What is Central Bank Digital Currency (CBDC)?... NO, it is not Bitcoin!
Is it any wonder that some people cannot tell the difference between the two, with headlines like US FedCoin and UK BritCoin? It is as though the mainstream media are intentionally trying to blur the lines.
Although CBDC may use similar blockchain technology, this is where the similarities end. Ultimately, the implementation of this financial technology will have wildly different effects on society, depending on whether it is centralised or decentralised. To understand the very real threat of CBDC, a certain level of technical understanding is required. Therefore, for those without a technical background, I will try my best to explain this in simple terms.
Cryptocurrency such as Bitcoin is decentralised. This means that there is no centralised ownership or control. It works because the digital ledger (aka block chain) is validated by everyone in the network. It is secured with some very clever cryptography, which ensures the security of each ‘block’ in the chain. Each block is basically just data containing a list of transaction. These ‘blocks’, in turn, make up the entire digital ledger. For promoters of cryptocurrencies, they often advertise that it is secure and transparent. Furthermore, if you own a cryptocurrency non-custodial wallet (the place where you store your cryptocurrency), no government can access your money without your permission. The only person who can access your money, is you! Now, I am not trying to sell you cryptocurrency here and nor is this in any way to be taken as financial advice. However, this is necessary information to understand the threat that CBDC pose.
In contrast to cryptocurrency like Bitcoin, the digital ledger of a CBDC is centralised entirely. This gives governments and central banks, complete visibility, and control of all citizens financial transactions. Some of you might be thinking, “how is this different from current online banking?”. Well, it is very different for several reasons. Firstly, if a government department wishes to go into your bank account, currently they must follow judicial process to gain access through retail banks and they must have a legally justifiable reason to do so. However, much of this privacy may be gone with CBDC. In fact, it is possible that retail banks themselves, will also be gone. Secondly and more importantly, CBDC is programmable money. This means that the Government and central banks will be able to program when, what and where you spend your money.
• Central bankers are always looking for ways to improve money velocity (i.e., spending) to boost the economy. Therefore, with CBDC Central Banks could simply add an expiry date to your money. So, you can forget about being a responsible saver because any money saved will be lost at the end of the year, month, week or even day!
• Our current Tory government seem committed to its insane green initiatives. So, maybe to help reduce the use of fossil fuels, the government puts a cap on how much fossil fuel you can buy each month. Fancy a road trip? Sorry, you’ve reached your fossil fuel limit this month.
• To varying degrees, governments around the world seem to flippantly decide what is or is not good for its citizens, without their consent. Therefore, maybe the government takes a disliking to a certain organisation or seller and thus, prohibits spending with these companies.
Although the above examples are not written in stone, the possibilities for total control are endless with CBDC. Therefore, we would be wise to take notice now and start the conversation as to the future of our money. Lastly, it is worth noting that more than 80% of the world’s central banks are already researching, developing, or have launched their own CBDC.
Ritchie Robinson - Libertarian Party, Wales