​CBDCs: the good, the bad, and the downright ugly.

Fair warning: this is going to be a an absolute doozy of an article...

Talking about CBDCs is almost akin to having the 'birds and bees' chat.

(It needs to be done, but we're not exactly looking forward to it).

As we covered in the last article, CBDCs = government run stablecoins.

Which sound kind of harmless at first (and they may well be), but there's some pretty dystopian potentialities that come with them.

So prepare yourself, we're about to leave the realm of 'what is' and take a trip to the world of 'what if'...

Right now, most major cryptocurrency projects have either achieved, or are attempting to achieve, a decentralized form of programmable money.

The keyword there is: decentralized.

Meaning, no one group or entity can change or control where it can be used, or how it functions - without reaching consensus with its user base.

(I.e. Want to change something? It needs to be put to a vote).

With CBDCs, the power to change where the token can be used or how it functions, is held by the government. Which could pose some issues...

Let's ease into this, and dial up our tinfoil-hat-panic-levels slowly...

Level 1 = every single cent you spend can be tracked in real time (when, where, who, and for what) by the government.

Level 2 = governments could start dictating where/on what you spend your money (e.g. want to lower consumer spending in real time? Program in a cap on all non-essential purchases for a month).

Level 3 = your money can now be 'switched off' (doing something that isn't government approved? The money in your account is now null and void).

Now...we understand how alarmist this all sounds!

And just because something sinister could be done, doesn't mean it will (screw Murphy's Law!).

BUT! Here's the head scratcher:

We already have non-government issued stablecoins, like USDT & USDC.

And the government-issued legal tender we use (for us, it's USD) works just fine without all the spooky potentials for control, ya know?

Ok, now...

Let's take our tinfoil hats off and balance the scales...what will the benefits of CBDCs be?

Payments and transfers would become way faster. Transfer fees (especially cross boarder payments) would be much easier to avoid.

The unbanked of the world would be able to access financial services and build their credit.

Oh, and pay-day loans would likely become a thing of the past.

What's another point of view on all of this?

Some see CBDCs as less of a power struggle between individual citizens & governments, and more of a reaction to the growth of privately controlled stablecoins.

Governments want to be in control of the creation/issuance of their own currencies, and CBDCs will give them that control in the crypto space.

What's the truth of it all?

No idea. But we'll let you know as soon as we find out.

...phew...ok...

We got through it - together! (Look at us go).

Give yourself a pat on the back.

We're gonna go take a nap.