Comment by mydriasis
3 years ago
> Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
> Is this akin to government-backed Venmo, or something?
Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
> On the other hand, it's going to let the government see every transaction you make
Can you go into more detail here on what you think will change from the status quo? Existing bank transfers are obviously not secret from the government on request. While the government doesn't have direct access to run search heuristics on the whole dataset they just delegate that to the banks' internal compliance team.
If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top. Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government.
Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
*Ability doesn't necessarily translate to authority - you can probably fight it - but the government's legal fees are paid by us so they're effectively unlimited.
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It lowers the cost of the government performing wide surveillance of financial activity; the fear is that lowering this cost will enable more advanced forms of detection and enforcement that ultimately look and feel like harassment.
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The magnitude of the change is somewhat in the eye of the beholder. On the one hand, the government already has a lot of visibility into your finances. On the other hand, this removes some friction that currently exists for certain kinds of transactions. This matters more to some people than others. There is also concern that this might be a step towards the eventual elimination of cash.
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Automated surveillance and automated interference. If you think YouTube's algorithms for determining copyright or Facebooks algorithms for "community standards" are bad, wait until you have your bank account locked and can't buy food.
I don't see how this is much different than the current situation. The Fed already processes ACH transactions (basically all bill-pay, most transfers to/from Paypal/Venmo etc), and all wire transfers (most high dollar money transfers)
The new system is faster.
The government can already see all your ACH transactions like payroll, rent, etc because the Fed Reserve literally runs ACH. This also isn't replacing credit cards or the like, so it is basically an ACH replacement.
That's on top of reporting requirements banks already have for your transactions.
The Fed only runs FedACH, which is one of two ACH networks running the same protocol. The other is The Clearing House Payments Company's Electronic Payments Network. Indeed there used to be more private network operators, but the other two eventually folded, leaving just these two remaining.
Govt can already see any bank transaction made as it chooses already.
Question is, why does this fact get brought up everytime as if it’s novel?
paypal , visa and the like have proven to be worse than most governments
Put the flag of North Korea into the notes of a venmo transaction. You will very quickly find out the extent to which the government knows what you are doing with your money.
Thats actually a private corporation having an excessively skittish interpretation of federal regulations.
The government would still need to go out of their way to know about that transaction. And the liability would only come after you or the organization got in trouble for something else.
That's just not true and conspiracy nonsense.
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> > Is this akin to government-backed Venmo, or something?
> Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
No, exactly wrong. It's a gov Blockchain
Ok but.. ACH
So, almost like SEPA, but not as good, as not all banks are in it? I can type anyone's IBAN* into my banking app and transfer them money pretty much instantly. However, ours will have a delay outside banking hours, which is annoying. Sounds like FedNow is always instant, which is a definite improvement.
* Any IBAN from a SEPA country, at least.
"Normal" SEPA isn't instant either. You need SEPA Instant Payments for that and many banks don't support that yet although an EU directive is supposed to make it mandatory to at least be able to receive them, I think.
A large portion of SEPA bank accounts can now use TARGET Instant Payment Settlement (TIPS) on TARGET2/T2. https://www.ecb.europa.eu/paym/target/tips/html/index.en.htm...
My mid-sized Italian bank has a promotion right now to make instant payments with only 1 € in fees (instead of the usual 7 they charge, or 0 for "normal" bank transfers settled overnight).
> > Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
> Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
No, under the hood it's a government Blockchain
Does it use cryptography to digitally sign its messages?
> Whoa. Is this as awesome as it sounds?
No. A possible CBDC rails in the US is nothing to get excited about. Unless you want savings limits and expiry dates on your money.
> Is this akin to government-backed Venmo, or something?
Yes, but even worse.
>Unless you want savings limits and expiry dates on your money.
I don't believe in saving limits or expiry dates in the sense of losing 100% of your money. But think about what impact limiting savings has on debt. In aggregate, there can only be as much debt as there are savings. This means if you want to limit debt in the economy, you are going to have to limit savings as well.
This is particularly relevant with debt brakes. A country with a debt brake but without a savings brake is going to run into a pretty fundamental limitation.
Savers can delay their spending decisions and this ultimately delays the ability to repay debts but since debtor's are at the mercy of lenders, we blame the debtor for the lenders tardiness.
Savings and debt in an economy are related, but not 1:1. See the money multiplier [1].
[1] https://en.m.wikipedia.org/wiki/Money_multiplier
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> Unless you want savings limits and expiry dates on your money.
Why is this something that's not already possible under the current settlement regime and is uniquely possible and likely to happen with a CBDC?