Should you worry about Central Bank Digital Currencies?

There are two stories unfolding unbeknownst to large swathes of the population today. Each stands in stark contrast to the other. On the one hand, there is a story of freedom and flourishing, and on the other hand, there is a story of control and serfdom. Though a war has raged between these opposing stories over the centuries, a new battle is being fought concerning the future of civilization’s most important tool: Money.

What is Money?

Money is a tool that enables individuals to trade goods and services with one another. Without it, trading what we have for what we need or desire would be exceedingly inefficient, impractical or just downright impossible to do. Just as speech allows individuals to communicate their ideas and opinions, money allows individuals to express their economic choices and desires. 

Serving as a language of value, money in the form of cash, banknotes, and coins affords us the ability to express our preferences, values, and intentions freely. As a bearer instrument, cash is often referred to as “printed freedom”. Having cash gives you the power to buy whatever you want without the need for permission from a third party. 

When you hand over cash to a merchant, you receive the goods straight away, the transaction is immediate and final. Another element is that transactions remain private and anonymous since the merchant has no name, no email address – nothing. If you have cash, your funds can’t be frozen or traced.

It is clear that there are many advantages to cash, and anyone who values individual freedom should also value the right to use it. In most countries, this is (still) a constitutional right. There is something, however, that cash and the right to use it doesn't protect you from. 

The money people are forced to use via legal tender laws, including paper money, is issued by the state. Unfortunately, cash doesn't protect those who use it to store value from inflation of the money supply. What is colloquially known as "money printing", eventually leads to a loss of purchasing power. This equally impacts cash and bank account balances. 

Where double-digit inflation used to be something that would only happen in faraway countries, over the last few years, it has become a reality for most people in the so-called "developed world" too, with some EU countries approaching 20%. As if this isn't enough, the right to use cash is currently in jeopardy.

The War on Cash

In recent years, governments and financial institutions have been waging a war on the use of cash in an attempt to steer us toward a cashless society. This war is really about one thing – to consolidate control over the monetary system. Cash, which provides a certain level of privacy and anonymity, is viewed as a direct challenge to the cashless agenda because it cannot be controlled in the same way that digital transactions can.

In a cashless society, all transactions would be conducted electronically using credit cards, mobile wallets, and various online payment systems. This provides governments and banks with the ultimate method to track, monitor and analyze financial data.

The conditions created by the Covid-19 scare propelled the cashless agenda in ways that no other single event has. Many retailers began refusing cash and only accepted debit or credit cards, erroneously believing that it would reduce the spread of infection. Although the scare is over, many retailers still do not accept cash.

Along with the growing number of retailers who’ve stopped accepting cash, there is also a noticeable decline in the number of ATMs where people can withdraw cash. Additionally, limits are being placed on how much can be withdrawn. The EU has banned all cash payments greater than 10,000 euros under the pretext of preventing money laundering. Many countries are also removing higher denomination bills. For instance, in 2016, India invalidated all bank notes over 500 and 1,000 rupees overnight, wiping out 86% of its cash and rendering cash savings worthless without warning.

Not only are these attempts to discourage individuals from using cash, but they are also attempts to weaken the control and autonomy that individuals have over their own finances.

As this war on cash intensifies, the trajectory toward a cashless society dominated by central bank digital currencies becomes more and more apparent. 

Central Bank Digital Currencies

In a supposed attempt to modernize or enhance the existing payment system by reducing transaction costs, increasing financial inclusion and combating illicit activities, over 130 central banks around the world are planning, piloting, or launching a central bank digital currency, or CBDC.

These are essentially digital representations of the flawed fiat currencies that are in use today, but with one major difference – they will be fully programmable.

As programmable money, it provides huge scope for central planners to shape and influence individual behavior that would not have occurred otherwise. Additionally, authorities will also be able to dictate who you can transact with, what you can purchase and when you can purchase, in order to ensure your money is only spent on “essentials” that the government deems acceptable. 

"We are on the brink of a dramatic change; we are about to abandon the traditional system of money and replace it with a new one, Digital Blockchain CBDC, which will give us greater clarity over every single transaction." - Pippa Malmagren, World Government Summit 2022

As with the war on cash, CBDCs are all about control, or as Agustín Carstens, the head of the Bank of International Settlements (the “central bank of central banks”) stated –  “absolute control”

Furthermore, if combined with a digital ID, central banks and governments would have direct insight into the identities of those transacting. This would enable them to peer into individual spending habits, political affiliations, and even seize funds. This is especially concerning for financial censorship if the ruling government dislikes your ideas, your opinions, or your politics.

In many ways, this scenario would effectively usher in a proto-social credit system that already exists in China. The social credit system in China is a digital surveillance system where the government and businesses work together to track and score citizens based on their behavior. Doing good things such as donating to charity or paying bills on time improves one's credit score, while doing things that authorities disapprove of, such as voicing dissent about government policies or breaking traffic laws, leads to a loss of points. If an individual’s score drops too low, it can restrict their ability to take certain actions, such as buying plane tickets, acquiring property, or taking out loans.

While it isn’t surprising that China, a communist totalitarian regime, was the first country to release their own CBDC – after all, programmable money means programmable citizens – it is important to remain vigilant as to what might come down the road for you, even if you believe your *current* government is benign, there is no assurance that it will remain so in the future.

Bitcoin

Born in the aftermath of the global financial crisis of 2008, bitcoin has kicked off a monetary revolution. It has captured the imagination of millions around the world who value individual and financial sovereignty.

Its decentralized peer-to-peer network ensures that no single entity can manipulate or censor an individual’s financial activities. Its fixed supply of 21 million coins protects the purchasing power of its holders from the arbitrary whim of central banks printing money out of thin air. 

Each transaction is recorded on an immutable public ledger ensuring transparency and integrity. Because no one is in control, no one can choose who or who cannot use bitcoin. Its permissionless nature means you can spend it, save it, and nobody can stop you. Bitcoin is for everyone because the rules apply to everyone equally, no matter who you are.

Unlike the current system where “too big to fail” institutions privatize the gains and socialize the losses, bitcoin offers a level playing field for everyone. It represents a departure from the current opaque structures pervaded by deceit and broken promises.

In a world plagued with hopelessness and apathy, bitcoin stands as a beacon of hope towards economic freedom and self-sovereignty.

The Choice is Yours

“Money will be digital. But it’s up to us what kind of digital money we have, and what kind of future it enables. We must choose wisely.” — Andrew M. Bailey, Bradley Rettler

In some respects, CBDCs could be the biggest boon for bitcoin because they will strengthen its case. But, ultimately, as these opposing stories unfold, the onus lies upon you to decide which story you choose.

The first is a system characterized by control and subjugation. The alternative grants you complete sovereignty over your wealth, enabling you to lead a life of your choosing, unfettered from the need for anyone else’s approval or the adherence to chains of political correctness. 

We stand at a crossroads, teetering perilously on the brink of an Orwellian nightmare that if we allow ourselves to fall into its grip, there will be no turning back; no escape.

( If you’re interested in learning more about how bitcoin is the escape hatch from this dystopia, you can read our 21-page e-book HERE )