CBDCs rip out the heart of crypto while offering no clear benefit to citizens and industry – Oliver Linch, CEO of Bittrex Global

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(Kitco News) – Until governments clearly demonstrate the benefits of central bank digital currencies (CBDCs) and address industry and public concerns, their intentions will be suspect, according to Oliver Linch, CEO of the ‘Bittrex Global cryptocurrency exchange and a financial regulatory lawyer with over ten years of experience in Europe, the UK and the US.

CBDCs are not for cryptocurrencies, Linch said. When I talk to my clients about this, they just aren’t interested in something that has ripped the heart out of what crypto is.

Linch joined Kitco News reporter Ernest Hoffman to discuss the results of the latest Bank for International Settlements survey that shows 93% of central banks are working on CBDCs while increasing oversight of their country’s crypto markets.

He said that while CBDCs can solve real problems in areas such as cross-border money transfers, the broad and vague approaches taken by governments show a lack of policy direction and raise questions about their real motives.

I think before we can say if it will crowd out altcoins, will it crowd out bitcoin, will it crowd out stablecoins, you just have to ask well, what is it ? What is this product, what is it for? he said. At the moment, it just feels like governments are jumping on the bandwagon. It’s kind of like the Batmobile, you put the word bat in front of anything, it sounds a little cooler, and it’s not. Putting the word digital is not enough. There must be a purpose to this, and at the moment it seems like CBDCs in general are a solution in search of a problem.

As for the benefits, Linch doesn’t think CBDCs would be any better at enforcing anti-money laundering regulations and knowing your customer (AML/KYC) than crypto.

I don’t see CBDCs being any better on this front, he said. If you attempt to trade on Bittrex Global, you will be KYC to the same standards as any type of bank or financial institution. We know exactly who our clients are, we know what they trade and how they trade, where that money goes. This is true if they are trading Bitcoin, if they are trading any number of altcoins. I don’t think that’s more true just because you’re trading special government tokens.

On the other hand, Linch said concerns about CBDCs’ potential to destabilize the banking sector in countries where most of the money is created by private banks are valid.

I think there are going to be a lot of very sensitive conversations between central banks and private banks in those jurisdictions, and in the UK, Europe and the US for that matter, he said. I think governments and central banks at the moment are avoiding having these discussions by going out and saying oh, nothing is on the table, we can configure these things however we want. In fact, it looks like you don’t have a plan, does it? Figure out what you’re trying to accomplish, figure out the best way to get there, and then go for it.

He also expects that even countries exploring wholesale CBDCs for use by institutions will eventually create a retail version for their citizens, and the public will lose the benefits of crypto in the process.

One of the major problems with traditional finance is that it is excluded from the benefits of cryptocurrencies, he said. Many people are underserved by traditional finance, where governments and regulators say sorry, you’re not welcome in these products, because you’re too stupid, or too poor, or both. Because you are not a high net worth individual, you are not a sophisticated investor, therefore you cannot have access to this product. And if that means you can’t get a mortgage or grow a business, then that sucks to be you.

Linch said many people feel they have been let down by traditional finance in this way, and cryptocurrencies are filling that gap. This is a phenomenal benefit that crypto can bring to people, he said. If CBDCs don’t even help in this regard, where are they going to find their users from? Where are they going to get people interested, excited, unless they start forcing people to use CBDCs?

In the absence of a clearly articulated policy goal and a clear rationale for CBDC as a means to achieve it, Linch said it’s perfectly understandable for people to assume the worst of CBDC supporters.

Wherever you fall on the conspiracy theory spectrum, do governments and central banks just want to be cool and say digital all the time? Is that, plus they want to give back a little more control to the central bank, and even to the private banks, to have a little more familiarity? Do they want a mass of data on every transaction and can see the incredibly poor life choices I’ve made while shopping on the weekends? Or do they want to be able to do really nefarious things like cut money, stop you from going to stores, and direct your spending?

Linch said that ultimately it doesn’t matter which theory you subscribe to, because the onus is on the government to make the case for the benefits of central bank digital currencies. If you’re lobbying for CBDCs, you need to explain what your positive motivators are, he said. At the moment, it’s just not there.

To hear Linchs’ analysis of CBDC programs from Russia, China and other jurisdictions, watch the video above.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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