The Central Digital currencies will make monetary policy more difficult

[paxmao]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

[Sterbens]

It is true that this has a profoundly negative impact on financial stability, which can increase panic in banks as commercial banks face a shortage of cash reserves to pay. perhaps we will witness more holding Bitcoin as a hedge, when trading in stablecoins denominated in euros or dollars.
It is worth remembering, last spring that the central bank warned, that if the central bank of any country is to launch a CBDC, it must anticipate its implications carefully, as this has to do with monetary policy and overall economic stability.

[fulcare]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

I don't think I am getting your point. This is just a question of policy making, setting rules and laws. If you are not allowed to hold an account with a central bank you are still forced to stick with intermediaries. Beyond that, the whole lending apparatus could be changed and still have the ability to print more money or a certain multiplier for every digital coin you hold on deposit. Like Tether without collateral. Where is the issue if a commercial bank can just ask the central bank to print and transfer on demand for a new loan? In fact it could even become crazier than in the past.

[paxmao]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

I don't think I am getting your point. This is just a question of policy making, setting rules and laws. If you are not allowed to hold an account with a central bank you are still forced to stick with intermediaries

You would skip the retail banks, that is the point. Your perspective is from the crypto world clearly, you consider that a Central Bank is an intermediary, but that is not really the case, as they issue the currency, so you would be holding an account with the original supplier as opposed to having to go through a retail bank. However, the post is more about how this could make monetary policy more difficult to implement as one of the tools (the "multiplier" of the banking system) would be lowered.

[avikz]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

Let's not get confused about a digital currency. A digital currency is a digital representation of a physical currency which can be transacted through an intermediary like banks. Everything else will remain same as fiat currency. The way you operate your online banking today, the digital currencies will be operated in a Similar manner. So make no mistake thinking that banks will loose its control over it.

No central bank would risk such a proposition which would eliminate the need of a banking intermediary. So digital money will be printed digitally whenever the need arise. There will be literally no difference in fiat and government issued digital currency.

[adriaparcerisas]

Interesting topic. First, central banks have internalized that private cryptocurrencies like pound may be a reality and that, if their use were to become widespread, they would erode the central bank's ability to influence the money supply and interest rates. Second, the pandemic may have accelerated the trend to use less cash. A third factor to consider is that if such a scenario emerges, many central banks would also consider issuing a currency of their own to keep their bank from losing ground.

In this rapidly changing context, central banks have taken an important step forward in the last year and a half and are now seriously contemplating the possibility of issuing a digital currency in the future. But is that the solution? In my opinion it depends, because if what they intend is to create a global digital currency, to solve the problem of the decline in the use of cash, the problems would be the same, the centralization is evident and with this little seems to change. However, if what they intend to do is to create a currency for each bank, things would change, but I doubt it. So, from my point of view, yes, I agree, central banks relegitimize and make monetary policy more difficult.

[crwth]

If they keep the same ways like in the current money that we have.

• Unlimited Supply
• Print how many they want
• They want control

I'm worried that most of the time is the part where they can print anytime they want. I haven't read much on CBDC's, but if they keep the same style and ways they have, there's no point in doing it anymore. Like it's the numbers in our bank accounts already, digital. So why do they need to make this?

[oHnK]

I am still very confused about what form of CBDC they will release.  All central banks in the world agree to jointly create CBDCs for each country.  Until now, my country has also prepared it with various researches.  It is lagging behind China but it looks like this is a serious agenda they are working on.  So big is the impact of crypto that they are bothered by new technologies in the economy that they are not considered important in the process.  They keep saying crypto is very dangerous because of the bubble it will continue to experience.

[el kaka22]

I believe these digital yuan deals are only happening because they want to have a chance to monitor and control everything people do. Why are they hating on bitcoin all that much and constantly? Because, they know that there is no chance they could control people who use bitcoin (or other crypto) and that means we are talking about china here so obviously they will hate something they can't control.

Is there even a single second doubt in your mind that china is a pure dictatorship that kills everyone that faces them? I mean they literally kill the whole family when just one person goes against them. So obviously they wouldn't allow crypto, and that is why they are doing digital yuan. This is the worst part of it, other nations would be better but it is still incredibly centralized for sure.

[dothebeats]

Personally I view it as moving from one medium to another, but still keeping the same regulations and policies that we had all this time. With a CBDC, not much is changing actually, apart for some intricate details that the groundwork of which has not been laid yet, nor even discussed by economists today. In the future if any novel problems arise from using and controlling CBDCs, they would be able to figure it out, although of course we know that it will not be the perfect solution, just a band-aid one and hope the issue goes away on itself.

[worle1bm]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

Why would banks loose control over something built for their Functioning? You are just getting confused among the two statements but in actual digital currency will act similar to digital payments which can be cleared with your respective banks.There will always be bank interaction like every transaction will go through the banking system and they can have control over your funds.Banks fear decentralisation and they never gonna let it use in their own CDBC which is actual point of these all digital currency for banks.They are digital form of your fiat used for daily transaction at every pos.

[BrewMaster]

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries.

not at all. there won't be even a tiny bit of difference between any new digital (crypto) currencies and the existing digital currencies run by the banking system. even the same laws would apply including the KYCs and who can and who can't open an account.

[teosanru]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

Not only difficult it would make monetary policies essentially useless. If the monetary policy won't be able to control the flow of money then how can it even be called a monetary policy? But talking about crisis time, in Bitcoin we are talking about a self-balancing equilibrium which means there shouldn't be any crisis in the very first place. But even if there is one it is very difficult to predict the consumer sentiments at the time of such a crisis? in Fiat we generally see lower demands in the market, but in the bitcoin-based economy, the demand is not bound to go lower as we are already in a deflationary style economy. It's really hard to imagine what a crisis in cryptocurrency time looks like.

[stompix]

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries.

That's not how CBDC will work and there were never planned of something like that. Even in the Communist era the central banK was not dealing with everyone's deposits and most of the factories and manufacturers' unions had some sort of third-party financial organization that could lend the members of the syndicate loans.

If you think that you're going to download an app from gplay, install a wallet and have your 100 addresses and be able to send to any address out there any amount you want you're deeply mistaken, the central bank will simply issue CDBC to commercial banks, those will allow customers to use it, with their account that is created and controlled by them with whitelistS and blacklistS whenever you plan on sending and receiving.

This is how China is doing and I seriously doubt anyone would take a different approach:

Distribution will be conducted via a so-called two-tier system. That means the PBOC will distribute the digital yuan to commercial banks. The commercial banks will be responsible for getting the currency into the hands of consumers. This could include services to allow consumers to exchange their coins and cash for digital yuan.

You would skip the retail banks, that is the point.

As you can see, nothing gets skipped 

[fiulpro]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

Hello
I do think that you have to understand that this will happen for sure, it has been happening to an extent but center is putting more and more control over everything. Well for me I do believe that the old system did not work therefore at the end of the day if we get to experiment with this we might see that the benefits hugely overweights whatever negative effects that might be there.
I don't think they will make it this easier. There will be KYC and other documents in place for sure. They made us submit documents for Bitcoins and other decentralized cryptocurrencies also. What else can we expect now ?
What I do think is that we should wait and see how this all goes down. There will be more advancements on the way.
I would still prefer cryptocurrencies over these digitalized fiat.

[Gozie51]

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries.

not at all. there won't be even a tiny bit of difference between any new digital (crypto) currencies and the existing digital currencies run by the banking system. even the same laws would apply including the KYCs and who can and who can't open an account.

I think one major difference is that it is going to be highly centralised and control by the developing country and you can't compare such coin to bitcoin in no way. Countries that are talking about digital currency are only seeking to regulate the flow of fiat money and cryptocurrency in circulation in the country.

[adzino]

When a crisis arrives, central banks usually say that they will do whatever it takes to solve it, which usually means ridiculous amounts of money being printed a large amount of debt being bought. The traditional banking system "multiplies" the effect as a result of the fiduciary system (you can lend more than you have).

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries. I think that this will have a negative effect on the ability to cope with further crisis by monetary policies. The risk should not be ignored.

Not even sure what you are trying to say... Yuan, euro, dollars and other fiat currency were never a "digital currency". They were always fiat physical currencies. Digital wallets that you use like Paypal, they all are backed by fiat currency.
If you are talking about centralized crypto currencies made by central bank, then how is it going to make monetary policy more difficult? In fact imposing them is going to be more easier for the government. They will have more control over the financial system and they citizens (which is what most of the people don't want).

[AndySt]

Not even sure what you are trying to say... Yuan, euro, dollars and other fiat currency were never a "digital currency". They were always fiat physical currencies. Digital wallets that you use like Paypal, they all are backed by fiat currency.
If you are talking about centralized crypto currencies made by central bank, then how is it going to make monetary policy more difficult? In fact imposing them is going to be more easier for the government. They will have more control over the financial system and they citizens (which is what most of the people don't want).

I don't fully understand what you're trying to say either Just recently, digital money in many countries already makes up a considerable part of fiat currencies, and some Scandinavian countries are already hatching plans to completely abandon the issue of paper money and switch to a completely digital currency turnover. Therefore, it is not necessary to contrast fiat currencies and digital currencies, because digital currencies are a subset of fiat currencies and if there is a contrast, it is only cash and digital money. As for centralized state cryptocurrencies, I agree with the author of the topic that the exclusion of banking structures from circulation will not lead to anything good, because banks are analogous to ordinary enterprises that deal with finance in a specialized way.

[odolvlobo]

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries.

That's not how CBDC will work and there were never planned of something like that.

If banks can continue to restrict their customers and charge for money transfer services, then a CBDC really provides no benefit over the current system.

[cabron]

With the new digital central currencies such as yuan, euro, dollar,... anyone could potentially hold an account on a central bank skipping the intermediaries.

That's not how CBDC will work and there were never planned of something like that.

If banks can continue to restrict their customers and charge for money transfer services, then a CBDC really provides no benefit over the current system.

No difference to what the system we use today, it just becomes digital and they could surveillance everyone's account thru the commercial banks since the central banks have their eyes on them. If one day the country banks crypto, they will know who those people are that made crypto transactions in the past.

The commercial banks we have today still will exist because they will provide users access to digital cash.