When CBDC Arrives, What Will it Take for You to Use it?

In a world of increasing consumer payment choices, what will a Digital Dollar have to offer?

7 min readDec 13, 2020

Photo by Marcin Kempa on Unsplash

CBDC’s are arriving, one country at a time

Speaking of trust, there was a survey released by Genesis Mining in September 2020 about the perception and understanding of money in the US, which tells us that compared to Congress, people apparently trust banks much more (about 89% vs 11%), which really says something, after multiple financial crises.

The survey also tells us that while many acknowledge we’re unlikely to be using physical cash a hundred years from now, at the moment people aren’t crazy about the possibility of cash being straight-up replaced by CBDC.

Although a CBDC would reportedly be released “alongside” our current money as another payment option for consumers, we simply don’t know the long-term future of physical cash. For now though, CBDC’s are coming, possibly sooner than later. Today, about 80% of the world’s central banks are in some stage of development of their CBDC, with some obviously further along than others.

A better deal?

When the US Digital Dollar (CBDC) arrives, what does one more payment choice — on top of credit and debit cards, PayPal, Square Cash, Apple Pay and others mean? What will entice you, the consumer, to actually use it for daily transactions? Or at all?

One thing is for certain, the Federal Reserve will absolutely need buy-in from us — without widespread adoption by consumers, the whole project could potentially face failure (assuming it remains voluntary to use).

What if the Fed offers you an account with no monthly “maintenance” fee?

“So what? My bank already offers that.”

Fair enough. How about instant money transfers for free? Well, Zelle and some others offer that as well.

Ah, but what interest rate does your bank pay you on checking or savings? 0.00%–0.01%? There are few things less disheartening than getting paid six cents on a few thousand dollars. What if the Fed offered you 1.0%, or even 2–3.0% — would that be enough to cause you to change your daily behavior?

You don’t want to get used to a new system, but what if they make it a super-smooth transition that works just like the bank account you have now?

What if they offer you a discount — but only if you pay using CBDC?

What if we need more economic stimulus in the future, but the only way to get it is to use the Fed’s digital wallet banking app?

“Okay, I’ll bite.”

“After all, I could always convert the CBDC into regular dollars if I don’t want to worry about the government snooping through my transactions.”

Well, you could probably do that — at least at first. They’re going to want to make CBDC as attractive as possible for you to use it, so we’ll likely see some nice bells and whistles at the outset.

Let me ask you a couple more questions though…

Have you ever tried to pay for lunch at Chipotle with a Chick-fil-A gift card? You probably haven’t because that would be weird — and it likely wouldn’t work.

Do you know anyone that receives food stamps from the EBT/SNAP benefits program? Ask them what happens if they try to buy a bottle of wine, some cold medicine, or a hot rotisserie chicken from the deli at the grocery store. They’ll tell you that you can’t.

The purchase simply doesn’t go through. All purchases have a unique code — and if it’s not on the list, it ain’t goin’ through.

Programmable

This begins to introduce the concept of programming into a money system. It is important to understand that CBDC will be programmable, not unlike “Smart Contracts” on Ethereum. But try not to let Orwell take over your imagination just yet.

While programmable money opens up a whole world of possibilities, and allows the Fed an increased ability to affect monetary policy, we must consider what it means for us, the consumers.

What if instead of a discount for using CBDC, it starts to cost you more to use today’s dollars? Like a tax on cash?

What happens when your gift cards expire? Can money also be programmed to expire?

Perish the thought! But yes — it is possible for funds in CBDC to have an expiry date, though I assume that would not be very palatable in our present economic situation. I’ll be covering this programmable aspect of CBDC’s in much more detail in my next article.

Bigger than consumers

Earlier, I mentioned the Fed will need our buy-in, but this is much bigger than individual consumers adopting CBDC as a payment method.

Introducing a CBDC is nothing short of a significant change in the global financial system as a whole — which is moving into the 21st-
century with or without America. After all, the US Dollar is used worldwide for trade and even tourism.

With the rise of Fintech companies, cryptocurrency, and now Central Bank Digital Currency, modernization is starting to move at a breakneck pace. We really don’t have a choice at this point — with China releasing its CBDC, being the second largest economy in the world, and also in a trade war with the US, the idea that China could easily evade US sanctions, while its new CBDC starts to proliferate globally is far too much of a threat for America to take a back seat. We won’t be in the lead, but we must get in the race.

US Senator Tom Cotton (R-Ark) said it like this in July’s Senate Banking Committee Hearing:

“The U.S. needs a digital dollar” and “The U.S. dollar has to keep earning that place in the global payments system. It has to be better than bitcoin… it has to be better than a digital yuan.”

It may sound far-fetched, but when multiple developed countries with large economies all begin using their own CBDC’s between one another for trade, the US effectively loses control over sanctions and the Petrodollar, and we lose much of our ability to police the global financial system.

CBDC’s are coming, like it or not. Let’s just hope consumers get a good deal, and that cash and anonymity stick around for a little while longer.

To read more about CBDC, and the many changes happening in our global financial system, follow me and check out:

What is a CBDC and Why Should I Care?
A Primer with FAQ’s on the coming Central Bank Digital Currencymedium.com

Are You Ready for Your New Bank Account?
The Digital Dollar is coming sooner than you think. What will this mean for you?medium.com

Do People Not Understand What Regulating Crypto Will Mean?
You will lose anonymity — full stop.medium.com