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Fiscally conservative think tanks suspect central bank digital currencies (CBDCs) are beneficial and have negative consequences.
In Club for Growth’s new policy brief, question Some of the major arguments in favor of central banks issuing government-backed cryptocurrencies.
CBDC seems to be the solution for looking for problems. There are no obvious market failures that CBDC will fix.
The idea that a CBDC could provide banking to the unbanked without crowding out the services of private commercial banks seems questionable.
A so-called improvement in monetary policy consists of the central bank’s ability to avoid the so-called zero lower bound on nominal interest rates, but it is not entirely clear whether this is an actual constraint on monetary policy, or such a constraint. . properties are desirable.
Zero bound is a term that refers to when a central bank is unable to stimulate the economy by lowering short-term interest rates that are already at or near zero.
The report adds that a CBDC could replace cash entirely, depriving citizens of their right to privacy when conducting day-to-day transactions.
The potential demise of physical currency will undoubtedly make peoples lives worse than the status quo and is part of the greater threat to privacy created by CBDC.
Regarding CBDCs, which are touted as a solution to slow payment processing speeds, Club for Growth believes that CBDCs are “clearly a better alternative” to other private centralized ledgers such as dollar-pegged stablecoins. There is no way to provide And Bitcoin (BTC).
The brief concludes by noting that while there are many challenges facing the current financial system, central bank digital currencies are unlikely to offer consumers the best solution.
Advocates believe that a CBDC will bring significant benefits in the form of increased financial inclusion, faster payment processing, greater monetary policy flexibility, and reduced tax evasion and illegal activities conducted using physical currency. claims.
Given all these objectives, there is little reason to believe that CBDC is the best policy solution to bring about these changes. Private solutions undoubtedly provide a great way to make payment systems more efficient.
There is no clear need for more flexibility in monetary policy, and the benefits of eliminating physical currency must be balanced against the costs of digital surveillance and loss of privacy.
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