CBDC SPECIAL: Digital Euro Takes Aim On Credit Cards, Will They Fracture Global Payments?
Bankings' digital divide grows wider
Artwork of the day: Concentric Circles, 1913 Wassily Kandinsky
Quadrate und konzentrische Ringe), perhaps, Kandinsky's most recognizable work, is not actually a full-fledged picture. This drawing is a small study of how different color combinations are perceived that the painter used in his creative process as a support material.
For Kandinsky, color was more than just a visual component of a picture—it was its soul. In his books, he described his perspective on how colors interacted with each other and with the spectator in detail and poetically. Moreover, Kandinsky was a synaesthete, i.e., he could ‘hear colors’ and ‘see sounds.’
So, this is probably righteous that after a century, it is not one of his compositions – which he himself considered as his main achievements – but this small drawing that has become one of Kandinsky’s most popular works.
Making connections
A new style designed to help readers see how this week’s stories are connected
This was a big week for CBDCs, with three different reports all showing a big role for CBDCs in the future, though not all the news was so positive.
To start our three stories about CBDC, we’ll look first at a progress report for the digital euro being built now by the European Central Bank.
By all standards, the project is going well, and the ECB is furthering the connection between CBDC privacy and offline usage. This may just be the ECB’s biggest contribution to CBDC design.
This is why the next article, part 1 of 2, is so interesting. Central banks are devoting tremendous amounts of time to CBDC, but for the moment, linking fast payment systems (FPS) may be more effective for enhancing cross-border transfers.
Another benefit of this is that it will allow them to delay CBDC deployments as they underestimated how they will fracture the dollar-based payment system. This isn’t bad news for CBDC, but it is the realization that CBDCs are more powerful than first imagined by many.
In my book Cashless, I warned that CBDC would end SWIFT’s monopoly and fracture money transfer.
Central banks have a point; there are 20-30 fast payment systems in operation to link and only 2-3 CBDCs in the pilot. However, linking FPS is not a solution to cross-border payment problems. It is the equivalent of putting a bandage on a gushing wound.
Perfectly timed for the CBDC or FPS system debate, it is a great read by the BIS, which is Part 2 of this two-part series.
The BIS tries to answer the tricky question: “If you have a fast payment system (FPS), do you need a CBDC?” The answer is that CBDCs and FPS have a complementary relationship and are more partners than rivals.
Leaving CBDC we talk about digital banking and how the gap between the “digital haves” and the “digital have-nots” losers continues to grow. In my view this will be the reason for an increasing number of buyouts of unsophisticated digital banks.
We end with a prediction for a roaring 2025 for financial markets by UBS. This is a great read but believe it at your own risk!
Thanks for reading and I hope you enjoyed the new format. So I figured I’d ask!
Things that matter: (Soon for subscribers only)
I will make this section for subscribers only in the next few weeks. That seems to be the best compromise between keeping my writing accessible and trying a bit harder to get paying subscribers.
I don’t want to cut anyone off, but I want to nudge people toward paying for a subscription. That’s also why I have the new buy me a coffee button!
AI Brains In Robots: The Next Breakthrough Disrupting Jobs (This is not science fiction)
We now live in a new world where AI is allowing robots to see, learn, move, talk, take instructions into code, and then take actions. Robots now have brains, which is an absolute game-changer, and it's happening now.
What is scariest is that the robots are coming first for highly paid blue-collar jobs, as they pay off the robot fastest!
Estimates show that payback for the purchase of a "high-priced" humanoid worker of $35,000 will reach payback in a mere 9 weeks when replacing workers costing $41 an hour or 22 weeks for workers paid $16 an hour.
Read the full article in this great CitiGPS report:
Stablecoins his a speed bump as Brazil proposes restricting stablecoin transfers to self hosted wallets. Is anyone really surprised by this? Do stablecoin supporters really think that they have the right to take $100,000 and send it to their friend's private wallet in another nation without the state being pissed off?? Article: HERE
How Shanghai’s ambition to be the ‘future of finance’ fell apart. This is a great read from the FT, which includes interviews with a few of my local friends. The article is a bit harsh, and I think that Shanghai has more going for it than the article shows. That said, I agree its tough going here right now: HERE
From MIT Technology Review: Moving generative AI into production Read the full article HERE
My long tweet about how the US government killed Meta’s Libra coin seemed to hit a nerve this week: Link HERE
Full text below:
Why Libra had to die and more recently mBridge!
Anyone remembering the theater that surrounded the birth and quick death of Facebook's Libra coin must read this first-hand account by CEO
@davidmarcus.
Marcus shows how the US will tolerate no dissent or challenge of dollar primacy and that the banking system was weaponized against Libra as it has been against crypto.
Yesterday's comment by Trump that he will put a specific 100% tariff on BRICS nations if they try to de-dollarize confirms the continuation of this policy.
At the time, the propaganda was that Facebook had gone rogue and sprung this on regulators. Nothing could be further from the truth. They were well advised of the plans but fought back and killed Libra.
Now let's look more recently to the sudden pull out of the BIS from its mBridge project in Hong Kong. It doesn't take a big leap to assume that similar forces were at work!
As I am fond of saying, then BIS head Augustin Cartens feigned surprise at the fact that mBridge could be used for de-dollarization. I am sure he received a few phone calls from Washington!
Thankfully, mBridge can't be killed off like Libra, and the supporting central banks, most notably the PBOC, will take over mBridge to ensure its completion.
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