[mikro2nd]

I find it interesting that the paper focusses on Central Bank Digital Currencies and Global Stablecoins, but pretends not to see/prefers not to deal with the elephant in the room - Bitcoin. If anything is a candidate for a potential Reserve Currency, BTC is it, imho.

Deep in the footnotes comes the contorted logic,"According to the IMF Treatment of Crypto Assets in Macroeconomic Statistics, crypto assets such as Bitcoin do not meet the definition of a financial asset—and hence currency—in macroeconomic statistics." and presumably that's what lets them off the hook, nevertheless, the ONE payment-rail that BTC fits perfectly is precisely that of international settlements between Central Banks/countries - such settlements typically involve the large-scale transfer of assets, they're not especially time-sensitive, and the transfer cost is inconsequential (and in the case of BTC negligible against the values transferred).

So I'm still left wondering: Why the aversion?

Fear? Lack of control by recognised "authorities"? Their argument that it's "too volatile" is largely untrue over the past year or two, with Bitcoin showing no greater volatility than any of the world's fiat currencies, so I doubt that's the factor at play.

[jononor]

What do you mean by "Bitcoin showing no greater volatility than any of the world's fiat currencies"? I pulled up BTC/USD and EUR/USD https://www.xe.com/currencycharts/?from=XBT&to=USD&view=2Y https://www.xe.com/currencycharts/?from=EUR&to=USD&view=2Y In the last 1 year, I see BTC low of 5000 and high of 12000, a 40% difference. And EUR at 1.06 to 1.20, about 12% difference. The year before was worse for BTC and better for EUR. 3x the volatility is quite considerable.

[demosito666]

Not that bitcoin is not volatile (it sure as hell is), but you're picking the most stable currencies in the world and comparing them to a crypto asset that is younger than a kindergarden class. Try building the same graphs for 3rd or even 2nd world currencies and observe that they might have even worse volatility. I live in a country whose currencies devaluated in order of trillion times in 20th century if you count multiple "monetary reforms" and "denominations".

[JumpCrisscross]

> you're picking the most stable currencies in the world

OP tried to compare Bitcoin to reserve currencies. Reserve currencies are more stable than average.

[notahacker]

Sure, but nobody is pretending that the likes of the Venezuelan Bolivar show no more volatility than any of the world's [other] fiat currencies as they breathlessly hype its potential as a global reserve currency.

[emteycz]

The thing is that it's not that bad given its age, and it's improving.

[dogman144]

You have to approach it with a pretty wide angle lens, but the better analogy IMHO is comparing BTC to other early day currencies.

Have you looked at USD vol in the 1800's? Reichsmark vol? From that angle, vol of "proper currencies" in their early adoption days tend to start looking a lot like BTC vol. At a minimum, BTC today to USD today isn't an apples:apples take at all.

In my mind, this starts to damage vol = bad BTC arguments in terms of analyzing BTC's adoption. potential.

[JumpCrisscross]

> Why the aversion?

Students of central banking are familiar with central banking in the era of gold and why it was almost universally a disaster. (Most of Bagehot [1] concerns itself with bank runs.)

This paper’s audience is familiar with that history. Talking about Bitcoin would be like addressing why machine language wasn’t used in a CS paper.

[1] https://en.m.wikipedia.org/wiki/Lombard_Street:_A_Descriptio...

[baybal2]

I doubt if anything made changed since the era of gold, just sizes of economies went up dramatically, more common people are banked, and there are more option to do bank run against.

Gold [https://goldprice.org/charts/history/gold_6_month_o_usd_x.pn...] is of course one of them, but costs of many other liquid commodities have shot up counterintuitively this time as well.

There is nothing "magical" that has happened to banks when they switched to fiat money.

[JumpCrisscross]

> There is nothing "magical" that has happened to banks when they switched to fiat money

Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort.

There is a lot of scholarship, originally from the turn of the last century but perennially refreshed, on the inherent failure modes of fixed-supply money systems amidst a growing, industrialising or industrialised economy.

Fixed-supply assets are good. Fixed-supply currencies cease, quickly, to be currencies.

[baybal2]

> Of course there is. Deposit guarantees are enabled. That and the central bank’s credible power to influence money supply and borrowing costs as well as act as an unconstrained lender of last resort.

So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state. Just before, it was much more likely led to more angry people with pitchforks than today.

[JumpCrisscross]

> So it was at the time when the king could've simply set the gold rate for the currency, and do the very same thing with borrowing, and lending on behalf of the state

No. The de facto currency was estimated mass of precious metal. The king could default, of course. But that is selective; inflation is not. Re-basing happened, but just as with money printing, it is tracked and accounted for and, in extreme cases, fled from.

Equating modern monetarism with gold-standard economics betrays, fortunately, a terrific opportunity to learn from works that have been peer reviewed, in many cases, for over a century.

[anm89]

Yes the system that lasted for thousands of years, which was fine until politicians turned the system into a polítical utility making promises they knew they could never keep, and which was replaced by another system that is falling apart after 50 years.

If a gold standard was a disaster, I don't know what our current system is.

[andomar]

If Central Banks were to get into Bitcoin, they would make early investors in Bitcoin very rich. Like 1 person would own 25% of all the world's wealth.

That wouldn't be proper Central Banking :)

[herendin]

If that's true, then the longer they wait, the worse it gets. That's not good.

[raverbashing]

What I love about the Bitcoin enthusiasts is how they picture it to be the be all/end all magical money that will solve everything

Meanwhile the real big money-movers (legal or illegal) are still using bank accounts and paper companies in "business-friendly" jurisdictions.

[janoside]

The "market" is always active and always looking to select the best of everything, including money. Bitcoin isn't be-all/end-all magical money - but it is a massive, order-of-magnitude improvement on history's greatest "hard money" (gold). The markets of the world are slowly coming to understand the value of this "best reserve asset and best collateral asset ever seen" (Raoul Pal).

A new digital, internet-native asset with the greatest monetary properties in history is monetizing before your eyes; meanwhile you're relying on your understanding of an old world to convince yourself it doesn't matter and the people who see something deeply interesting are kooks.

[seibelj]

This is the history of all revolutionary technologies. At first it seems like a useless toy, then the establishment laughs at and denigrates it, then it's fought aggressively, then it takes over. I would say we are almost past the "fought aggressively" stage, at least for Bitcoin, and into the "taking over" stage as smart institutional money begins to get exposure.

It's very interesting that a large contingent of smart software people on HN heard about Bitcoin extremely early, said it was a useless failure, and then had to re-justify their position for a decade as Bitcoin marches on. It's impossible for anyone to claim Bitcoin has no value at this point, but on every blockchain post on HN there is a core of haters that will make the same tired arguments against it. Meanwhile, no one cares!

[gamblor956]

They said the same thing about Theranos, too...In fact, the only time I've ever heard that quote is in reference to failing technologies and companies.

You'll never hear that quote about actually revolutionary technologies, because their revolutionary nature is immediately apparent, even if the economic case for the technology is not (at the time).

Cryptocurrency isn't revolutionary. There isn't any use case for cryptocurrency that wouldn't be easier to address with normal cash or credit payment. Cryptocurrency solves none of the actual problems in the current financial or banking systems but introduces a host of new problems that weren't issues in the old system. It's a solution in search of a problem.

[seibelj]

You keep repeating the same tired arguments, then can't explain why Bitcoin went from 0 to $240 billion market cap in 10 years. There is clearly a lot of value here, even if you refuse to acknowledge it.

[gamblor956]

Theranos had a high market cap to, right up until the WSJ reporting revealed it to be a fraud. And on that note, there's strong evidence that multiple parties have been manipulating the value of cryptocurrencies, including especially Bitcoin, through various fraudulent mechanisms (see, e.g., Tether).

I also used to be heavily involved in cryptocurrency, when it first started, and what I saw then is a large part of why I don't see any usefulness in cryptocurrency now and why I'm convinced that it will never replace any part of the financial system.

[janoside]

I appreciate your perspective. I feel like I'm taking crazy pills these days on HN concerning BTC. This idea (early rejection, re-justification) is a helpful heuristic for understanding some of it at least.

[raverbashing]

What you're saying applies to crypto-currencies in general, but not necessarily to Bitcoin, which has some thorny issues.

Yes, maybe the popularity of BTC will overcome the issues, but I doubt.

[janoside]

No, it doesn't. Money, perhaps more than anything else in human society, exhibits network effects that incline it toward winner-takes-all dynamics. Every money implicitly competes against every other money.

I recommend taking a look at something like https://bitcointreasuries.org/

And don't just glance at it - try asking some probing questions, like "What does this mean?" and "What might I be missing concerning the underlying dynamic at play?"

You can also try reading The Bitcoin Standard for a good analysis of the dynamics and history of competition between different forms of money - the central thesis being: History has shown that you can't protect yourself from someone else holding money that's harder (better) than yours. Bitcoin is better money than anything else we have or have ever had.

[gamblor956]

Money, perhaps more than anything else in human society, exhibits network effects that incline it toward winner-takes-all dynamics.

That's not how money works, if by money you mean a currency. Currencies are issued by sovereign governments, and don't exhibit network effects within that sovereign jurisdiction, because they don't need to. They're legal tender; you're required to accept them, and everyone needs them to pay taxes.

If you mean money as in wealth, that's an entirely different topic.

[dogman144]

Microstrategy was a public company that recently put its treasury reserves into 100% BTC from USD.

Why is this important: note "public." To do this legally, they had to convince: - external auditors - internal compliance - external/internal legal - and where it gets interesting: the institutional investors who are large enough to matter, i.e. your big-money movers. This party says no at a shareholder meeting, the conversion isn't happening.

CFO who led this found that last party were all ok with the move given explanation, and most owned BTC already. 1 holdout took some convincing. These big money-movers hold BTC already, in short. Yeah it's not 100% of their assets, but this isn't an argument about that.

[RikNieu]

> Lack of control by recognised "authorities"

Ding, ding, ding!

[dogman144]

Yeah that's sort of silly. The implications of a non-BTC-based standard with the intent of enabling cross-border more effectively is: - IMFcoin, UNCoin(and the conspiracies around global banking cartel actually take flight because yeah actually that would be nuts) - EUcoin, USAcoin, ChCoin (imagine the geopolitics...)

A digital currency that directly fits the digital use-case being described by these papers written by central banks, that is in turn ignored by these papers, is sort of like talking about WW2 without mentioning Germany's role.

I can definitely understand the aversion given the implications of a non-CB controlled digicoin, but just ignoring its existence really blows a hole in the intellectual rigor of these whitepapers.

Ultimately, the network adoption will play out as it plays out. We don't have USAweb and RUSweb (maybe moving toward that, but different topic), we have the decentralized, multi-party, ICANN/IETF/private sector/public sector-led The Internet. When you track how the Internet came to be, and how it's actually controlled now, it starts to look a lot like the Bitcoin network's growth plan at the moment. What will be will be. Once it gets analyzed as a network protocol with digital native payments, vs. a digital currency on the regular internet, the blind spots in BTC criticism start to show.

[anoraca]

Maybe because whatever entity created bitcoin controls what, like 9% of all bitcoin? And nobody knows who or what they are? Why would anyone want to be involved in a financial system that functions that way?

[nabla9]

BTC has no benefit over central counterparty clearing and settlement.

Even if the technology would adapt cryptographic ledgers, there is no reason to use another currency for that. You use sovereign currencies as before.

[bboygravity]

> BTC has no benefit over central counterparty clearing and settlement.

I can think of a few huge practical benefits:

1. Try to transfer money cross border within the EU/SEPA zone on a Friday. It'll be in the receiving account on Tuesday (and usually not in the morning). That's around 96 hours between sending and receiving. During weekdays this goes to 24 hours. Not even talking about intercontinental transfers. And this is assuming there are no national holidays in either the sending or receiving country during that period. And then there are people that complain that Bitcoin's < 15 minutes is slow, lol.

2. Transfers through central counterparty clearing and settlement sometimes get rejected/delayed for absolutely no reason at all. They can also be rejected/delayed for political or other (good) reasons. BTC doesn't suffer from this.

3. Transfers through central counterparty clearing and settlement can get stolen by attacking the IT systems themselves. Example:https://www.bankinfosecurity.com/another-swift-hack-stole-12.... BTC doesn't suffer from this. Yes, BTC can get stolen through phishing or by attacking end-points, but so can those transfers.

4. Going through central counterparty clearing and settlement requires both the sending and the receiving party to have some type of bank account in the locations that they want to send or receive money to/from. This means dealing with very time consuming local bureaucracy. Especially when the receiving party (for example) wants to receive money in a "new" country that they're not "set up" in yet. Setting this up can take days/weeks of turn around time and hours/days of man-hours. BTC doesn't suffer from this at all.

5. Transfer costs and high exchange rate spreads.

There are probably more issues that I didn't think of.

As a traveler only dealing with relatively tiny amounts of money across borders, BTC has already saved me a ton of time, money and frustration in trying to access my own money across borders. Even I as a nobody can see the benefit, I imagine those benefits only get greater for people dealing with larger amounts (as I assume the bureaucracy and problems go up with the amount of money transferred).

[tanseydavid]

Thank you for the time-scale comparison on a level with money transfers as opposed to POS Credit/Debit -- it is a more appropriate comparison IMHO.

Here's one interesting angle in POS comparison that I never see mentioned anywhere:

VISA, MC, AMEX set a high-standard being able to very quickly process transactions even under high-load times like holidays.

But they did this in part, because they practically had to...Think of holidays shoppers at physical retail stores lined-up at a cash register -- they need approved or denied answer ASAP.

But with that sales model is dying a noticeable death -- no one doubts it will soon be gone -- which brings me back to BTC and and me finally making my point

If you're making a retail purchase from Amazon and choose Next Day for delivery, does it matter that BTC is going to take 15 minutes or even 30 minutes to clear?

[biolurker1]

Obvious difference that no one entity can control supply. If that's good or bad is another long academic discussion

[javert]

Obviously, if you are a user of the currency and don't want it to be inflated by the central bank, there's at least one thing in bitcoin's favor, as it has a fixed maximum supply.

You can argue that's a bad thing if you want, but just ignoring that it exists doesn't make much sense.

[biolurker1]

I wrote the same message before seeing yours :)

[javert]

I see, happy to have someone who agrees with me. I don't know why so many people ignore the fixed supply issue with bitcoin, it seems like the "elephant in the room."

[x87678r]

The USA is super strict on making sure every transaction they can control gets monitored and tracked. Any financial firm that touches dollars must comply or they'll get fined literally billions. There is no way BTC will be allowed to go mainstream unless the US regulators can track every user on the blockchain.

[anm89]

Our "exorbitant privelege" is not going to last forever. When the imf called. For a new Bretton woods moment last week, ending that system is what they were talking about.

[x87678r]

Yeah check out where IMF headquarters is and who pays for it then tell me again that the IMF is going to let BTC take over from the dollar.

[anm89]

The IMF already doesn't have a say in this. The USA isn't going to have a say in it either if 30 year yields go down any further.

Also I'm not claiming that the BTC will take over the dollar, I'm saying dedollarization will occur in general. This isn't a particularly controversial opinion at this point in the finance world. The average CNBC guest is willing to admit this at this point.

[x87678r]

> I'm saying dedollarization will occur in general.

US Feds have gone overboard on tracking financial crime, but I really dont see people thinking Euro, Yuan or Yen is safer. Certainly non-CB cryptocurrencies are worthless as soon as sentiment turns.

> The average CNBC guest is willing to admit this at this point.

That really doesn't hold a lot of credibility with me though. :)

[anm89]

You keep responding to things I haven't said . I'm agnostic to how dedollarization will occur. I'm not claiming that it will be the Yen, the euro, the sdr, gold or bitcoin specifically.

[seibelj]

It becomes an asset that eats dollars. Print more dollars and BTC goes up. Just like gold sits in vaults, Bitcoin can sit in cold storage.

BTC is also something that individuals can buy in extremely small increments. It is an escape valve for people in Argentina, Turkey, Venezuela, etc. to protect their wealth from horrible and corrupt central bankers.