I think today is a good time to have another look at central bank digital currencies (CBDC) and Libra. Both projects have made some significant progress over the past six months.
Libra took a U-turn from a currency basket concept to single currency stable coins (see its white paper).
The main driver in the CBDC space is China. They have already kicked off a test phase with several domestic banks and their customers. A wallet (smartphone app) was released and some screenshots made the rounds on Twitter.
Why am I bringing up these two topics together? In the beginning, the crypto community was super bullish when the Libra announcement was made. The narrative of “when all the Facebook users have a Libra wallet on their smartphone, it will only be a small step for them to own bitcoin”. I see things differently.
What was actually triggered was a very heated discussion involving regulators around the globe. Also, central banks were watching the developments very closely. My theory is that Libra accelerated the CBDC project speed of some central banks, because, in the end, a Libra$ is just a private company’s version of the CBDC$ from the Fed.
This report on a pan-Asian digital currency seems to confirm my theory: Decrypt
Central banks like to control “their” money. With Libra, it will be more difficult, and for certain interventions, it will even be impossible. The flexibility of what central banks can do with their currencies is limited.
With CBDC, they are in full control of every move and every possible second layer functionality (smart contract functionalities) that exist. Also, I believe, especially for the Chinese government, they see better chances of globalising their currency through CBDCs and further currency associations similar to the pan-Asian project. In my view, this is their long-term goal anyways: to weaken the US-dollar hegemony.
Additionally, the Chinese government is pushing hard on the blockchain front. Here is some news on their BSN (blockchain-based service network).
This is a very smart thing to do in combination with the CBDC project. You (the government or central bank) control the currency, and the private sector will develop all the second layer applications as per the demand of the citizens.
I know, the way or direction this is going is diametrically opposed to what the hard-core blockchain community would like to see.Read more