> Financial data can reveal uncomfortable information about a consumer’s preferences and habits; our finances give a window into our lives. Any US CBDC should prioritize user privacy and data protection. In addition, collecting and storing personally identifying user data at all makes it vulnerable to accidental leaks or malicious hacking attempts, so the design of a US CBDC should strive to minimize data collection to only what is critically necessary to safely process transactions.
> A CBDC which is in some part run by the central bank does not necessarily require the central bank to have visibility into fine-grained transaction data. Legitimate public policy goals relating to combating criminal activity can be fulfilled while preserving the privacy of the public and preventing a central bank being drawn into the commercial surveillance models which are now prevalent in the private sector.
It sounds like they're prioritizing a system that uses cryptography to ensure a zero-trust and plausible deniability environment similar to cash. For the US, I think this is the right path for their government. They need to be able to easily transfer monetary assets to foreign agents or governments without anyone snooping in on them. Even the possibility of a back door would mean that one of their enemies could see where resources are being allocated internationally, which would be a vulnerability.
This would also promote use of the currency among others in low trust environments, which is part of why the US dollar has such significant international hegemony in comparison to something like the Yuan/Digital Yuan. No third world government wants to be in the position where the Chinese can see how they're spending their funds and immediately freeze them based on this oversight.
1) Cryptocurrencies are mined decentrally. In this case, who will mine and how?
2) Crypto blockchains are secure by having many distributed miners. In this case, how will the blockchain be decentrally secured? (And if it will not be decentrally secured, then will it simply be a central database?)
It would be really cool to see all the corrupt money on the blockchain, no more easy lobbying etc. You can exactly see all the government spending (wasting).
That's a very attractive use of blockchain. It would be great if we can have accountability and traceability for all publicly spent money. It would also be nice to be able to trace all public contracts in a similar manner.
A simple question. Is there any reason not to put a Fed backed stablecoin on Ethereum and the other major blockchains? Even if you're crypto-skeptical, what is the downside?
In a world where Tether didn't have mass adoption, I can see why you might oppose it. But Tether and other stablecoins already exist and are widely used. DeFi already trivially interacts with fiat prices. We also know that Tether poses a serious, potentially systematic risk. The Fed could put it out of business overnight just by deploying a simple ERC20 token tracker.
Because there's no benefit over a central system. If you trust the central bank (which a vast majority of participants in the financial system do), you don't need distributed anything. Blockchains are for trustless systems. The US financial and capital systems are built on legal and regulatory trust. Your smart contract will never override a judge or a regulatory body.
The federal government need not deploy a crypto token in order to kill Tether. They will simply regulate it out of existence. It is clear this is the path we're on from Yellen's statements and the nomination of Gary Gensler to the SEC (who previously taught about cryptocurrency systems at MIT) [1]. Globally, China is cracking down hard, and Europe seems to be preparing to do so. None of this should be unexpected to an educated scholar of history and nation state mechanics.
> It is important to note that a CBDC might not be the only way to address some of these
problems; for example, in the US we might improve financial inclusion by requiring commercial
banks to provide free, no-minimum accounts to users [2] [3], or by limiting or eliminating fees, as these
were some of the reasons listed when the US unbanked were asked why they don’t have bank
accounts.
So, instant payments are coming in the next 18 months [3] (it is actively in testing currently with a handful of participants), and free accounts for everyone is a stroke of legislative pen. What's blockchain solving?
Fear of losing control in future. For example Ethereum presently seems to be quite secure based on the potential reward of an attack vs the assets that might be deployed to attack Ethereum. But if a Fed-backed stablecoin relies on Ethereum, then a very expensive attack on Ethereum could become more attractive to an adversary. And how about the risk of an accidental coding error by Ethereum developers in a future update?
Fear of lending legitimacy to other cryptocurrencies and tokens. Their values would explode if the Fed issued an ERC-20 token on the Ethereum blockchain
A dollar is not a stablecoin period. A stablecoin isn't just a number on a ledger and it isn't a physical dollar.
It is a really bad idea from a privacy perspective. Physcial cash is better, the fact that bitcoiners like this idea means they aren't really for privacy and stuff like that.
Also blockchain has many design flaws including that they can be attacked and there is only 'rough' consensus about the order of transactions. It is a no good terrible idea.
> A simple question. Is there any reason not to put a Fed backed stablecoin on Ethereum and the other major blockchains? Even if you're crypto-skeptical, what is the downside?
Without a substantial benefit that advances the Federal Reserve's core mission, there would seem to be no reason to do it. "Why not?" is one approach, and a perfectly valid one! It's perhaps often not how central banks approach decisions though.
So... I don't quite understand all the implications of a "fedcoin." Isn't it basically creating an alternative USD, which the Fed becomes obligated to keep in parity with regular USD?
What happens if a proverbial Soros messes starts exchanging these at massive rates? Does the Fed need to start printing USD (or stablecoin) to meet the demand? Parity is a hard problem. That's why we abandoned fixed exchange rate currency systems, for the most part.
Also, if Tether is anything to go by, demand for stablecoins is sky high already. The day the Fed decides to issue Fedcoin, demand could be trillions. The Fed would be receiving
^I could be totally off. Haven't thought about this much. Please don't bite me.
Because then the Fed is exposing itself to the mess that is Ethereum (and honestly, blockchain tokens in general).
In order to produce a token on a given blockchain as a central government, you’re by implication saying that the blockchain itself is legitimate. In the case of Ethereum this would be disastrous.
As an example - What happens if people start putting this Fed-backed token into solidity contracts? You can’t wave it away from court and say “this is funny money and has no legal standing” if someone raises a dispute when you (the government) issued the token.
You likewise can’t start treating Ethereum contracts as legally valid because they are utterly unfit for that purpose for literally innumerable reasons.
For Architecture 7 which is similar they call out the reversal of the DAO hack as an example of giving over control to other groups being potentially undesirable. I'm not sure how likely something like that negatively affecting a fedcoin would be, but I can see them wanting as much control of the ecosystem as possible.
Because ethereum is hopelessly broken, inefficient, unscalable tech. You do not want your entire currency running on it. If it moves to PoS, it will be even worse, with frequent chain reorgs causing tx reversing and contract balance non-determinism. If you want to see a vision of broken eth, just look at polygon.
They need total control. Why would they want to do that, that will make the price of ETH to skyrocket. The Fed will never run on blockchain, imagine someone guessing the private key. The Fed needs total control and this is good. All the transaction will pass through them and no one else.
The US Federal Reserve has no interest in holding a whole lot of random cryptocurrencies. Tether doesn't really work - letting you trade arbitrary cryptos into tethers means the backing company is holding arbitrary cryptos it hopes to resell for more tethers.
The blockchain is massively energy inefficient with high transaction costs. That seems like sufficient reason not to put actual economic transactions on the blockchain.
Regulation and criminal penalties is sufficient for dealing with the frauds of the world. The answer to Madoff wasn’t “outcompete him” it was jail.
> Traditional electronic transaction systems today have high fees, limit access, and have not evolved fast enough to keep pace with the demand for online digital payments.
High fees:- How much do merchants/consumer pay today? I am not sure if transacting a digital currency is going to be free.
Limit access:- How does the current system limit access? As a merchant I can easily signup with thousands of payment providers.
Not evolved fast enough:- I agree with this but from where we were say 20 years ago I would say they have evolved a fair bit.
There's no reason for something like this to be a cryptocurrency is the problem, because the central bank literally has the power to issue new currency as it sees fit.
Wouldn't this be closer to offering Federal Reserve clearing accounts to regular citizens as a service?
This person... so much talk about convenience of payment, and a total misunderstanding of why goverments want CBDC. And she call herself a PhD? And no word about the threat of CBDC.
[+] [-] f38zf5vdt|4 years ago|reply
> A CBDC which is in some part run by the central bank does not necessarily require the central bank to have visibility into fine-grained transaction data. Legitimate public policy goals relating to combating criminal activity can be fulfilled while preserving the privacy of the public and preventing a central bank being drawn into the commercial surveillance models which are now prevalent in the private sector.
It sounds like they're prioritizing a system that uses cryptography to ensure a zero-trust and plausible deniability environment similar to cash. For the US, I think this is the right path for their government. They need to be able to easily transfer monetary assets to foreign agents or governments without anyone snooping in on them. Even the possibility of a back door would mean that one of their enemies could see where resources are being allocated internationally, which would be a vulnerability.
This would also promote use of the currency among others in low trust environments, which is part of why the US dollar has such significant international hegemony in comparison to something like the Yuan/Digital Yuan. No third world government wants to be in the position where the Chinese can see how they're spending their funds and immediately freeze them based on this oversight.
[+] [-] nobrains|4 years ago|reply
1) Cryptocurrencies are mined decentrally. In this case, who will mine and how?
2) Crypto blockchains are secure by having many distributed miners. In this case, how will the blockchain be decentrally secured? (And if it will not be decentrally secured, then will it simply be a central database?)
Thanks.
[+] [-] headmelted|4 years ago|reply
Is the justification in the paper and I’m just missing it?
[+] [-] tiku|4 years ago|reply
[+] [-] tiku|4 years ago|reply
[+] [-] lifty|4 years ago|reply
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] dcolkitt|4 years ago|reply
In a world where Tether didn't have mass adoption, I can see why you might oppose it. But Tether and other stablecoins already exist and are widely used. DeFi already trivially interacts with fiat prices. We also know that Tether poses a serious, potentially systematic risk. The Fed could put it out of business overnight just by deploying a simple ERC20 token tracker.
[+] [-] toomuchtodo|4 years ago|reply
The federal government need not deploy a crypto token in order to kill Tether. They will simply regulate it out of existence. It is clear this is the path we're on from Yellen's statements and the nomination of Gary Gensler to the SEC (who previously taught about cryptocurrency systems at MIT) [1]. Globally, China is cracking down hard, and Europe seems to be preparing to do so. None of this should be unexpected to an educated scholar of history and nation state mechanics.
> It is important to note that a CBDC might not be the only way to address some of these problems; for example, in the US we might improve financial inclusion by requiring commercial banks to provide free, no-minimum accounts to users [2] [3], or by limiting or eliminating fees, as these were some of the reasons listed when the US unbanked were asked why they don’t have bank accounts.
So, instant payments are coming in the next 18 months [3] (it is actively in testing currently with a handful of participants), and free accounts for everyone is a stroke of legislative pen. What's blockchain solving?
[1] https://www.youtube.com/watch?v=EH6vE97qIP4 (MIT 15.S12 Blockchain and Money, Fall 2018, Instructor: Prof. Gary Gensler)
[2] https://www.congress.gov/bill/116th-congress/senate-bill/357... (Banking for All)
[3] https://www.federalreserve.gov/paymentsystems/fednow_faq.htm (FedNow Instant Payment system, 2023 GA)
[+] [-] herendin|4 years ago|reply
Fear of losing control in future. For example Ethereum presently seems to be quite secure based on the potential reward of an attack vs the assets that might be deployed to attack Ethereum. But if a Fed-backed stablecoin relies on Ethereum, then a very expensive attack on Ethereum could become more attractive to an adversary. And how about the risk of an accidental coding error by Ethereum developers in a future update?
Fear of lending legitimacy to other cryptocurrencies and tokens. Their values would explode if the Fed issued an ERC-20 token on the Ethereum blockchain
[+] [-] runbathtime|4 years ago|reply
It is a really bad idea from a privacy perspective. Physcial cash is better, the fact that bitcoiners like this idea means they aren't really for privacy and stuff like that.
Also blockchain has many design flaws including that they can be attacked and there is only 'rough' consensus about the order of transactions. It is a no good terrible idea.
[+] [-] Kalium|4 years ago|reply
Without a substantial benefit that advances the Federal Reserve's core mission, there would seem to be no reason to do it. "Why not?" is one approach, and a perfectly valid one! It's perhaps often not how central banks approach decisions though.
[+] [-] dalbasal|4 years ago|reply
What happens if a proverbial Soros messes starts exchanging these at massive rates? Does the Fed need to start printing USD (or stablecoin) to meet the demand? Parity is a hard problem. That's why we abandoned fixed exchange rate currency systems, for the most part.
Also, if Tether is anything to go by, demand for stablecoins is sky high already. The day the Fed decides to issue Fedcoin, demand could be trillions. The Fed would be receiving
^I could be totally off. Haven't thought about this much. Please don't bite me.
[+] [-] headmelted|4 years ago|reply
In order to produce a token on a given blockchain as a central government, you’re by implication saying that the blockchain itself is legitimate. In the case of Ethereum this would be disastrous.
As an example - What happens if people start putting this Fed-backed token into solidity contracts? You can’t wave it away from court and say “this is funny money and has no legal standing” if someone raises a dispute when you (the government) issued the token.
You likewise can’t start treating Ethereum contracts as legally valid because they are utterly unfit for that purpose for literally innumerable reasons.
[+] [-] BrianOnHN|4 years ago|reply
[+] [-] kipchak|4 years ago|reply
[+] [-] randomhodler84|4 years ago|reply
[+] [-] icf80|4 years ago|reply
[+] [-] XorNot|4 years ago|reply
[+] [-] bitcurious|4 years ago|reply
[+] [-] graeme|4 years ago|reply
Regulation and criminal penalties is sufficient for dealing with the frauds of the world. The answer to Madoff wasn’t “outcompete him” it was jail.
[+] [-] victor106|4 years ago|reply
High fees:- How much do merchants/consumer pay today? I am not sure if transacting a digital currency is going to be free.
Limit access:- How does the current system limit access? As a merchant I can easily signup with thousands of payment providers.
Not evolved fast enough:- I agree with this but from where we were say 20 years ago I would say they have evolved a fair bit.
[+] [-] XorNot|4 years ago|reply
There's no reason for something like this to be a cryptocurrency is the problem, because the central bank literally has the power to issue new currency as it sees fit.
Wouldn't this be closer to offering Federal Reserve clearing accounts to regular citizens as a service?
[+] [-] rahimnathwani|4 years ago|reply
[+] [-] mistrial9|4 years ago|reply
15th USENIX Symposium on Networked Systems Design and Implementation (NSDI 18) . 2018.
[+] [-] steve76|4 years ago|reply
[deleted]
[+] [-] WannaFly|4 years ago|reply
[+] [-] bdcravens|4 years ago|reply
You don't call yourself anything. You either have a PhD, or you don't. It's not conditional on having ideas others agree on or being 100% correct.