EU Delivering CBDC Regulation: So Much For Fearmongering
There is a lot of fearmongering about central bank digital currencies (CBDC). Part of this includes the timing of it. There are some who claim that FedNow, in spite of being an account based system through the commercial banks, will be the release of FedCoin.
It is pure nonsense.
We now have the EU taking up the measure. It is an area that is advancing in digital asset regulation while the United States drags its feet, allowing Gary Gensler to run roughshod over the industry.
Now we are starting to get some indication of the direction that legislation is likely to move in.
A "leaked" bill shows what is being proposed.
Stop Putting The Cart Before The Horse
When I hear how soon some people are proposing for CBDC rollout, my first question is what network? Where is the infrastructure to house all that is going to be required? For some reason people believe this magically runs on air.
The reality is the EU hasn't even decided to accept a CBDC.
Here is what was said about it:
“The Council will not decide or formulate a joint opinion on whether a digital euro should be introduced, at least not in any near future,” a senior EU official, speaking on condition of anonymity, said ahead of talks that are set to continue Thursday. “I would not expect the ECB to go forward against a very skeptical bunch of ministers.”
That said, it can change with time. As always, it will take a while for them to even decide on what to do. It is ironic that the only thing politicians can quickly agree upon is war. Anything else takes forever.
This, naturally, is to the industry's advantage.
We have another piece of the puzzle that has to be consider:
“The digital euro shall be available for both online and offline digital euro payment transactions as of the first issuance of the digital euro,” said the text viewed by CoinDesk. The level of privacy for offline, face-to-face use should be “comparable” to withdrawing banknotes at an ATM, it said.
Here we have something that is going to take a while. Even if they decided to jump on an established blockchain, how are they going to incorporate the offline transactions. This will likely have to be integrated into some SMS service. We know this can be done with the right set up.
What this means is that, if adopted, this would have to be built. As stated in the past, who is going to do it? Which private contractors are going to do it? What is the bidding process to get the job?
All of this will have to be worked out if they even go ahead of with it.
One noteworthy item is the bill makes it illegal to pay interest on the CBDC. This is to prevent the new currency from competing with the commercial banks. It is one concern many had. The other is privacy which was addressed in the bill. However, this might be questioned since we know that governments like to have back doors built into technology.
Finally, there is a proposed limit to the number of digital euros to be held, with a maximum of 3,000. The idea is to ensure the currency is used for payments.
Competition Means CBDCs Epic Failure
We know the truth rarely makes a good headline and cannot serve as clickbait on YouTube. However, as stated, the idea of widespread CBDCs is no even close. People overlook the most basic aspects to this.
That does not mean this will not come to reality. I firmly believe that as governments start suffer, they will turn to CBDCs as a last ditch effort to hang on. The EU is not in good shape and will likely face default on its [debt/@@leoglossary/leoglossary-debt)]( later this decade. That will set off a debt crisis which is orders of magnitude worse than aa bank crisis. When that happens, they will grasp at whatever they can.
Nevertheless, by then the euro will be cooked. I would not be surprised if it is pretty much done as a currency by 2030. The key is people are going to have other options, with cryptocurrency alternatives being central in that. Digital assets are not going away and people will find options that presently are not available to them.
As Web 3.0 evolves, more people will enter the digital realm in this manner. This means we are now dealing with the buildout by private entities. We know there are projects all over the world focused on all aspects of the financial system. Disruption is coming.
CBDCs will be an epic failure. There is no way for them to succeed when facing so many option. Even the US dollar was hijacked by the offshore dollar system. Today, the USD is really a unit of account, a denomination on balance sheets all over the world. Of the tens of trillions (dollars) in daily transactions, there is very little currency involved in the process.
By the time these roll out (the Bank of England stated they might aim for 2030), it will be too late. That is like trying to enter the world of search in 2007 after Google was operating for near a decade. Technology does not slow down.
As is par for the course, we just need to keep building. This is a race and governments own mechanisms slow things down on their end. Right now, the incentive for most countries to act in an expedient manner is not there. We could enter that time. However, if we keep forging ahead, they will not keep pace.
We are dealing with open source software. A half decade in a world like this is the equivalent to 30 years a few decades back. That is how quickly things are evolving.
Governments will always be playing catch up. It is no different with cryptocurrency.
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