Central Bank Digital Currencies (CBDCs) are a growing trend in the financial world, as governments and central banks seek to adopt elements of cryptocurrency technology to manage money. A CBDC can be described as a completely digital version of a national currency, with the aim of improving the efficiency of moving money and reducing intermediaries. However, CBDCs also raise concerns about privacy and the potential for arbitrary confiscation by the central bank. In addition, the transparency of a CBDC ledger raises the possibility of state surveillance and control, leading some to describe CBDCs as “surveillance money.”
The benefits of CBDCs include the ability to support micro-transactions, simplify tax payments, and provide a more efficient way of providing financial benefits. However, the ease of flow between governments and citizens, and the visibility it provides of the purposes to which it is being put, raise serious privacy concerns. The threat of bail-ins, in which funds are confiscated from citizens during a financial crisis, is another concern.
Despite these concerns, the trend towards CBDCs is likely to continue, as governments seek to improve the efficiency of their financial systems and gain greater control over the flow of money. It is important for citizens to be aware of the potential consequences of CBDCs and to consider the trade-off between efficiency and privacy.
Central bank digital currencies (CBDCs) have been receiving a lot of attention lately, as the world becomes increasingly digitized and financial systems move towards electronic means of transactions. CBDCs are digital versions of a nation-state currency issued by the central bank of a given nation, and they can either be backed by another asset or exist purely as fiat currency, which means the value is based on the promise of the government. The concept of CBDCs is to offer the speed, efficiency, and security of digital transactions while still maintaining the stability and backing of traditional currency.
9.) https://t.co/kpvlQQmptG— Sam Callahan (@samcallah) December 23, 2021
This paper explored the idea of Multi-CBDCs. This is where 1 global CBDC platform is designed and governed by…I guess a cohort of central bankers?
This would lead to 1 global platform that has a “single rulebook” and “mutually recognized ID schemes” pic.twitter.com/LCl1atR6NR
However, the rise of CBDCs raises serious concerns about privacy and freedom. One of the most significant concerns is the death of anonymity. Currently, cash transactions offer the secrecy and anonymity needed for financial freedom, but CBDCs would be fully traceable, meaning that every transaction would be recorded and monitored by the central bank, potentially allowing central banks to surveil and control financial transactions in ways that were previously impossible. This raises serious concerns about privacy and civil liberties.
A CBDC is a perversion of cryptocurrency, or at least the founding principles and protocols of it—a cryptofascist currency, expressly designed to deny you the basic ownership of your money by installing the State at the center of every transaction. https://t.co/720SYvqzZM— Edward Snowden (@Snowden) October 9, 2021
Image courtesy of ICBA
In addition, some of the policies implemented in response to the global financial crisis could further restrict individual financial activities, such as imposing capital controls or limits on people’s daily financial holdings and expenditures. This could serve to significantly erode privacy and freedom and have a chilling effect on free speech and political dissent.
CBDCs could also exacerbate existing inequalities, as those without access to the internet or digital gadgets would be shut out of the financial system. This could apply to underrepresented groups like the elderly, the poor, and residents of rural areas. CBDCs may potentially lead to new types of financial exclusion since central banks may decline to do business with those regarded as high-risk.
Moreover, central banks could use CBDCs to implement negative interest rates, which would incentivize people to spend their money rather than save it, leading to a surge in consumption and inflation and potentially destabilizing the economy.
Image courtesy of NGRAVE
While CBDCs offer the potential for speedier, less expensive, and more secure transactions, they also raise important issues related to freedom, privacy, and financial stability. Central banks must carefully consider the implications of CBDCs for privacy, freedom, and financial stability, and make sure that CBDCs are created in a way that respects individual rights and freedom. The defense of individual liberties and rights should be a top priority for central banks as they consider their approach to CBDCs. [1, 2, 3].