• tal@kbin.social
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    1 year ago

    The immediate reaction in the thread seems to be something like “what makes it a good alternative to Bitcoin” but it might be that it’s aimed more as a competitor to the physical euro.

    If the government knows when payments have been made, that eliminates potential for not reporting sales, which I understand is a significant issue in some EU members.

    There’s also some cost to handling (including security) and maintaining physical currency that doesn’t exist with digital currency.

    Here’s an article arguing that the US – which has apparently not shown much interest in a “digital dollar” – should adopt something similar. The rationales it gives seem more aimed at it being an alternative to physical cash:

    https://www.nytimes.com/2021/07/22/opinion/cash-digital-currency-central-bank.html

    • One benefit is security. Cash is vulnerable to loss and theft, a problem for both individuals and businesses, whereas digital currencies are relatively secure. Electronic hacking does pose a risk, but one that can be managed with new technologies.

    • Digital currencies also benefit the poor and the “unbanked.” It is hard to get a credit card if you don’t have much money, and banks charge fees for low-balance accounts that can make them prohibitively expensive. But a digital dollar would give everyone, including the poor, access to a digital payment system and a portal for basic banking services.

    • A central-bank digital currency can also be a useful policy tool. Typically, if the Federal Reserve wants to stimulate consumption and investment, it can cut interest rates and make cheap credit available. But if the economy is cratering and the Fed has already cut the short-term interest rate it controls to near zero, its options are limited. If cash were replaced with a digital dollar, however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest.

    That one might not be too popular with users.

    • A digital dollar would also hinder illegal activities that rely on anonymous cash transactions, such as drug dealing, money laundering and terrorism financing. It would bring “off the books” economic activity out of the shadows and into the formal economy, increasing tax revenues.
    • Sigmatics
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      1 year ago

      I struggle to understand the “poor and unbanked” argument. You will still need a smartphone and an app at the very least? Which is not cheap?

      • tal@kbin.social
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        1 year ago

        I assume that they’re talking about not having the minimum funds available to open an account or not being able to maintain the minimum balance and having the fees for not doing so being significant.

        https://www.forbes.com/advisor/banking/bank-account-minimum-deposit-minimum-balance-requirements/

        A minimum opening deposit is a certain amount of money—usually $25 to $100—that a bank or credit union requires you to deposit to open a checking or savings account. Some financial institutions do not require a minimum opening deposit.

        https://www.thebalancemoney.com/typical-minimum-balance-for-traditional-savings-accounts-5204547

        When you open a traditional savings account, you may need to keep a certain amount of money in the account to avoid a monthly service fee. The minimum balance ranges from $300 to $500 in most cases, while the fees typically are around $5.

        The bank is going to make their money by lending out the money you deposit, so they’re going to want to have some money kept in the account.

        Might also be that “unbanked” is a euphemism for illegal immigrants who don’t have bank accounts because they’re worried about showing up to immigration enforcement or something. It looks like, while an illegal immigrant won’t have a Social Security number, there are ways to get around that.

        googles

        Or maybe that they immigrated legally from somewhere where banks aren’t a very safe place to put money.

        https://www.cnbc.com/2021/10/12/more-than-12percent-of-hispanic-households-are-unbanked-why-that-can-cost-a-lot.html

        More than 12% of Hispanic households don’t have a bank account.

        Still, Hispanic households are less inclined than white, non-Hispanic ones to use the banking system. In 2019, 12.2% of Hispanic households were unbanked, compared to 2.5% of white ones, according to the FDIC’s latest survey. Black households had a rate of 13.8%.

        The reasons for staying away from bank accounts may vary. There may be language barriers or a distrust of banking institutions, especially for those who may have come from a country that had a weak or corrupt system, Espinal said.

        The main reason people are unbanked is the belief that minimum balances are too high for them to meet, said Karyen Chu, chief of banking research at the FDIC. Therefore, they will incur fees.

        I mean, a mobile phone is going to cost something too, but I think that that’s kinda considered to be an essential by a lot of people today. Like, they’re going to want to have a phone to have a phone, independently of how they might use that phone to spend money.