The U.S. is considering whether to adopt a digital version of its currency

[poochyena]

Summary

 

The US is considering processing digital currency in addition to paper money. This isn't crypto related, its about providing a public alternative to debit or credit cards, as they are all run by the private sector. Presumably with no fees.

 

Quotes

Quote

The U.S. would not only mint the coins and print paper bills but also issue digital cash, or a central bank digital currency (CBDC), that would be stored in apps or "digital wallets" on our smartphones.

We could then use them to pay for things, just like we do with Venmo or Apple Pay, and no physical money would change hands.

It's a vision of a cashless future that other countries are already embracing. China, for example, has unveiled the digital yuan on a trial basis. India this week said it would create a digital rupee.

Now the U.S. is weighing whether it wants to get into the game.

Last month, the Federal Reserve released a much-anticipated paper, laying out the advantages and disadvantages of a digital currency.

The Fed says it's a first step, meant to kick-start an important conversation among policymakers and to gather feedback from average people to some of the country's largest financial institutions.

 

My thoughts

Why was this not done 20+ years ago? I never understood this. Why does the government manage paper money, but not digital money too? Why am I paying private companies processing fees? Shouldn't it be the government maintaining that? Makes absolutely no sense to me why this wasn't done decades ago. There will be little reason to even use cash once this is implemented, as the only reason I ever use cash is so I can avoid paying fees to private companies to profit off of.
Credit cards will still have use of course. They would still likely have better fraud protection, and of course they help in making large purchases.

 

Sources

https://www.npr.org/2022/02/06/1072406109/digital-dollar-federal-reserve-apple-pay-venmo-cbdc

[Lightwreather]

So, if I'm understanding this right, basically what this does is just shift responsibility of exisiting infrastructure to be directly under the US government?

So, apart from fees and some other formalities virtually nothing would change? Well, that would certainly make it easier for adoption.

[Velcade]

Biden Bucks! 

 

A centralized federal bank would be interesting.  I could see them using it to distribute welfare and other forms of aid. 

[Levent]

Digital how? What will differentiate this from having a centralized database with just numbers in it? I am guessing it is almost a guarantee that it will be a blockchain based service but that has its own public stigma and I dont think it will get support from the current set of policy makers.

[tikker]

Cool. Lots of countries are looking into it lately.

 

As for why it wasn't done decades ago. It's not just the government managing payments that private companies now do and removing fees. You need to define an actual digital currency. We may be most of the way there already, given how a lot of stuff already happens digitally, but I can imagine introducing a "new" currency (if it's to be anything like the digital Euro) to be a tricky thing with lots of pitfalls. The digital Euro, for example, from what I've read about it (if it ever comes to be) will be its own separate thing complentary to and not replacing the "actual" Euro.

 

[Doobeedoo]

Would be good to only have digital version and no filthy cash and coins.

[GhostRoadieBL]

this is a very complex issue, how do you fully digitize something which requires a physical value backing to have a "value"?

if you link the digital currency to physical resources (gold being the standard for many countries *everyone knows the USD isn't solely backed by gold since the 30's) the value will change based on the physical resource value on the world market which is what we have now, just cutting out the processing fee (which is what blockchain currencies did, not fully but better than anyone else)

 

if you are just replacing paper currency (being a physical representation of,effectively, what is a loan the government or bank gives you with gold reserves holding the original physical value) then it may be fine. It will absolutely save the government money from printing physical currency since running a centralized server would be cheaper for gaining and losing the same volume/value of currency (1's&0's instead of physical $)

 

the replacement of credit card companies becomes more of a challenge since the loan would come from and fees set by the Central Bank compared to private sector banks which have competition for better interest and lower fees when the market moves.

 

I believe the more ideal policy is 2 fold, centralize digital currency while removing the link between investment and trading private sector banks.

Investments become translated to digital currency reducing the paper/resource holdings forcing private sector banks to compete and be regulated by the central bank's oversight (digital currency means digital tracking of transactions through the central bank)

 

Trading becomes a "backed by physical value" transaction where private sector trading can happen but is backed by gold or other proof of value currency. This reduces the run away trading we've seen in the recent past where trading houses didn't hold the equity to cover the trades being made and values being inflated/deflated rapidly. This also becomes easily regulated since it's a proof of value situation not allowing trading houses to have loans from the same banks which people have their accounts in. The layers to that start getting too complex for a forum conversation though.

 

[Avocado Diaboli]

51 minutes ago, poochyena said:

There will be little reason to even use cash once this is implemented

That's the point. I would be extremely wary if this passes and would keep a lookout for policy makers who argue that, since now you have a digital currency system backed by the government, you can abolish cash altogether. Cash is still the only viable means of truly anonymous transfer of funds with no third party keeping a record and therefore needs to be maintained as such. As soon as you hear people ask for a value transfer system that only goes through a government, you can consider yourself on the road to complete government surveillance. 

[Beerzerker]

53 minutes ago, Velcade said:

Biden Bucks! 

 

The very definition of worthless......

53 minutes ago, Velcade said:

 

A centralized federal bank would be interesting.  I could see them using it to distribute welfare and other forms of aid. 

And I can see plenty of problems with that concept.
Has nothing to do with distribution or anything else along those lines, it's the fact the Feds would then have access to ALL of your monetary business regardless of how large or small - Even a stick of gum purchased they would know about.

Already know it's not like they can't access your info now because they can get it but that's also the point, they HAVE to get it instead of it always being directly at their fingertips and that also includes direct control over your account on a daily basis like a local bank has today.
Sorry - A centralized federal bank is just a bad idea all around.

[poochyena]

16 minutes ago, GhostRoadieBL said:

this is a very complex issue, how do you fully digitize something which requires a physical value backing to have a "value"?

US currency has no physical value backing it.

 

17 minutes ago, GhostRoadieBL said:

if you link the digital currency to physical resources (gold being the standard) the value will change based on the physical resource value on the world market which is what we have now

uhh, you may want to look into an economics book that isn't 90+ years old. The US hasn't been on the gold standard for a very long time.

6 minutes ago, Avocado Diaboli said:

That's the point. I would be extremely wary if this passes and would keep a lookout for policy makers who argue that, since now you have a digital currency system backed by the government, you can abolish cash altogether. Cash is still the only viable means of truly anonymous transfer of funds with no third party keeping a record and therefore needs to be maintained as such. As soon as you hear people ask for a value transfer system that only goes through a government, you can consider yourself on the road to complete government surveillance. 

What is the downside to this exactly? It will be harder for people to cheat on their taxes. Oh no.

[Avocado Diaboli]

4 minutes ago, poochyena said:

What is the downside to this exactly? It will be harder for people to cheat on their taxes. Oh no.

I'm sure behind that facetiousness you can come up with a myriad of creative ways on how a government can abuse stuff like that. If they control your funds, they control how you get to spend it. So lets say a conservative government has power. They don't have to criminalize something like abortions. They can just mandate that no payments can be made to anyone offering abortions. Or if a liberal government has power, they can mandate that you can now no longer purchase any firearms. They don't have to make something legal or illegal. They can just tell you you can't buy it.

[GhostRoadieBL]

11 minutes ago, poochyena said:

US currency has no physical value backing it.

"The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation"

https://www.federalreserve.gov/faqs/currency_12770.htm

 

11 minutes ago, poochyena said:

The US hasn't been on the gold standard for a very long time.

this is technically true, the federal reserve notes are not directly redeemable in gold as they were 90years ago when the amendment was written, however the largest percentage of federal collateral for lending is still gold reserves. followed very closely by commercial holdings. So yes, it is not solely backed by gold but the lending is still backed by gold and various physical mineral holdings (again, why I said this is too complex to discuss on a forum)

 

3 minutes ago, Avocado Diaboli said:

Or if a liberal government has power, they can mandate that you can now no longer purchase any firearms.

3 minutes ago, Avocado Diaboli said:

They can just mandate that no payments can be made to anyone offering abortions

these are a bit of a tinfoil hat stretch based in other regulations and laws, the central bank simply provides currency in those examples. If it were the case, private banks would be able to regulate where you spent your money based on their business ideals or charge extra fees based on your spending habits.

 

What can happen is government tracking of spending which can automate the tax process, both discounts and write-offs can automatically be applied to purchases for businesses or individuals based on their spending. The potential for better protections from scams/theft do show up since the currency is tracked and logs held centrally, no more hiding money in foreign banks since they have to send it through the central bank.

The gov can also see what people are spending on and adjust payments, drug deals become more difficult but liquor regulations also could come into play for welfare users. "intended for" becomes an interesting wording for business spending and tracking.

[Velcade]

23 minutes ago, Beerzerker said:

it's the fact the Feds would then have access to ALL of your monetary business regardless of how large or small

don't put all your eggs in one basket.  Even now if all your money is in one bank you're doing it wrong.

[Avocado Diaboli]

11 minutes ago, GhostRoadieBL said:

these are a bit of a tinfoil hat stretch based in other regulations and laws, the central bank simply provides currency in those examples. If it were the case, private banks would be able to regulate where you spent your money based on their business ideals or charge extra fees based on your spending habits.

Remember when OnlyFans announced they were going to pivot away from adult content because credit card companies refused to allow payments? This hasn't been the first or the last time a private financial institute has actually interfered with someone's ability to purchase something 100% legal. So no, I refute that this is mere idle speculation when it is in fact already absolute certainty. 

 

13 minutes ago, GhostRoadieBL said:

What can happen is government tracking of spending which can automate the tax process, both discounts and write-offs can automatically be applied to purchases for businesses or individuals based on their spending. The potential for better protections from scams/theft do show up since the currency is tracked and logs held centrally, no more hiding money in foreign banks since they have to send it through the central bank.

The gov can also see what people are spending on and adjust payments, drug deals become more difficult but liquor regulations also could come into play for welfare users. "intended for" becomes an interesting wording for business spending and tracking.

These are all weak excuses in the light of the abuse potential from the side of the government. If all financial transfer is now only possible through the government and cash (meaning anonymous transfer of funds) will be abolished, guess what happens next: A grey/black market substitute will be found, thus completely circumventing all the gates put in place for tax evasion, money laundering or illegal activity while only hurting legitimate citizens, even if you don't end up with a tyrannical government that limits what stuff you can spend your money on.

[Beerzerker]

1 minute ago, Velcade said:

Don't put all your eggs in one basket. 

Must agree with this.

1 minute ago, Velcade said:

Even now if all your money is in one bank you're doing it wrong.

However this only applies with a system as we have it now.
A centralized system is THE system (One bank), not just part of it and is literally the same China has in place today.

15 minutes ago, Avocado Diaboli said:

I'm sure behind that facetiousness you can come up with a myriad of creative ways on how a government can abuse stuff like that. If they control your funds, they control how you get to spend it. So lets say a conservative government has power. They don't have to criminalize something like abortions. They can just mandate that no payments can be made to anyone offering abortions. Or if a liberal government has power, they can mandate that you can now no longer purchase any firearms. They don't have to make something legal or illegal. They can just tell you you can't buy it.

And this is just one example why it's not a good idea. 
China has done a fine job in proving it as fact with their "Rewards" system for payments and penalties.

[poochyena]

16 minutes ago, Avocado Diaboli said:

If they control your funds

if? What do you mean "if"? They already do.

17 minutes ago, Avocado Diaboli said:

They don't have to criminalize something like abortions. They can just mandate that no payments can be made to anyone offering abortions.

Thats already a thing. Sex isn't illegal, but paying for it is.

 

20 minutes ago, Avocado Diaboli said:

they can mandate that you can now no longer purchase any firearms. They don't have to make something legal or illegal.

Mandating that something can't be done is literally the same as saying its illegal.

19 minutes ago, GhostRoadieBL said:

"The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation"

https://www.federalreserve.gov/faqs/currency_12770.htm

Thats not specifically physical like gold like you mentioned earlier.

4 minutes ago, Avocado Diaboli said:

something 100% legal

The content on onlyfans is not 100% legal. Adult content is very risky due to laws like FOSTA-SESTA.

[Avocado Diaboli]

13 minutes ago, poochyena said:

if? What do you mean "if"? They already do.

No they flat out don't. They don't control any physical cash in your possession, they can't tell you how to spend it (you can also buy illegal things with it) and they can't track any purchases made with it. This statement is just all around wrong.

 

14 minutes ago, poochyena said:

Thats already a thing. Sex isn't illegal, but paying for it is.

Paying for sex is illegal. You can still do it, with cash. But if you can't do it with electronic currency, the aforementioned effect kicks in and a substitute will be found.

 

15 minutes ago, poochyena said:

Mandating that something can't be done is literally the same as saying its illegal.

In practice maybe, but in principle it's vastly different. You can say getting an abortion is 100% legal. But if you can't find anyone doing it for free and you can't pay them, it's functionally illegal. That is a problem and to pretend it isn't is foolish.

 

16 minutes ago, poochyena said:

The content on onlyfans is not 100% legal. Adult content is very risky due to laws like FOSTA-SESTA.

It's still legal, otherwise those laws would've had the actual effect of forcing OnlyFans to pivot away from explicit content. Which they haven't. This wasn't because of those laws, this is a typical case where Visa and Mastercard both have had tremendous influence over a market because of their unwillingness to associate with it. This was puritanical in nature, not as a response to a potential illegal act.

[leadeater]

Wait I already thought the US Dollar was largely already digital. It's not like their currency is backed by gold or other physical assets anymore. 

[leadeater]

56 minutes ago, GhostRoadieBL said:

"The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation"

https://www.federalreserve.gov/faqs/currency_12770.htm

 

Quote

This collateral is chiefly held in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.

This means not all of it is something "physical"

[Velcade]

58 minutes ago, Beerzerker said:

A centralized system is THE system (One bank)

I think you're reading too far into it.  The gov isn't looking to dismantle current banking system. 

[poochyena]

34 minutes ago, Avocado Diaboli said:

No they flat out don't. They don't control any physical cash in your possession, they can't tell you how to spend it (you can also buy illegal things with it) and they can't track any purchases made with it. This statement is just all around wrong.

They can, at any point, raid your car and home and take all your cash. They can tell you how to spend it (thats breaking the law when you buy things they say you can't), and well, they can track purchases to some degree. Buy something with cash at walmart, and they can probably track that to some degree.

37 minutes ago, Avocado Diaboli said:

But if you can't do it with electronic currency

huh? Why can't you? I could pay for something thats illegal with my paypal account right now if I wanted to and the government wouldn't know unless the person I send the money to reports me, but thats true for cash too.

40 minutes ago, Avocado Diaboli said:

You can say getting an abortion is 100% legal. But if you can't find anyone doing it for free and you can't pay them, it's functionally illegal.

Paying for it would therefore be illegal, yes?

40 minutes ago, Avocado Diaboli said:

otherwise those laws would've had the actual effect of forcing OnlyFans to pivot away from explicit content.

It did actually pivot many website away from it. Onlyfans is an outlier.

 

42 minutes ago, Avocado Diaboli said:

this is a typical case where Visa and Mastercard both have had tremendous influence over a market because of their unwillingness to associate with it.

their unwillingness to associate with it because of these laws. You think these companies just hate free money or something? They don't want to be held liable for when lawsuits start.

[GhostRoadieBL]

1 hour ago, Avocado Diaboli said:

A grey/black market substitute will be found

it already exists in blockchain currency trading and that's where anonymity will be, until you can't buy those with federally backed currency and some other version will appear which also will be prevented. What are you buying anonymously anyway? Whether a government or a tech company or currently the worst case an Ad company knows what you are buying, what's the difference?

 

1 hour ago, Avocado Diaboli said:

OnlyFans announced they were going to pivot away from adult content because credit card companies refused to allow payments

that was due to private companies having contracts with advertisers. Ad revenue would drop because contracts were being pulled because credit cards were being used for 18+ entertainment (which broke the social policies of the contracts)

the content sits in a grey area of legal where the regulations haven't caught up to digital sources of content yet.

[NumLock21]

Think about how much money they can save without the need buy ink, to print physical money anymore. The US will finally be out of debt!

 

/s

[GhostRoadieBL]

15 minutes ago, NumLock21 said:

The US will finally be out of debt!

well that's not going to happen, who's going to fund China's millionaires traveling around the world buying up all the property and hoarding resources?

[Arika]

A digital USD? its called USD......Fiat currency is not exactly backed like it used to and can already be used for digital purchases...so what's the difference?