CBDCs and political oppression in your country.
CBDCs and political oppression in your country.
The Blockchain Industry: Examining the Dangers of Central Bank Digital Currencies (CBDCs)
The financial world is abuzz with talk of Central Bank Digital Currencies (CBDCs), hailed by proponents as a solution to many of the issues plaguing our current financial system. However, a closer examination reveals two important characteristics that are often overlooked: the data trail and the programmability of CBDCs. These factors pose significant risks to privacy, financial autonomy, and even democratic processes.
The Data Trail
CBDCs, as digital legal tender issued directly by central banks to individual digital wallets, will not offer anonymity. Customers will be required to go through identification processes similar to those imposed by commercial banks. This means that either the central bank, commercial banks, or both will always know who holds the fiat currency, how it is spent or transferred, to whom, and for what purpose. All this information will be stored on a central digital ledger operated by central banks.
This level of visibility will enable central banks to assemble a comprehensive ledger containing every citizen’s financial transactions from birth to death. While proponents may dismiss concerns, governments could potentially exploit this wealth of information to monitor citizens’ political affiliations, religious donations, mental health, and other personal details. Public health services might scrutinize alcohol and cigarette purchases, as well as lifestyle choices to determine insurance premiums. Even the CO2 footprint of purchases could be tracked for environmental policy adjustments, compromising the privacy of the citizenry.
Restrictions and Programmability
The introduction of CBDCs will fundamentally alter our relationship with money. Unlike physical cash that we directly possess, CBDCs will be held in our name at the central bank. This means that we will never have full discretionary power over our digital money—there will always be a middleman, the central bank, between us and our funds. If this intermediary refuses to process transactions on our behalf, we will be unable to make purchases or transfer money. In a world where CBDCs have replaced physical cash, we will no longer be able to simply pull out a banknote and exchange it with anyone.
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Essentially, every CBDC transaction could be subject to restrictions imposed by political leaders. Payment constraints, transfer limits, and bans on certain individuals, organizations, or companies could be imposed. Governments could regulate how money is spent, imposing limits or blocks on purchases like alcohol, cigarettes, fuel, electricity, or even flight tickets. This level of control conveniently enables governments to defund dissenting voices or prevent protests simply by pushing a button, without the need to issue orders to freeze bank accounts.
Moreover, CBDCs could potentially be used to enforce curfews or house arrests. Governments could program CBDCs to only function during certain hours or within a specific radius of an individual’s registered home address. This could effectively prevent political rallies or gatherings from taking place. The abuse of CBDCs could extend further to the depreciation of funds over time, allowing governments to stimulate the economy but leaving savers at a disadvantage. Special taxes, forced loans, and direct access to digital wallets for tax collection and fine deductions are also potential threats to financial autonomy under a CBDC regime.
The Veil of Ignorance
Beyond the constrained freedoms concerning data privacy and financial autonomy, a more fundamental danger looms. Those in positions of power could exploit CBDCs for electronic power grabs, undermining democratic processes. Granting governments the ability to defund and silence opposition threatens the very essence of democracy. It is akin to pouring a glass of whiskey for an alcoholic and hoping they won’t drink it.
To properly evaluate the pros and cons of retail CBDCs, we must consider the concept of the “veil of ignorance.” This prompts us to not only ponder whether our current government would abuse CBDCs, but also to consider the possibility of future governments doing the same. We must imagine the worst possible scenarios and reflect on whether those in power would misuse their authority over CBDCs. The risks become clear: CBDCs pose an imminent threat to freedom, not just in our own countries but worldwide.
In conclusion, while advocates of CBDCs tout their advantages in terms of stability, security, and efficiency, it is crucial to consider the risks they bring. The blockchain industry, with its deep understanding of technological advances, must actively engage in the discourse surrounding CBDCs to ensure that potential dangers are addressed. There is a need for careful regulation and the establishment of safeguards to protect individual privacy, financial autonomy, and democratic processes in the face of this new digital currency paradigm.
