CBDCs Could Give Central Banks Greater Power
Jake Yocom-Piatt, Co-Founder of Decred (DCR), claims that the development of CBDCs will result in tremendous growth in patronage or capitalist cronyism.
The downside of CBDCs
Jake Yocom-Piatt, Co-Founder of Decred (DCR), claims that the development of CBDCs will result in tremendous growth in patronage or capitalist cronyism. The rationale for their claim is that central banks, with control of their own CBDCs, will not need intermediaries and this will allow favoritism to be created within the ecosystem.
According to Yacom-Piatt, the CBDC issue would create a greater lack of transparency compared to the current monetary system, and he believes that governments could take advantage of it: "If a central bank really wanted to do this, the amount of opacity they can create for themselves and, at the same time, extracting the privacy of everyone else is ridiculous, so they could literally do whatever they want". Yocom-Piatt explains that the current banking system is configured in such a way that central banks are unable to grant direct loans to a company or industry since they first have to make a loan to a commercial bank that will then be responsible for making the loan to companies or industries that request it. And he adds: “So, this is a process that is at least nominally responsible in the sense that you can see how much credit the central bank gives to a commercial bank. And if they were lying about it, it would be like a massive scandal."
** Earlier this month, a group of independent experts from central banking and economic policy participating in the Official Forum of Monetary and Financial Institutions (OMFIF) announced the launch of its Digital Monetary Institute.
CBDCs could give excessive power to central banks and, as history has taught us, great power concentrated in a few people always ends up creating big problems. Yacom-Piatt explains what his concern is: “They could launch CBDCs and then, well, you know what, start giving credits to people they like in specific industries who think they need credit. So it could make the problem much worse with central banks by increasing opacity."