We Should Be Scared of Central Bank Digital Currencies
CBDCs have been in the spotlight of public opinion recently with countries moving toward introducing their versions of cryptocurrencies in all corners of the world. The most recent announcement came from Russia where the government is planning to roll out its version of a digital Ruble somewhere in 2023.
This example is quite good for illustrating our point. We have to be very skeptical about CBDCs in general because they can turn the benefits of crypto into nightmarish dystopian instruments of governmental control — exactly what Bitcoin was supposed to save us from.
Digital cash is used as a flawed argument against crime
Countries like the UK are aware of the demand for cryptocurrencies and want to embellish their digital currencies with benefits provided by decentralized blockchain networks like Bitcoin. However, CBDCs will not have any redeeming qualities of BTC. On the contrary, tools like immutable transaction history and full transparency will be used for surveillance purposes despite, on paper, fulfilling a completely different function of preventing laundering, terrorism, and financial crime.
CBDCs may also be subjected to many limitations because they will be programmable. It means that you may be prevented from buying a loaf of bread because the government does not like how you spend your money or how you speak about the government. It is a dream come true for authoritarian societies like China, Russia, or Iran. All three are very interested in using digital currencies.
Digital currencies also grant Central Banks more control over cash flow. By using penalties for withdrawals and influencing limits of cash balances, they can simply prevent people from using their money or cause massive delays when they are short on cash. While we would like to move to crypto, having real cash on hand is very important during periods of economic instability.
CBDCs threaten the very concept of financial freedom
The Chinese government is already using the social score system and may soon focus on integrating digital currencies into it to prevent any “unreliable” citizens from using their money on necessities or traveling which is happening already. Do we want to give such power to governments?