Global policymakers are still pushing CBDCs despite their failures

Published

1 year ago

December 6, 2023

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Despite the risks and the failures associated with central bank digital currencies (CBDCs), global policymakers are pushing forward to make them a reality.

In November alone, officials from the International Monetary Fund (IMF), Bretton Woods Committee, and Bank for International Settlements (BIS) issued rallying calls for governments to push forward on CBDCs with courage and determination. But rather than double down on a bad idea and waste further resources in this pursuit, policymakers should let this idea go and focus on more fundamental reforms that would create a freer financial system.

The November CBDC campaign began when IMF managing director Kristalina Georgieva told policymakers, “If anything… we need to pick up speed [with CBDC development].” Bretton Woods Committee chair Bill Dudley likewise called not only for the United States to develop a CBDC, but for the BIS to establish an international standard for CBDCs. And BIS Innovation Hub head Cecilia Skingsley told an audience that CBDCs should not be dismissed as a “solution in search of a problem” because they might be useful one day.

These calls come at a strange time. As the Human Rights Foundation’s CBDC Tracker indicates, nine countries and the eight islands that compose the Eastern Caribbean Currency Union have launched CBDCs; 38 countries and Hong Kong have CBDC pilot programs; and 68 countries and 2 currency unions are researching CBDCs. Yet, none of these projects have proven worthwhile.

*CBDC activity by country. Source: Human Rights Foundation*

Yet, some governments may not even have the money to give away. In Thailand, plans to give citizens 10,000 baht ($288) through a CBDC were delayed partly because the government had not identified where the 548 billion baht ($15.8 billion) needed to cover the handout would come from. Worse yet, others warned that the handout may not even be legal. It wasn’t until later that the prime minister announced that it would be funded by government loans.

Elsewhere, the CBDC experience has been much worse. Nigeria’s CBDC struggled to gain adoption so much that the Nigerian government started pulling cash off the streets. Within weeks, it created a cash shortage so severe that it led to protests outside of banks and riots in the streets. Still, CBDC adoption only increased from 0.5 percent to 6 percent.

So at best, the CBDC experience seems to be one of government waste. At worst, the CBDC experience is one of government control. And it is against this backdrop that it is difficult to understand why international organizations like the IMF, the Bretton Woods Committee, and the BIS are still calling for policymakers to charge ahead with CBDCs.

After seeing the failures in practice and considering the risks still looming, neither the U.S. government nor governments abroad should launch a CBDC. Put simply, the costs outweigh the benefits. There’s no doubt that central banks and other organizations have invested their time, resources, and reputations in developing CBDCs. However, it would be a mistake to let those investments be a reason to fall victim to the sunk-cost fallacy.

With that said, if policymakers are eager to transform the financial system in a way the benefits everyone, there is much that can be done to create a freer, more accessible, and open financial system.

In fact, there is no shortage of policy reform ideas on the table. From strengthening financial privacy protections to establishing oversight of federal regulators, there are many opportunities to reform the financial system today.

For example, consider just the idea of reigning in the financial surveillance currently taking place. U.S. financial institutions spent an estimated $46 billion complying with financial reporting requirements in 2022. These are costs that end up making their way down to people trying to open accounts or acquire loans. More so, there is also the unseen costs of delays in transfers and payments as institutions work to verify identities, spending habits, and issue individual reports to the government. Reforming financial policy alone holds the potential to create a cheaper and faster financial system.

Perhaps best of all, reforming financial privacy does not require reinventing the money in everyone’s pockets.

Nicholas Anthony is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. He is the author of The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions and The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Politics

European leaders to meet in Ukraine for ‘coalition of the willing’ talks – and issue call to Russia

Published

3 hours ago

May 10, 2025

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European leaders to meet in Ukraine for 'coalition of the willing' talks - and issue call to Russia

Sir Keir Starmer will join other European leaders in Kyiv on Saturday for talks on the “coalition of the willing”.

The prime minister is attending the event alongside French President Emmanuel Macron, recently-elected German Chancellor Friedrich Merz and Polish Prime Minister Donald Tusk.

It will be the first time the leaders of the four countries will travel to Ukraine at the same time – on board a train to Kyiv – with their meeting hosted by President Volodymyr Zelenskyy.

Follow latest updates on the Ukraine war

Military officers from around 30 countries have been involved in drawing up plans for the coalition, which would provide a peacekeeping force in the event of a ceasefire being agreed between Russia and Ukraine.

Ahead of the meeting on Saturday, Sir Keir, Mr Macron, Mr Tusk and Mr Merz released a joint statement voicing support for Ukraine and calling on Russia to agree to a 30-day ceasefire.

“We reiterate our backing for President Trump’s calls for a peace deal and call on Russia to stop obstructing efforts to secure an enduring peace,” they said.

“Alongside the US, we call on Russia to agree a full and unconditional 30-day ceasefire to create the space for talks on a just and lasting peace.”

The leaders said they were “ready to support peace talks as soon as possible”.

But they warned that they would continue to “ratchet up pressure on Russia’s war machine” until Moscow agrees to a lasting ceasefire.

“We are clear the bloodshed must end, Russia must stop its illegal invasion, and Ukraine must be able to prosper as a safe, secure and sovereign nation within its internationally recognised borders for generations to come,” their statement added.

“We will continue to increase our support for Ukraine.”

The European leaders are set to visit the Maidan, a central square in Ukraine’s capital where flags represent those who died in the war.

They are also expected to host a virtual meeting for other leaders in the “coalition of the willing” to update them on progress towards a peacekeeping force.

This force “would help regenerate Ukraine’s armed forces after any peace deal and strengthen confidence in any future peace”, according to Number 10.

Politics

The ‘tricky balancing act’ facing Starmer over US trade deal – and the real challenge to come

Published

3 hours ago

May 10, 2025

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The 'tricky balancing act' facing Starmer over US trade deal - and the real challenge to come

If you want a very visual representation of the challenges of transatlantic diplomacy in 2025, look no further than Oslo City Hall.

Its marbled mural-clad walls played home to a European military summit on Friday.

In December – as it does every year – it will host the Nobel Peace Prize ceremony. It’s an award Donald Trump has said he deserves to win.

But while the leaders gathering in the Norwegian capital may not say it publicly, they all have a very different perspective to the US president on how to win the peace – particularly when it comes to Ukraine.

So far, Sir Keir Starmer has managed to paper over these foreign policy gaps between the US and Europe with warm words and niceties.

But squaring the two sides off on trade may be more difficult.

The US-UK deal announced on Thursday contained no obvious red flags that could scupper deeper trade links with the EU.

However, that’s in part because it was more a reaction and remedy to Mr Trump’s tariff regime than a proactive attempt to meld the two countries together.

Laced with party-political venom, yes, but the Tory leader Kemi Badenoch is getting at something when she says this agreement is “not even a trade deal, it’s a tariff deal and we are in a worse position now than we were six weeks ago”.

There may be more to come though.

The government will talk up the possible benefits, but there are risks too.

Take the Digital Services Tax – much hated by the Trump White House as an unfair levy on US tech firms.

Despite the apparent pitch-rolling from the government, that was left untouched this week.

But asked to rule out changes in the future, the prime minister was non-committal, simply saying the current deal “doesn’t cover that”.

For trade expert David Henig, the potential flashpoints in the transatlantic Venn diagram Downing Street is trying to draw around food standards, digital regulation and services.

“It is a tricky balancing act, at this stage it looks like the UK will go more with the EU on goods regulations, but perhaps a little bit more with the US on services regulations,” he said.

For veterans of the post-2016 Brexit battles, this may all sound like Labour embracing the Boris Johnson-era mantra of “cakeism” – or trying to have it both ways.

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It’s ironic indeed, given Sir Keir is a politician who supported the Remain campaign and then called for a second referendum.

But what matters now is what works – not for Downing Street but for the swathes of voters who have abandoned Labour since they took office.

That’s why the prime minister was once again trying to humanise this week’s trade deals.

These are agreements, he said, that would be measured in the “many thousands of jobs” they would safeguard across the country.

That’s the real challenge now, taking the work done in the marbled halls of the world’s capitals and convincing people at home why it matters to them.

Politics

US senators ask DOJ, Treasury to consider Binance-Trump ties — Report

Published

7 hours ago

May 9, 2025

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US senators ask DOJ, Treasury to consider Binance-Trump ties — Report

A group of Democratic senators has reportedly sent a letter to leadership at the US Department of Justice and the Treasury Department expressing concerns about US President Donald Trump’s ties to cryptocurrency exchange Binance and potential conflicts of interest in regulating the industry.

According to a May 9 Bloomberg report, Democratic senators asked Attorney General Pam Bondi and Treasury Secretary Scott Bessent to report on the steps Binance had taken as part of its November 2023 plea agreement with US authorities, amid reports that Trump and his family had deepened connections with the exchange.

That settlement saw Binance pay more than $4 billion as part of a deal with the Justice Department, Treasury, and Commodity Futures Trading Commission, and had then-CEO Changpeng “CZ” Zhao step down.

However, since Trump won the presidency in 2024, many lawmakers have accused the president of corruption from profiting off crypto while being in a position to influence laws and regulations over the industry.

Trump has launched his own memecoin — which earns the project millions of dollars in transaction fees — and offered the top tokenholders the opportunity to attend an exclusive dinner in Washington, DC. His family-backed crypto venture World Liberty Financial also recently announced that an Abu Dhabi-based investment firm, MGX, would settle a $2 billion investment in Binance using the platform’s USD1 stablecoin.

“Our concerns about Binance’s compliance obligations are even more pressing given recent reports that the company is using the Trump family’s stablecoin to partner with foreign investment companies,” the senators said in the letter, according to Bloomberg.

Stablecoin bill fails to pass the US Senate

The letter came less than 24 hours after some of the same senators blocked a crucial vote on a bill to regulate stablecoins, named the GENIUS Act. Senator Elizabeth Warren, who reportedly signed the letter and opposed moving forward on the stablecoin bill, suggested the Senate should not be aligned with “facilitat[ing] this kind of corruption” from Trump.

Bessent said the Senate “missed an opportunity” by not passing the stablecoin bill, but did not directly address any of the concerns over Trump’s crypto interests. It’s unclear if or when the chamber could consider another vote on the bill.

In an April 23 report, the nonpartisan organization State Democracy Defenders Action said roughly 40% of Trump’s net worth was tied to crypto. The group noted that the GENIUS Act, in its current version, “would not prevent President Trump from using his executive powers to establish a regulatory environment and enforcement agenda that prioritizes his personal enrichment over the broader interests of US stakeholders.”

Amid the concerns with the stablecoin and proposed market structure bills, Zhao reportedly applied for a federal pardon from Trump. Though the former CEO already served four months in prison, a pardon for his felony charge could allow him to get more involved with the crypto industry through a management position.

Magazine: Trump’s crypto ventures raise conflict of interest, insider trading questions