CBDC Report You HAVE To See! The Tables Are Turning

As governments around the world rush to Roll out their Central Bank digital Currencies or cbdcs their dystopian Characteristics are causing many Individuals and institutions to push Back now believe it or not but some of The pushback against cbdc's has come From governments themselves their Primary concern is that cbdcs could Destabilize the entire Financial system And cause it to collapse so today I'm Going to summarize a recent study from The U.S government which warns of such An outcome I'll explain what it says in Simple terms and tell you why the real Target of the report could be crypto The study I'll be summarizing today is Titled quote digital currency and Banking sector stability it was written By the office of financial research or Ofr and it was published on the 22nd of March I'll leave a link to the full Study in the description if you're Interested but I will caution that it's Quite technical now before I unpack the Study I want to give you a bit of Background about the organization that Put it together the ofr's purpose is Threefold to collect and standardize Economic data to perform research using This data and to provide regulatory Recommendations based on This research The ofr reports to the U.S department of The treasury which basically manages the

Money of the US government to be exact The director of the ofr reports to the Treasury secretary right now that's Janet Yellen who is also the head of the Financial stability oversight Council or Fsoc for context the fsoc is a Government agency consisting of members From the Main Financial Regulators in The U.S The fsoc and the ofr were created by the Dodd-Frank Act which was introduced Following the 2008 financial crisis and Seems to have laid the groundwork for The current crypto Crackdown if you Watched our first video about fed Vice Chair Michael Barr you'll know that he Was one of the architects of Dodd-Frank And happens to be extremely anti-crypto You'll also know that Dodd-Frank created The position of fed Vice chair for Supervision the one which Michael now Coincidentally holds If you watched our more recent video About Michael Barr you'll know that he Also appears to be one of the architects Of the ongoing crypto Crackdown in the USA you'll also know that the fsoc has Been actively discussing the Cryptocurrency Crackdown in recent weeks And it seems that the ofr is involved Now the director of the ofr is currently James Martin in the November 2022 speech James specified that one of the ofr's Focuses under his leadership would be

The financial stability risks posed by Cryptocurrency as such it's safe to Assume that the ofr is involved in the USA's ongoing crypto Crackdown it's also Safe to assume that the purpose of this Crypto Crackdown is to get rid of any Crypto companies and projects which Compete with the feds fed now payment System Fed now seems to be the first step Towards a full-blown digital dollar and It will be launched in July Now last July the ofr published a study Which found that a cbdc would add Stability to the U.S banking sector this Is why it's strange that the ofr Recently published this study claiming That cbdcs could destabilize the U.S Banking sector it's literally the exact Opposite finding of their initial study As always though the devil is in the Detail the first study specified that it Was about cbdc's whereas the second Study specifies that it's about digital Currencies including cryptocurrency as You'll soon see it seems the ofr is Arguing that the ability for people to Opt out of banking using crypto is a Risk Now the study begins with a brief Introduction wherein the authors admit That digital currencies could become an Alternative to physical currencies they Highlight the fact that digital currency

Developments are taking place both in The private sector AKA crypto and in the Public sector AKA central banks They acknowledge that the stable coins Being built by crypto are not always That stable and that the cbdc is being Developed by central banks can increase The risk of Bank runs they note that the Study will focus on the possibility that Both types of digital currencies will Integrate fully with the financial System For the purposes of the study the Authors assume that these digital Currencies will compete with bank Deposits and if you watched our recent Video about the banking crisis you'll Know that Banks make money by investing Deposits in other assets and they can be Temporarily insolvent when the value of These assets go down naturally the Authors are concerned that the ability For depositors to quickly withdraw their Money as a cbdc or stablecoin could lead To financial instability as banks are Forced to sell assets at a loss to honor Withdrawals newsflash this is basically The cause of the current banking crisis In the United States what's interesting Is that the authors predict that this Outflow of deposits could be beneficial To asset prices this makes sense given That many of the outflows from banks That we've seen so far have been

Invested into U.S government debt AKA U.S bonds and some have been invested Into alternative assets like gold and Crypto what's fascinating is that the Authors also predict that the benefits Of digital currencies to households Could outweigh the financial stability Risks obviously they imply that this Only applies when the digital currency In question was issued by the government And specified that stable coins should Be restricted The authors then give an overview of Existing literature about the subject They revealed that all existing research About digital currencies focuses on how They could impact the financial system During good times and bad times They believe that this study is the First to examine the effects of a full Integration Now when it comes to their mathematical Model I must admit that most of it flew Over my head but there are a few parts That stood out to me for starters the Model assumes that cbdcs and Cryptocurrencies are equivalent not Surprisingly the model focuses on stable Coins that are backed by U.S bonds for Those who don't know most of the stable Coins in circulation are backed by U.S Bonds this means that when you buy a Stablecoin you're effectively Subsidizing the US government spending

Meanwhile the stablecoin issuers make Mad money from the interest rates on Their reserves this is why it's Surprising that the model does not Assume that stablecoins will earn Interest but does assume that cbdcs will Earn interest the model also assumes That each cbdc transaction will not be Automatically taxed which is something That governments have discussed Extensively in their research The model even makes some assumptions About how households invest their money But that maths is way above my pay grade I must admit Following many more complex mathematical Models and even more complex calibration The authors finally break down the Results they analyzed what would happen If the supply of digital currency in the Economy increased from 18 to 26 percent For regular reasons no crisis no Black Swan Etc The authors found that this small Increase in digital currency Supply Would make the financial system less Stable and therefore increase the Probability of a financial crisis it Would also cause the value of Bank Stocks to fall which makes sense given That Banks make money from investing Customer deposits The authors also found that this small Increase in digital currency Supply

Would provide a slight benefit to Households this is due to the Aforementioned increase in asset prices That would result from such digital Currency issuance and also lower levels Of asset price volatility due to all the Extra liquidity The authors then showcase the risks to The financial system and benefits to Households using two graphs as you can See keeping the supply of digital Currency close to 18 would minimize Risks and maximize benefits This ties into the next section about The optimal level of digital currency Supply as hinted by the graphs the less Digital currency there is in circulation The lower the risks are to financial Stability Conversely the higher the digital Currency there is in circulation the More benefits there are to households What's annoying is that the authors Don't say what the ideal percentage is They explain that this is because it's Not up to them to balance the risks and Benefits of digital currencies that's Presumably up to politicians however They do make an epic assertion cbdcs are A bigger threat to financial stability Than stable coins this is the opposite Of what you tend to hear these days they Explain that this is because cbdc's are More analogous to bank deposits than

Stable coins this makes sense when you Remember that the model assumed that Cbdcs would earn interest whereas stable Coins would not holding a cbdc would be The logical choice if that ends up being The case the thing is that existing Literature about cbdc's well at least Not the Central Bank reports we've Summarized does not assume that they Will earn interest in fact this Literature suggests that cbdcs will Actively lose value due to the taxes Included in every transaction you'll Recall the authors referred to this What's crazy is that even though cbdcs Don't earn interest are taxed on every Transaction and are unlikely to be Adopted research still suggests that They will pose a threat to financial Stability this is because Central Bankers seem to be under the impression That everyone will see cbdc's as the Safest asset ever what's funny is that Projections by the bank for International settlements or bis the Literal bank for central banks suggests That only between 4 and 12 percent of People will voluntarily adopt cbdcs You'll know this if you watched our First video about cbdc's that will be Down in the description it's a really Good watch even if I do say so myself Anyways the Assumption by the authors That cbdcs will pose significant

Financial stability risks seems to be a Way to justify limiting the supply of Stable coins this is because they State Quote optimal regulation would limit the Supply of digital currencies when the Only risk is coming from cbdc's Now this relates to the conclusion of The study wherein the authors spell it Out plain and simple If digital currency truly becomes a part Of the economy it will benefit Households by a whopping three percent And double the risk to the financial System by an equally whopping six Percent up from the three percent Baseline rookie numbers Jokes Aside the authors also highlight The scapegoat they created in the Discussion quote digital currency Whether privately or publicly issued is Likely to be detrimental to financial Stability and bank valuations can be Significantly harmed despite these harms Coming from cbdc's as per their own Admission so this brings me to the big Question and that's what this study Means for cryptocurrency in contrast to The stated conclusion the study suggests That stable coins are a preferable Alternative to cbdcs that said neither Of the two are preferable if you want Financial Freedom in a digital currency System I've said it before and I'll say It again the true definition of

Financial Freedom is the ability to Transact when you want with whoever you Want and for however much you want this Kind of Financial Freedom doesn't seem All that important but it will be when Stable coins and cbdcs become more Common that's because stable coins and Cbdcs are both centrally controlled this Means that the issuers of these digital Currencies will have the final say on All of your transactions be they stable Coin issuers or central banks in other Words it's ultimately the issuers of These digital currencies that own them Not you we've already seen a few stories About stablecoin issuers freezing tokens Associated with illicit activity Although I haven't seen any stories About central banks doing the same with Cbdc's their own documentation states That they will have this ability and Will use it whenever they feel it's Justified If you watched our recent video about a Speech given by fed Vice chair Michael Barr you'll know that one of the only Differences between stablecoins and Cbdcs is that stable coins will provide Slightly more privacy protection this is Because governments will need legal Permission to access stablecoin data Beside the fact that most governments Will spy on stablecoin transactions Regardless most stable coins exist on

Publicly viewable cryptocurrency Blockchains This means that anyone will be able to See every transaction and the mandatory Kyc at exchanges means it's easier to Connect crypto wallets to identities On that note another one of the only Differences between stable coins and Cbdcs is that a digital ID is required For cbdcs to work this is why Governments around the world are so Focused on rolling out digital IDs well They're about to find out that the Voluntary adoption of digital ID isn't Very high either even so there's nothing Stopping governments from requiring all Stablecoin issuers to conduct kyc on all Cryptocurrency wallets holding their Tokens it's quite possible that this Requirement is coming and some stable Coin issuers such a circle have gone Ahead and created their own digital IDs To this end so what's the solution then Well easy answer actual cryptocurrencies That is digital currencies that are Truly decentralized from top to bottom Now the list of cryptocurrencies which Meet this Criterion is very short and None of them could be called a currency Per se their prices are way too volatile The good news is that this price Volatility means you'll never see a Government entity publishing a study About how the circulation of these

Cryptocurrencies needs to be limited Because they compete with bank deposits The bad news is that this price Volatility means they can't be used as Currencies so what's needed then is a Truly decentralized stable coin that can Be used as a currency while there have Been many attempts to develop such a Currency so far they have all collapsed Proponents of cbdc's and centralized Stable coins alike have capitalized on These collapses to deter further Development the Silver Lining is that This isn't going to stop crypto Companies and crypto projects from Trying to develop a truly decentralized Stablecoin of some kind if Done Right The profits will be unprecedented this Massive incentive will dare developers To try again and again regardless of the Risks and the regulations with some luck We will see a truly decentralized Stablecoin developed before it's truly Too late And that is all for today's video folks So if you enjoyed it smash that like Button to make sure you don't miss the Next one subscribe to the channel and Ping that notification Bell and feel Free to share this video with others in The crypto Community as well the first Step to solving any problem is to be Informed after all and if you've been Considering copying some crypto apparel

Getting your hands on a hardware wallet Or creating an account on one of the top Cryptocurrency exchanges well then check Out our deals page in the description Below we've got dozens of discounts and Thousands of dollars of incentives for You with all that said thank you for Watching and I'll see you in the next One this is guy over and out [Music]