No, the Digital Dollar Won't Kill Bitcoin
What's going on guys. it is actually. I have no idea what day it is one of the episodes that i'm recording in advance of being out for a couple of days to witness the birth of our new child so i'm not actually sure what day it's coming to you but i thought it would be fun to talk about digital dollars and their relationship to bitcoin given that we had some new comments. From jerome powell. The fed chair over the last couple of weeks about how a digital dollar is finally going to come to the fore of the fed strategy and twenty twenty one. The name of this piece is the same as my thesis. Which is no the digital dollar. Won't kill bitcoin to understand. Why i we need to talk a little bit about central bank digital currencies in general a central bank digital currency is pretty much exactly what it sounds like. It is the digital equivalent of cash. But isn't money already digital. You say the difference is that these digital currencies would actually be bearer instruments in other words. They're not just a digital representation of something that exists elsewhere offline so when a tether is minted for example there is theoretically a us dollar that exists somewhere that it can be redeemed for it has no other value other than that dollar that it can be exchanged for central bank digital currency a fed coined would work in a way where the digital dollar was itself. The thing that had value it wouldn't correspond to an offline dollar importantly another difference from something like tether is that it would be completely under the jurisdiction of the issuing government it would be digital fiat with the money supply that could be controlled just as it is controlled today indeed with more precision which gets us to our next question. Why are countries interested in. Cbd's there are a number of reasons. First let's talk about a cost convenience. This one is pretty obvious. Part of the classic disruption of digital alternatives is that they make things faster cheaper and easier just to understand how the government might see this the. Us spent nearly nine hundred million dollars last year. Actually printing cash. There's a cost to produce this physical thing. And this would eliminate that entirely. That's not where the efficiencies cost and convenience and however think about things like how much easier it would be to pay or extract taxes. If you had an account directly with the fed think about how much easier it would be distribute stimulus checks in fact stimulus. Checks are part of why a digital dollar came up as a bigger deal again last year. The first covid nineteen relief. Bill proposed by democrats actually had a fed account built into it as the mechanism to distribute government support so that countries are interested in. Cbd's has to do with fighting financial crime. This is one of the biggest reasons you're likely to see some version of a cdc come to pass in the us since nine eleven the us has been trying to get evermore visit into an even more control over the flows of money. This won't shock anyone. In bitcoin of crypto given how frequently the used in crime narrative is cited as a major reason to be skeptical of our industry.