The Fed Vs. ECB On Central Bank Digital Currencies

For this episode of Bitcoin Magazine's Fed Watch, my cohost Christian Keroles and I get into specifics on the plans of the European Central Bank (ECB) in regard to its digital euro. We are told in the media that central banks are going to release Central Bank Digital Currencies (CBDCs) and that this will will have damaging economic effects. However, on this podcast episode we get our information directly from the source.

First, we must answer a critical question: Is a digital euro likely to really launch and why? (In future episodes we will cover the side-effects of CBDCs, if there are any.)

On November 30, 2020, the president of the ECB, Christine Lagarde, released a blog post detailing the ECB’s current thoughts on money and how a digital euro, or CBDC, fits into its plans. I talked about this on my recent episode of Bitcoin & Markets, and Keroles wanted to explore the idea of the worries of the ECB specifically, because its thinking seems to be heavily worried about monetary sovereignty.

That term, “monetary sovereignty,” came up several times is Lagarde’s blog post in the context of why ECB feels pursuing a CBDC is necessary. This contrasts with statements from Federal Reserve Chairman Jerome Powell’s, which have focused on patience and conservatism instead of worries about monetary sovereignty. Why is this?

Most likely, this is because there already are digital stablecoins, which function in a similar manner to how a digital euro would function in the market. But there is a big problem in the free market offerings of these stablecoins from the ECB vantage point: they are 99 percent U.S. dollar based. If the ECB were not to act, the market might completely bypass use of the euro in favor of a digital dollar. That is a scary possibility for the ECB, so it must provide that option for the market, and maybe even require its use in some cases to maintain the euro’s global position.

This episode also covered the recent MicroStrategy “bonds for bitcoin” proposal. Listen to find out if this is the first signs of the long awaited “speculative attack” on fiat by bitcoin, and what to watch out for as this move receives the keen attention of regulators.

We also discussed jurisdictional arbitrage at length. How does bitcoin enable jurisdictional arbitrage even within regions like the U.S. or European countries? Of course, as good bitcoiners, this leads us to a cosmic back and forth about citadel locations, and the best place to live in the future from a freedom and economic standpoint. 

Overall, it's a fantastic episode, heavy on central bank commentary. Do not forget to subscribe to Fed Watch’s new RSS feed, so you don’t miss any of our great guest insights in the future.

Ansel Lindner: Economist, author, investor, and bitcoin specialist. Find more from Ansel at BitcoinDictionary.cc, BitcoinAndMarkets.com and BTCM.co.

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