15th October 2023 > > Rejoice the CBDC killer!

tl;dr

The Aussies have unintentionally freed us from the dystopian oppression of CBDCs.

Market Snap

Market Wrap

With markets expecting oil supply pressures with their attendant effects on domestic inflation, western central bankers have their fingers poised above the “raise rates” button. I have asked the relevant authorities, but none can explain to me how reducing cash flow available for businesses to invest and forcing mortgage holders to cut spending on discretionary goods and services, helps to calm a long intractable problem in the Middle East.

The anachronism of government controlled short-term interest rates must go, for it is a severe drag and impediment to our wealth and prosperity.

Remarkably, the tantalising prospect of removing this desperately damaging state intervention is now on the horizon. Read on if you wish to know more.

Curious Cryptos’ Commentary – Rejoice the CBDC killer!

Man, this is exciting news.

Mastercard has announced a successful collaboration with the Reserve Bank of Australia (RBA) in the development of the latter’s CBDC project:

https://www.mastercard.com/news/ap/en/newsroom/press-releases/en/2023/mastercard-demonstrates-interoperable-cbdc-for-trusted-web3-commerce-in-australia-and-beyond/

Wait, what?

Didn’t I say this was about a CBDC killer? Well it is, in the sense that all the pernicious downsides to CBDCs have been mitigated by the successful conclusion of this project. Allow me to explain.

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The project investigated the transfer of an Australian dollar CBDC from the government’s private blockchain onto a public one, in this case Ethereum. This is a common enough concept already – the A$ CBDC is locked on the source chain, whilst wCBDC (Wrapped CBDC) is created on the new chain.

The wCBDC was then exchanged for an NFT. A crucial part of the experiment was limiting the transfer of wCBDC between wallets on Ethereum to ones that were “allow-listed”. This means that the owners of both wallets had been identified – a form of KYC (Know Your Customer) – to the government.

In contrast, the new owner of the NFT can transfer that NFT to any other wallet, “allow-listed” or not. For NFT, read “any crypto you care to mention”.

Richard Wormald, Division President, Australasia at Mastercard explains:

“As the digital economy continues to mature, Mastercard has seen demand from consumers to participate in commerce across multiple blockchains, including public blockchains. This technology not only has the potential to drive more consumer choice, but it also unlocks new opportunities for collaboration between the public and private networks to drive genuine impact in the digital currency space.”

An obvious twist is the creation of CwCBDC – a true crypto version of wCBDC originated entirely on the public blockchain, one that does not have the “allow-listed” restriction, for this crypto has not been created by the government.

The effect of this is that CwCBDC can be used for any purpose that the owner wishes without the government knowing anything about it or being able to do anything about it. By moving CBDC cross-chain in exchange for wCBDC, then swapping for CwCBDC, the privacy issues, and the coercion issues – that are the driving motivations behind CBDCs – have both been removed at a stroke. The Australian government, unwittingly perhaps, has facilitated this breakthrough.

The Premier division of governments fighting against CBDCs comprises the US, Switzerland, and Slovenia, as the legal situation in those three countries prevents the central bank from developing or issuing a CBDC. Australia has been promoted to the Championship for its unintended help in freeing us from this form of government oppression.

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But it gets even better than that.

As CwCBDC will always exchange 1:1 with wCBDC, which will always exchange 1:1 with CBDC, which will always exchange 1:1 with the relevant fiat, by issuing a CBDC the government will be creating a stablecoin across all public blockchains backed by its own fiat guarantee, but outside of its control. This will effectively remove the setting of short-term interest rates from the remit of central banks and hand it back to the markets, where it properly belongs, a long-standing demand of the CCC.

Oh happy days!

And one must love the irony that the driving forces behind CBDCs of coercion and control will result in a loosening of the government’s ability to interfere with our lives. They did not see that one coming.

The wonders of the crypto revolution are only just getting going.

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Though they do not yet know it, my personal list of bogeymen (Convicted Criminal Christine Lagarde, IMF, Financial Times, Grauniad, Donald Trump, Joe Biden, Putin/Xi/Kim Jong Un, and the rest of the bedraggled, motley crew who are fully paid-up supporters of CBDCs) are going to be shell-shocked when they realise that their plans for the financial oppression of ordinary people have been convincingly crushed.

I cannot predict what will result from the fire and fury that will be occasioned by this thwarting of their personal ambitions, but it sure ain’t gonna be pretty.