We’re supposed to be able to trust the agencies tasked with protecting us like the FBI, like the CDC, like our state and national governments. What we’ve found since the beginning of Russiagate through the COVID era until today, is quite a bit different and we need protections from them.
Should we trust a government with the power to make it illegal to buy something with cash? Or to give money to our children or friends in need?
Central Bank Digital Currencies (CBDCs) are seen as a solution to current economic instability. However, there are concerns about consumer confidence in these currencies and the potential for governments to force their usage and control. The recent example of Nigeria limiting cash withdrawals and making older notes obsolete highlights these concerns. CBDCs could potentially be used as tools for state coercion and surveillance, which is something we should be aware of.
Central Bank Digital Currencies (CBDCs) provide authoritarian regimes with direct control over a nation’s currency, allowing them to impose negative interest rates, collect taxes directly, and even spy on and censor citizens. CBDCs make it easy for governments to freeze funds and sanction individuals, leading to a step back towards state control. In contrast, Bitcoin aims to decentralize the financial system, protect individuals’ financial self-sovereignty, and provide a store of value that preserves purchasing power.
CBDCs need to be carefully considered before being implemented worldwide.
Digital currency refers to any currency that exists exclusively in electronic form, without a physical counterpart. There are three main types of digital currency: cryptocurrency, stable-coins, and central bank digital currency (CBDC). CBDCs are digital currencies issued and overseen by a country’s central bank.
While over 100 countries are exploring CBDCs, only a few have implemented them. Examples include The Bahamas (Sand Dollar), Eastern Caribbean (DCash), Nigeria (e-Naira), and Jamaica (JamDex). In the United States, the Federal Reserve is conducting research on CBDCs through Project Hamilton, but there is no indication of an imminent launch. Congressional approval would likely be required for the Fed to introduce a CBDC.
CBDC would function similar to physical cash, providing instant and irrevocable transactions. It would be legal tender and accepted for all purposes, including tax payments. Unlike cryptocurrencies, CBDC would not create taxable events with each transaction.
The Federal Reserve plans to launch its digital payments system called FedNow, which aims to facilitate faster and more cost-effective money transfers. The panelists at ATMIA discussed the hypothetical nature of CBDC and its impact on cash usage, with some suggesting that ATMs would still play a role in exchanging CBDC for cash.
However, concerns were raised regarding compliance, fraud control, financial inclusion, and potential disruptions to banks’ deposit base. The decision on implementing CBDC in the U.S. is not expected to be made soon and would require legislative and executive support.
In summary, the adoption of Central Bank Digital Currencies (CBDCs) may not happen for another five years, according to expert opinions. While some developing countries have already implemented CBDCs due to issues with their existing payment systems, privacy concerns remain a significant factor.
A study revealed that 46% of Europeans expressed worries about privacy with CBDCs, as cash offers the highest level of anonymity. It is clear that significant questions need to be addressed before widespread adoption can occur.
George Eliason
