Aadhaar, the 12-digit number linked to the fingerprints and iris patterns of most Indians, the key to unlocking government for the citizen, is a security nightmare in a world where big data and a handful of global defence contractors control the technology for biometric solutions. If information warfare is the way of the future—as Brexit and the Trump campaign show it need not be rooted in facts—select companies and the small circle of protagonists behind them have proprietary tools and the world’s best expertise to access, mine and manipulate data belonging to governments and citizens for desired outcomes.
Very interesting article, thanks. In Puerto Rico there's a cash transfer and payment system called ATH Movil that meet everything about CBDC. Started just for transfer cash, now you can pay any merchant with it.
From a tech perspective only, how far away are the current big US banks from this? If courts didn’t stop them, can they functionally do most of these things now to your bank account? As you noted, “emergency powers” can at least temporarily circumvent legal protections.
It’s a ways away. Retail pilots will come before wholesale.
Their biggest use case for them will be wholesale CBDC for interbank payments, large settlements, cross border txns, etc
Functionally the settlements now are different from the costly intermediation headaches they deal with on large cross-border transfers with fees and time. Wholesale CBDC brings instant settlement and direct transfer. Much different and comes with better capacity, capabilities, speed, efficiency, etc.
Not sure exactly when those will come, but it’s years away. Will keep updated as it’s a primary focus.
Thanks for the work on this -- a very good rollup of CBDC frameworks and concerns.
On the other end of the anti-sovereignty individual effects of e-CNY is the establishment of the necessary framework for further internationalizing the yuan. In other words, e-CNY allows for easier cross-border transactions and the domestic rollout (proving the success/adoption) will probably help convince the otherwise politically/socially heterogeneous BRICS players to acquire some sort of the technology from China. After all, look how happy all those Chinese citizens are spending their official internet monies... who wouldn't want happy subjects?
Other than the long (very long?) term effort of China to dethrone the USD, an emerging concern is the competitive impetus a CBDC creates for other central banks, especially in a presumably bipolar world.
"Don't you enjoy your cheap trinkets as a member of the outer party? Who doesn't love cheap money and unlimited liquidity? You don't want to be the reason the USD loses its status as the reserve currency, do you? Use the Fed's e-USD to help guarantee continued dollar sovereignty!"
Exactly! This has been a long term plan from the PBoC.
Also, it is very much a primary concern for smaller central banks being “dethroned” by the larger central banks. Interoperability will not secure their level of authority. Expanding the scope and authority of large central banks, as you have correctly pointed out, was addressed in the Digital Dollar Discussion paper and the Executive Order from earlier this year.
Direct quote from Powell “A digital dollar may be a necessary defensive move”
The FEDs competition isn’t just private stablecoins!
How do they plan to sell this to the public? The U.S. dollar is already primarily digital, so how can they convince most people that they need CBDC without admitting the dollar is a failure?
Who will we trade with if everyone is linked to a CBDC? Will we need to use it in any case and then when we use an alternate crypto get flagged and blocked from using our bank accounts.
Speaking of which, poorer continents looking like a good place to go (Africa and South America) since less resources for this kind of surveillance/shutdown?
I understand the speculation here, but let’s not forget that one of the top motivations for this is “financial inclusion/banking the unbanked”
South America is further ahead than Africa, but not by far. Think about it, going to those countries won’t avoid surveillance. The resources needed to build CBDC infrastructure is a lot easier to scale than building things bank branches across the continent.
true they'll be able to track but was thinking that the quality of government enforcement on a mass scale is weak compared to China, Western nations. You can still hide where internet penetration is low and electricity supply is not stable. Except, would you want to?
yes I heard about that. It seems really odd as thier also one of the most tech savvy societies as well. I'd predict this is only temporary as world banks are united in thier desire for CBDC's.
Great article. Appreciate the depth of research that went into writing it.
Thank you Tarzdan!
Consider India, which demonetized banknotes in 2016
https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation
Aadhaar, the 12-digit number linked to the fingerprints and iris patterns of most Indians, the key to unlocking government for the citizen, is a security nightmare in a world where big data and a handful of global defence contractors control the technology for biometric solutions. If information warfare is the way of the future—as Brexit and the Trump campaign show it need not be rooted in facts—select companies and the small circle of protagonists behind them have proprietary tools and the world’s best expertise to access, mine and manipulate data belonging to governments and citizens for desired outcomes.
http://fountainink.in/reportage/aadhaar-in-the-hand-of-spies-
Thank you for sharing!
Good read, Scholar - nice work!
Appreciate it, Fawn - no bugs for us
Very interesting article, thanks. In Puerto Rico there's a cash transfer and payment system called ATH Movil that meet everything about CBDC. Started just for transfer cash, now you can pay any merchant with it.
From a tech perspective only, how far away are the current big US banks from this? If courts didn’t stop them, can they functionally do most of these things now to your bank account? As you noted, “emergency powers” can at least temporarily circumvent legal protections.
It’s a ways away. Retail pilots will come before wholesale.
Their biggest use case for them will be wholesale CBDC for interbank payments, large settlements, cross border txns, etc
Functionally the settlements now are different from the costly intermediation headaches they deal with on large cross-border transfers with fees and time. Wholesale CBDC brings instant settlement and direct transfer. Much different and comes with better capacity, capabilities, speed, efficiency, etc.
Not sure exactly when those will come, but it’s years away. Will keep updated as it’s a primary focus.
Thanks for the work on this -- a very good rollup of CBDC frameworks and concerns.
On the other end of the anti-sovereignty individual effects of e-CNY is the establishment of the necessary framework for further internationalizing the yuan. In other words, e-CNY allows for easier cross-border transactions and the domestic rollout (proving the success/adoption) will probably help convince the otherwise politically/socially heterogeneous BRICS players to acquire some sort of the technology from China. After all, look how happy all those Chinese citizens are spending their official internet monies... who wouldn't want happy subjects?
Other than the long (very long?) term effort of China to dethrone the USD, an emerging concern is the competitive impetus a CBDC creates for other central banks, especially in a presumably bipolar world.
"Don't you enjoy your cheap trinkets as a member of the outer party? Who doesn't love cheap money and unlimited liquidity? You don't want to be the reason the USD loses its status as the reserve currency, do you? Use the Fed's e-USD to help guarantee continued dollar sovereignty!"
Exactly! This has been a long term plan from the PBoC.
Also, it is very much a primary concern for smaller central banks being “dethroned” by the larger central banks. Interoperability will not secure their level of authority. Expanding the scope and authority of large central banks, as you have correctly pointed out, was addressed in the Digital Dollar Discussion paper and the Executive Order from earlier this year.
Direct quote from Powell “A digital dollar may be a necessary defensive move”
The FEDs competition isn’t just private stablecoins!
Wow sound so scary... :( What can we do right now? Can $btc really help us from this?
Ask the citizens of Russia and Ukraine
Great article - thank you for putting it together
How do they plan to sell this to the public? The U.S. dollar is already primarily digital, so how can they convince most people that they need CBDC without admitting the dollar is a failure?
Who will we trade with if everyone is linked to a CBDC? Will we need to use it in any case and then when we use an alternate crypto get flagged and blocked from using our bank accounts.
Speaking of which, poorer continents looking like a good place to go (Africa and South America) since less resources for this kind of surveillance/shutdown?
I understand the speculation here, but let’s not forget that one of the top motivations for this is “financial inclusion/banking the unbanked”
South America is further ahead than Africa, but not by far. Think about it, going to those countries won’t avoid surveillance. The resources needed to build CBDC infrastructure is a lot easier to scale than building things bank branches across the continent.
true they'll be able to track but was thinking that the quality of government enforcement on a mass scale is weak compared to China, Western nations. You can still hide where internet penetration is low and electricity supply is not stable. Except, would you want to?
https://en.wikipedia.org/wiki/Executive_Order_14067
https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/09/fact-sheet-president-biden-to-sign-executive-order-on-ensuring-responsible-innovation-in-digital-assets/
What's DLT?
Distributed Ledger Technology
Great post. Is there anything we can do about this realistically?
Japan cancelled their CBDC plans as they’re predominantly a cash based society
yes I heard about that. It seems really odd as thier also one of the most tech savvy societies as well. I'd predict this is only temporary as world banks are united in thier desire for CBDC's.