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CBDC, Stablecoins, DeFi and Web3

Jan 24, 2023

Hello, friends from all over the world. Welcome to the English for Economists podcast.  This is podcast number 63. I am Alan Robert and I am very happy that you joined me today. Thank you for your support. It’s January 24th, 2023, and today our topic deals with the vocabulary of digital currencies, and more specifically, Central Bank Digital Currencies and stablecoins.

Stay tuned, following this brief English vocabulary lesson, I will cover some words that are difficult to pronounce. Afterward, I will share a useful idiomatic phrase in English to describe the wasteful use of money.

Let’s get started with our new vocabulary. Listen to this headline, which was published on January 5th in the Coin Telegraph, and see if you understand what they are trying to say:

https://spotifyanchor-web.app.link/e/Av77dZ9iRwb

“Hong Kong lawmaker wants to turn CBDC into stablecoin featuring DeFi”

What does CBDC stand for?  CBDC stands for Central Bank Digital Currency. It is a digital representation of a country’s fiat currency, issued and backed by the country’s central bank. It is intended to provide a digital alternative to physical cash and can be used for transactions between individuals or businesses.

What does ‘Stablecoin’ mean?

Stablecoin: A stablecoin is a type of cryptocurrency that is pegged to the value of a fiat currency, or a basket of fiat currencies, or another asset in order to maintain a stable value.  Stablecoins can be issued by various entities, including centralized organizations such as companies and financial institutions.

And what does ‘DeFi’ mean? DeFi stands for “Decentralized Finance”, it refers to an ecosystem of financial services built on blockchain technology that aims to provide an open and accessible financial system, through direct transactions between parties. In other words, it empowers peer-to-peer transactions. In other words, it enables various financial activities, such as lending, trading, and investment, without the need for traditional intermediaries, like banks for example.

Now, I want to teach you a phrase that has a strong relationship with decentralized finance, or ‘DeFi’. It is the phrase Web3.  And it refers to the next generation of the internet. It is this new internet that will be the natural environment for DeFi products.

The article I took the headline from goes on to explain how an official in Hong Kong has argued for CBDC in the form of a stablecoin, because this would make it easier for users of the central bank digital currency to access financial products offered in the so-called ‘Web3’.

Here is the headline one last time: Hong Kong lawmaker wants to turn CBDC into stablecoin featuring DeFi

Make sense? The link to the story is on the englishforeconomists.com web page. I have also included some supplemental vocabulary related to CBDCs there, too.

Okay, before we move on to our pronunciation section, I wanted to remind released the 70-minute video seminar ‘How to Give Great Presentations in English, Even if your English Isn’t Great. It is perfect for adult professionals who are not comfortable with their level of English, they know they need to improve and become more fluent, but they still need to give presentations in English at work. If this is you, check out this course. It’s really helpful.  

Alright, let’s move to pronunciation and after that, you’ll learn a new idiom.

Listen and repeat these words that often get mispronounced:

Scenario
Vulnerable
Category
Migration
Poll
 

Just in case you didn’t recognize that last word ‘Poll’, it is a verb and a noun. As a verb, ‘To Poll’ means to count someone’s opinion on something. For example, “They took a poll before the election to see how the citizens intended to vote”.

I wanted to teach you something extra today. It is a helpful idiom for economists or anyone who needs to deal with investments. Maybe you have heard it before. The expression is to  ‘Throw good money after bad’.

“Throw good money after bad” means to keep investing in a losing venture, instead of cutting losses.

Example: “He kept investing more money in his failing business, throwing good money after bad.”

It’s similar to the phrase “pouring money down the drain”

That’s all for now. Find lesson notes on the webpage, where you can also to get all kinds of good stuff. Remember to share these lessons with your colleagues who are on the same journey as you are learning English for economics. Sharing is Caring! I’ll be back soon with another class.

This is Alan Robert at englishforeconomists.com.  Take care.

________________________________________________________________________________________________________________

Supplemental Vocabulary

Backdoor CBDC: A digital currency that is indirectly backed by a stablecoin issuer’s cash held at the central bank, rather than having a direct account with the central bank.

Example sentence: The Bank Policy Institute claims that the use of the Federal Reserve’s reverse repo facility by the Circle Reserve Fund could be seen as a backdoor CBDC.

Network effect: The phenomenon where a product or service becomes more valuable as more people use it.

Example sentence: The stablecoin with the highest network effect is likely to become the dominant stablecoin in the market.

Counterparty: A company or person with whom a financial contract is made, and who may be required to fulfill the terms of the contract.

Example sentence: The use of the Federal Reserve as a counterparty in the reverse repo facility significantly reduces the risk profile of the USDC stablecoin.

AML: Anti-money laundering regulations and procedures designed to prevent, detect, and report money laundering activities.

Example sentence: The Circle Reserve Fund may face compliance issues when applying for access to the Federal Reserve’s reverse repo facility due to its status as a sole shareholder in a high-risk sector from an AML perspective.

DeFi: Decentralized finance, a financial system built on blockchain technology that allows for peer-to-peer transactions without the need for intermediaries.

Example sentence: Circle, the issuer of the USDC stablecoin, has a strong presence in the DeFi space.

Stablecoin issuer: A company that issues a stablecoin, a cryptocurrency that is pegged to the value of a fiat currency or asset.

Example sentence: BlackRock has been managing a large portion of the reserve assets of the USDC stablecoin on behalf of the stablecoin issuer, Circle.

Risk profile: A summary of the potential risks associated with an investment or financial product.

Example sentence: The use of the Federal Reserve’s reverse repo facility by the Circle Reserve Fund would considerably improve the risk profile of the USDC stablecoin.

Sole shareholder: A shareholder who owns all of the shares in a company.

Example sentence: The Circle Reserve Fund may face compliance issues when applying for access to the Federal Reserve’s reverse repo facility due to its status as a sole shareholder in a high risk sector from an AML perspective.

Flight to quality: The tendency of investors to sell risky assets and move their money into safer investments during times of economic uncertainty.

Example sentence: If a proportion of the USDC stablecoin reserves were allowed to be parked at the Federal Reserve, it could result in a flight to quality and a potential bank run into the stablecoin.

_____________________________________________________________________________________________________________________Photo credit: FamZoo | Creative Commons Attribution-Share Alike 2.0 |Digital Coded Money

Disclaimer: Some of the vocabulary definitions were written by Assistant, a large language model trained by OpenAI. The author has proofread. (https://openai.com/blog/openai-assistant/) The writing used from Assistant does not necessarily reflect the views or opinions of OpenAI.

ADDITIONAL LINKS

https://www.investopedia.com/decentralized-finance-defi-5113835

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