00:00:00.000In particular, I want to just revisit this idea of central bank digital currency that I was talking about earlier on in the program briefly and also a couple of weeks back because this hasn't gotten a lot of coverage in Canada.
00:00:21.940Part of the reason is because we don't have a firm ironclad proposal, but we do know that the Bank of Canada is proceeding with this.
00:00:28.460They are talking about it, if you read their materials, as though it is inevitable, as though it's just this thing that's going to come.
00:00:34.980We're all mere passengers and they're just going to shepherd us through this transition.
00:00:39.840And if you're someone who, like most people in Canadian society, walks around using your debit and credit card everywhere, you're probably thinking, all right, well, digital currency, what's the big deal?
00:00:48.320Well, electronic banking and digital currency are two very different things.
00:00:53.120And we'll talk about why that is now with Gleb Lysik, who is a phenomenal writer with the C2C Journal.
00:00:59.360We've had him on before about his work there.
00:01:01.480And in particular, he has a great piece out this month, Hush Money, The Untold Dangers and Delusions of Central Bank Digital Currency.
00:01:13.080Hey, nice to, thanks a lot for having me back here.
00:01:16.340So let's talk first off with what Central Bank Digital Currency is, because I do think it's important people not conflate it with online banking and electronic finance, which is a pretty ubiquitous part of the finance system right now.
00:01:30.820The major difference in between CBDC or Central Bank Digital Currency is that it is controlled by the Central Bank, right?
00:01:39.640So the Central Bank has it has a liability to you for that currency.
00:01:47.080It's very similar to cash in that respect.
00:01:50.760So if you have a bank note, you can always go to the Central Bank and say, well, I need something for it.
00:02:01.340And what we have right now is with commercial banks, you have the money, your online banking.
00:02:11.000These money are, they belong to the, they sit with the commercial bank, right?
00:02:17.520And they, they, they don't really, they're not affiliated with the Central Bank for the most part, the Central Bank just offers some insurance that these banks will pay you, let's say cash.
00:02:35.300You can withdraw cash if you have an online banking account.
00:02:37.780So that's, that's the, that's the major difference, the liability, the liability of CBDC, CBDC as with cash lies with the Central Bank, the liability of the digital money we use now lies with the commercial banks.
00:02:54.340One of the things that the government, the Bank of Canada has told us on this is that it will remain available.
00:03:01.280It's not basically outlawing cash, but I've heard some people who don't really buy that.
00:03:08.000I mean, we already see in some ways aspects of a society that's moving beyond cash.
00:03:12.260There are some major retailers that have said they won't take cash in certain venues and COVID was certainly a part of that.
00:03:17.480Do you buy from what you've seen that a Central Bank digital currency would coexist alongside cash or do you think it would really eventually be a replacement?
00:03:27.780That's definitely how it is explained to everybody.
00:03:30.900Well, everybody, it's not widely advertised as to how CBDC exactly is going to behave in Canada, what it's going to do.
00:03:38.880But certainly the way the Central Bank, the government is assuring us is that if CBDC gets introduced, it will not replace cash.
00:03:50.040It will not replace your online banking account or anything.
00:03:53.080It will just be an alternative, a third type of a currency.
00:03:56.740Obviously, if you read my article, you will probably get from it that I have personally.
00:04:29.560If the CBDC gets introduced, then obviously it needs to take its place over something and it's over something is probably going to be cash.
00:04:42.220And we have examples in the world how it's been introduced that I explained in my article what happened in Nigeria, for example, where they went live with the CBDC under the same promise that CBDC is not going to replace cash.
00:04:56.820And as soon as the CBDC, well, not as soon as a year after from the introduction of CBDC, they just cancel cash there.
00:05:03.980And half of the population in Nigeria relies on cash and they canceled it.
00:05:35.520And right now I don't see any reason other than replacing something which is probably going to be cash.
00:05:40.740I want to talk about the Nigeria case in just a moment.
00:05:43.680But before we get there, Gleb, I wanted to ask you about the offline aspect.
00:05:48.360I've mentioned when this topic has come up on the show in the past.
00:05:50.920We have a very real and very recent example of what happens when our telecom infrastructure is just hampered instantly, which is when the Rogers outage happened.
00:06:00.500I think it was about a year and a half ago or 15 months or so ago.
00:06:04.760And you had retailers who were entirely reliant on Rogers to run their debit and credit card terminals that couldn't do transactions.
00:06:11.680If people didn't have cash, they were up the creek without a paddle.
00:06:15.440And, you know, the central banks that are pushing CBDC kind of claim that they can find a way around this.
00:06:22.660But really there has been no solution proposed for what happens in a situation in which, for whatever reason, people cannot use an electronic device, in which case you have power outages or whatnot.
00:06:33.640But they kind of avoid that that's a big, giant, glaring problem in this.
00:06:41.320It's pretty obvious to me, it should be for anybody, that if you want to do an electronic transaction between two parties, a seller and a buyer, at least one device needs to have power, right?
00:06:59.300I mean, they are transmitting electromagnetic waves to exchange the information, so you must have power.
00:07:53.640How much cash you can exchange sort of in that semi-offline mode with the other party?
00:07:59.560Yeah, it's a bit convoluted, but again, cash is such a simple solution to all of that problems that CBDC brings up when we start talking about offline operations and stuff.
00:08:11.560So I'm not sure if I'm answering questions.
00:08:15.040Well, you are, and I said I wanted to go back to Nigeria because Nigeria had this pilot project originally, and it had very, very little uptake.
00:08:24.360And this is a, you know, very large country.
00:08:26.420Half of them are, as you say, reliant on cash.
00:08:28.780They did this, and I think it was 0.8% of people started using this, and then they expanded it.
00:08:34.580Yeah, so the way it started in Nigeria is that they introduced CBDC in 2021, and just for the people who already had bank accounts, just to see what the uptake is going to be, I guess.
00:08:51.800And they only, they didn't really see much of an adoption of CBDC.
00:09:00.260Only 0.8% of that banked population downloaded the wallets, and they weren't using them at all.
00:09:09.740I guess some curious people just downloaded a new free application to their phone and didn't really know what to do about it.
00:09:18.120And that's pretty much was the level of adoption, so not much that.
00:09:23.220And a year later, the government, seeing those results, maybe they didn't want to take that as a voting choice of the constituents.
00:09:38.400They just decided to double down, and they just canceled cash and requested everybody, including those who did not have accounts with banks.
00:09:50.680They just wanted them to bring their paper money to the bank offices and exchange that for the digital currency.
00:09:59.320So that was a great failure, and people were literally starving there because they ended up with the paper money that was worthless, that would not be accepted anywhere.
00:10:10.080So, and up until this moment, Nigerians don't understand what's going on.
00:10:16.940They don't understand the value that CBDC offers.
00:10:20.640The adoption is happening, but that's only because of the artificial cash shortages.
00:10:29.020People just don't have any other choice.
00:10:32.000Well, you mentioned in your essay here, the advisors from the World Economic Forum and the International Monetary Fund.
00:10:39.300I mean, were they pushing this on Nigeria as just a massive experiment, or was this the Nigerian government that wanted to do this and then asked for some external advice?
00:10:49.220Or do we not know kind of who the initiator was?
00:10:52.320Yeah, yeah, they definitely had the advisors and consultants from the IMF and the World Economic Forum.
00:10:59.740I would probably put more emphasis on the IMF.
00:11:21.420And I just don't understand why, because actually, if we look at the World Economic Forum, they have a pretty decent framework for introducing CBDC.
00:11:32.380They give you a very balanced approach to what are the cons and pros of CBDC and what are the risks of etc.
00:11:40.960So I was actually quite surprised at how I'm biased that that framework was.
00:11:45.920But if in Nigeria case, it just didn't work, right, for some reason, if they followed through that very same framework, they would have said,
00:11:58.800No, guys, sir, you should stop immediately.
00:12:02.020Like, there's no way it's going to work, right?
00:12:04.680Instead, they just pushed it through onto the starving people.