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"What sort of credit is fiat money? There are many different kinds of credit instruments, from bonds to deposits to banknotes, each with its own unique features. To see where central bank money fits, I've made a chart that illustrates how credit instruments differ across three different criteria (click to expand)."

"Let governments issue CBDC and compete for the attention of the fixed-price floating-rate investor, just like they already compete for the attention of the 30-year bond investor. This would remove an inefficient distortion, namely a subsidy to banks and a penalty on non-banks."

Although the U.S. dollar is the world's reserve currency, the U.S.'s ability to apply strong and effective sanctions has very little to do with the U.S. dollar itself.

"How long will regulators allow pseudonymous usage of stablecoins to continue? FATF regulations are supposed to be technology-neutral. So far FATF hasn't had much to say on stablecoins. But you can be sure that something is in the works, and it isn't likely to be good for stablecoin operators. The problem is that granting permissioned-pseudonymity to stablecoin operators contradict technology-neutrality. It sets one set of standards for bank accounts and another for stablecoins."

The PBOC's imminent CBDC is going to have a feature called controllable anonymity. None of the news articles have made much of an effort to explain What that means. But we've actually known about this feature for quite some time. Back in 2018, the project's head, Yao Qian, provided a short description of it. It's not as Orwellian as it seems.

Valve, a game maker, has put an end to trade in various in-game items because "worldwide fraud networks" had been using these items to "liquidate" their gains. JP Koning explains hos this works.

Paying for things online usually means giving up plenty of privacy. But this needn't always be the case. Last night I donated to a local charity via their website and didn't have to give up any of my personal information. The trick for achieving a degree of online payments anonymity? Not bitcoin, Zcash, or Monero. I used a product created by old fashioned bankers: a non-reloadable prepaid debit card.

In sum, the case for bitcoin as a sanctions buster is not clear-cut. Genuine evil leaders probably should be sanctioned, the less ways to short-circuit the blockade the better. And given the way that U.S. sanctions are structured, bitcoin may not provide much help anyways.

There are good reasons not to implement a gains/losses tax on betting games like roulette, poker, or cryptocurrency. Interestingly, a decision to avoid taxing cryptocurrency gains may actually help promote their usage as monetary instruments. Calculating how much tax one owes after each purchase made with cryptocurrency is a pain. Remove that headache and people may be more willing to spend them.

Concerns over the unbanked, fintech, and a government participation in the payment system were all present back in England in the 1880s.

Circle, an issuer of stablecoin USDC, belatedly announced that it had partnered with the opposition Guaidó government to deliver financial aid to Venezuelan health care workers. Circle says it helped to get million of dollars to Venezuelans by leveraging "the power of USDC...to bypass the controls imposed by Maduro over the domestic financial system, and stablecoins have now become a tool of US foreign policy. But if you pick through the transaction chain carefully, USDC's role was trivial and that leg of the transaction could have been done via Fedwire, the Federal Reserve's large value payment system.

JP Koning discusses the idea of paying interest on cash, and explores three ways of doing this. The first way is to use stamping, but this means that banknotes are no longer fungible. The second way is for the central bank to sever the traditional 1:1 peg between deposit money and cash, and have cash slowly appreciate in value relative to deposits, but this imposes a calculational burden on merchants and users. Plus there may be taxation issues. The third way is to run lotteries based on banknote serial numbers, an idea proposed by Hu McCulloch and Charles Goodhart back in 1986, but it introduces the threat of bank runs (the day before the big lottery is set to occur, everyone will withdraw deposits for cash so that they can compete in the draw). JP also discusses Gesell's "shrinking money" which has recently been proposed in a Celo C-Lab paper.

The outbreak of Covid-19 has caused a global increase in the amount of cash in the economies of Canada, Europe, US, and the UK. But the big increase in cash-in-circulation is not due to an increase in withdrawals of cash. There is much less cash being returned to banks and ATMs - businesses and individuals simply aren't redepositing their banknotes. This article argues that is probably being driven by an unwanted accumulation of cash by crooks, because the network of restaurants and other businesses that they rely on to launder their funds have all shut down thanks to virus fears and lockdowns. So throughout the pandemic they have been accumulating ever more cash from the drug using customers, with no place to offload it.

A CBDC could be designed so that anyone can get as much anonymous money as they want. But they'd have to pay for this privilege. One way is by charging a hourly fee, or a negative interest rate, on anonymous balances or set a large withdrawal fee, say 5% for anomymity. These revenues might be used by the government to to bolster the budgets of fraud departments, or to compensate victims of ransomware. But an anonymity tax puts regular people and criminals into the same bucket and it subtly ostracizes licit users of anonymous CBDC.

"18 things about Tether stablecoins"

The European Central Bank's recent report exploring the idea of issuing a retail central bank digital currency (CBDC) claims that "regulations do not allow anonymity in electronic payments and the digital euro must in principle comply with such regulations". In fact, the Fifth EU Anti-Money Laundering Directive (AML5) exempts issuers of e-money/prepaid cards from collecting customer information if user holdings do not exceed EUR50 (EUR150 for non-rechargeable stored value cards). Why did the EU build an anonymity exemption into payments law but now chooses to avoid exploiting it in potential CBDC designs?

"Tether says in its terms of service that it only creates new stablecoin tokens, USDt, in acceptance for money. That is, to get $1 worth of USDt from Tether, you need to send it $1 in actual U.S. dollars. But in reality, Tether does not seem to be waiting for deposits to roll in before issuing new USDt. As the FT's Kadhim Shubber reports, it is directly lending new USDt out, much like how a bank puts new dollar IOUs into circulation by lending them out."

Matt Levine entertains the possibility that all money is a ponzi: "But of course crypto people will happily tell you that fiat currency is the biggest Ponzi scheme of all, and they are not really wrong are they?" JP Koning disagrees...

"The diffuse nature of U.S. banking (and the concentrated nature of Canadian banking) will play into the upcoming launches of FedNow and Real-Time Rail (RTR), two instant retail payments system belonging to the Federal Reserve and Bank of Canada, respectively. I'd expect RTR usage to amp up quickly, given that Canada's big-5 banks will likely help sponsor it. FedNow adoption will lag. It's just not that easy to get 9,466 institutions on the same page."

"Coinbase isn't a bank, nor is it an SEC-approved money market mutual fund. And unlike Wise and PayPal, Coinbase's interest payments aren't powered under the hood by a bank. So how does Coinbase pull this off? In short, Coinbase seems to have seized on a third-path to paying interest. It cleverly describes the ability to receive interest as a "loyalty program", which puts it in the same bucket as Starbucks Rewards or Delta's air miles program. The program itself is dubbed USDC Rewards, and in its FAQ, customers are consistently described as "earning rewards" rather than "earning interest." "