The Ultimate Reason Why Cryptocurrency Will Prevail Over Central Bank Digital Currencies

We keep getting articles of how CBDCs will take over and governments will simply outlaw cryptocurrency. This seems like a sensible path of how things could unfold if that is how money actually worked. Understanding this basic concept reveals why, as stated for a while now, I believe CBDCs will be an epic failure.

There is a lot of misunderstanding about money. This is something that causes people to believe in nonsense. A great deal of what is put out is out of ignorance. There is, however, a portion that is designed to intentionally mislead.

In this article we will clarify a few points. This should help in the understanding of what is likely to take place. We will also see why a CBDC future is a pipedream of the power hungry politicians and bureaucrats.

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The Myth of Government Money

This is probable the biggest myth out there. How many times have you heard people refer to fiat currency as "government money"? This is not correct in most instances.

Most of the currencies in the world, including all the majors operate under fractions reserve banking. This means that governments do not control the money. Under the central bank system, the responsibility of the legal tender, i.e. the currency, is under that jurisdiction.

Sadly, even those who follow to this point fall short. There was a change over the last half century. The central bank only handles banknotes (and coins in partnership with the mint). When we switched to a digital world, the central banks were left behind.

Hence, the money supply is basically in the hands of the commercial banks. Thus, the idea of government money is even less true than before.

What Money Exists

Money was not created by governments. In fact, throughout its history, it was always in the hands of the private sector.

When we moved past the barter phase, money was the solution. The creation of a medium of exchange was not done for taxes, government spending, or to buy votes. Rather, it was so that merchants could trade.

Money is the tool for trade. Without money, little trade takes place. Who controls trade? The answer might depend upon your outlook but, for the most part, this is in the hands of the private sector.

Thus, money was made for and is driven by the private sector, i.e. businesses.

Own Self Interest

Companies are going to operate in their own self-interest. This point is pretty obvious.

This is true when it comes to money. They are going to select the money that provides the greatest liquidity, least friction, and has the best distribution.

The idea of a top down push for money might make sense if you believe government controls this. However, what happens if the business community rejects it in favor of something else?

This is where the failure of CBDCs is almost guaranteed.

International Trade

The economy is global. This is something that took place post-World War 2.

Outside the U.S. dollar, there are no international currencies. The euro is the closest, being regional. That leaves everything else being national.

There is something interest with the dollar. It actually is not the global currency. Instead, it is actually the eurodollar, which is the basis for a system set up by the banks and other financial institutions. This was outside the governments and central banks.

Why was this done? To meet demand.

The banks were not going to allow a demand for money to go unmet. Since the system was not catering to them, the banks took it upon themselves.

There is no way to forecast what the economy will need. This is why the concept of a centralized institution, whether it is a central bank, monarchy, or mint, can know how much will be needed is absurd.

Not Conducive To Business

It appears that central bank digital currencies will not be conducive to business. If the reports are true about how retail CBDCs will be structured, this is dead on arrival.

The reason I make this claim is because of the fact that businesses are simply not going to use something that harms this. This is really emphasized when we get on the global stage.

There is no way a Japanese company is going to accept a currency from a company that the Chinese government has full control over. It simply will not happen. This is the case for a smart parts manufacturer or Toyota.

Neither is going to have any holdings in that currency and put it at risk of the government suddenly erasing the balance.

Cryptocurrency Only Grows Stronger

We are seeing the emergence of the "centralized cryptocurrency" world. This is where the corporations, such as PayPal, start to enter the game. While this is obviously not in keeping with the tenets of Satoshi Nakamoto, and it is under the control of one company, we do see how it adds a monkey wrench to the equation.

PayPal is not going to be the last entity to travel down this path. We can expect a lot of others to follow. Are governments going to be able to stop that especially if it starts occurring in many different countries at the same time?

Obviously not.

Is something like PYUSD a game changer? In my view, no. However, it is another layer that adds protection to those projects that will end up being the difference makers. Maxine Waters is already questioning the move by PayPal. While she is looking at that, her focus is not upon the stuff that will make the impact.

What is overlooked by many is the fact that monetary systems are not like computer networks. That is a major component. What we are dealing with is technical as much as monetary. Most focus upon the later overlooking the former. This is a mistake.

Money is a technology that evolves. Innovation is not going to come from central banks or even Fortune 1000 companies. Instead, it will emerge out of the bedrooms of coders who come up with some insights and build an application tied to it. These are the ideas that spread.

Each day, cryptocurrency expands. The horse is already out of the barn and is not going back in.

It is also designed to favor businesses and merchants that use them. That is why it will prevail over CBDCs.

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