Thread by @Melt_Dem

1/ central banks are so crypto-curious these days

with the @federalreserve *finally* getting on the central bank digital currency (CDBC) bandwagon, let's talk incentives and where this may lead (hint: ✨starts w/ b, ends w/ coin✨)

meltdem.substack.com/p/digital-curr…

@federalreserve 2/ following @Facebook's announcement of Libra, central banks had a come-to-satoshi moment

according to @BIS_org, 80% of central banks are currently exploring issuing a CDBC

i'm getting acid flashbacks to 2017 enterprise blockchain announcements. but onward! 👉

@federalreserve @Facebook @BIS_org 3/ case study: Cambodia

last week, Cambodia's central bank announced it will soon launch a “quasi” central bank digital currency on a private blockchain network

p.s. soon as in this year, not crypto soon™️ which is not soon at all and possibly never

financemagnates.com/cryptocurrency…

@federalreserve @Facebook @BIS_org 4/ this network is called Bakong, and:
- private network built by @Soramitsu_co
- 11 banks participating
- payment token is a basket of USD + Cambodian Riel
- accessible via digital wallet
- consumers must tie digital wallet to bank account to create / redeem tokens

@federalreserve @Facebook @BIS_org @Soramitsu_co 5/ the goal is to "improve the fragmented payments ecosystem in Cambodia" which is mostly cash based, and to drive more electronic payments

but if we look at the facts, we start to understand how this initial step could fulfill a larger goal...

@federalreserve @Facebook @BIS_org @Soramitsu_co 6/ reduce dollar dependence: 84% of transactions in Cambodia are done in dollars, not Riel. because the NBC controls the basket backing the token, can prioritize Riel over USD ✅

i would expect many "dollarized" economies will be excited about reducing USD usage...

@federalreserve @Facebook @BIS_org @Soramitsu_co 7/ influence current account: Cambodia's biggest industries are textiles (export) and tourism, both of which are influenced by fx rates

with a token, the NCB will have a way to manage financial flows into and out of the country *and* influence exchange rates in real time 💱

@federalreserve @Facebook @BIS_org @Soramitsu_co 8/ data gathering and controls: a digital system tied to commercial banks will minimize the shadow (cash) economy and capture granular data on flows, allowing gov't to implement more effective policies

india tried to do this by removing high value bills from circulation in 2017

@federalreserve @Facebook @BIS_org @Soramitsu_co 9/ ok - enough on cambodia. the playbook they're running is going to be run by every central bank, starting the ones who have more to gain (Venezeula, Iran, etc) and those who are most ambitious (China)

you don't have to look far to see where this goes...

@federalreserve @Facebook @BIS_org @Soramitsu_co 10/ @Facebook's own CEO said it best in his @FinancialCmte hearing

“china is moving quickly... Libra is going to be backed mostly by dollars and I believe that it will extend America’s financial leadership around the world, as well as our democratic values and oversight”

🤷‍♀️

@federalreserve @Facebook @BIS_org @Soramitsu_co @FinancialCmte 11/ so the real question is...

if every central bank, corporation, and cult of personality decides to issue its own digital currency, what will be the neutral choice for international trade?

does the medium (blockchain-based token) change the message?

@federalreserve @Facebook @BIS_org @Soramitsu_co @FinancialCmte 12/ the current circus that is central bank digital currencies has many people playing out this chess game in their heads and realizing why bitcoin is so powerful - it belongs to no state, government, or country

and that is something that we can all be excited about

#Bitcoin

@federalreserve @Facebook @BIS_org @Soramitsu_co @FinancialCmte note: yes, i know there are lots of other cryptocurrencies that aren't bitcoin that could play a role here. i personally believe that at *this* point in time, bitcoin is the only cryptocurrency that could fit the bill.