 | Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here! |
(Kitco News) - Until governments make a clear case for the advantages of central bank digital currencies (CBDC) and address the concerns of industry and the public, their intentions will be suspect, according to Oliver Linch, CEO of cryptocurrency exchange Bittrex Global and a financial regulatory lawyer with a over decade of experience in Europe, the UK and the United States.
“CBDCs aren't for crypto people,” Linch said. “When I speak to my clients about this, they're just not interested in something that has ripped the core out of what crypto is about.”
Linch joined Kitco News reporter Ernest Hoffman to discuss the results of the latest survey from the Bank for International Settlements which shows that 93% of central banks are working on CBDCs while also stepping up surveillance of their countries’ crypto markets.
He said that while CBDCs could solve real problems in areas like cross-border money transfers, the broad and vague approaches being taken by governments show a lack of policy direction and raise questions about their real motives.
“I think before you can say if it's going to crowd out altcoins, is it going to crowd out Bitcoin, is it going to crowd out stablecoins, you just have to ask yourself well, what is it? What is this product, what is it for?” he said. “At the moment, there's just this sense that governments are jumping on a bandwagon. It's a bit like the Batmobile, you put the word ‘bat’ in front of anything, it sounds a bit cooler, and it's not true. Just putting the word digital isn't enough. There has to be a purpose for it, and at the moment it does just seem like CBDCs in general are a solution in search of a problem.”
As far as advantages go, Linch doesn’t believe that CBDCs would be more effective for enforcing anti-money laundering and know-your customer (AML/KYC) regulations than crypto.
“I don't see that CBDCs are any better on that front,” he said. “If you try and trade on Bittrex Global you will be KYC to the same standards as any kind of bank or financial institution. We know exactly who our customers are, we know what they're trading and how they're trading, where that money is going. That's true if they're trading in Bitcoin, if they're trading in any number of altcoins. I don't think that's any more true just because you're trading in special government tokens.”
On the flip side, Linch said that concerns about the potential for CBDCs to destabilize the banking sector in countries where most money is created by private banks are valid.
“I think there's going to be a lot of very awkward conversations between central banks and private banks in those jurisdictions, and in the UK and in Europe and in the U.S. for that matter,” he said. “I think governments and central banks at the moment are avoiding having to have those discussions by coming out and saying ‘oh, nothing's off the table, we can configure these things however we want.’ That actually just sounds like you don't have a plan, right? Figure out what it is you're trying to achieve, figure out the best way to achieve it, and then go do that.”
He also expects that even the countries exploring wholesale CBDCs for use by institutions will ultimately create a retail version for their citizens, and the public will lose the advantages of crypto in the process.
“One of the major problems that traditional finance has, is that it's excluded from the benefits of cryptocurrencies,” he said. “Many people that are underserviced by traditional finance, where governments and regulators say ‘sorry, you're not welcome in these products, because you're too stupid, or too poor, or both. Because you're not a high-net-worth individual, you're not a sophisticated investor, so you can't have access to this product. And if that means that you can't get a mortgage or grow a business, then, sucks to be you.’”
Linch said many people feel they’ve been failed by traditional finance in this way, and cryptocurrencies are filling that gap. “That's a phenomenal advantage that crypto can bring to people,” he said. “If CBDCs don't even help in that regard, where are they going to get their users from? Where are they going to get people interested in this, excited about this, unless they're going to start forcing people into using CBDCs?”
In the absence of a clearly articulated policy objective, and a clear justification for the CBDC as the means to achieve it, Linch said it’s perfectly understandable that people assume the worst of CBDC proponents.
“Wherever you fall on the spectrum of conspiracy theory… is it governments and central banks just wanting to be cool and say digital all the time? Is it that, plus they want to give a little bit more control back to the central bank, and indeed to private banks, to have a little bit more familiarity? Is it that they want a load of data on every single transaction, and they can see the incredibly poor life choices that I made when I go shopping on the weekends? Or is it that they want to be able to do really nefarious things like turn off money, and stop you going to shops, and direct your spending?”
Linch said that at the end of the day, it doesn't really matter which theory you ascribe to, because the onus is on the government to make a good case for the benefits of central bank digital currencies. “If you're pushing for CBDCs, you've got to explain what your positive motivating factors are,” he said. “At the moment, that's just not there.”
To hear Linch’s analysis of the CBDC programs of Russia, China and other jurisdictions, watch the above video.
