THE PROBLEM A U.S. CBDC WON’T SOLVE
Several reports involving cryptos and a possible U.S. CBDC were released this past week.
But the reports themselves, and much of the media attention surrounding them, failed to get at the core issue.
The massive problems in the U.S. monetary and financial system and economy aren’t a consequence of cryptos.
And they won’t be solved by a CBDC.
The U.S., and to be fair, most of the rest of the world, have manipulated money to siphon wealth from what was supposed to be a stable storehouse of value and medium of exchange.
The story isn’t new, or flashy. But whenever, wherever and by whatever mechanism currency debasement becomes rampant, the consequences have always been the same: disaster.
Two Reports, Both Overshadowed by a Spiraling Banking Crisis
Perhaps the Biden administration thought an attack on cryptos, via its 2023 Economic Report of the President (ERP), would draw some attention away from its trad-fi banking crisis.
The report pronounced that various promised utilities and use cases for decentralized crypto technology had largely failed to materialize.
This for a sector where the first “smart contract” technology, Ethereum, dating from 2015, is all of eight years old.
As theblock.co noted, according to the report, though crypto technology has claimed it could provide distribution and reward tools for intellectual property and financial value, better payment mechanisms, greater financial inclusion and reducing middle players in many processes, “so far, crypto assets have brought none of these benefits.”
XRP, XLM, DeFi, DAOs, blockchain tokenization across industries, and the world of NFTs apparently escaped the notice of the report writers.
To give just one recent example of how clueless the Biden report is (or perhaps, pretends to be), consider recent news that Sony has just filed a patent for technology facilitating the use of NFT assets across multiple gaming platforms. (“Sony eyes NFT transfers across multiple game platforms, reveals patent,” CoinTelegraph, 25 Mar 2023.)
The Biden report seemed to raise a sort of “Bitcoin Is Dead!” flag, only substituting the entire crypto blockchain sector.
Meanwhile, a Treasury Department report on possible creation of a U.S. CBDC, “Digital Currency and Banking-Sector Stability,” raised concerns about the perils to the banking sector, while claiming consumers would benefit.
The report noted CBDCs could essentially make the Federal Reserve the only necessary entity mediating digital dollars.
Payments industry outlet pymnts.com noted about the report:
“Government researchers modeled a financial sector where digital currencies coexist with bank deposits, finding: ‘Digital currency, whether privately or publicly issued, is likely to be detrimental to financial stability, and bank valuations can be significantly harmed.’”
(“US Treasury Says CBDCs Good for Consumers, Bad for Banks,” Pymnts, 24 Mar 2023.)
On the heels of the report, multiple lawmakers, mostly from the GOP side, reacted negatively to the idea of a CBDC.
Several, including Florida Governor Ron DeSantis and Texas Senator Ted Cruz introduced legislation that would bar the creation or use of CBDCs.
“The federal government has no authority to unilaterally establish a central bank currency,” Cruz said, concerning his Senate bill, co-sponsored by Senators Charles Grassley (R-IA) Mike Braun (R-IN). “This bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States.”
TRENDPOST: Though Cruz didn’t state it as starkly as he could have, his words did allude to the problem of money.
Like the problem of power, the problem of money is that whoever wields control over it, abuses it, until they operate as a monster of destruction.
In the case of the fiat system, the U.S., along with other governments, have manipulated and debased their currencies to the point where old games are no longer working to paper over the chasms.
As the current system continues to erode and implode, expect smart money to continue to flow to holdings that preserve value, and which are relatively resistant to manipulation.
For related reading, see:
- “REPORTS GALORE, CLARITY POOR” (22 Sep 2022)
- “CAN INNOVATION OUTPACE GREED, WAR AND CORRUPTION?” (27 Sep 2022)
- “CAN CRYPTO TECHNOLOGY DEMOCRATIZE THE AI AND AUTOMATION REVOLUTION?” (21 Feb 2023)