I hadn't heard about Brazil's adventures with central bank digital currencies. But apparently, they're using something called Pix.
Pix is sort of like a publicly run version of Zelle, the payment system operated by a consortium of U.S. private banks. But Pix is much easier to use. And while Zelle is big, Pix has become simply huge, used by a reported 93 percent of Brazilian adults.
Krugman is really salty (I think the last time I read an article he wrote was four or five years ago, but, guy really seems to be down bad these days). In the spirit of objectivity, however, I tried to read the article without remembering his infamous predictions about Bitcoin and the Internet.
What Republicans are really afraid of, with good reason, is the likelihood that many people would prefer a CBDC to private bank accounts, especially but not only stablecoins. And in general any attempt to create a full-fledged CBDC would run into fierce opposition from the financial industry.
Krugman accurately identifies that Republicans do not care about the privacy of US citizens any more than Democrats do. However, I'm curious about his second claim: that the US financial system is the real blocker against adoption of a CBDC.
- Pix transactions take place almost instantaneously. A Pix payment settles in 3 seconds on average versus 2 days for debit cards and 28 days for credit cards.
- Transaction costs are low. The authorities have set a requirement on Pix to be free for individuals, and the cost of a payment transaction for firms/merchants is only 0.33 percent of the transaction amount, versus 1.13 percent for debit cards and 2.34 percent for credit cards.
We Bitcoiners have already identified that middlemen are a problem, so that logic checks out. It seems pretty reasonable that Visa, Mastercard, Paypal and Co would not like the idea of a central bank taking all their business. So when I hear politicians talking about laws that ban a CBDC or making sure it will never happen in the US, it makes me feel like we're being played. In this way, "CBDC" is becoming a very useful term for politicians, a lot like "terrorist."
In my mind, what the gov't gets out of a CBDC is surveillance and control. Does the government need to actually run the thing to achieve their ends? Certainly, the payment processors aren't going to stand up for our privacy rights.
One last point to remind myself why I find Krugman so repulsive:
If we ever do create a CBDC, it will surely involve comparable privacy protection. Either you trust in rule of law or you don’t.