68 economists have come out of the woodwork calling for the ECB to launch a CBDC.
I guess this is a good reminder that just because a lot of people say something doesn’t mean it’s right.
This letter is particularly troubling, though. I say that because their argument lacks an understanding of both central bank digital currencies (CBDCs) and economic history.
The economists claim that a CBDC like the digital euro would be “an essential safeguard of European sovereignty, stability, and resilience.”
📄.pdf
Setting aside their lack of evidence to back the claim, where has this been true in practice?
It certainly isn’t true in The Bahamas.
https://www.cato.org/commentary/bahamians-didnt-want-cbdcs-so-now-theyre-being-forced-use-them
It certainly isn’t true in Jamaica.
https://www.cato.org/briefing-paper/cbdc-lessons-caribbean
It certainly isn’t true in Nigeria.
Nigerians’ Rejection of Their CBDC Is a Cautionary Tale for Other Countries
Nigerians are protesting their country's CBDC and demanding renewed access to paper money, despite government incentives to use the digital currency.
Do I need to go on?
The CBDC experience varies country to country, but no CBDC has been “essential” in any sense of the word.
CBDC Tracker
A CBDC is a digital national currency. In the case of the United States, a CBDC would be a digital form of the U.S. dollar whereas, in Nigeria, the...
Yet, even within Europe’s borders, the economists appear to misunderstand economic history.
Pointing to the dominance of non-European financial institutions, the authors say the only defense is for the European government to intervene. Yet, interventions by the European government are partly why European businesses have struggled to gain ground.
https://www.cato.org/blog/europe-blames-america-its-payment-problems-digital-euro-wont-help
Rather than being free to serve customers, European businesses must navigate a maze of red tape: customer-surveillance mandates, extensive reporting rules, and regulatory fragmentation.
Making matters worse, price controls—such as caps on interchange fees—prevent new entrants from generating the revenue needed to manage these compliance burdens. It’s not a market failure if the source of the issue is government intervention.
If the economists are right about one thing, it’s that the European Parliament should be careful about who it takes advice from.
While I was limited to just one, I also have to give shout-outs to Skot building Bitaxe, @calle building Cashu, and many more.
The policy front may be depressing at times, but the people building solutions on the ground give me hope.
See what everyone else on the HRF Freedom Tech Team had to say here. 