India to make its digital currency programmable The Reserve Bank of India (RBI) announced on Thursday it would make its digital currency programmable, and ensure it can be exchanged when citizens are offline. The country's current CBDC retail pilot launched in late 2022. It already enables both person-to-person and person-to-merchant transactions. Apparently, that's going …
Programmable, traceable currency grants a level of control over people's lives that I don't think has ever been achieved across a whole nation in history. That's not to say bad things will definitely happen if it's adopted by a given nation, it just gives government the opportunity.
I expect, if the time comes, people will be told that normal currency is only really used by criminals and to please think of the children.
It's not mentioned in that release but the RBI did mention it in a 2022 concept note:
https://rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage&ID=1218
It can also have other implications for monetary policy transmission as tokens may have an expiry date, by which they would need to be spent, thus ensuring consumption.
I think, with universal adoption (a long way off, even in the most controlling countries) it would become hard to run a black market because, at any sort of scale, they're still run on fiat cash. I acknowledge that people could barter but that would rely on a black market producer or high levels of sustainable theft. This may be a black swan theory but it seems fairly trivial with a CBDC for a government to identify people exchanging their limited tokens for non-limited ones. Perhaps someone else will issue their own currency but that seems like a lot of trust to place in your black market merchant.
Perhaps CBDCs will never fully supplant cash but, if they did, I can see it making black markets (outside of local barter) extremely difficult.
I mean, Aadhaar leaks like a sieve and the Unified Payments Interface is used for money laundering...
A sieve ? Is that a unit of measurement ? How much are you talking ? 10% ? 20% ?
The listed article is about a get rich quick scheme depending on social engineering people into using fake apps to disclose their personal data. It states that an enormous $44,000 was bilked. Over two months involving 30,000 victims, i.e an average of under $1.50 - about the cost of a meal from a push cart, not even a sit down restaurant.
The official UPI data is at https://www.npci.org.in/what-we-do/upi/product-statistics.
UPI does about $2,500,000,000,000 - 2.5 trillion dollars - in annual turnover. Up from 1,4 trillion a year ago. Over two months, it now averages about $450 billion, or $450,000,000,000 .
The listed crime is 0.00001% of the UPI turnover during that period. If I had a sieve like that, I'd consider getting another.
The scary bit is not that CBDC can be programmed or earmarked to be used for a specific purpose. That will only hamper its adoption. The scary bit is, that even when the CBDC was not created with that programmability, it can easily be bolted-on later.
This is something to keep in mind when you read the EU draft regulation; "The CBDC “shall not be programmable,” the text added, following concerns that giving the ability to control how given funds are used could limit the freely usable nature of fiat currency. Basically, it means for the time being, the CBDC will not be programmable.
The EU one is built on Ethereum so you know straight away that that "regulation" is a lie. It's programmable from the outset.
The draft regs are clearly intended to mislead people.
Also note that every presentation I've seen (same for each of the EU, UK, & US teams, incidentally) has said almost nothing about currency aspects; instead going on at great length and excitement about its programmability. This is explained via detailed examples showing the level of control/permissions over money, transactions, savings, & hence people you get as a result.
Offline-exchangeable - thumbs-up, very good feature
Programmable - big thumbs-down. In the worst-case scenario it's full Black Mirror, the government can disable anyone's money at a whim. But even at the most benign interpretation, which is for example that the government can only do this to a limited number of issued tokens, which are limited to buying basic foodstuffs but not luxuries.... the intent is that patronising idea that poor people receiving government handouts are stupid and/or lazy and can't be trusted with cash handouts in case they might occasionally buy (shock, horror) a pack of cigarettes or a bottle of wine. This type of restriction anyway won't work, if someone really wants to buy other stuff than designated they can always barter designated stuff for non-designated stuff (clearly at a loss and to the benefit of criminal sharks willing to facilitate that trade). In fact the only method of making sure government handouts are not squandered that has reliably been proven to work is to give control (or at least joint control) of family finances to the mother rather than the father.
In any case even the lightest entry into programmability is a slippery slope to ever more restrictions on how the e-cash can work
The potential for controlling individual usage is real. And concerning.
But were I the government, a more immediate concern would be that ANY "zero-day" flaw in the implementation opens one to the possibility of an adversary expiring some large fraction of the money in circulation and shutting down my economy.
" the possibility of an adversary expiring some large fraction of the money in circulation and shutting down my economy."
Presumably having previously siphoned off a large chunk of e-money and used it to buy vast amounts of tangible goods just prior to triggering the expiry
Currency and data have been moving to digital. Moving from something you have, to something you access.
Your access is not a right, or guaranteed, and is controlled by people in power. People in power like to have power, which means less for others.
This is the control.
Obey or your limited access is removed.
Ohhh your ID/account has been taken over - prove it, without access. I'm sorry, I can't hear you, you don't have access to complain.
P may be largely in the electronic domain but C and A have plenty of analogous concerns in non digital money, and are subject to manual speeds.
Let's talk scaling here with respect to what's been achieved in the M0 domain to set a baseline: https://www.npci.org.in/what-we-do/upi/product-statistics
UPI had its first full year in 2017. It now has annual turnover of:
2023: $2.5 trillion from 120 billion transactions
2022: $1.4 trillion from 75 billion transactions
2021: $880 billion from 40 billion transactions
2020: $420 billion from 19 billion transactions
2019: $220 billion from !0 billion transactions
That's a near doubling YoY that's been going on several years now. Mainly driven by the ~750 million smartphone users in India.
UPI already accounts for a substantial share of RBI M0 data, and turnover will exceed the dollar GDP ($4 trillion) in perhaps 2-3 years. Of course that's normal of M0 but it's a measure of scale of digital payments.
Indian and Chinese central banks deal with mature systems operating at volume and value scale not seen anywhere else on the planet. They already have experience dealing with TD atomicity and instantaniety . Bank issued stablecoin is an incremental problem for them, and they've a prior record of building and scaling pilot designs.
No, P has be a core problem for the physical banking system since the Knights Templar. That's how people scam banks.
And seriously, read up on the duality between databases & the list of transactions. And observer that this correlates EXACTLY with the blockchain and the persistent state derived from it. Then understand the CAP theorem.
THIS. CANNOT. SCALE.
This level of control over peoples' cash is Orwellian. They can decide what you can buy and who/where you can buy it from. Your nation becomes a prison, you can't function abroad or pay for anything to import it. You can only own government sanctioned things from government sanctioned suppliers. You can see why governments want to take control of tech. Corporates can only make money with it. Governments can take complete control over every aspect of their citizens' lives with it.
I keep saying that India will be the next China, and this is yet more proof. I'm sure the Chinese are working on this too. Western governments will loftily condemn it, and then do it themselves by the back door.
This is why we need to keep physical cash circulating and keep using it.
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