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Central Bank Digital Currency (II)
This idea of “executable objects” best illustrates what's happening. The history of money includes currency in the form of everything from shells, to specie, to paper. The BIS advocates currency as “executable objects,” a term derived from database programming – code as a new currency. Such tokens would certainly provide a more complex and information rich currency. “Tokenisation makes the conditional performance of actions more readily attainable, even quite complex ones,” which is not necessarily a bad thing.
The BIS continues,
“First, tokenised deposits would help preserve the singleness of money. In the current system, singleness of money for payments involving commercial bank deposits is achieved because central banks operate settlement infrastructures that guarantee the ultimate transfer of payments at par value in terms of the sovereign unit of account. Tokenised deposits would preserve this arrangement.”
Now, this definition of the singleness of money is a little vague. It appears BIS simply means one controlling institution, a central bank, not having currencies spew from every PC and smart phone a la crypto. Money's singleness is what created its great mystery. Money's singleness makes money's value abstract, almost infinitely mutable. For example, you can use the same dollar to buy an avocado or a bulldozer. It is why goldbugs continue to exist. There is nothing more single than Au(79), an element where single value is provided by mass, its weight. Plus, gold's shiny and we Homo sapiens have a long established, a pre-Homo propensity to like, even worship, shiny objects. Database executable objects are anything but single value. They are not abstract, but information specific and complex, in ways that would make each token unique.
The BIS ignores this and simply sees itself as the final arbitrator of all claims on its tokens,
“Second, payments in tokenised deposits settled in wholesale CBDC would ensure finality. By using its own balance sheet as the ultimate means of settlement, the central bank provides the means for ensuring the finality of wholesale payments. As the trusted intermediary, it is the central bank that debits the account of the and credits the account of the payee, after which the payment is final and irrevocable. In the above example, finality ensures that Paul does not have a claim on John (or John’s bank), but on his bank only.”
While BIS tokenisaton necessitates a role for central banks, it's quite clear fewer bankers would be necessary. Realizing this, they do throw assurance and a salve to the banks,
“Third, tokenised deposits would ensure that banks could continue to offer credit and liquidity in a flexible way. In the current two-tiered monetary system, banks provide individuals and firms with loans and on-demand access to liquidity through, for example, credit lines. Most of the money that circulates in the monetary system today is created in this way. Unlike narrow banking models, this flexibility allows banks to adjust to the needs of firms and households in the light of changing economic or financial conditions.”
BIS humorously adds, “Of course, adequate regulation and supervision are required to prevent excessive credit growth and risk-taking” – funny, funny stuff.
Again, its very important to understand this system, liberally borrowed from its crypto-initiators, is fundamentally about removing established intermediaries. Those established money intermediaries are banks, though with a little thought you can come up with many other actors in the established financial system who would no longer be necessary. If digital currencies are to be valued by industrial measures, as pretty much all compute media has been to this point, its ability to lessen the need for human labor in any task, as accomplished already on the factory floor or the grocery checkout, will be its paramount value. A digital currency would certainly remove the need for many bankers, and really, who would be against that? Ay, there lies the rub, it simultaneously requires greater centralized control.
The BIS acknowledges their digitalized money system would require a centralized, “unified ledger,” and of course what better fit than established central banks:
“There are two key aspects to the design of a unified ledger. The first is that it combines all the components needed to complete a transaction on one platform, ie it has everything in one place. The second is that it features money and assets as executable objects, which means they could be transferred safely and securely without going through external authentication and verification processes and without relying on external messaging systems.”
No doubt such a power grab would be unpopular, though much less so than it should be, BIS catches themselves, lizardly explaining,
“The concept of a unified ledger does not mean 'one ledger to rule them all' – a sole ledger that overshadows all other systems in the economy. Depending on the needs of each jurisdiction, multiple ledgers, each with a specific use case, could coexist.”
I read this whole proposal with a great deal of amusement and not a little bit of horror. Who could ever thought the central banks would be leading the charge for changing the money system, that used to be the exclusive arena of Wall Street hustlers and New York banks. Central banks were created to provide stability, they were conservative. The BIS actually writes, “to realise the full benefits of innovation in money.” Lord, I miss Greider, he'd be one of the few to appreciate the full comical absurdity.
Again, the big difference between the BIS and the crypto-crowd, and it is all the difference, is the acknowledged necessity of a “platform,” the necessity of some sort of governance:
“The ledger comprises a data environment and an execution environment, which are subject to a common governance framework… .The common governance framework specifies the rules and standards of how the different components interact in the execution environment.”
Folks, where there's governance, there's politics, or even more fundamentally, paraphrasing the Ancient Greek Aristotle, where there's people, there's politics, it is the nature of what we are. Now, you could very rightly argue, and the crypto-lot certainly will, representing a quasi-government institution such as the Fed or full government institutions such as many central banks, the BIS proposal is completely guided by self-interest — You wouldn't be wrong. The Fed, all central banks, were established as inherently undemocratic institutions and what is offered here is even greater centralized control. However, kudos for BIS addressing governance, if terribly, an essential issue crypto and all of tech continually try to fairy dust away. No technology removes politics from any given situation. Every technology and technological system embeds certain political structures and processes, whether acknowledged or not. With the establishment of central banking, modern bank-debt money has from the get-go been not just an undemocratic money system, but an anti-democratic one. The BIS proposal makes it worse.
From its beginnings, money provided two things. First, a social system through which value is conveyed. Secondly, and it is no way easily separated from the first, money numerically accounts. Across history, money provided mutable value for innumerable things by remaining completely unsophisticated. In the evolution of money, bank-debt money was a true advancement in that the loans/debt on which it was based, tied a currency's value directly to economic activity.
What crypto offered and the BIS advocates is to allow for more sophisticated money, money which holds not simply a numerical value, but can embed various information in regards to previous transactions, production, or other various values. For example, the “singleness” of the present money system poorly values energy and the environmental impact of many economic activities. A more information complex currency could foster much more helpful measures to how energy is used for mass economic activities and the daily activities of every individual, specific information providing value embedded in every transaction.
This would prove a very valuable innovation, but requires not just a change of currencies, but money's institutions, most specifically in how money is controlled. In looking to protect their own self-interest, the BIS stumbled on the politics of technology, that all technology must be looked at in relation to human society, requiring political organization to measure value. Money used to better value specific things and processes would in fact require money to lose what BIS calls its singleness, requiring more distributed democratic control where trust is an essential element.
With tech development – clouds, AI, and now money – we watch an ever greater centralization of control. Left undeterred, this promises power concentrated in ever few hands, concentration of an historically unprecedented magnitude. Just as importantly, such centralized control will become increasingly incapable of dealing with problems arising with the technologies themselves. Centralization does not provide sophistication necessary for a healthy, vital complexity. At this point, our politics are not only incapable of dealing with these issues, but completely incapable of even talking about them. Whatever you think about money, it is, and always will fundamentally be a political medium.
“Here the madman fell silent and looked again at his listeners; they too were silent and looked at him disconcertedly. Finally he threw his lantern on the ground so that it broke into pieces and went out. 'I come too early', he then said; 'my time is not yet. This tremendous event is still on its way, wandering; it has not yet reached the ears of men. Lightning and thunder need time; the light of the stars needs time; deeds need time, even after they are done, in order to be seen and heard. This deed is still more remote to them than the remotest stars - and yet they have done it themselves!' — F. Nietzsche, The Gay Science
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