Much has changed since we first covered the subject of central bank digital currencies (CBDCs), and much has stayed the same. On the heels of China issuing a CBDC, the eCNY or e-yuan, we again have Western central banks considering their own digital counterparts.
Being the global reserve currency, the U.S. dollar is naturally being pushed as the front-runner in this race with a questionable trophy.
The recent (and lengthy) Wall Street Journal analysis undoubtedly has an “elephant in the room” air about it. The article covers everything about CBDCs and even admits there is “stiff resistance” to the project. Somehow, it seems the causes or sources of this “stiff resistance” must not be named.
The WSJ report says that a number of parties, from private institutions to Australia’s central bank, have objected to a number of issues surrounding CBDCs. Specifically, CBDCs are redundant, especially in nations that have a well-developed and robust financial system.
As an unnamed Australian central bank official stated:
A question that has received less attention to date, especially in countries like Australia that already have relatively modern and well-functioning payment and settlement systems, is the use cases for a CBDC and the potential economic benefits of introducing one.
Honestly, it’s no surprise to see any bureaucracy embarking on new and unnecessary projects to simply expand the bureaucracy.
But that’s not the real issue.
If CBDCs are the future, privacy is history
Fidelity covers the real issue in a far more thorough manner. CBDCs amount to a complete and total loss of financial privacy.
Furthermore, a CBDC can serve as yet another tool of financial exclusion of undesirables in a world already rich in tools to marginalize and suppress whoever is declared a “deplorable.” (Don’t think I’m making this up! These concerns are far from a fringe view.)
It’s hardly a coincidence that China, the country with the most established social credit system outside of North Korea, is now piloting CBDCs. They work in China because it’s China. The nation already functions as a panopticon, an Orwellian nightmare of constant and unrelenting surveillance. The ruling communist party sees CBDCs as a complement to their massive network of paid civilian spies who already report on their fellow citizens.
Saying that the U.S. can implement CBDCs without inevitably weaponizing their potential (as China has) is naive at best. Government’s primary function seems to be perpetuation of government. Offer bureaucrats a tool to disempower their critics and scold them not to use it and see what happens…
CBDCs are part and parcel of the destruction of liberty and human rights that are virtually impossible outside of China.
Crypto, we’re told, is full of criminals. Money launderers. A wretched hive of scum and villainy. Fidelity’s Anne Richards says that governments are actively seeking to replace these supposed ne’er-do-wells.
Which would be worse?
The question answers itself.
CBDCs are both digital currency and the opposite of crypto
As if anyone needs reminding, crypto was made with the stated intent of creating an alternative to the malpractice of centralized financial authorities. And what else fits that description better than the concept of the CBDC?
Another interesting point, and one we’ve heard brought up often, is that a Federal Reserve-issued digital dollar would avoid the kind of collapses we’ve seen from the privately-issued TerraUSD. Well, we have to ask:
- When the Weimar Republic’s currency collapsed, was it digitally issued?
- What about when the Venezuelan bolivar destroyed the nation’s economy?
- And what about the two double-digit inflationary periods in the U.S. in the last 40 years?
A FedCoin digital dollar would more likely destabilize the global economy.
As it happens, TerraUSD’s collapse came and went while other top private stablecoins remained intact. Clearly, it’s a matter of how sound the project is, not whether the issuer is private or sovereign.
When the World Economic Forum released its now-infamous “You’ll own nothing and you’ll be happy” video, we discussed the issue of centralization versus decentralization. The CBDC illustrates the drawbacks of centralization, as implemented by China, all too vividly.
Cryptocurrency already offers an alternative to CBDCs. Crypto is fast and easy to use. They work across national borders seamlessly. They don’t report back to a centralized government database about your purchasing habits. Cryptocurrencies have gained in popularity to a great degree for these very reasons.
We seriously doubt that a CBDC could ever really succeed in any nation where personal liberty and human rights are valued. What’s most interesting about this entire story is that central banks are so threatened by cryptocurrencies that they’re thinking, “We gotta make one of those in order to stay relevant.”
The good news for us is it’s probably already too late for central banks to stay relevant. They’re dinosaurs, and money has evolved far beyond their understanding, faster than they could’ve partially imagined. That’s why so many people are abandoning central bank currencies in favor of diversifying with cryptocurrencies to future-proof their savings.
