CBDC-CENTRAL BANK DIGITAL CURRENCY
Digital
currencies issued by central banks across the world mark a decisive inflection
point in global monetary history—comparable to the collapse of the gold
standard in 1971 and the dismantling of the Bretton Woods system. Their
emergence signals the gradual erosion of US dollar dominance and the rise of a
multipolar economic order.
Historically, reserve currency status has never
been permanent. The Dutch guilder in the 18th century, the British pound in the
19th and early 20th centuries, and the US dollar post–World War II all rose and
declined in tandem with economic strength, trade dominance, and monetary
discipline. The dollar’s supremacy, established in 1944 under Bretton Woods,
was explicitly backed by gold. This linkage ended in 1971 when the US
unilaterally suspended gold convertibility, transforming the dollar into a fiat
currency sustained primarily by trust and geopolitical influence.
Today, that trust is under strain.
Global
public debt has crossed USD 100 trillion, with the United States alone
accounting for over USD 34 trillion—more than 120% of its GDP. Persistent
fiscal deficits, monetary expansion, and weaponization of the dollar through
sanctions have accelerated efforts by nations to seek alternatives.
Central Bank Digital Currencies (CBDCs) represent
this next evolutionary phase.
• Monetary credibility and asset backing:
While CBDCs themselves are digital representations of sovereign currency, their
long-term acceptance increasingly depends on balance-sheet strength and
tangible reserves. Since 2010, central banks—particularly in emerging
economies—have been net buyers of gold, reversing decades of selling. This
reflects a renewed preference for precious metals as a hedge against fiat
debasement and geopolitical risk.
• Technological integrity and counterfeit
elimination: Unlike paper currency, CBDCs leverage distributed ledger and
cryptographic technologies that render counterfeiting economically and
technically infeasible. This transition mirrors the shift from physical share
certificates to dematerialized securities, which drastically reduced fraud and
settlement risk in capital markets.
• Restoration of monetary sovereignty:
CBDCs allow nations to regain control over domestic payment systems and reduce
dependence on foreign clearing mechanisms such as SWIFT. Historical precedents
show that monetary sovereignty weakens when trade and settlement are
intermediated by external powers—as experienced by many developing nations
during the post-colonial era.
• Decline of dollar-centric trade: The
share of the US dollar in global foreign exchange reserves has declined from
over 70% in 2000 to below 60% today. Bilateral trade settlements in local
currencies—between China and Russia, India and the Middle East, and across
BRICS economies—are expanding steadily. CBDCs accelerate this trend by making
non-dollar settlement efficient, low-cost, and instantaneous.
• Towards a unified, multipolar payment
architecture: The future points not to a single global currency, but to a
basket of interoperable digital currencies. A unified payment mechanism—similar
in spirit to the IMF’s SDR but technologically superior—can enable transparent
cross-border trade. India’s digital public infrastructure, particularly UPI,
demonstrates how scale, inclusion, and efficiency can coexist without
compromising sovereignty.
Just as Bretton Woods defined the post-war
financial order, CBDCs are defining the post-dollar era. They are not an abrupt overthrow of the dollar,
but a structural rebalancing—where trust is distributed, power is
decentralized, and economic influence aligns more closely with real assets,
productivity, and demographic strength.
https://www.iba.org.in/cbdc/index.html
India’s Central Bank Digital
Currency (CBDC) - The Digital Rupee
Digital
Rupee is the electronic version of our currency which can be used to carry out
transactions or store value digitally, similar to the manner in which currency
notes can be used in physical form. Digital Rupee is currently in pilot mode
and various use cases, underlying technology, features are being tested and
explored. Currently, the pilot is ongoing with 19 banks - SBI, ICICI
Bank, Yes Bank, IDFC First Bank, Bank of Baroda, Union Bank of India, HDFC
Bank, Kotak Mahindra Bank, PNB, Canara Bank, Axis Bank, IndusInd Bank, Federal
Bank, Karnataka Bank, Indian Bank, IDBI Bank, UCO Bank, Bank of Maharashtra and
Bank of India. Additionally, two non-bank entities- CRED and
MobiKwik, have been permitted to join the pilot. They will be
extending CBDC wallet services to users in the near future.
The
model for retail Digital Rupee issuance in the pilot is identical to the
arrangement for paper currency i.e., RBI creates Digital Rupee
and issues it to the banks. Banks, in turn, distribute Digital Rupee to
customers. It offers the convenience of digital mode of transactions by being
available 24/7. Further, additional features related to programmability and
offline functionalities are also being tested.
1.
Money as Precious Metals: Historically Indisputable
For
5,000+
years, money meant:
·
Gold (store of value, sovereignty,
settlement)
·
Silver (medium of exchange, daily commerce)
Paper
currency was never
money by itself—it was a receipt, a promise to
deliver metal. The break came not gradually, but politically:
·
1933:
Gold confiscation (US citizens)
·
1944:
Bretton Woods (USD as proxy for gold)
·
1971:
Nixon Shock — gold backing abandoned
From
that moment, currency
became faith-based, not asset-based.
2. Petro-Dollar: Hegemony by Design, Not
Accident
The
petro-dollar wasn’t economic genius—it was geopolitical coercion.
The
deal was simple:
·
Oil
priced only in USD
·
US
provides military protection
·
Surplus
dollars recycled into US treasuries
This
allowed the US to:
·
Print
without restraint
·
Export
inflation
·
Finance
wars and deficits with foreign savings
No
empire in history has enjoyed such privilege without eventual abuse—and
abuse always precedes decline.
3. Trump’s Tariffs: Symptom, Not the
Disease
Trump’s
tariff regime is exposing fault lines, not creating them.
Tariffs
were:
·
An
admission that free
trade failed the US industrial base
·
A
recognition that dollar dominance no longer guarantees real power
·
A
crude attempt to reverse decades of de-industrialization
The
irrationality wasn’t economic—it was desperation. We don’t
weaponize tariffs unless our monetary tools are losing effectiveness.
4. Multipolar Order Is Not Coming — It Is
Already Here
The
mistake analysts make is waiting for an “announcement.”
Multipolarity
happens de
facto before de jure:
·
Yuan–oil
settlement
·
Gold
accumulation by central banks (record levels)
·
Bilateral
trade in local currencies
·
SWIFT
alternatives
·
Sanctions
fatigue
The
world is quietly voting against dollar risk, is not
against America per se.
5. BRICS, Digital Currency & Metal
Backing: The Real Constraint
My
thesis becomes strategically sharp—and
where caution is needed.
What
is likely:
·
BRICS settlement unit (not a retail currency)
·
Digital ledger for cross-border trade
·
Partial asset backing (gold, commodities basket)
·
Voluntary
participation, not forced adoption
What
is unlikely (in near term):
·
Fully
gold-backed national currencies
·
Sudden
“end” of the dollar
·
Public
declaration of war on USD hegemony
Why?
Because trust
must precede convertibility.
6. India’s Chairmanship in 2026:
Symbolically Powerful, Practically Subtle
India’s
strength is:
·
Credibility
across blocs
·
Civilizational
legitimacy
·
Institutional
patience (not shock therapy)
If
something is announced, expect:
·
Frameworks,
not fireworks
·
Pilots,
not proclamations
·
Architecture,
not abolition
Civilizations
don’t dethrone reserve currencies—they outgrow them.
7. Gold & Silver: Not Investments, but
Monetary Insurance
Precious
metals are not assets to outperform markets; they are anchors when markets
lose meaning.
Gold
preserves sovereignty
Silver preserves liquidity
Paper preserves illusion
When
confidence breaks, pricing resets, not
gradually—but violently.
Final Thought (Civilizational Lens)
Empires
collapse when:
·
Currency
divorces value
·
Production
divorces finance
·
Power
divorces restraint
What
we are witnessing is not the fall of the dollar—but the return
of discipline to money.
And
discipline always smells like gold and silver.
1.
Can CBDCs be credibly backed by “real value”
like gold?
2.
Is the recent
strength in silver a repricing of monetary perception rather than pure
industrial demand?
1. CBDC & the “gold backing” paradox
There
is not enough gold in the world to back the total money supply—especially in a
digital, instant-settlement world.
Reality
check
·
CBDCs are not designed to be gold-backed
·
They
are liability-backed,
not asset-backed
·
Just
like today’s fiat, a CBDC is backed by:
o Sovereign taxing power
o Legal tender laws
o Monetary policy credibility
o Network acceptance
The problem is not technical, it
is philosophical.
Gold
backing collapses under:
·
Global
trade volumes
·
Financial
derivatives
·
Velocity
of money
·
Credit
creation
If
CBDCs were gold-backed:
·
Monetary
contraction would be violent
·
Credit
markets would freeze
·
Governments
would lose fiscal flexibility overnight
Hence,
CBDCs
actually move us further away from commodity anchoring, not closer.
2. “Price is perception”
Price
is not intrinsic value.
Price is a negotiated
belief.
Gold,
silver, currency—none have “absolute” value.
They have:
·
Relative scarcity
·
Trust
·
Utility
·
Narrative power
That’s
why:
·
Gold
went from ₹35/g to ₹7,000/g without changing atomic structure
·
Paper
money retains value despite being printable
·
Bitcoin
has value despite no physical presence
3. Gold–Silver ratio:
Historically:
·
Long-term
average Gold–Silver Ratio: 15–20
·
Post-1971
fiat era average: 40–60
·
Crisis
spikes: 80–120
You
point out it’s now near 50—and that matters.
Why
silver is structurally different from gold
|
Gold |
Silver |
|
Monetary + reserve asset |
Monetary + industrial asset |
|
Hoarded |
Consumed |
|
Central bank controlled |
Market driven |
|
Stock >> annual production |
Stock ≈ annual production |
Silver
is destroyed
in use (solar, electronics, medical).
Gold mostly sits in vaults.
This
makes silver monetarily under-priced if
trust in fiat weakens.
4. Is silver being “pulled up” toward
gold?
Not
equalised—but repositioned, yes.
The
recent silver strength reflects:
·
Monetary
hedging without central-bank control
·
Industrial
scarcity
·
Distrust
in long-duration fiat promises
·
Retail
+ institutional “shadow hedging”
Importantly:
Silver
is the only
precious metal ordinary people can still accumulate meaningfully.
That
alone gives it political and monetary asymmetry.
5. CBDC + silver = unintended consequence
Here’s
the irony:
·
CBDCs
increase state
visibility
·
Cash
alternatives shrink
·
Privacy
erodes
·
Financial
repression becomes easier
Result?
People instinctively move to:
·
Physical
assets
·
Portable
value
·
Assets
outside digital rails
Silver
fits that psychological
and practical gap better than gold.
Bottom line
·
CBDCs
will
not be gold-backed
·
Commodity
backing is mathematically impossible at scale
·
Value
will remain perception + trust
·
Silver’s
rise is not accidental—it is monetary insurance rediscovered
·
Gold
remains sovereign money
·
Silver
remains people’s
money
This is not about metals outperforming—it’s about confidence slowly
migrating.
It is financially prudent now for a common man to buy ETF SILVERBEES keeping in mind long-term
gain, as a better option than locking hard earned monies in fixed deposits as a
safe investment option.
1.
What SilverBeES?
·
SilverBeES (SILVERBEES) is an ETF that tracks the price of
physical silver — so your return depends on how silver prices move. It lets you
gain from silver without holding physical metal.
·
It’s
not
a fixed-income product, and the principal isn’t guaranteed. So
your returns are market-dependent, just like stocks or other commodity-linked
assets.
📈 2.
Recent Performance — Strong but Volatile
·
In 2025,
silver ETFs have delivered very high returns (often
double-digit or over 100% year-on-year in many products), driven by strong
demand and rising global industrial use of silver.
·
Silver
ETF volumes and liquidity have grown significantly, showing rising investor
interest.
💡 But: high recent returns
are past
performance — not a guarantee of long-term performance.
3.
Risks vs FDs
SilverBeES Risks
Market volatility
·
Silver
prices fluctuate widely based on industrial demand, global economic conditions,
and investor sentiment. This means the NAV can swing up or down significantly
over short periods.
·
On
forums, investors have discussed how ETFs can trade at premium/discount vs.
fair value (iNAV) — meaning you might pay more or less than the
underlying silver value at any moment.
Tracking and liquidity nuances
·
Some
traders note tracking inconsistencies or premiums, which can affect returns.
Taxation
·
Gains
from selling silver ETFs are taxed as capital gains:
if held over 12 months (long term), you pay a capital gains rate (e.g., 12.5%
LTCG in India for ETF silver), not FD interest tax.
No guaranteed return
·
Unlike
FDs, there’s no assured interest; your capital can rise or fall.
📊 Fixed Deposits (FDs)
Pros
·
Capital protection: Principal and interest are guaranteed
(subject to bank soundness).
·
Stable returns: Predictable, with interest paid at
fixed rates.
·
Good for emergencies or short/medium
horizons.
Cons
·
Lower effective returns after inflation: With inflation in India often above FD
rates, real returns can be negative.
·
Typically
not a good long-term growth engine compared with equity or commodities.
🧠 4.
Long-Term Prudence: Silver ETF vs FD
🔹 When SilverBeES Might Be Better
✔
If you have a long horizon (5–10+ years) and can tolerate
volatility.
✔ If you
want diversification
— exposure to commodities as part of your portfolio.
✔ If
inflation is a concern — silver often acts as a partial hedge.
Experts
suggest staying invested in silver ETFs for long horizons but not
allocating too much of your total portfolio to it. Often a small
slice (e.g., 5–10%) is recommended as part of diversified asset
allocation.
🔹 When FDs Might Be Better
✔
If your priority is safety of capital and
assured returns.
✔ If you can’t
tolerate significant fluctuations in your invested amount.
✔ For short-term
financial needs or emergency funds.
🧩 A Sensible Middle Path
For
many common investors:
✔ Strategy
📌 Emergency Fund (20–30%)
– FDs / liquid funds (safe, stable).
📌
Core
Growth (50–60%) – diversified equities / mutual funds.
📌
Diversification
(5–10%) – SilverBeES or commodity exposure.
📌
Optional
(10%) – Gold ETFs / SGBs (for inflation hedge).
This
helps balance growth potential with safety
and liquidity.
📝
Bottom Line
👉 SilverBeES can be a good long-term
holding if you:
·
Are
prepared for ups and downs,
·
Hold
for 5+ years,
·
Use
systematic investing (like SIP) rather than lump sums,
·
Make
it part of a diversified portfolio.
👉 FDs remain safer but typically deliver
lower real returns.
👉
It’s
usually not “all-or-nothing” — mixing safe and growth assets
often works better.
Why invest in ETF SILVERBEES over physical FIXED DEPOSITS?
The
key attraction of investing in ETF
SILVERBEES lies in its unique positioning. While it is traded
on the stock exchange, it is neither an equity nor a corporate scrip. The
underlying asset is physical
silver, a precious metal that has historically functioned as
money or currency, independent of any company, sector, or management risk.
Unlike
equities, whose value depends on business performance and market sentiment,
SILVERBEES derives its value from silver itself—an asset traditionally
considered a store of
value. In that sense, it offers a safety profile closer to
fixed deposits, yet without being constrained by a fixed interest rate. Over
the long term, silver has demonstrated the potential to deliver returns that
can exceed bank deposit interest by a wide margin, particularly during
inflationary phases.
A
further layer of comfort comes from historical evidence. Over the past century,
precious metals—especially silver—have shown a long-term upward bias in value. During
periods of financial stress, currency depreciation, or market crashes, investor
confidence in precious metals typically strengthens, reinforcing their role as
a hedge against systemic risk.
In
this context, ETF SILVERBEES functions not merely as a traded instrument, but
as a form of financial
insurance—combining liquidity, transparency, and long-term
value preservation.
Every ETF
SILVERBEES underlying asset is SILVER BULLION so it does not make much
difference between ETF & physical Silver bullion. Investing in Silverbees
is as good as holding cash which is highly liquid & there is no threat of
getting stolen or reduction in purity while converting into jewellery items.
As explained above
For the next 5-15 years investment in ETF Silverbees is expected to give sustainable
return more than 30% on invested value.
Warm regards with love
Hari Rao
Former Civil Servant from IRS 1999 Batch
25th Jan 2026
