Shownotes
There are at least 87 countries considering digital currencies. There are already nine countries who have official CBDCs (Central Bank Digital Currencies). What does this mean for the average user and how will these CBDC tokens compare to Bitcoin in utility?
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Transcripts
Hey, everyone. This is McIntosh. Thanks for joining me tonight. I do apologize. This is
Speaker:a day late. I did record an episode Sunday night and decided not to put it out. I don't
Speaker:think it was ready, if it ever will be. So by the time I got done recording that, I was
Speaker:not up to recording an additional episode. I already had the topic picked out. We were
Speaker:going to do this on the next episode, but we will go ahead and move that up and we will
Speaker:talk about it. Today, we're going to be talking about central bank digital currencies. No
Speaker:one on this podcast is a financial advisor. All information presented, of course, is for
Speaker:informational purposes only. Welcome to the generational wealth of cryptocurrency podcast.
Speaker:So let's get right into it. What are central bank digital currencies? Well, for one thing,
Speaker:a central bank digital currency or CBDCs are currencies that are created by nation states,
Speaker:by countries that essentially duplicate a fiat physical currency. For example, if the
Speaker:United States were to create a central bank digital currency, they might call it a digital
Speaker:dollar or something like that. The idea would be the legal tender equivalent to a US dollar
Speaker:bill of whatever denomination. There's a lot of talk about these. In fact, I have brought
Speaker:up an article. I've brought these up several times. There are 87 countries right now that
Speaker:are considering issuing central bank digital currencies. This was in March this year. There's
Speaker:nine countries, the Bahamas, Nigeria, and seven countries in the Eastern Caribbean Union
Speaker:that have already launched a central bank digital currency. So, clearly, there's a lot
Speaker:of interest. The Bahamas actually became the first country to issue a digital currency.
Speaker:They call it the sand dollar, acutely enough. It is their form of a digital dollar. That
Speaker:was in October of 2020. In October of 2021, Nigeria established a central bank digital
Speaker:currency called the INERA. That can be kept, of course, in a digital wallet used for
Speaker:in-store payments and money transfers. The Indian government, I'm not going to go through
Speaker:every one of these, of course, but hit some of the bigger countries. India has announced
Speaker:a digital rupee that will be introduced in 2022 or 2023. Russia, actually, earlier this
Speaker:year in February of 2022, announced that it had completed initial trials of a digital
Speaker:ruble. The ruble is their currency. China is testing a digital yuan. In fact, I actually
Speaker:think that the news on this is a little dated. I believe they have it in fairly widespread
Speaker:usage at this point. In March of this year, the President Biden's administration signed
Speaker:an executive order about innovation in digital assets. I'm not really sure what that means,
Speaker:but part of that is their funding research for central bank digital currencies. UK doesn't
Speaker:have a timeline. The central bank of Mexico planning to launch a CBDC by 2024, and so
Speaker:on and so forth. Of course, there's a lot more than that. Let's talk about that for
Speaker:just a minute, because most people ultimately will end up having some involvement with these.
Speaker:In my mind, I think across the board, all of these CBDCs are essentially going to be
Speaker:replacements for fiat, for the current currency. They're not going to be any better, other
Speaker:than the fact that maybe they're more convenient. They're digital. The aspects of that, they're
Speaker:not paper. They don't wear out, that kind of thing. They're still not backed by anything.
Speaker:In fact, there still can be an unlimited supply of those. I would caution that maybe potentially,
Speaker:I would not treat these any different than the fiat for the United States here, for the
Speaker:U.S. dollar. It's going to inflate or deflate based on the economy, just like the U.S. dollar would.
Speaker:There's actually other aspects to this that maybe are a little more subtle. I have a list
Speaker:here, and let's talk about these. For one thing, I already mentioned, these are subject
Speaker:to inflation. You can create new digital dollars, if you want to call them that. I promise you,
Speaker:there's not going to be a fixed supply of those. They will somehow tie it in with the
Speaker:same structure that they use for the paper currency, but they create new paper currency
Speaker:when they need it, so that won't be changed. Of course, this will all be centralized. I
Speaker:would assume that the Federal Reserve would control this, the Treasury Department, under
Speaker:direction of the Federal Reserve, more or less. I think that's how that works. Regardless,
Speaker:it will still be centralized. It won't be a single point of failure.
Speaker:The reality is, I think that most people don't understand their nation's monetary policy,
Speaker:whether that's the United States or any other country. The average person does not understand
Speaker:what makes inflation, deflation, the monetary supply in general. They don't understand that.
Speaker:It's very opaque. It's very difficult to understand and peel back the layers. There are people
Speaker:who benefit from that, central banks, and people in power, essentially. That's not going
Speaker:to change. If we're just replacing paper dollars for digital dollars, the monetary policy behind
Speaker:that is not going to change radically. There is a risk of seizure. In fact, I would argue
Speaker:that this is far more likely with a digital dollar than a paper dollar. Yes, the police
Speaker:can break in my house and steal stacks of money if I have them, but with a digital dollar,
Speaker:it's far more likely that those will sit on a central bank, or a credit union, or whatever,
Speaker:but if you put out a warrant and you just seize that money digitally, it can be done
Speaker:conveniently, and it's gone. It remains to be seen, I guess, if you have the ability
Speaker:to hold those in private wallets. I don't really think that's going to be a very strong
Speaker:aspect of this, to be honest, but you certainly have an issue with, and I would say that we
Speaker:saw this in Canada already, a risk of seizure with emergency acts, this kind of thing.
Speaker:When we had the trucker protests going on in Canada, which a lot of people would consider
Speaker:to be peaceful protests, and I'm not going to discuss that in great detail, but there
Speaker:were certainly a lot of people who thought that, and the Canadian government passed an
Speaker:emergency act to seize their money, to shut down their GoFundMe account, to even attempt
Speaker:to seize their Bitcoin that was being sent to them.
Speaker:Another aspect of this is that CBDCs will allow for even more of an invasive nature
Speaker:when it comes to the government and our transactions. Every little detail will be tracked. Oh, I
Speaker:went to the Circle K five times this week and bought a slushie. That's not good for
Speaker:my health. Therefore, I'm going to tax you for that. And we're not actually far off of
Speaker:that, honestly. Now, you can think I'm crazy, but it's probably, in my opinion, it's true.
Speaker:So if we're using central bank currency, every little transaction will be logged on a ledger.
Speaker:They will certainly copy that from cryptocurrency, from Bitcoin, with the ledger. Oh, and finally,
Speaker:it will enable censorship. Oh, we don't like what you're doing, so we're going to restrict
Speaker:your access, or we're going to reverse those transactions because, see, it's centralized,
Speaker:so we can do that. So those are all negatives, in my opinion, of a central bank digital currency.
Speaker:Now, I will tell you, obviously, as we said, it's coming. These countries are preparing
Speaker:for this. My suggestion would be, there may be times when you have to interact with it,
Speaker:certainly. But I would be very aware of all of this stuff, and we're going to talk about
Speaker:this over time as this basically comes to pass, how you may protect yourself from that.
Speaker:But the reality is, it is coming, and you will have to deal with that.
Speaker:Now, on the flip side, I want to do a comparison of that to Bitcoin. As the number one cryptocurrency,
Speaker:the Lightning Network, certainly, as a way to pay for things, to transact business, let's
Speaker:make a comparison. We had an unlimited supply of currency with central bank digital currency.
Speaker:Really, they're just going to implement the same policies that they had for fiat in CBDCs.
Speaker:Of course, with Bitcoin, we limit that to 21 million. Never be any more. It's centralized
Speaker:for CBDCs. For Bitcoin, it's very decentralized. We have a set of rules that we implement and
Speaker:code, but there's no single point of failure. The Bitcoin nodes are what manage that network,
Speaker:but they're everywhere. We've even seen where the nodes have been shut down out of a country.
Speaker:Oh, we're kicking you out of China. Okay. At the time, actually, more than 50%, if I'm
Speaker:not mistaken, of the miners were in China, and they all just went elsewhere. Within a
Speaker:few months, less than a year, we were actually at a higher hash power than we were before
Speaker:that Chinese ban. Very decentralized. You have a clear monetary policy with Bitcoin.
Speaker:You've got rules that are determined by math and by the code, unlike this opaque monetary
Speaker:policy of these countries. It's, again, the opposite. Arguably, Bitcoin is unconfiscatable.
Speaker:If you properly store it, and that's important, there's no risk of seizure. Now, properly
Speaker:storing your Bitcoin doesn't mean putting it on a central exchange. There's a saying
Speaker:in Bitcoin, not your keys, not your Bitcoin, right? If you're storing it on a centralized
Speaker:server, on a Kraken Coinbase, they own the keys. You just have a log in.
Speaker:All right. Bitcoin is privacy conscious. Now, Bitcoin is an open ledger, and that creates
Speaker:things that you have to account for. I was actually listening to a podcast today. Oh
Speaker:my goodness. Maybe Citadel? I'm not sure. But they were discussing the privacy implications
Speaker:of Bitcoin and how to manage that. Basically, it's layers. It's how much you're willing
Speaker:to do to achieve that privacy, what level of privacy. But Bitcoin is at least privacy
Speaker:conscious versus with a central bank digital currency where every transaction that you
Speaker:commit will be. It'll be logged. It'll be monitored. It'll be put into a central database,
Speaker:really. And it's censorship resistant, right? We saw this, again, with the Canadian trucker
Speaker:strike, where they started using Bitcoin instead of GoFundMe. And it wasn't a perfect solution,
Speaker:but it did work. And if they would have actually done it properly, it would have been completely
Speaker:resistant to censorship by the government. So basically, with every one of the main points
Speaker:of a CBDC, with Bitcoin in particular, it's basically the counterpoint. Risk of seizure,
Speaker:unconfiscatable, right? Privacy invasion with this financial surveillance that's taking
Speaker:place versus privacy conscious. Unlimited supply. We're going to keep doing our same
Speaker:policy we did before. We have a limited supply of $21 million and so on. So these are things
Speaker:to think about. I don't think people will be investing in central bank currencies. You
Speaker:don't really invest in the US dollar, for example. I'm sure, speaking of the US dollar,
Speaker:as we move along in this process, once it becomes the digital dollar or whatever they
Speaker:call it, they are going to attempt to say, hey, we're going to use this for the global
Speaker:reserves. This whole switch of the US dollar to something else as a global reserve currency
Speaker:is going to take a number of years. It's not going to happen overnight. Now, I think the
Speaker:wisest choice probably would be Bitcoin, but it remains to be seen. It may be the yuan.
Speaker:It may be, crazy enough, it could be the Russian ruble. I don't know. I hope not. In either
Speaker:of those cases, to be honest. I think what would be best for most countries around the
Speaker:world would be that it would be something completely agnostic, which in this case would
Speaker:be Bitcoin. Hopefully, this will give you some food for thought there. Excuse me for
Speaker:just a second. I'm messing with my tea. The earl grey tonight was steeping at the start,
Speaker:and now it's just about perfect. I took out the tea bag.
Speaker:Let's talk about the news. We do have some news this week, a little bit. One of the biggest
Speaker:news items, I think, in the last few days has been that apparently Goldman Sachs, who
Speaker:is a major banking company, they are raising funds to buy the Celsius assets. Now, that's
Speaker:according to sources. I've also heard sources, whatever, according to this article. I've
Speaker:also heard other things saying that was completely untrue, that they knew people inside Goldman
Speaker:Sachs, who they asked, and they said that wasn't true. I don't know. I do not have
Speaker:hope at this point for the Celsius network, certainly for the users. I said this almost
Speaker:when this all started. I said, the users, the people who were trying to make money out
Speaker:of this, the little guys, so to speak, they're going to be the ones who are going to get
Speaker:the shaft on this. It's certainly looking that way, unfortunately.
Speaker:All right, so we'll have to continue to monitor that. Another item that's come up, and I guess
Speaker:you could say this is rumor at this point, certainly. I've mentioned on here a couple
Speaker:of times, I think, that the USDD, which is based on the Tron token, it's an algorithmic
Speaker:stablecoin similar in that respect to the Terra Luna network, where they had stablecoins
Speaker:that were backed by the Terra Luna token. This one actually lost its dollar peg, so
Speaker:it's worth less than a dollar, starting on June the 13th. It went all the way down to
Speaker:93 cents, and it has actually gone up to about 98 cents, roughly. It's close to regaining
Speaker:its peg. Supposedly, there's enough assets that it could cover everything. I don't understand
Speaker:at this point why it would have dropped, other than possibly somebody trying to fiddle with
Speaker:that system, and I use that in the technical demeaning, like what went on with Terra Luna,
Speaker:where you had people who were actively attacking that system to cause that to drop. I have
Speaker:a feeling they tried that here, and couldn't get it to go down enough to really profit
Speaker:from it.
Speaker:The rumor is, and this is a rumor, that Justin Sun, who's the founder of Tron, who's kind
Speaker:of the guy behind all this, like Doe Kwan for Terra Luna, is going to dump basically all
Speaker:of his stuff, and run. Take the money and run, so to speak. I don't know if that's true
Speaker:or not. With all this going on, I don't know. I would be extremely careful, and I would
Speaker:not have extremely large positions in something like Tron, or USDD for that matter.
Speaker:That's the news for the last couple of days. The Bitcoin price, we're looking at $20,750,
Speaker:so we haven't moved a whole lot. It was actually a fairly quiet weekend. Ethereum, I believe,
Speaker:is up $1,184. It was up to about $1,200 and some change. It's actually gone down a little
Speaker:bit. Both of them have in the last 24 hours or so. But we still basically have this sideways
Speaker:movement.
Speaker:That's it for this episode. Just to let a little bit of the cat out of the bag, I heard
Speaker:a podcast recently of a young lady who comes from Toga, which is in West Africa. Toga is
Speaker:one of these countries that used to be a French colony. The situation is actually so bad.
Speaker:She's somebody who's striving for rights for her people there in Toga. Toga is not a democratic
Speaker:place. It's basically a dictatorship. It's been a long time, like 40 or 50 years. It's
Speaker:either been led by a father or his son. Imprisoning people, killing people, the whole nine yards.
Speaker:So anyways, she talked a lot about the situation there as they came out of the French colonial
Speaker:control. I'd already heard a little bit about this in regards to the Central African Republic
Speaker:that recently made Bitcoin legal tender. I knew that there was a large number of countries
Speaker:in Africa actually that were under French control. It turns out that there's been a
Speaker:lot going on since they gave these countries, quote, their independence. I put that in quotes,
Speaker:and yes, they are independent, but it's independent with a lot of limitations. In my opinion,
Speaker:it's not truly independent. I think I'm going to be taking an episode very soon, maybe the
Speaker:next one, certainly within the next few weeks, to discuss this. It's a little outside of
Speaker:the topic of cryptocurrency, but I do believe that it's very relevant because the currency
Speaker:is actually one of the ways that the French control this situation. Countries like the
Speaker:Central African Republic, who begin using Bitcoin as legal tender, is a way to break
Speaker:this monopoly. I'm looking forward to that. It might be something I break up over, say,
Speaker:two episodes. Might be a little long for one, but I hope you will find it interesting. I'm
Speaker:just going to go ahead and throw that out there. It will be a little different than
Speaker:normal, I guess.
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Speaker:about the Generational Wealth Cryptocurrency Podcast. Thanks for being here. I hope this
Speaker:has been helpful. I sure would love to hear from you. I'm on Twitter at MacintoshFintech,
Speaker:and you can reach me by email at macintosh@genwealthcrypto.com. Now go out and make