at will?
Illegal — grey-area money-making no doubt exists. Within the walls of government as well as on a massive scale within economy. Major entities which may hold sway no doubt have vested interest in precisely how CBDC takes over private and public accounting. To think otherwise would be naive.
Taxes
Could all sorts of automation be applied? Sure it could. Monopolies, and potential monopolies, could be identified very easily. What if your business corners a niche market and a micro monopoly tax is applied to your business’ net profit to slow it down? This is an example but could be done without human intervention and in the future is a very real possibility.
Why?
The IRS already does this but they have to catch tax discrepancy to legally do so.
Imagine a world where this was automated. Taxes removed from every transaction based upon its category and filtered through the sender/recipient’s tax situation.
This will no doubt be efficiently built into CBDC process.
Cryptocurrency
No one wants to talk about this but…
Will CBDCs be built for interoperability between other CBDCs? Of course they will. The intent of global economy regulation reveals the goal of bridging the gaps of remittance and currency exchange that we have today.
So why wouldn’t government agencies require that blockchains, which drive a native token, where people and organizations store money, have mechanisms built-in for them to levy?
An IRS levy protocol? Yes, this will exist.
An SEC accredited investor filter for the purchase of securities? Yes, and masking the category of your transaction would be, of course, illegal or impossible in the first place.
As it stands the SEC has had to scramble to create process to monitor and penalize ICOs who misappropriate their tokens. Unregistered tokens are faced with major penalties but in the future all blockchains will be embraced as economic stimulus.
Imagine a future where entire blockchains become locked via automation, or at the push of a button by any one of the many authoritative agencies who govern or have interest.
Here’s a list of actions which could have been much easier on the SEC if there was an in-built protocol to manage them via CBDC interoperability protocol.
Registering an ICO (or blockchain?) and its token category will no doubt become easier.
Like registering an LLC, playing ball with the SEC here in the US, and any other country, is a smart move for these founders. And in the future, mechanisms for supreme governance will no doubt be required or these tokens will become illegal.
They’d be the same as cash-only businesses… who don’t pay taxes.
Conclusion
Creating CBDCs globally will be easy. Especially after private companies pave the way, then they will be regulated heavily. The treasury will fill “Fort Knox” with compute power for financial audits of both itself and other blockchain forensics.
Those blockchains who do not cooperate will be classified as black-market.
