The Truth About CBDC

These days, discussions on CBDC are rising again. When you forget, you will hear it once in a while. The bottom line is that it will be forgotten again. Then it will raise the issue again. It is expected that such repetition will be made several times in the future.

The debate on CBDC is simple. It is a matter of whether the state directly conducts banking or lets commercial banks do as they do now. No more, no less. However, even if CBDC is introduced, it is impossible to eliminate all existing banks, so it will inevitably take on the appearance of the state and banks jointly conducting banking. It is meaningless. Because it is nothing more than an additional bank. Nor is there a new innovation in particular.

Nevertheless, the reason why CBDC is on the stage of discussion is none other than China. In other words, the essence of this issue is actually only in the struggle for key currencies between countries. From the perspective of the general private sector, the emergence of another bank called the state has no significance. On the other hand, the U.S. will have to tilt its head when watching China. It gets into an ambiguous position.

China is going wild to take away the hegemony of the U.S. key currency. Having done business in China for a while, I am well aware of the structural habits of China's political economy. Huawei's backdoor is China's true face. Huawei's Ren Zhengfei would have personally opposed it desperately.

The Chinese enjoy a kind of voyeurism. It's not a clever thing but they don't feel the shame. Rather, they feel orgasm. There is still a culture in China that the man who using shallow tricks is a smart guy. They think of a bone head as a smart head. As a result, China was humiliated from all over the world because of the backdoor. The whole story of the case is as follows. Ninety-nine percent of what happens in China is like that.

An official of the Chinese Communist Party came up with a trick and forced Ren Zhengfei to do backdoor, and Ren Zhengfei had no choice but to follow the instructions. If he refuses, he'll be shot immediately or at least in prison. China is such a place. Ren Zhengfei is just a pitiful person. This is China. This is one of the most important things to pay attention to during Xi Jinping's future reign. He should be able to accept a deep head, not a shallow head. The reason why China is now branded as a shameful country from the world is that it used shallow heads, not deep heads. Now it has to be changed. It is the only way for China to regain its dignity as a great country.

The idea of creating a key currency with CBDC is a low-level idea. It is an idea with an IQ of about 80 to 90, and its level is similar to that of a backdoor. By the way, China is trying to take down the dollar hegemony with an idea that doesn't make any sense. Therefore, even if the U.S. does not step up specifically, China's attempt will go to nothing. The reason is as follows.

First of all, CBDC cannot erase the impression that it is being led by people who do not have professional knowledge about cryptocurrency, especially programming knowledge. This is the same in South Korea. Even South Korea's former chairman of the Financial Services Commission was a person who mistook the NFT for currency. As a result, if Picasso creates and sells 100 NFTs, he must go to prison for violating the law. This is the positive law still in use in Korea. (In addition to the securities law, there is a separate prohibition law in South Korea. Americans would never have imagined.)

CBDC is issued by the central bank of the country and is issued in the currency unit of the country. Namely, it is issued in yuan in China and in dollars in the United States. Therefore, in the United States, even in Korea, Japan, and even Taiwan, you cannot buy Coca-Cola at convenience stores with the yuan CBDC. Anyhow currency exchange is required.

If they can purchase goods directly with the yuan CBDC without needing currency exchange, their idea will be deep thinking, not a shallow trick. But China's CBDC framers have no idea about it. There is no idea of a new yuan that can be used around the world without currency exchange. In other words, there is no idea to impart global characteristics to CBDC in itself, like gold or Bitcoin. There is nothing more or less than just one new Chinese giant commercial bank.

The bank can only exert its power only inside China, and outside China, it will be treated as no different from conventional Chinese commercial banks. Already, most commercial banks around the world have long introduced overseas credit cards that can convert their own currency into currency units in other countries in real-time. The same is true of commercial banks in China. Therefore, the idea that China launches the CBDC to break down the dollar hegemony is no different from the idea that the Chinese Communist Party supports one existing Chinese commercial bank to issue unlimited yuan currency. The CBDC of the Central Bank of China is nothing more and nothing less. Nothing is new but rather infringes on personal information and privacy.

Even if CBDC is operated based on the form of a blockchain, this is only a formality. It is because the state won't substantially hand over the operation rights of P2P nodes to the general public. In other words, in CBDC, the blockchain is nothing more than fiction. In this case, the node operator is only a national official. Therefore, it is no different from having a single centralized server in the first place, and rather, it is efficient to do so. In short, CBDC is not a P2P. Even if a CBDC transfer is made between individuals, it is completely the same as an account transfer within a central bank account. For it is the same as transferring between accounts within the same single commercial bank. Therefore, CBDC is a server-client system, not a P2P. In conclusion, even if CBDC takes the form of a blockchain, it is not a blockchain. The node held by an individual is nothing more than a backup of a central server.

This was also the reason why the United States initially considered CBDC unnecessary. CBDC doesn't have any particular groundbreaking factors. The U.S. dollar hegemony is the only achievement of U.S. national power and U.S. commercial banks. In order to establish yuan hegemony, China also has no choice but to strengthen its national power beyond the U.S., and China's commercial banks should expand around the world to play an active role. Launching a bank that issues CBDCs can't change anything.

I do not know in detail why CBDC is studied in countries other than China. In the case of South Korea, there is a local currency issued by each local government. If this is done at the national level, it becomes a CBDC. However, the purpose of each local government in Korea issuing local currency is completely different from the concept of CBDC. The purpose is only to ensure that the low-income class consumes properly. In other words, local currency can be used mainly only for the consumption of daily necessities and cannot be used outside the local government. As such, Korea's local currency has an opposite direction from CBDC. In other words, it is not aimed at expanding nationwide but rather at limited use within the region.

The CBDC discussion in Korea is also pathetic. Research is being conducted without knowing why CBDC should be studied. Among them, the most likely reason is that other countries are doing research, so Korea should follow them. There is no other compelling reason. Since others are running, they just run along with them.

But that's what the U.S. looks like now. Since China is running, the U.S. is also running. But, as seen above, China's CBDC idea is nothing more than a shallow level. Just as One Belt, One Road fell into a shallow level and became the subject of international resentment, their yuan CBDC cannot escape the shallow level. Although it is basically an incompetent idea, it is indeed laughable for the U.S. to run along with it. If the U.S. wants to run after China, it should first examine what brilliant and admittable process China's yuan CBDC can go through to become a key currency. The U.S. is just running along with China, not arguing about this and that, surprised by China's run. If China was wise, it should follow suit, but if they were stupid, it should not follow suit. However, the current U.S. does not seem to have such a judging ability. There is no real professional in sight.