You think you had a difficult Christmas?

The central banks of the world must be having kittens right now.  They’ve been careful crafting their plans to launch a Central Bank Digital Currency (CBDC), and the markets have had other ideas.  You may have noticed the value of Bitcoin climb from around $20,000 to just under $40,000 as I write.  It’s hard to be exactly precise about the value of a Bitcoin as it jumps by rather large percentages each day.  Of course state operators are never first out the blocks; private banks can move much more quickly – more on that below.

So why are the central banks in danger of having pets? Well there is concern that they are losing control.  Losing control of their money supply given how they are creating vast amounts of reserve savings to help fund the health crisis!  Losing control in that if there is going to be a dominant digital currency then the central banks need a role in this! Losing control in that the use of Cash is on such a rapid decline now that it may well become a marginal method of payment, with the digital payment networks dominating! Losing control in that China’s GDP appears to be growing again, and rather well!

One bank which has stolen a march on pretty much everybody else is JP Morgan.  With their announcement back in September 2020 they launched they own dollar-backed JPM-coin, and as an organization that moves some $6 trillion daily, across 100 countries, they hope to streamline their payments infrastructure between cross-border parties reducing cost, removing a lot of the exceptions processing normally associated with existing interbank payments practice.

I noticed with some interest that even Visa, that traditional card payment network whose image adorns every online check-out you ever saw, plus shop windows if you remember those, yes that Visa is planning a new system to allow people to pay one another without having to use the Visa network, or any other network for that matter.  Visa’s plan is that you would have some chosen wallet on your phone, and using nothing but Bluetooth or NFC would be able to push money to anyone you’re allowed to get close enough too.  They appear to be planning for a post-Covid world where people mix, socialize, attend events, and do all the normal things we’re currently craving.

The details of this new underlying CBDC are slowly coming to the surface, and while they do it’s worth considering that Visa appear to be planning for a world where we settle with one another using a (essentially prepaid) wallet to settle with one another directly just as if we were using physical money, bills or notes.  It’s almost a visa’s view of the world without Visa.

Are their client banks asking for this?  Possibly yes.  There are a myriad of different pressures that have been emerging for some time now.  Banks are desperate to avoid becoming mere utilities in a world of Open Banking.  European Banks are keen to avoid the dominance of the US and Asian card networks, when Europe doesn’t really have any well-known brand to offer.

So 2021 promises to be an interesting year: Bitcoin could come crashing down; the economies of Europe could limp back into action. I just hope it doesn’t end up where it becomes the economy that needs a vaccine.