
Winds of Change: The Case for New Digital Currency - T-A
https://www.imf.org/en/News/Articles/2018/11/13/sp111418-winds-of-change-the-case-for-new-digital-currency
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larrysalibra
> This currency could satisfy public policy goals, such as (i) financial
> inclusion, and (ii) security and consumer protection; and to provide what
> the private sector cannot: (iii) privacy in payments.

If financial inclusion and privacy in payments were actual public policy
goals, cryptocurrencies would be a lot less attractive.

In reality, the real public policy goals are:

1) Financial exclusion: using denial of access to the state run financial
system as a political, law enforcement, social control and tax collection
tool.

3) "Know your customer" and "anti-money laundering" (AML/KYC) rules that
remove privacy in payments to make it easier to use the state run financial
system as described in 1). These regulations in practice exclude the the
poorer people in society - the people Lagarde like means when she says
"financial inclusion" \- that can't meet requirements like "proof of address"
and can't meet the minimal balance / month fee requirements that have come
about from these AML/KYC regs.

~~~
fro0116
I don't disagree with your points around the public policy goals of currency,
but suggesting that minimal balance / monthly fee requirements come from
AML/KYC regulations is quite the stretch. I'd wager those come from greed,
pure and simple.

The banks charge those fees because they can. If we got rid of AML/KYC
regulations and reduced the banks' costs around regulatory compliance, do you
think the banks will pass the savings onto customers or pocket the difference?
I know where I'm putting my bet.

~~~
AnthonyMouse
> If we got rid of AML/KYC regulations and reduced the banks' costs around
> regulatory compliance, do you think the banks will pass the savings onto
> customers or pocket the difference?

The existing banks, on their own? Surely not. But complicated and expensive
regulations like that are the main reason we don't have more, smaller banks,
and _they_ would be happy to gain customers by charging lower fees. Then the
existing banks would have to compete and do the same.

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hanniabu
> cryptocurrencies seek to anchor trust in technology. So long as they are
> transparent.....Still, I am not entirely convinced. Proper regulation of
> these entities will remain a pillar of trust.

I don't think they understand that the purpose of cryptocurrencies is to
remove the need for trust. Trust in the math, not the banker. AKA the economy
should be built off the monetary system rather than the monetary system being
built off the economy.

~~~
PeterisP
You can't remove the need for trust - that need is inherently _beyond_ the
reach of math.

If I want to use money to pay for some goods, I need trust that I can get that
money back if the goods won't arrive. Math alone can't provide that, it needs
something extra, e.g. a _trusted_ escrow service in the case of crypto.

If I want to use money as a store of value, I need trust that the value is
going to stay stable and maintain liquidity in the long term. Math alone can't
provide that, that trust is inherently social. I also need reasonable trust
that the money isn't likely to get stolen - math isn't sufficient for that,
and our current experience shows that crypto assets are more vulnerable in
practice than e.g. bank deposits, maintaining appropriate "opsec" is tricky
and people fail in that too frequently.

And for your other point, the economy existed before a monetary system and
currently works off of many monetary systems - however, for a monetary system
the only criteria that matters is if it's good for what the economy needs; if
some system does not fit these needs, then it won't get used much and is not
particularly relevant.

~~~
randaouser
>If I want to use money to pay for some goods, I need trust that I can get
that money back if the goods won't arrive. Math alone can't provide that, it
needs something extra, e.g. a trusted escrow service in the case of crypto.

No need for extras, you can do this today on Ethereum with Hashed Time Lock
Contracts

~~~
emiliobumachar
Could you please expand on how does the Ethereum blockchain get to know
whether the goods arrived if the buyer and seller are saying conflicting
things and no third parties are involved?

~~~
AnthonyMouse
> Could you please expand on how does the Ethereum blockchain get to know
> whether the goods arrived if the buyer and seller are saying conflicting
> things and no third parties are involved?

It's possible to have some mutually assured destruction here, e.g. the
contract is for $100 so the buyer puts in $150 and the seller puts in $100.
Then when the buyer releases the money, they get $50 of their money back and
the seller gets $200 ($100 from the buyer and their original $100). If the
buyer doesn't release the money, _nobody gets anything_.

It gives the buyer a way to punish the seller for non-delivery, but without
receiving any personal benefit (and in fact at a personal cost) for using it.

~~~
DoctorOetker
there's an endless supply of replies to comments like yours that go like "it
will never be possible to fix every problem so the safest move is no move",
and I _don 't_ wish to be that kind of commenter, i.e. I think it is good to
at least try and propose mechanisms -even flawed ones- so that at least the
discussion of the problems continue and hopefully the mechanisms can be
improved.

it is in this mindset that I am asking if we can adress the following issue:
suppose the government or its postal system selectively withholds the goods
payed for through cryptographic protocols, then buyer and seller lose.

again, I'm not trying to be destructive, just wondering out loud if we can
generalize the kind of protocol you describe to include the transporter as an
attacker in the attack model.

I think we could split up in 2 cases: transporters that are paid on the same
cryptographic protocol/platform, and transporters that are paid outside. I
believe it will be easier to solve the problem by restricting to transporters
who get paid by the same contract/platform, since we could have the
transporter deposit an insurance of same or higher value as the good to be
transported, and upon arrival his pre-agreed transport cost and deposit are
released?

Obviously the traditional postal system can not be forced to be paid through
this platform, so this hole in the market would effectively create demand for
crypto postage and hence create jobs.

I would like to see a more rigorous breakdown of such a protocol, and a
censor-ship free listing of issues remaining with the protocol, so that the
discussion on improvement can continue.

Also it seems like the first transporter does not need to be the same person
as the last transporter, i.e. intermediary packet handoff could also be
handled by the protocol such that the first transporter gets paid back his
deposit after doing "his part" of the packet journey...

~~~
PeterisP
It seems that you're describing a solution to the problem of delivery failure.
However, the larger problem where consumers need the ability to revoke deals
is not failure of delivery as such, but failure to deliver _the right goods_ ,
possibly maliciously. And vice versa, the possibility by consumers to exploit
the system to maliciously refuse paying for goods.

Censorship resistance is an edge case that's nice to have for some people,
fraud resistance is the mainstream need that's mandatory for most users.
Current crypto approaches don't handle fraud resistance as well as the
traditional payment systems, so censorship resistance is a moot point
until/unless _that_ gets solved.

~~~
DoctorOetker
I am making no claims about priority of problems, so I certainly welcome
identification of other issues and proposals to improve them.

If we mentally subdivide all commercial activity between
traditional/centralized/blind trust commercial activities and
novel/decentralized/cryptographic trust commercial activities, then (even if
it is not occuring yet) it can desirable for the supporters of
decentralization to be able to assure themselves that the status quo can not
undermine the economic value of the cryptographic trust community.

Even outside of cryptocurrencies we have debates about net neutrality,
priority of packets etc... One could similarily wonder if current delivery
services are able to say profit by investing in specific companies within a
sector of products, and differentially prioritizing the delivery of their
goods (or gentleness of delivery for fragile goods, or even non-delivery).

I don't believe in moot points, people can work on different issues, design
solutions for them and then they can look at how to intersect/generalize their
protocols so that it displays both or more desirable traits...

~~~
PeterisP
Okay, in that regard the assumption that "the government or its postal system
selectively withholds the goods payed for through cryptographic protocols"
seems questionable. Is this a real problem that we're seeing in some markets?
As far as I'm aware it seems that in general delivery services are decoupled
from the payment for goods; the delivery system, no matter if it's government
postal system or private parcel delivery, does not know and can not know how
(and if) the goods were paid for. They may require some declaration from the
sender about the value for insurance and customs purposes, but that's
different than the payment data.

------
chroem-
If cryptocurrency is like bittorrent for finance, then this proposal is like
downloading DRM-encumbered music from a walled garden marketplace. I think
I'll pass.

------
netcan
Because of bitcoin, cryptocurrency has a strong association with "free money,"
which is basically a dissent theory of macroeconomics that doesn't want
central banks to have control. This was written by a central banker, so
obviously there's a belligerence here...

In any case... Idk what I think about free money. Macroeconomics is hard.

OTOH, I think cryptocurrencies have other disruptive potential even if we want
to keep our current macroeconomics, central bank control over interest rates.

It's the kind of technology that turns a £100bn industry into a £1bn one.
There are several clunky inefficient financial services sub-industries that
could potentiall be digitised by good implementation of blockchain tech.

The problem is too-big-to-fail. Besides actual central banking, does Christine
Lagarde see her job as protector of the financial services industry? If so,
she's going to build bureaucracy that maintains the status quo.

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hkt
I feel like one day, central banks are going to be attacked by private banks
and the means of attack will be cryptocurrency. The aim will be to get rid of
central bank deposits and seize control of the payments system - once the
central bank deposits are gone and we're cashless, this will become easy. They
could even base it offshore to avoid consumer protections. If we're lucky when
this happens, it will be a test of the remaining power of nation states. If
we're unlucky, they'll roll over as the most basic means of exchange is
privatized.

------
divan
This is suprisingly good and even refreshing speech after reading tons of very
opinionated pro- and contra-crypto articles.

Financial system design still have this chicken or the egg problem – we need
to design fintech systems aligned with offline social interaction patterns as
much as possible, but their (current) design changes our social interaction
patterns in return as well.

It's still fascinating to see how the world reimagines and reconsiders the
nature of money. And not only in cryptopunks community, but in such a huge
powerhouses as IMF as well.

