Authored by Joseph Hall via CoinTelegraph.com,
Tony Yates, the former senior adviser of the Bank of England, argues that CBDCs are not worth the headache...
Central banks worldwide are pushing forward with digital asset projects despite the various crypto industry implosions of the past 12 months. China has rolled out its central bank digital currency (CBDC) to several cities and made it available for use at the Winter Olympics.
Many other central banks, including the Bank of England, are considering how to roll out a CDBC, while Nigeria’s CBDC has had poor uptake so far. India has already launched a pilot scheme, while Mexico has confirmed the launch of a digital peso.
However, Tony Yates, former senior adviser to the Bank of England, advises against CBDCs in a recently published opinion piece for the Financial Times.
According to Yates, “The huge undertaking of digital currencies is not worth the costs and risks.”
CBDCs are already in place in most countries as most countries already have digital versions of cash, coins and notes.
Yates, therefore, questions the motivations behind global rollouts of CBDCs, calling them “suspect.”
CBDCs could be a way of quashing crypto, including decentralized currencies such as Bitcoin.
However, “Cryptocurrencies are such bad candidates for money,” he explains, adding:
“They don’t have money supplies managed by humans to generate steady paths for inflation and are hugely expensive and time consuming to use in transactions.”
Yates’ take on Bitcoin is unsurprising.
He has tweeted several times about Bitcoin, claiming that most of Bitcoin’s use is “illicit” and “speculative.”
I would guess that most of the use is 1) illicit, and not discouraged by central bank provision and 2) speculative; if CBDC were to cause a large price drop, this could wipe out and discourage a lot of users.— Tony Yates (@t0nyyates) April 17, 2021
Since Bitcoin use a public ledger available for everyone, its use for illicit purposes has decreased steadily over the years to less than 1% of total transactions, reports show.
On top of that, the layer-2 Lightning Network allows instant remittance payments, while other cryptocurrencies and even stablecoins continue to grow in use cases and development.
For Yates, introducing CBDCs is akin to “making central bank reserves more widely available than just to counterparties.”
But in a world where the reserve currency is the U.S. dollar, the competition for a new global CBDC is counterproductive.
The Financial Times opinion piece summarizes that the most compelling arguments for CBDCs are around payments and settlement efficiency, but the debate is “mysterious.” Yates explains that it would be a colossal undertaking for the central bank to employ the staff to build and manage the hardware and software of a new payment system.