“Overall the world’s population has bought into digitization, including digital assets and welcomed cryptocurrencies, and governments have set out plans to debut a CBDCs” — Paul Ebeling
In order to launch a central bank digital currency, beyond building the technology, there must be education of The People. You must get them to buy into the new technology. The best technology is useless if nobody is using it, Yes?
And in Ghana, a country where The People were on board, a promising sign preceding the launch of a CBDC, the politicians in charge did the unthinkable, by back dooring them with a tax.
Once the populace was utilizing mobile payment methods, comfortable with the technology and happy with the benefits it brought into their life –the government then decided to tax it. Now, those who were once among the digitized are regressing back to a cash-based economy.
Kofi Brobbey, who owns a store that retails spare parts, told The Guardian that, after being robbed, he began utilizing mobile money more frequently, particularly for fuel purchases saying, “I don’t want to pay with MoMo anymore because I’m going to be taxed on top of the price for the fuel. Does this make sense at all? Where is the digitalization they promised us? We’ve been deceived, and now the reality is dawning on us.”
It is easy to understand the motivation of the government. It is expected to raise an additional $900-M into Ghana’s government coffers, allowing the country to avoid seeking another loan from the IMF. However necessary increasing government revenue is, a tax on digitalization, after spending yrs educating and moving the populace towards digitalization is the incorrect initiative.
Financial technologies are blossoming unlike any time in history. Blockchain technology, including cryptocurrencies and other digital assets, are transforming the way the world interacts with money.
Penalizing The People for adopting these changes will put a country behind, technologically speaking, for decades. The economic cost of such a move is much greater than the advantage of the short-term budget remedy.
US Treasury Secretary ‘Schoolmarm’ Yellen said last Thursday crypto asset regulations should support responsible innovation while managing risks, sticking to the contours of a recent White House executive order that was well-received by the crypto market.
“Our regulatory frameworks should be designed to support responsible innovation while managing risks – especially those that could disrupt the financial system and economy,” Ms. Yellen said.
“As banks and other traditional financial firms become more involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities,” she said.
Crypto regulation remains patchy and regulators are still figuring out the best way to oversee trading platforms and crypto services provided by banks, such as digital asset custody.
The Depository Trust & Clearing Corporation (DTCC) has commenced testing how a central bank digital currency (CBDC) might operate in its US clearing and settlement infrastructure using distributed ledger technology (DLT).
Project Lithium will measure the benefits of a CBDC and inform the future design of the firm’s clearing and settlement offerings. It will also explore how a CBDC could enable atomic settlement, a conditional settlement that occurs if delivery and payment are both received at the same time.
Meanwhile, the Fed has issued a discussion paper on the potential introduction of a US CBDC, and has called for industry and public feedback on the topic.
Have a prosperous day, Keep the Faith!