{"id":20958,"date":"2021-11-08T20:12:59","date_gmt":"2021-11-08T20:12:59","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=20958"},"modified":"2022-03-03T16:47:43","modified_gmt":"2022-03-03T16:47:43","slug":"libra-shrugged-chapter-15-central-bank-digital-currencies","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2021\/11\/08\/libra-shrugged-chapter-15-central-bank-digital-currencies\/","title":{"rendered":"Libra Shrugged \u2014 Chapter 15: Central bank digital currencies"},"content":{"rendered":"<p style=\"text-align: center;\"><i>Excerpt from <a href=\"https:\/\/davidgerard.co.uk\/blockchain\/libra\/\">Libra Shrugged: How Facebook Tried to Take Over the Money<\/a> by David Gerard<\/i><\/p>\n<p><b>Update, November 2021:<\/b> Here&#8217;s a book excerpt a year after its publication \u2014 because I keep referring people to this chapter. Buy the book for more!<\/p>\n<p>This chapter has stood up quite well through 2021. Sand Dollar, D-Cash and DC\/EP (now e-CNY) are still in ever-growing pilot programmes. Nigeria has just launched its eNaira CBDC as an alternate payment system.<\/p>\n<p>Consumer use cases for CBDCs are still thin on the ground \u2014 basically when commercial banks aren&#8217;t serving the public sufficiently, and the central bank has to step in. Even then, they partner with the commercial banks as absolutely far as possible.<\/p>\n<hr \/>\n<blockquote><p>He had his cash money, but you couldn\u2019t pay for food with that. It wasn\u2019t actually illegal to have the stuff, it was just that nobody ever did anything legitimate with it.<\/p>\n<p style=\"text-align: right;\">\u2014 William Gibson, <i>Count Zero<\/i><\/p>\n<\/blockquote>\n<p>Central banks issue physical cash \u2014 but what if they could print official legal tender digitally? The real world result from Libra may turn out to be \u201ccentral bank digital currency,\u201d or \u201cCBDC.\u201d<\/p>\n<p>A central bank\u2019s job is to keep its economy on an even keel. Central bank researchers look at a new idea and think: \u201cwhat would happen if this weird thing got popular?\u201d The structure of money can change surprisingly fast.<\/p>\n<p>So the researchers routinely come up with wild plans to rebuild the financial system, but upside-down and inside-out \u2014 just in case they suddenly need them.<\/p>\n<p>Bankers noticed Bitcoin and other cryptocurrencies early. When people talk about a new form of \u201cmoney,\u201d and there are news headlines about the price of Bitcoin, central bank research papers will follow.<\/p>\n<p>Then Libra threatened to put the idea of a blockchain-like currency into practice, at massive scale \u2014 but badly. Central bank researchers quickly dusted off their old papers, with an eye to heading off disaster. And if there was anything to the Libra idea, maybe it could be implemented with an eye to caution.<\/p>\n<p>Central banks have issued electronic money before \u2014 but current discussion of \u201cCBDC\u201d involves a lot of misapplied blockchain hype. End users don\u2019t need to worry too much about this particular back-end plumbing.<\/p>\n<h3>What is a central bank digital currency?<\/h3>\n<p>E-money (electronic money) is money for consumers that\u2019s transmitted electronically outside the banking system itself. PayPal is a well known example. A central bank digital currency is e-money issued directly by the central bank \u2014 it\u2019s regulated differently, but the end user shouldn\u2019t see much difference.<\/p>\n<p>Central banks had been thinking about what central-bank-issued e-money might mean since the 1990s<sup><a id=\"back_note_256\" title=\"256\" href=\"#note_256\">256<\/a><\/sup> \u2014 but the current round of CBDC discussion was largely inspired by Bitcoin and blockchains.<\/p>\n<p>CBDC on a blockchain was first suggested in 2013 by economics blogger J. P. Koning as \u201cFedcoin.\u201d<sup><a id=\"back_note_257\" title=\"257\" href=\"#note_257\">257<\/a><\/sup> Koning proposed that the US Federal Reserve run a widely-distributed blockchain-based database, and create and destroy dollar tokens on the chain as needed. This could also be a consumer payment system, running on your phone.<sup><a id=\"back_note_258\" title=\"258\" href=\"#note_258\">258<\/a><\/sup> <sup><a id=\"back_note_259\" title=\"259\" href=\"#note_259\">259<\/a><\/sup><\/p>\n<p>Central banks wrote papers on what a popular retail CBDC might mean, and what the economic risks might be.<\/p>\n<p>For a long time, all of this was just an academic exercise \u2014 with a fair bit of blockchain hype. But as CBDC proposals get closer to reality, they tend to have less and less to do with blockchains.<\/p>\n<p>Some proposals are for wholesale CBDC \u2014 between the central banks and the commercial banks \u2014 though it\u2019s not yet clear what this gets anyone over the banks just sending numbers between known and trusted computers, as we\u2019ve done for decades. Banks have experimented with blockchains, but the results are, at best, slightly worse, slower and less sophisticated versions of existing systems. Wholesale CBDC is mostly blockchain hype, and mainly of interest to the sort of crypto news site that thinks CBDCs are good news for Bitcoin.<\/p>\n<h3>Responding to Libra with CBDC<\/h3>\n<p>Libra frightened the central banks \u2014 a popular private currency run by people who didn\u2019t seem to know what they were doing could be disastrous.<\/p>\n<p>Central banks started looking into CBDC with more urgency. There might be a gap in the market, mainly for low-cost international settlement \u2014 and Facebook said Libra could fill that need. But Libra would run at a large enough scale to risk financial stability.<\/p>\n<p>So central banks would need to do a coin themselves \u2014 one that was responsible to the public, rather than to a private company or consortium. The People\u2019s Bank of China finally kicked its CBDC programme into high gear in direct response to Libra. (Though they were also reacting to US dollar hegemony and the size of the local payment providers.)<\/p>\n<p>It wasn\u2019t clear that Libra could in fact do what it claimed \u2014 nor was it clear that a central bank version would do the job either.<\/p>\n<h3>Why do a CBDC?<\/h3>\n<p>If you live in Europe or China, you probably have good electronic payment systems \u2014 within your country, at least. So you know that good payment systems are possible without adding a blockchain.<\/p>\n<p>Other countries are different \u2014 because local conditions are important.<\/p>\n<ul>\n<li>The US is an advanced economy \u2014 but the payment system is old, creaky and complicated, and payment companies have to register federally and in fifty states.<\/li>\n<li>Many countries still run on physical cash, cheques and so on. But better payment systems speed up the flow of money, and get the economy moving faster.<\/li>\n<li>Even in Europe, the systems inside a country will be fast \u2014 but payments between countries may still be slow or expensive.<\/li>\n<li>Sweden has the opposite problem. Cash is used less and less \u2014 but some sort of cash is considered to be socially necessary, and the Riksbank, Sweden\u2019s central bank, worries about how to manage an economy with almost no central bank cash in it.<\/li>\n<\/ul>\n<p>Maybe CBDCs will fix all of these problems! Somehow. Libra also promised to fix all of these problems \u2014 somehow.<\/p>\n<h3>Watching every move you make<\/h3>\n<p>Physical cash doesn\u2019t have Know Your Customer (KYC) \u2014 your transactions are private (unless they\u2019re large). But one thing that the anti-money-laundering (AML) agencies have required of digital cash so far is KYC. So they would want a CBDC to have KYC.<\/p>\n<p>The idea of all transactions being on a blockchain also appeals to the anti-money-laundering agencies \u2014 imagine having a complete ledger of your entire economy. No criminal transaction could escape.<\/p>\n<p>Bureaucrats also keep being seduced by the prospect of a full Eye of Sauron panopticon of every transaction in the economy. This appeals to those who think their problem is not having enough knowledge to exert control as finely as they\u2019d like to.<\/p>\n<p>This is otherwise known as the Big Data Fallacy \u2014 where you think that just getting enough data will surely solve all your problems. It\u2019s a fallacy because your problems are usually political \u2014 you know perfectly well what you need to do, and you\u2019re hoping the big data will help convince others to let you do it.<\/p>\n<p>Nevertheless, bureaucrats and anti-money-laundering agencies find the prospect of a CBDC with a full record of everything hard to resist.<\/p>\n<p>Libra would record <i>less<\/i> data centrally \u2014 a lot of transactions would happen internally to Facebook\u2019s Calibra\/Novi, and not even make it outside of that company to be recorded on the main blockchain.<\/p>\n<h3>Can CBDCs give us better payment systems?<\/h3>\n<p>A common fallacy of CBDC proposals is thinking that changing the back-end is all you need to make a better payment system.<\/p>\n<p>CBDC proposals tend to have a disconcerting lack of detail about what magic a CBDC will bring that the commercial banks couldn\u2019t do better \u2014 and that commercial banks haven\u2019t done better in other countries. A lot of CBDC plans have been vague, and don\u2019t offer much that\u2019s new.<\/p>\n<p>Facebook claims Libra can give us better payment and settlement systems. Facebook\u2019s method appears to be to ignore regulations. Central banks can\u2019t do that.<\/p>\n<p>Agust\u00edn Carstens of BIS acknowledged in June 2019: \u201cThere needs to be evidence for demand for central bank digital currencies and it is not clear that the demand is there yet. Perhaps people can do what they want by using electronic wallets provided by banks or fintech companies. It depends on the development of payment systems.\u201d<sup><a id=\"back_note_260\" title=\"260\" href=\"#note_260\">260<\/a><\/sup><\/p>\n<p>Retail CBDCs are only useful if they let you do something that wouldn\u2019t be possible without them. But current payment systems are pretty good, and mostly just need to be put into place in infrastructure-poor economies.<\/p>\n<p>The more solid CBDC plans aim to get the commercial banks to build better inter-bank payment systems. A central bank may even build a CBDC system to kickstart better retail payment systems.<\/p>\n<h3>Real-world retail CBDCs<\/h3>\n<p>Central banks have issued electronic money for broad public use twice before: Avant in Finland, and Sistema de Dinero Electr\u00f3nico in Ecuador. Both failed \u2014 Avant wasn\u2019t as convenient as debit cards, and Ecuador\u2019s central bank just wasn\u2019t trusted by the populace.<\/p>\n<p>Uruguay ran a very limited CBDC proof-of-concept over 2017 and 2018, which involved a small number of ordinary end users.<\/p>\n<p>China\u2019s DC\/EP proposal \u2014 which isn\u2019t live yet \u2014 will be accepted by end users to the degree it works as well as Tenpay\/WeChat Pay or Alipay.<\/p>\n<p>New systems in pilot tests with real end users include the Bahamas Sand Dollar and the Eastern Caribbean DCash.<\/p>\n<p>These are very different from each other, and show the many success and failure modes of projects labeled \u201cCBDC.\u201d<\/p>\n<h4 class=\"block_23\">Finland: Avant (1993)<\/h4>\n<p>The very first CBDC was Avant-Kortti (\u201cAvant Card\u201d), which was launched by the Bank of Finland in 1993.<sup><a id=\"back_note_261\" title=\"261\" href=\"#note_261\">261<\/a><\/sup><\/p>\n<p>Avant was a stored value smart card \u2014 you bought a card with money on it that you could then spend. From 1994, you could top up an Avant card with more money. The encrypted smart card was far more secure than the magnetic stripe debit and credit cards of the time. So this was e-money, but backed by the central bank.<\/p>\n<p>Cards were anonymous and individual transactions weren\u2019t tracked, so money on Avant would work like cash. The card was labeled an \u201celectronic purse\u201d \u2014 the Bank of Finland hoped Avant would replace small change. Though users couldn\u2019t exchange Avant money between themselves directly \u2014 this was possible in the design, but that function was not enabled.<\/p>\n<p>Avant fit most modern definitions of CBDC \u2014 it was in the national currency, it was entirely electronic, the money was a claim against the central bank, it was a widely accepted payment instrument, and it didn\u2019t need to be continuously online to a central authority. The main difference to modern schemes was that Avant didn\u2019t start from blockchain ideas.<\/p>\n<p>The money in Avant was not legal tender \u2014 despite being issued by the central bank \u2014 so that merchants would not be legally required to accept it in payment of debts, which would have required them to buy expensive terminals.<\/p>\n<p>In 1995, the Bank of Finland sold Avant\u2019s operator, Toimiraha, to a consortium of commercial banks. This made no difference to the users \u2014 nothing changed about the system.<\/p>\n<p>Avant was one of the first examples of regulated e-money, and informed the European Union\u2019s E-money Directive of 2000.<\/p>\n<p>Avant was moderately popular \u2014 at its peak there were 900,000 cards in active use, in a country of five million people.<\/p>\n<p>The biggest problem was that users were unhappy at being charged a fee for loading and unloading money, especially as ATM withdrawals were free by this time. Users hated fees more than they liked anonymity. Avant was discontinued at the end of March 2006.<\/p>\n<h4 class=\"block_23\">Ecuador: Sistema de Dinero Electr\u00f3nico (2014)<\/h4>\n<p>The Sistema de Dinero Electr\u00f3nico (SDE; \u201celectronic money system\u201d), run by the Banco Central del Ecuador (BCE), was a bit odd. For one thing, the currency was the US dollar. For another, the BCE didn\u2019t quite have the powers you\u2019d expect of something called a \u201ccentral bank.\u201d<\/p>\n<p>SDE wasn\u2019t quite a CBDC \u2014 in practical terms, it was really a failed payment system.<\/p>\n<p>Ecuador went through a hyperinflation in the late 1990s. The national currency, the sucre, went down in value rapidly, and the economy was already substantially running on cash in US dollars \u2014 so the government chose dollarisation, and formally declared the US dollar the national currency of Ecuador in January 2000.<\/p>\n<p>This left the central bank unable to issue its national currency, act as the lender of last resort, or manage monetary policy in any meaningful way. So the BCE\u2019s focus shifted to guidelines and policy. It was also the regulator for payments.<\/p>\n<p>In 2014, Ecuador\u2019s Congress approved a fully-backed electronic dollar \u2014 so this was technically the first CBDC US dollar, sort of! The system was launched as SDE.<\/p>\n<p>Each dollar in SDE was backed by a dollar stored at the central bank. BCE was the only legal issuer of e-money \u2014 cryptocurrency was also disallowed \u2014 and the phone company, CNT, was the only legal distribution channel.<\/p>\n<p>You could sign up with an Ecuadorian identity card and a mobile phone. This gave you an account at the BCE. You could go to an authorised outlet and deposit cash into the account.<\/p>\n<p>The stated reason for SDE was to improve access to the banking system for poorer residents, and reduce the reliance of the economy on physical cash, to get the economy moving.<\/p>\n<p>Users could exchange dollars on SDE between themselves, just like cash. The poor ran on a cash economy, a lot of which was an informal economy, and the central bank hoped that SDE would bring them into the financial system.<\/p>\n<p>Both local commentators and foreign debtors worried that Ecuador would create unbacked dollars in SDE to fund government spending and pay off the country\u2019s debts \u2014 particularly given that the government had defaulted on bond issues just a few years before.<sup><a id=\"back_note_262\" title=\"262\" href=\"#note_262\">262<\/a><\/sup> But Ecuador denied any such plans, and didn\u2019t end up doing anything along these lines with the dollars in SDE.<sup><a id=\"back_note_263\" title=\"263\" href=\"#note_263\">263<\/a><\/sup><\/p>\n<p>SDE had a limited launch in late 2014 and a full public launch in 2015. The BCE expected 500,000 users by the end of 2015.<\/p>\n<p>SDE failed to take off \u2014 the system only had 5,000 users by the end of 2015. By the end of 2017, SDE had moved $62 million via 5.1 million transactions in its entire existence<sup><a id=\"back_note_264\" title=\"264\" href=\"#note_264\">264<\/a><\/sup> \u2014 with only $11 million on deposit, as compared to the $24.5 <i>billion<\/i> in cash in the Ecuadorian economy. There were 402,515 e-money accounts \u2014 but less than 30% of these were ever used, at all.<sup><a id=\"back_note_265\" title=\"265\" href=\"#note_265\">265<\/a><\/sup><\/p>\n<p>Ecuadorians with money trusted private banks more than they trusted the central bank \u2014 because they remembered the ways the government had abused its financial powers in recent years.<sup><a id=\"back_note_266\" title=\"266\" href=\"#note_266\">266<\/a><\/sup><\/p>\n<p>Nor was SDE taken up by the unbanked or underbanked.<sup><a id=\"back_note_267\" title=\"267\" href=\"#note_267\">267<\/a><\/sup> Even in the rural areas \u2014 \u201cAqu\u00ed pagamos con la palabra y el dinero contante y sonante\u201d (\u201chere, we pay with our word, and hard cash\u201d) \u2014 people trusted their local co-op bank, but they didn\u2019t trust the central bank.<\/p>\n<p>The central bank just wasn\u2019t good at serving retail customers, either \u2014 even if it had had the full trust of the users.<\/p>\n<p>The government eventually acknowledged SDE wasn\u2019t going to do the job. The commercial and cooperative banks put together a new mobile payment system, Bimo, with BCE as the regulator. SDE was shut down in March 2018, and accounts could be migrated to Bimo.<sup><a id=\"back_note_268\" title=\"268\" href=\"#note_268\">268<\/a><\/sup><\/p>\n<p>The main lesson of SDE is: don\u2019t try to back your system with a bank that your users don\u2019t trust with their money.<\/p>\n<h4 class=\"block_23\">Uruguay: e-Peso (2017)<\/h4>\n<p>Banco Central del Uruguay (BCU) issued an e-Peso in a public pilot programme that ran from November 2017 to April 2018. The pilot was part of an official push for financial inclusion.<sup><a id=\"back_note_269\" title=\"269\" href=\"#note_269\">269<\/a><\/sup><\/p>\n<p>BCU issued 20 million e-pesos. Commercial banks were not involved in the pilot \u2014 though once it started, some banks approached BCU asking if they could join in. Digital wallets were operated centrally by Antel, the national phone company.<\/p>\n<p>The 10,000 end users could hold a maximum of 30,000 e-pesos in their wallet, and registered participating businesses could hold 200,000 per wallet. Users could transfer money to each other \u2014 if they had phone coverage. Transaction data was encrypted, but could be decrypted if legally required.<\/p>\n<p>To encourage participation, the first thousand users got a 500 e-peso credit, and there were monthly lotteries for the most active users and businesses.<\/p>\n<p>The pilot finished in April 2018. The e-pesos were cashed out and destroyed.<\/p>\n<p>BCU considered the pilot a success \u2014 the system basically worked on a small scale, and commercial banks wanting to join suggested that such a system could be popular. BCU is still considering whether to do a full-scale public e-Peso \u2014 the technical bit works, and now they\u2019re going through the economic risk assessments.<\/p>\n<h4 class=\"block_23\">Bahamas: Sand Dollar (2020)<\/h4>\n<p>The Central Bank of the Bahamas (CBB) wanted to encourage an electronic payment system that reached the outer islands of the Bahamas \u2014 the cash infrastructure was shrinking as commercial banks closed branches, but phone coverage was surprisingly good, if patchy.<\/p>\n<p>Electronic payment systems for retail were usually built by commercial banks. But in this case, the central bank figured it needed to push things forward.<sup><a id=\"back_note_270\" title=\"270\" href=\"#note_270\">270<\/a><\/sup><\/p>\n<p>The CBB started with a list of what they needed in an electronic payment system, and worked out the system from there \u2014 something to handle spotty network coverage and lots of poor prospective users, but almost all of whom had phones.<\/p>\n<p>Most users connected via their bank account \u2014 the CBB left retail to the retail banks. Users who didn\u2019t have bank accounts could get a Sand Dollar wallet with their name, address, phone number and a photo, which was enough to open a very limited account at a retail money changer.<\/p>\n<p>The Sand Dollar wallet app on your phone could transmit small amounts of money when you were offline.<\/p>\n<p>The Sand Dollar pilot in 2020 was small \u2014 just $48,000 in circulation in the system<sup><a id=\"back_note_271\" title=\"271\" href=\"#note_271\">271<\/a><\/sup> \u2014 but it went well, and the system was set to go live across the Bahamas in late 2020.<\/p>\n<h4 class=\"block_23\">Eastern Caribbean: DCash (2020)<\/h4>\n<p>DCash, from theEastern Caribbean Central Bank (ECCB), started its pilot programme in late 2020 \u2014 with real consumers and merchants using it for real transactions.<sup><a id=\"back_note_272\" title=\"272\" href=\"#note_272\">272<\/a><\/sup><\/p>\n<p>DCash had similar local conditions to the Bahamas Sand Dollar initiative. However, the system had no offline capability at the pilot stage \u2014 you had to be online.<\/p>\n<p>Most DCash end users worked through their banks, with limited accounts available for unbanked users.<\/p>\n<p>DCash had a blockchain in the system, though it was just an instance of IBM\u2019s Hyperledger running as a back-end data store, and not doing anything you couldn\u2019t do just as well without a blockchain.<\/p>\n<h4 class=\"block_23\">China: DC\/EP (in testing)<\/h4>\n<p>Digital Cash\/Electronic Payments, or DC\/EP, is a payment system project by the People\u2019s Bank of China (PBOC), carrying central-bank-backed digital renminbi (yuan).<\/p>\n<p>PBOC started looking into blockchains in 2014, and officially established the Digital Currency Research Institute in 2017, which had looked into CBDCs. In the wake of Facebook\u2019s June 2019 announcement of Libra, Wang Xin of the PBOC said on 8 July 2019 that they were stepping up their CBDC project,<sup><a id=\"back_note_144\" title=\"144\" href=\"#note_144\">144<\/a><\/sup> to turn it into something that would stand up to public use at scale.<\/p>\n<p>DC\/EP has the following design goals:<\/p>\n<ul>\n<li><b>Two-tier design. <\/b>PBOC issues the money, the commercial banks distribute it \u2014 the central bank is not going to try to do retail itself.<\/li>\n<li><b>Interoperability. <\/b>You can\u2019t send payments between the big private money transmitters, Tenpay\/WeChat Pay and Alipay \u2014 but all DC\/EP providers will be interoperable.<\/li>\n<li><b>Financial inclusion. <\/b>PBOC gave no specific plan to achieve financial inclusion, though there were aspirations to reach remote and rural populations.<\/li>\n<li><b>Traceability of all transactions. <\/b>WeChat Pay and Alipay don\u2019t give the central bank full logs of every transaction. Some in the PBOC are seduced by the prospect of a full record of the entire Chinese economy.<\/li>\n<li><b>\u201cControllable\u201d anonymity. <\/b>You will be anonymous to the retailer \u2014 but the central bank still gets a full feed of who\u2019s doing what.<\/li>\n<li><b>Working offline. <\/b>You should be able to exchange money without being online 24\/7. Transactions will be sent in when you\u2019re back online.<\/li>\n<\/ul>\n<p>PBOC found that even relatively fast permissioned blockchains were too slow in internal testing. DC\/EP would have to be able to handle at least 300,000 transactions per second across the country at peak times to do what cash does. So DC\/EP won\u2019t be a blockchain. (The system will apparently contain some sort of blockchain descendant.) Mu Changchun, leader of the DC\/EP initiative, co-authored a paper that recommended not to use blockchains to transform traditional payment systems.<sup><a id=\"back_note_273\" title=\"273\" href=\"#note_273\">273<\/a><\/sup><\/p>\n<p>PBOC would like DC\/EP to replace physical cash to some degree \u2014 \u201cM0,\u201d the physical cash in the economy. The money in DC\/EP will be legal tender, just as paper notes are.<sup><a id=\"back_note_274\" title=\"274\" href=\"#note_274\">274<\/a><\/sup><\/p>\n<p>The financial press, as well as the crypto press, leapt upon every new morsel of information about DC\/EP \u2014 the PBOC had to keep stating that there was no release date as yet. The trickiest part was not the technology \u2014 it was regulatory issues, particularly around anti-money-laundering and tax evasion.<sup><a id=\"back_note_275\" title=\"275\" href=\"#note_275\">275<\/a><\/sup><\/p>\n<p>The press covered what looked very like public pilot programmes in several areas from late 2019 on \u2014 even as the PBOC insisted on calling these only \u201cinternal and closed pilot tests.\u201d PBOC Governor Yi Gang also mentioned testing in \u201csome scenarios of the coming Winter Olympics\u201d in 2022. He stressed again that there was no release date as yet.<sup><a id=\"back_note_276\" title=\"276\" href=\"#note_276\">276<\/a><\/sup><\/p>\n<p>Pilot tests continue through late 2020, at increasing scale.<\/p>\n<h3>Why would I want a CBDC?<\/h3>\n<p>Consumers want systems that make their lives easier. Convenience is king. Nobody is going to choose a new payment system that\u2019s less convenient.<\/p>\n<p>The users won\u2019t care who issues the dollars, pounds or euros, if they can assume basic legal protections \u2014 they\u2019ll only care how easily they can get, move and spend them.<\/p>\n<p>If you\u2019re in a country with good electronic payment systems, a retail CBDC probably won\u2019t do anything new for you. The Reserve Bank of Australia decided against a CBDC in 2020, because, even with the decline in cash use in the COVID-19 crisis, existing systems were still working fine, and there was still good access to physical cash.<sup><a id=\"back_note_277\" title=\"277\" href=\"#note_277\">277<\/a><\/sup><\/p>\n<p>If you\u2019re a banker, of course, it matters a lot who the money is a liability against. But for anyone else, knowing that a payment system is a \u201cCBDC\u201d tells you nothing else about that system. If someone wants you to get excited because something is a CBDC, look closely at what the system does and doesn\u2019t do.<\/p>\n<p>If you\u2019re Facebook, you might want to run blockchain CBDC tokens over your network instead of Libra tokens \u2014 in Libra 2.0.<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><a id=\"note_144\"><\/a><a title=\"144\" href=\"#back_note_144\">144<\/a>. Frank Tang. <a href=\"https:\/\/www.scmp.com\/economy\/china-economy\/article\/3017716\/facebooks-libra-forcing-china-step-plans-its-own\">\u201cFacebook\u2019s Libra forcing China to step up plans for its own cryptocurrency, says central bank official.\u201d<\/a> South China Morning Post, 8 July 2019.<\/p>\n<p><a id=\"note_256\"><\/a><a title=\"256\" href=\"#back_note_256\">256<\/a>. <a href=\"https:\/\/www.bis.org\/publ\/bisp01.htm\">\u201cImplications for central banks of the development of electronic money.\u201d<\/a> Bank for International Settlements, 1 October 1996.<\/p>\n<p><a id=\"note_257\"><\/a><a title=\"257\" href=\"#back_note_257\">257<\/a>. J. P. Koning. <a href=\"http:\/\/jpkoning.blogspot.com\/2013\/04\/why-fed-is-more-likely-to-adopt-bitcoin.html\">\u201cWhy the Fed is more likely to adopt bitcoin technology than kill it off.\u201d<\/a> Moneyness (blog), 14 April 2013.<\/p>\n<p><a id=\"note_258\"><\/a><a title=\"258\" href=\"#back_note_258\">258<\/a>. J. P. Koning. <a href=\"http:\/\/jpkoning.blogspot.com\/2014\/10\/fedcoin.html\">\u201cFedcoin.\u201d<\/a> Moneyness (blog), 19 October 2014.<\/p>\n<p><a id=\"note_259\"><\/a><a title=\"259\" href=\"#back_note_259\">259<\/a>. The phrase \u201ccentral bank digital currency\u201d seems to have been coined by Richard Gendal Brown of enterprise blockchain company R3, in his blog post <a href=\"https:\/\/gendal.me\/2015\/03\/05\/a-central-bank-cryptocurrency-an-interesting-idea-but-maybe-not-for-the-reason-we-think\/\">\u201cA Central Bank \u201ccryptocurrency\u201d? An interesting idea, but maybe not for the reason we think,\u201d<\/a> 5 March 2015. The initialism \u201cCBDC\u201d was first sighted in a speech by Ben Broadbent of the Bank of England, <a href=\"https:\/\/www.bankofengland.co.uk\/speech\/2016\/central-banks-and-digital-currencies\">\u201cCentral banks and digital currencies,\u201d<\/a> 2 March 2016.<\/p>\n<p><a id=\"note_260\"><\/a><a title=\"260\" href=\"#back_note_260\">260<\/a>. Claire Jones. <a href=\"https:\/\/www.ft.com\/content\/428a0b20-99b0-11e9-9573-ee5cbb98ed36\">\u201cCentral bank plans to create digital currencies receive backing.\u201d<\/a> Financial Times, 30 June 2019.<\/p>\n<p><a id=\"note_261\"><\/a><a title=\"261\" href=\"#back_note_261\">261<\/a>. Aleksi Grym. <a href=\"https:\/\/helda.helsinki.fi\/bof\/handle\/123456789\/1759\">\u201cLessons learned from the world\u2019s first CBDC.\u201d<\/a> BoF Economics Review 8\/2020, 15 September 2020.<\/p>\n<p><a id=\"note_262\"><\/a><a title=\"262\" href=\"#back_note_262\">262<\/a>. Jennifer Sondag, Nathan Gill. <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2014-08-11\/ecuador-turning-to-virtual-currency-after-oil-loans-correct-\">\u201cEcuador Turning to Virtual Currency After Oil Loans.\u201d<\/a> Bloomberg, 11 August 2014.<\/p>\n<p><a id=\"note_263\"><\/a><a title=\"263\" href=\"#back_note_263\">263<\/a>. Everett Rosenfeld. <a href=\"https:\/\/www.cnbc.com\/2015\/02\/06\/ecuador-becomes-the-first-country-to-roll-out-its-own-digital-durrency.html\">\u201cEcuador becomes the first country to roll out its own digital cash.\u201d<\/a> CNBC, 9 February 2015.<\/p>\n<p><a id=\"note_264\"><\/a><a title=\"264\" href=\"#back_note_264\">264<\/a>. Evelyn Tapia. <a href=\"https:\/\/www.elcomercio.com\/actualidad\/cambios-impulsar-dinero-movil-bce.html\">\u201cCinco cambios para impulsar el dinero m\u00f3vil.\u201d<\/a> El Comercio, 18 December 2017.<\/p>\n<p><a id=\"note_265\"><\/a><a title=\"265\" href=\"#back_note_265\">265<\/a>. <a href=\"https:\/\/www.eluniverso.com\/noticias\/2017\/12\/03\/nota\/6508306\/71-cuentas-dinero-electronico-uso\">\u201c71% de cuentas de dinero electr\u00f3nico, sin uso en Ecuador.\u201d<\/a> El Universo, 3 December 2017.<\/p>\n<p><a id=\"note_266\"><\/a><a title=\"266\" href=\"#back_note_266\">266<\/a>. Mar\u00eda Laura Pati\u00f1o. <a href=\"https:\/\/www.eluniverso.com\/opinion\/2016\/06\/01\/nota\/5610315\/dinero-electronico-apuesta-peligrosa\">\u201cEl dinero electr\u00f3nico, una apuesta peligrosa.\u201d<\/a> El Universo, 1 June 2016.<\/p>\n<p><a id=\"note_267\"><\/a><a title=\"267\" href=\"#back_note_267\">267<\/a>. <a href=\"https:\/\/www.eluniverso.com\/noticias\/2017\/12\/03\/nota\/6508273\/dinero-electronico-es-medio-pago-no-moneda\">\u201cJuan Pablo Guerra: Dinero electr\u00f3nico es un medio de pago, no moneda.\u201d<\/a> El Universo, 3 December 2017.<\/p>\n<p><a id=\"note_268\"><\/a> <a title=\"268\" href=\"#back_note_268\">268<\/a>.<a href=\"https:\/\/www.eluniverso.com\/noticias\/2018\/03\/26\/nota\/6685168\/cinco-dias-que-se-deje-usar-dinero-electronico\">\u201cEcuador: Cuentas de dinero electr\u00f3nico dejar\u00e1n de funcionar el 31 de marzo.\u201d<\/a> El Universal, 26 March 2018.<\/p>\n<p><a id=\"note_269\"><\/a><a title=\"269\" href=\"#back_note_269\">269<\/a>. Mario Bergara, Jorge Ponce. <a href=\"https:\/\/www.suerf.org\/docx\/s_cf0d02ec99e61a64137b8a2c3b03e030_7025_suerf.pdf\">\u201cCentral Bank Digital Currency: The Uruguayan e-Peso case.\u201d<\/a> In Do We Need Central Bank Digital Currency? Economics, Technology and Institutions. ed. Ernest Gnan, Donato Masciandaro. SUERF, 2018.<\/p>\n<p><a id=\"note_270\"><\/a><a title=\"270\" href=\"#back_note_270\">270<\/a>. <a href=\"https:\/\/cdn.centralbankbahamas.com\/download\/022598600.pdf\">\u201cProject Sand Dollar: A Bahamas Payments System Modernisation Initiative.\u201d<\/a> Central Bank of the Bahamas, 24 December 2019.<\/p>\n<p><a id=\"note_271\"><\/a><a title=\"271\" href=\"#back_note_271\">271<\/a>. Jim Wyss. <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-09-15\/bahamas-plans-nationwide-rollout-of-sand-dollar-e-currency\">\u201cBahamas Plans E-Currency to Connect Far-Flung Island Beaches.\u201d<\/a> Bloomberg, 15 September 2020.<\/p>\n<p><a id=\"note_272\"><\/a><a title=\"272\" href=\"#back_note_272\">272<\/a>. <a href=\"https:\/\/www.eccb-centralbank.org\/p\/frequently-asked-questions\">\u201cECCB Digital EC Currency Pilot: Frequently Asked Questions.\u201d<\/a> Eastern Caribbean Central Bank.<\/p>\n<p><a id=\"note_273\"><\/a><a title=\"273\" href=\"#back_note_273\">273<\/a>. Mu Changchun, Di Gang, Lu Yuan, Qian Youcai, Qing Su De\u2019. <a href=\"https:\/\/tech.sina.com.cn\/i\/2020-02-21\/doc-iimxxstf3229817.shtml\">\u201c\u592e\u884c\u6570\u5b57\u8d27\u5e01\u7814\u7a76\u6240\u8c08\u533a\u5757\u94fe\u6280\u672f\u7684\u53d1\u5c55\u4e0e\u7ba1\u7406\u201d<\/a> (\u201cThe Central Bank Digital Currency Research Institute talks about the development and management of blockchain technology.\u201d) Sina Technology, 21 February 2020.<\/p>\n<p><a id=\"note_274\"><\/a><a title=\"274\" href=\"#back_note_274\">274<\/a>. Fan Yifei. \u201c<a href=\"https:\/\/www.financialnews.com.cn\/ll\/gdsj\/202009\/t20200914_200849.html\">\u5173\u4e8e\u6570\u5b57\u4eba\u6c11\u5e01M0\u5b9a\u4f4d\u7684\u653f\u7b56\u542b\u4e49\u5206\u6790<\/a>\u201d (\u201cAnalysis on the Policy Implications of Digital RMB M0 Positioning.\u201d) China Financial News Network, 14 September 2019.<\/p>\n<p><a id=\"note_275\"><\/a><a title=\"275\" href=\"#back_note_275\">275<\/a>. Frank Tang. <a href=\"https:\/\/www.scmp.com\/economy\/global-economy\/article\/3030120\/china-has-no-timetable-launch-its-digital-currency-says\">\u201cChina has \u2018no timetable\u2019 for launch of its digital currency, says central bank governor.\u201d<\/a> South China Morning Post, 24 September 2019.<\/p>\n<p><a id=\"note_276\"><\/a><a title=\"276\" href=\"#back_note_276\">276<\/a>. <a href=\"http:\/\/www.pbc.gov.cn\/en\/3688110\/3688175\/4031198\/index.html\">\u201cInterview with PBC Governor Yi Gang by Financial News and China Finance on Key Issues During \u2018Two Sessions\u2019.\u201d<\/a> People\u2019s Bank of China, 30 May 2020.<\/p>\n<p><a id=\"note_277\"><\/a><a title=\"277\" href=\"#back_note_277\">277<\/a>. Reserve Bank of Australia. <a href=\"https:\/\/www.rba.gov.au\/media-releases\/2020\/mr-20-19.html\">\u201cPayments System Board Update: August 2020 Meeting.\u201d<\/a> Press release, 21 August 2020.<\/p>\n<br><br><div align=\"center\"><p><a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\"><img src=\"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2021\/10\/become_a_patron_button.svg\" alt=\"Become a Patron!\" title=\"Become a Patron!\" width=217 height=51><\/a><br><p style=\"align:center;\" class=\"patreon-badge\"><i>Your subscriptions keep this site going. <a href=\"https:\/\/www.patreon.com\/bePatron?u=8420236\">Sign up today!<\/a><\/i><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>An excerpt a year after the book\u2019s publication \u2014 because I keep referring people to this chapter. Buy the book for more!<\/p>\n","protected":false},"author":1,"featured_media":18143,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[2512,2515,138,1638,1986,2516,2014,738,1985,1474,100,1988,1978,2514,1984,1976,2511,1639,1353,2011,1979,1715,1987,1977,2513,2013],"class_list":["post-20958","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorised","tag-agustin-carstens","tag-antel","tag-australia","tag-avant-card","tag-bahamas","tag-bce","tag-bcu","tag-bis","tag-cbb","tag-cbdc","tag-china","tag-dcash","tag-dcep","tag-e-peso","tag-eccb","tag-ecuador","tag-fedcoin","tag-finland","tag-jp-koning","tag-libra-shrugged","tag-pboc","tag-rba","tag-sand-dollar","tag-sde","tag-toimiraha","tag-uruguay"],"jetpack_featured_media_url":"https:\/\/davidgerard.co.uk\/blockchain\/wp-content\/uploads\/2020\/11\/libra-shrugged-paperbacks-header.jpg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/comments?post=20958"}],"version-history":[{"count":15,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20958\/revisions"}],"predecessor-version":[{"id":22089,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/posts\/20958\/revisions\/22089"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media\/18143"}],"wp:attachment":[{"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/media?parent=20958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/categories?post=20958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/davidgerard.co.uk\/blockchain\/wp-json\/wp\/v2\/tags?post=20958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}