Our money-system works, because we trust our financial institutions.
Central Bank Digital Currencies (CBDCs) are a digital transformation of the money we use today. It’ll usher in the tokenisation of almost any ‘real world asset’ and then eventually, allow for a more digital financial system. Using this type of money may increase our reliance on central banks like the Reserve Bank of New Zealand (RBNZ). Career-focused players position themselves in advance of the new frontier – they hasten the arrival of a CBDC. Other people feel, ‘differently’. They’re concerned about what it could become, not just on day one. CBDCs have the potential for positive and negative impacts.
Any study of money leads you to this: It’s not about the tools (investments), it’s about what we’re investing for, or what we’re building. It’s not about investments, it’s about the investor. It’s not about the money, it’s about the ones controlling it. It’s about the increased power that CBDC’s confer.
With great[er] power, comes great[er] responsibility.
The technology (Digital Currency) itself isn’t the risk; it’s the intent and policies of those in control of the money. Consider the benefits: More choice in how we use our money, more innovation and competition within the banking sector. Digitally endemic NZ dollars could also, but only if they were programmed to do so, assist in crime reduction and even enhance monetary policy. It’s hard not to see at least a few benefits.
The shift [fully] away from the gold standard in 1971 to fiat currency, or money backed by nothing other than trust in central banks, was nothing short of monumental. But now, over 50 years on, Central Banks and the Bank of International Settlements (BIS) are preparing for an upgrade. Something of this nature, where trust and interoperability reigns supreme, global cooperation is critical. Concerns about surveillance-potential and control-potential are justified too.
Can we trust them? Our financial system is functioning, party because we do in fact, trust them already. They’ll need even more of this trust, for later on the process. RBNZ engagement with ‘alternative’ media is as good of a sign as you can get, that they’re not covering up anything. ‘There is no sinister plot of lizard people taking over the world.” So can we trust them? Well, if I want financial stability, it’s probably not a bad idea.
In this conversation recently, the openness to scrutiny alone demands at least some degree of trust. It’s their responsibility to earn the rest, and the CBDC transformation will likely bring this to a head. Someone may have just said one day, ‘it’s the obligation of everyday people to limit the power of un-elected, supra-national organizations’. Any honest due diligence around CBDC’s requires a look at both present-day wins, and future potential losses. Real wealth is both sides of the coin.
Think of it like patting your head and rubbing your tummy.
Step one: Take RBNZ statements at face value,
Step two: at the same time as step one, remain vigilant about about future risks.
It’s a bit weird at first, but keep going.
Personally, I’m quite excited about the immediate benefits CBDC’s can bring to digital asset wealth space. We’re finally getting an upgrade!
At the same time, I know ‘different’ explanations drawn from the same set of facts paint a more dystopian ending.
You’re not going to become an extremist, by understanding extreme views, especially if negatively correlated (contradictory ideas). Example: I believe the ‘migration’ of analogue wealth to digital wealth, will be the biggest opportunity for the financial advice industry we all saw coming. I also think it’s incredibly bullish for crypto. On the other hand: For estate planning, what’s the risk management around CBDC’s look like? What are the odds your legacy’s lost because the next generation has low social credit? Probably nothing? I’d get advice here.
As Uncle Ben would say to a young Peter Parker, ‘With great power, comes great responsibility’.
Final thoughts: If I was just starting out and feeling good about my career, I’d be pretty excited about this point in time. I think we’re in a bit of bull run in all markets, but nothings in concrete after that. Doing things like buying property, investing, and eventually, retirement, are all good things you can still achieve. I believe CBDC’s will extend the way the current financial system works, for a long time. This means we’ll have inflation, and we’ll have economic cycles that are hard to predict from all the interference.
Whatever it’s like in the future, it just got a little faster. Both blind faith and critical thinking will get you through.
