Central Bank Digital Currencies – CBDCs
An Orwellian Nightmare?
What is a CBDC?
Central bank digital currencies are digital tokens pegged to a fiat currency of the issuing central bank. They are similar to cryptocurrency in so far that they use blockchain technology. Put simply, it’s a programmable digital coupon issued by a central bank or government.
Many countries are working on the development of CBDCs, and some have already implemented them. China is the first major economy to pilot a CBDC with many other countries actively working on ways to transition to digital currencies. The FED Dollar has recently completed it’s first successful test so its vital we understand the implications.
https://www.atlanticcouncil.org/cbdctracker/
What can a CBDC do that standard fiat cannot?
Most money is digital, so what’s the difference? The money in our bank accounts can be traced to a certain degree but it’s clunky and convoluted. A central bank digital currency will add the following functionality to our existing cash banking system.
1. Customised for individuals
2. Can be frozen or seized
3. Holding can be limited
4. Tax can be automatically taken
5. Fines can be automatically taken
6. Purchases can be controlled
7. Expiry dates can be applied
8. Limits on spending can be set
9. Location limits can be applied
10. Time limits can be set
Some of these attributes already exist within our current banking system but to a much lesser degree. A CBDC will take away the friction and make the process of freezing accounts and controlling spending easier. To demonstrate that this is coming to a country near you, the European Central Bank executive board recently confirmed that the digital euro may have transaction limits and a cap on savings.
This technology can be used to seize your money if you hold views contravening the mainstream narrative. The functionality of programmable money will allow governments to check behaviours to ensure they fall in line with the latest agenda and implement repercussions. They can stop travel, prevent you from buying certain foods and steer you towards the current social agenda.
Money is the energy that fuels your life and programmable money will control that energy.
According to Coin Telegraph a survey conducted by the Bank of International Settlements shows 90% of all central banks are exploring CBDCs and the above link supports this. This is not a question of ‘if’ but ‘when’.
This is the Telegraphs recent take:
How CDBCs will be sold to the Public?
Central Bank Digital Currencies will be marketed as better for the environment and the solution to inflation. Any centralised blockchain will use less energy but this is not necessarily a good thing (refer to my article ‘How Bitcoin Could Save the Environment for a more detailed explanation as to why). Any currency pegged to the current fiat system will not solve the existing inflationary pressures as it will just be a programmable form of the same currency. It will still be fiat money which will debase at the same rate, the fact it’s programmable makes it worse than the current fiat system because it can be set with an end date which means they can force you to spend it within a certain time frame.
Rishi Sunak is the current Prime Minster in the UK and prior to this role he served as a British conservative politician since 2015. His many responsibilities within government include Chief Secretary to the Treasury and Chancellor of the Exchequer. Previously he was working as an analyst for the investment bank Goldman Sachs. Rishi also completed an apprenticeship at the World Economic Forum (probably nothing) and is well versed in economics and an advocate for cryptocurrencies. During his tenure he has advocated for CBDCs and has muted the idea of a ‘Britcoin’. The clip below lays out his intension for this new technology:
It’s worth noting, there will be a significant difference between Retail and Wholesale CBDCs.
This will be bullish for crypto adoption as it will result in every citizen using digital wallets instead of bank accounts. It will also help the unbanked because anyone with a mobile phone will be able to use the technology.
However gently it is introduced initially, if successful it will facilitate totalitarian control. There are many examples of how various elite global non-governmental organisations such as the World Economic Forum and The Bank of International Settlements would like the world to look in the future.
And the infamous book written by Klaus Schwab:
https://www.amazon.co.uk/product-reviews/2940631123/
Here is another example of how the elite are trying to push this dystopian nightmare. The Tony Blair Institute for Global Change (yes, such an institution exists) state:
‘A well-designed CBDC is uniquely positioned to address barriers to inclusion, including by offering the unbanked alternative pathways to open transactional accounts and participate in the digital economy, particularly those who might otherwise fail to meet banking requirements. ‘
This statement is true and it will help to bank the unbanked, but there are currently better solutions that provide sovereignty and wield less control. The Bitcoin Lightning network is already offering this solution globally. To achieve the positive outcomes mentioned in the statement above, we do not need CBDCs.
CBDCs are not ethical. The implementation of such a currency will lead to ultimate government control. Everything you do will be tracked directly by the government. It has the potential to lead to control over your decision making. Whatever is deemed more ethical at the time or a specific political agenda will guide you. If eating less meat becomes a priority then they could prevent you from making further purchases if you exceed a quota; this could also stop you from eating sugar, or restrict your driving. If the economy declines, they could issue vouchers that must be spend in a certain time frame. Control will be the key and your freedoms will be organised. In a free market system, the only way to understand trends and evolving markets is by analysing the data arising from people’s free choice. If free choice is essentially guided then it’s no longer free choice and the data will not be accurate. It could be used to pursue the latest ideological agenda at the time and we know governments do not always get this right.
The Bank of England have been researching CBDC’s for a few years and it’s detailed on their website. Initially it felt like the UK was leaning towards stablecoins and away from CBDCs. As more countries race ahead with their implementation of this antiutopian technology it is becoming clearer as to which way the government will turn. The US’s favoured stablecoin is USDC. This is mostly backed by government debt and has been propping up US spending so is possibly no better.
The Governor of the Bank of England recently warned of ‘apocalyptic’ food shortages and the UK Chancellor at time (now Prime Minister) spoke of being powerless to assist with the cost-of-living crisis. They are laying bare the dire situation the world economy is in due to a multitude of bad decisions made by governments both from a geo-political and monetary point of view. The foundations are being laid for more ‘free money’ from the government. The introduction will be simple: download this wallet and we’ll air-drop you money. How could anyone resist?
The insidious drip feeding will commence. Slowly they may start to encourage employers to pay their employees using the new central bank digital currency. As it is programmable, your employer in theory could control what you spend your salary on. If there is an economic slowdown and a cash injection is needed, the government could issue tokens that need to be spent in a certain place or within a certain time limit. If your protesting is deemed too disruptive, your account will be ceased. This Orwellian nightmare seems far-fetched considering the relative freedom we have enjoyed; however, all mentioned points are already in pilot mode in other countries, whether it be the totalitarian control in China or the Canadian truckers in Canada. This is a sign of how society could be organised?
Follow the Science?
Science can be a subset of power and politics and we saw this during the pandemic. If what we can spend our money on is dictated by government mandates driven by ‘science’ it could be ill-informed and taking away freedom of thought. The term ‘follow the science’ was used as not to be challenged. It became clear that the scientific debate was far from clear cut and the government simply ordered the various scientific opinions and used those that reinforced their agenda.
This type of control seems alien to people that have lived in free countries. If the pandemic has taught us anything, it’s that mistakes can be made and the wrong advice can be followed. Most individuals value their sovereignty, however recently there have been a handful of laws implemented under the radar. Around 190 countries have signed up to a global agreement to allow the World Health Organisation to have overarching control over the next pandemic, even if it contravenes local laws.
https://commonslibrary.parliament.uk/research-briefings/cbp-9550/
In addition to this, earlier this year changes to the law were implemented to restrict our rights to protest:
https://www.libertyhumanrights.org.uk/advice_information/pcsc-policing-act-protest-rights/
A slow erosion of our liberties is taking place and in conjunction with CBDCs. Take Paypal for example, they recently updated their User Agreement Policy to fine users $2,500 if they violate their misinformation policy. This is a small glimpse into what the world will become under the governance of CBDCs. Essentially a small minority with specific interests deciding between right and wrong and penalising you accordingly.
What does this mean for the banking industry?
Currently we mostly hold our money in commercial banks, not directly with the Bank of England or with the government. Banks are governed by a universal set of rules to ensure compliance but overall, the detail of how the banking activity works is decided by the commercial bank or even the free markets. CBDC’s would result in banking directly with the Bank of England or equivalent such as The Federal Reserve. This will have consequences for the banking industry because it will change how commercial banks are run and will potentially result in central banks having full control over all transactions. This control will extend to assets within the network and that is where the programmable aspect of currencies will come into play.
Stablecoins are issued by centralised companies who work with banks to create an on-chain token which represents a real fiat currency. Transactions are viewable on a blockchain but the users are free to participate or not. Stablecoins can represent a free-market activity although they also have concerning aspects. The difference with CBDCs is the central bank control the servers and ownership can be adjusted. This is the polar opposite to Bitcoin which cannot be seized (if held in cold storage) and is censorship resistant.
CBDCs do not represent innovation, they represent control. With every transaction surveilled and controlled by a single entity this makes money political. It could also be described as communism on a blockchain - and essentially becomes spyware. The current fractional reserve banking system will no longer act as a third party. Like the phasing out of cash and the current fiat system, this will happen slowly.
Social Divides
Inequality has always been an issue and has been exacerbated since the USD came off the gold standard in 1971. Money has been printed to disguise bad monetary policy and fund never-ending wars. The introduction of CBDCs could be a precursor to a basic universal income. It will pacify the public until they realise their money will still find its way back to Wall Street.
Such a change to money will affect the structure of how fiscal policy works. It will create incentive schemes such as forcing boomers to have low interest rates to encourage spending and students will have higher interest rates to encourage saving. It will give rise to behavioural economics and behavioural systems. Every transaction you ever make will be recorded and you will lose the freedom to transact in anonymity.
So, what happens now?
I have no idea how this will pan out. If the violent reaction to PayPal’s recent user amendment policy is anything to go by, the introduction of CBDCs will not be well received. It will be down to the government to convince the public it’s progress and in your best interests. The need to privacy combined with the need to purchase items you do not want to be recorded on a blockchain forever, will force individuals to find a way to circumvent this control and find a suitable store of value outside of the system.
In a world where our brains are being hacked by phones and media, we still need to stay awake because if we do not, we will wake up in Communist China, living under a dictatorship and operating within a social credit system.
There is only one fully decentralised protocol which can move money to anyone on the planet with a mobile phone, in seconds and costing only pennies. It is possible to store this wealth outside of the current financial system and for you to maintain full custody of your property without fear of seizure or expiration. We may not be able to stop what’s coming but we can find ways to maintain our freedom. Bitcoin. This is how we fight for sovereignty of the individual.
Scary times ahead!!!