Why dollar CBDCs may never happen, by Alasdair Macleod

Central bank digital currencies are politicians and central bankers Holy Grail. They could be hell on earth for the rest of us. From Alasdair Macleod at goldmoney.com:

The Fed has just released its first public consultation paper on a dollar-based central bank digital currency. For many, central bank digital currencies (CBDCs) are a means of heading off private sector cryptos, but coincidentally the prices of bitcoin and others have collapsed, losing half their value since early November.

The CBDC proposition is being sold to us by the central banks as keeping up with the times and taking advantage of the opportunities presented by new technologies to evolve payment systems.

The Bank for International Settlements has been coordinating research into CBDCs, and this article gives a brief description of how the BIS and its committee members sees them evolving. It is early days, and there are several important issues yet to be tackled, such as will CBDCs pay interest, and what will be the likely reaction of commercial banks to seeing central banks muscle in on their territory.

There are also two separate CBDC functions to consider. There is retail, whereby individuals have direct access to their central bank as counterparty, and a wholesale function for financial intermediaries for international settlement.

Whether CBDCs will come into existence is doubtful. To have credibility, their introduction will have to be coordinated at G20 level, and they are unlikely to be widely issued before the end of the decade. That will probably be too late to save the world from a developing financial and monetary crisis which threatens to change everything. Furthermore, the Americans will need to be convinced that their dollar hegemony will not be compromised. And what will almost certainly stop it is the powerful US banking lobby, likely to remind politicians presented with the necessary legislation, that a political survivor is one who once bought, stays bought.


This month, the credibility of cryptocurrencies came into question as the price of bitcoin and those of its imitators continued to fall heavily. Bitcoin has halved from its peak, which was only two months ago.

It leaves everyone involved with headaches. As the private sector replacement for failing fiat currencies, the credibility of bitcoin may have suffered a mortal blow, with many observers now comparing it not in the context of rapidly expanding quantities of fiat, but with the wilder tech stocks which coincidentally have taken a battering as well. But a few state actors on the fringes have become strong supporters, notably El Salvador.

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