Thread by @RealNatashaChe

Some think b/c China is ahead of US in having a central bank digital currency, therefore Chinese central bank is smart & Fed is dumb.

Not true.

The two countries face very different calculations (1/8)

https://twitter.com/RyanSAdams/status/1424726419272261644?s=20

Chinese banking system is a state-owned insolvent beast living on government support. If central bank digital currency takes biz away from banks, so what? It's not like they're making so much money. (2/8)

American banks--even though I know you don't like them-- are among the most efficient in the world. Employs many people and pay lots of taxes. If CBDC cannibalizes banks, it's a big problem to the state. (3/8)

Also payment innovation has a bigger impact in China b/c unbanked population is high. But in the US, credit card / wire / finTech solutions are already established. The need to improve is much lower (4/8)

It's a different cost & benefit calculation, and a classic example of "innovator's dilemma".

The incumbent and the new entrant are both making rational choices. The irony is these choices may lead to the incumbent being disrupted, even though it didn't make "bad" choices. (5/8)

There is no point for the US to adopt a CBDC for "financial inclusion" motive. Much cost with only marginal benefit. (6/8)

The motive that makes sense is for protecting and growing the global reserve currency status.

But that's a long game. Even if the player is rational, they may not think so many steps ahead. (7/8)

For similar reasons, I'm afraid we're not going to see a lot of CBDCs from other countries soon, even though they are all over the news. (8/8)

https://twitter.com/RealNatashaChe/status/1413875684909281280

Still a great interview from @RyanSAdams though. Well done 👏