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July 4th? It’s bank independence day!

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July 4 is always when my American friends give Britain the middle finger and proudly celebrate Paul Revere’s midnight ride that led to Independence Day on July 4, 1776. Great … but what about bank independence day?

Most central banks, including the Federal Reserve, are independent of government control. Why and, more importantly, why is this important?

Well, let’s start with the Federal Reserve, as this is the USA’s independence day. The White House recently issued an update explaining the importance of Central Bank Independence (CBI). Here’s some of the key paragraphs:

An independent central bank is one that can carry out monetary policy without political interference. In an important distinguishing factor, governing bodies (typically national legislatures) legitimately dictate the goals or mandates of central banks, which, in the U.S. case, are maximum employment and price stability. But CBI requires that the Federal Reserve’s operational activities to achieve its dual mandate occur without political pressure or interference.

When did the Federal Reserve get its independence from the governmental sphere? December 1913, when President Woodrow Wilson signed the Federal Reserve Act into law to introduce “a decentralised central bank”. What’s that? Oh, “a decentralised central bank” balances “the competing interests of private banks and populist sentiment” (according to the Fed).

The issue with that statement is that you cannot have a decentralised central structure. Just ask the Swiss. A decentralised structure should be in the hands of the people; not a puppet of the government. Just ask the libertarians.

This is why we live in such an interesting time of juxtaposition where a truly decentralised structure that can meet the interests of the populist sentiment is represented by cryptocurrencies and, specifically, bitcoin. That’s what crypto is all about.

“I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party … it takes advantage of the nature of information being easy to spread but hard to stifle. - Satoshi Nakamoto

So we sit at an interesting moment where money could become truly independent of central government and move into the hands of the network of the people, worldwide.

This is what concerns governments and why central banks, as puppets of governments, have all moved rapidly to develop Central Bank Digital Currencies (CBDCs), but why is a CBDC needed?

A CBDC's main purpose is to provide businesses and consumers with privacy, transferability, convenience, accessibility, and financial security. Many individuals throughout the world have no access to bank accounts, so a CBDC would give them a way to be paid, hold their money, and pay bills.

Source: Investopedia

But it is controlled by the central bank of the nation and, consequently, tied closely to that nation’s government policies. Why not go for a stablecoin?

CBDCs are governed by a nation’s central bank, providing them with inherent trust and authority, while stablecoins, though pegged to a stable asset like the US dollar, are typically governed by private entities and can be subjected to market fluctuations.

Source: CCN

So stablecoins are more or less trustworthy than government coins? Why do central bank currencies have more trust? Because they are backed by the government? What about the government of the people, as represented by the network of the people?

Blockchain technology is a distributed ledger that connects a decentralized network on which users can send transactions and build applications without the need for a central authority or server.

Source: Gemini

Maybe we really do have an independence day … an independence day of money … an independence day without centralised government controls … an independence day of the people … an independence day of the power of the people.

If you are interested in this subject, you might want to read Money and Promises by Paolo Zannoni. Spanning a multitude of countries, political systems and historical eras, Zannoni shows that, at the heart of our institutions, lies an intricate exchange of debt and promises that has shaped the modern world. The result? Zannoni charts the development of the State Bank and makes the point that: “in different cultures, at different times, under different regimes, and yet in very similar ways, states and nations deal with banks to achieve their purposes and goals, paying for goods with banks’ promises to pay”.

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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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