In today’s Money Morning…new dog, old tricks…a history of treachery…the decentralised money antidote…and more…
It’s finally happened.
The RBA is taking the plunge on a central bank digital currency (CBDC)…
Known as ‘Project Dunbar’, this venture will see Australia begin to test the CBDC waters. But we aren’t going it alone, like most other CBDC projects that have been made public to date.
No, Dunbar will involve not only Australia but also the central banks of Malaysia, Singapore, and South Africa. A collaboration that aims to investigate a shared CBDC platform for international settlements.
All of which will be overseen and organised by the Bank for International Settlements (BIS) Innovation Hub.
As for their objective, here is what the BIS had to say in the joint media release:
‘Led by the Innovation Hub’s Singapore Centre, Project Dunbar aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs.
‘These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.’
In other words, our first step towards a digital Aussie dollar. One that will be swappable and directly transferable to other CBDCs.
So what does that mean for everyday Australians?
Well, for starters, it means you best start preparing for the worst…
New dog, old tricks
If you’re unfamiliar with what a CBDC is, or how it works, it’s pretty simple.
A CBDC is basically just a digitised version of a fiat currency, making use of the blockchain to facilitate transactions or distributions of said currency without the need for middlemen (regular banks).
For instance, the ultimate goal of a CBDC would be direct control and distribution over a nation’s money. Allowing the central bank to give and take money from each and every one of us as it sees fit.
As for why, well it would certainly make their jobs easier.
Imagine being able to directly feed cash into people’s bank accounts with digital money instantly. Stimulus would be far quicker, far easier, and far more measurable in terms of effectiveness.
It is a solution that governments are clearly hoping will bridge the gap between a cryptocurrency future and our traditional monetary systems. And for that reason, it is an utterly terrible idea…
The whole point of crypto — or digital currencies — is to decentralise money.
CBDCs are aiming to hand pick some features of crypto but retain its centralised power. Ensuring that the central bank, and by extension the government, has full control over the monetary system still.
That’s why central banks and governments have been so wary of crypto, constantly looking for ways to either outlaw it, undermine it, or discredit it.
Now, though, with CBDCs the goal is clearly to replace it and hope no one notices that it won’t change a damn thing.
In fact, in many ways, a CBDC could be even more insidious than our current fiat systems.
A history of treachery
I can imagine a few scenarios, for instance, where the digital nature could undermine user autonomy.
Take our recent era of deflation, for instance. A period where central banks have been desperately trying to get people to spend more. With a CBDC they could create money that expires, forcing you to spend your wealth before it literally disappears!
And as extreme as that example may seem, we have seen it tried in the real world.
Back in 2016, India made 86% of its publicly circulating cash notes illegal. A decision made to try and stamp out a perceived ‘shadow economy’. And while the Indian government did endeavor to replace these defunct bills with new ones, the transition left many destitute for months.
Just another example in the long-running farce that is central banking’s ridiculous history.
Which is precisely why you should be wary of CBDCs. Not because they are inherently bad, but because they are simply being overseen by the incompetent and corrupt.
That’s why now, more than ever, you need to start familiarising yourself with crypto.
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The decentralised money antidote
No matter what you may think of cryptocurrency, it is by far the best thing we have to fight back against CBDCs.
After all, crypto has been figuring out and perfecting cross-border payments for years now. Stellar, for example, is a cryptocurrency that has been purpose built for remittance and overseas money transfers.
The fact that central banks aren’t using this over a CBDC is simply because they want to retain control.
Because if they can’t tamper with the system, then they begin to lose any power they have. Something that has been integral to the financial system for millennia at this point.
And that’s what makes crypto so special.
It is about putting the responsibility and onus on the individual, giving you full control over your own money, for good.
Something that we’ve been talking about quite a lot this year. Aiming to give you all the facts to stay informed of what is happening, and what may be yet to come.
After all, it may start with a seemingly humble experiment.
But no one knows where it will all end.
All I can tell you for certain is that it pays to be prepared.
That’s why, if you have any interest or concerns on this topic, you need to stay informed. And the best place to start in my opinion is New Money Investor. A service dedicated to breaking down and explaining precisely what is going on during this monetary transition.
Because while this topic and its consequences can certainly be hard to wrap your head around at times, the price of privacy and autonomy is invaluable. Something that no CBDC will ever be able to offer you.
Editor, Money Morning
PS: Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.