Central bank digital currencies (CBDCs) are the talk of the town, with most of the heads of issuing institutions talking about more or less concrete projects. Their aim is to not be outdone by cryptocurrencies or easy money transfer applications (such as Lydia in France), but to enable instant transfers from a smartphone. That's the initial idea. Other, less avowed ambitions are to render cash useless, and thus be able to track all local transactions in order to combat undeclared work (and terrorism, an irrefutable argument). Its promoters are even credited with the technically feasible aim of making money programmable ("You've used up your carbon quota, so you can't buy plane tickets").
But for the moment, it's a little hard to understand how a CBDC could circulate. Different in nature from the usual currency, it would circulate in parallel, on a different network. Guaranteed by the central bank itself, this currency would be more valuable than that of your bank, which could go bankrupt. In May 2022, the American Bankers Association (ABA) took a stand against the Fed's digital dollar project, asserting that "the introduction of a CBDC would risk undermining the important role banks play in financial intermediation". In fact, if there were any doubts about a bank's solidity, customers could easily trigger a bank run by converting their funds into digital dollars deposited at the Fed! Deprived of its deposits, the bank wouldn't stand a chance.
In response to the banks' fears, ECB President Christine Lagarde explained that retail accounts in digital euros would be limited to 3,000 euros. But if this limit has already been reached and you receive money, will the transfer be blocked? Or will you have to quickly convert some of your digital euros into conventional euros? How can we manage such complexity for individuals, retailers, businesses and banks, which runs counter to the simplicity of a single currency?
It just doesn't make sense. In our view, the central banks are pursuing a project on a completely different scale: CBDCs will become the single form of currency. No more confusion between the two versions of the euro or the dollar, no more risk of bank run for the banks, but with the possibility of tracing all transactions, as cash gradually disappears. And the possibility - which will come later - of programming the currency (to fight terrorism, of course, to impose the energy transition, to apply a negative interest rate to force people to consume and boost the economy, etc.- the possibilities are endless).
The central banks' communication on the CBDC projects is a trial run, to test reactions, and then it will naturally appear simpler to stay with a single currency. We're already using digital currency almost entirely, so a little more (centralization of all movements by the central bank, and not just by one's own bank), what's the difference, after all? And will it be programmable? Will you lose the power to use your money as you see fit? No, we won't be telling you that just yet...
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