It offers the benefits of bitcoin (as a money transfer mechanism) without it's downsides.
For example it reduces the costs of international transfers as well as the ease of doing them. Swift transfers are not fun and easy to get wrong and fairly expensive.
And with Bitcoin you'd end up with the currency exchange twice and then the gas or transfer fees.
Also payment in bitcoin fluctuates so you'd have to write the invoices in BTC, which is not that useful. But companies writing invoices in USD are common enough.
I agree tThenhis is the best plausible benefit, but the question arises, why not just improve swift?
We see with the Russia sanctions that the US wants to maintain control of the currency, so if this comes to be it's going to be hobbled as a crypto currency to do just that, and by that point you may aswell improve the existing infrastructure.
This is never going to be the electronic version of a dollar bill. Untraceable, irreversible. It's not going to get to the point where you can get rid of traditional banks. It's going to be a niche tool for niche applications. That's not bad as far as it goes, but I don't think it's what anyone is think of when they're discussing this.
Especially if they are being implemented by commercial banks. (The other obvious alternatives are accounts with the central bank, or some form of distributed crypto style setup, where normal banks just act like the exchange, and probably run the mining/staking nodes).
Would they just be bank accounts where you can only access fully settled funds, that probably lack many normal bank features (like atm or debit cards), an affiliated transfer mechansim that instantly settles but is irreversable? (In order to properly simulate cash?)
After all, if it offers reversible payments that settle with a delay, then that is no better doing ACH transfers with a normal bank account, and banks would refuse to offer service to people with extremely poor credit (just as they do now).
If the payments are instant and without recourse, then the system is just as risky for the user as actual cash, and probably even more so, as people cant "hack in" from the other side of the planet to take the paper money out of your leather wallet. Even if implemented with say digital signatures held on your mobile device, with all transfers needing to be signed with such certs, surely this would just result in phone malware being developed to steal the keys, (or if an HSM is used, malware that imitates the normal app, but signs transactions stealing your funds instead).
Would there be transfer fees for this digital cash? If so, then that makes it less appealing for users. If not, then who is paying the costs for the infrastructure?
In any scenario, I would expect the likes of PayPal, Venmo, Cashapp, Mastercard, Visa, etc to be opposed to this system, unless one of them is actually administering it, since whatever it is will likely meaningfully eat into their transaction volumes, and thus profits.
I imagine a lot of the benefit of a CBDC goes to maintaining the USD's dominance internationally.
Domestically there is enough convenience.
But if you want to send USD to China, or somewhere with strict capital controls? Digital wallets that the user can self custody would be quite useful in bypassing those state authorities. Ironically, it may undermine your own state's authority...BUT at least you'd still ultimately control the network.
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I can send it electronically. I can exchange it for 'real' dollars, etc.
Is this people not getting crypto jumping on the band waggon, a dollar in the banking system but stripped of all the protections, or what?
For example it reduces the costs of international transfers as well as the ease of doing them. Swift transfers are not fun and easy to get wrong and fairly expensive.
And with Bitcoin you'd end up with the currency exchange twice and then the gas or transfer fees.
Also payment in bitcoin fluctuates so you'd have to write the invoices in BTC, which is not that useful. But companies writing invoices in USD are common enough.
We see with the Russia sanctions that the US wants to maintain control of the currency, so if this comes to be it's going to be hobbled as a crypto currency to do just that, and by that point you may aswell improve the existing infrastructure.
This is never going to be the electronic version of a dollar bill. Untraceable, irreversible. It's not going to get to the point where you can get rid of traditional banks. It's going to be a niche tool for niche applications. That's not bad as far as it goes, but I don't think it's what anyone is think of when they're discussing this.
Especially if they are being implemented by commercial banks. (The other obvious alternatives are accounts with the central bank, or some form of distributed crypto style setup, where normal banks just act like the exchange, and probably run the mining/staking nodes).
Would they just be bank accounts where you can only access fully settled funds, that probably lack many normal bank features (like atm or debit cards), an affiliated transfer mechansim that instantly settles but is irreversable? (In order to properly simulate cash?)
After all, if it offers reversible payments that settle with a delay, then that is no better doing ACH transfers with a normal bank account, and banks would refuse to offer service to people with extremely poor credit (just as they do now).
If the payments are instant and without recourse, then the system is just as risky for the user as actual cash, and probably even more so, as people cant "hack in" from the other side of the planet to take the paper money out of your leather wallet. Even if implemented with say digital signatures held on your mobile device, with all transfers needing to be signed with such certs, surely this would just result in phone malware being developed to steal the keys, (or if an HSM is used, malware that imitates the normal app, but signs transactions stealing your funds instead).
Would there be transfer fees for this digital cash? If so, then that makes it less appealing for users. If not, then who is paying the costs for the infrastructure?
In any scenario, I would expect the likes of PayPal, Venmo, Cashapp, Mastercard, Visa, etc to be opposed to this system, unless one of them is actually administering it, since whatever it is will likely meaningfully eat into their transaction volumes, and thus profits.
Domestically there is enough convenience.
But if you want to send USD to China, or somewhere with strict capital controls? Digital wallets that the user can self custody would be quite useful in bypassing those state authorities. Ironically, it may undermine your own state's authority...BUT at least you'd still ultimately control the network.
That gives it some advantages in terms of faster and potentially disintermediated payments.
Here in the UK I can already send basically instant payments anyway.