Cryptocurrencies

The Bundesbank, not a fan of the CBDC, swear not to want to put an end to the cash

Bndesbank does not want the end of cash

The saga of the Central Bank Digital Currency (CBDC) is not over. Central bankers always seem to cherish the sweet dream of creating their own Bitcoin (BTC). In any case, this is what the recent speech by Jens Weidmann, President of the Bundesbank suggests.


BUBA

President of the Bundesbank and chairperson of the Bank for International Settlements
Jens Weidmann

Jens Weidmann also heads the board of directors of the bank for international settlements (BIS). The famous central bank of central banks, guardian of so-called Basel rules. So you have to listen carefully when it comes to expressing yourself, especially when it comes to “cryptocurrency“.

The Teutonic banker has the reputation of being part of the “orthodox” fringe for having systematically opposed the Quantitative Easing of the ECB. Rather than inflating the debt bubble, the president of the BUBA prefers the shock therapy of the internal devaluatione. In other words, let unemployment increase and / or lower wages in all countries whose economies are weighed down by EuroMark. Or let the Euro implode … Which wouldn’t be a bad thing, by the way …

But now we come to his recent speech on the CBDC titled ” On the future of money and payment methods “. Just read the title of the third part of his speech ” Alternatives to CBDC To understand that the CBDC seems to be on edge.

Jens begins his speech with a bit of humor by making a dedication to Bitcoin comparing it to the currency used by the inhabitants of Yap Island in the Pacific: a huge stone in the shape of a donut (rai). The reason being that these stones came from an island located 400 km, de facto making spoke a very energy-hungry currency, like the mining of Bitcoin.

rai money yap island
Rai

This introductory parallel with spoke ends with the question: What can a CBDC bring? Good question…

Why a CBDC?

Jens notes at the outset that a CBDC is a central bank currency and that one already exists. It is called ” central currency “. It takes two forms. One is made up of coins and banknotes. The other is in the account that each private bank has with its central bank. You and I never see the color.

Jens then asks this very relevant question: What is the goal of central banks seeking to create a CBDC? ..

For him, creating a CBDC doesn’t seem to mean much more than allowing everyone to own central currency rather than BNP or Société Générale euros. Go to this article explaining the difference between BNP fake money and ECB euros.

Now allow everyone to exchange their euros BNP against euros from the ECB (CBDC) may result in a bank run. Indeed, why keep your money in a bank on the verge of bankruptcy when you can hold it in the form of a CBDC (the ECB cannot go bankrupt)? This is what we explained at the start of the year here.

Pub

Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

The solution would then be to apply a negative interest rate on the CBDC to discourage people from holding large amounts of CBDCs. A flawed solution because Jens concedes that depositors will absolutely not be discouraged by a negative rate in the event of a major banking crisis. A formidable ” digital banking run “.

End of cash

Jens Weidmann, a good German, is very fond of paper money. He says it bluntly in his speech:

“Let me be clear: central banks are not about to abolish cash. The Eurosystem is strongly committed to maintaining banknotes and coins. “

Jens Weidmann, 2020

Nice reassuring words that do not necessarily match reality. Let us remember all the same that the ECB recently eliminated the 500 euro banknote, and that Belgium, by royal decree … has made rounding up to the next 5 centimes compulsory. Which is one way of preparing for the disappearance of the small 1 and 2 cent grape shot. Inflation should not be seen too much either … We will also pass on 1000 cash machines that disappear every year in France…

And in order to exacerbate our skepticism, Jens is careful to point out that the Covid has gained ground for digital payments and that the long-term trend is clearly in their favor. In a totally digitalized world, Jens Weidmann argues that the “CBDC would make it possible to hold a currency as secure as cash”. But because of “legal obligations” the CBDC would not be anonymous …

Sovereignty of means of payment

Overall, we have the impression that the president of BUBA is sincere and that he is not an advocate of the end of the cash. Which does not prevent us from thinking that he is simply waiting for us to stop using the cash ourselves …

end of cash

The boss of the Buba seems rather to see in the CBDC a payment system allowing protection from large foreign multinationals seeking to extend their control.

We are talking here about parasitic multinationals taking their dime on each transaction (Visa, mastercard) and those who would like to create their own currencies (Facebook with Libra).

All that being said, Jens instead favors the creation of a private solution and supports the creation of a private European payment system but controlled by 16 strictly European banks.

Pub

Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

In short, the CBDC no longer seems to have the wind in its sails, confirming the fact that Bitcoin has nothing to do with the gas factory that is the modern monetary creation system. A system built on infinite debt that will implode when we can no longer extract enough energy from the earth to generate the growth needed to pay off the debt. All is well with Bitcoin.

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