Central bank digital currencies (CBDCs) are similar to decentralized cryptocurrencies such as Bitcoin, except that they centralize power and influence in a single entity – whose goals may not align with yours or mine.
The past few months have seen an acceleration in the development of CBDCs. Along with the exposure of numerous political blunders, including the mishandling of the health crisis, a hostile narrative towards them has emerged.
While the CBDC advocates for benefits such as greater financial inclusion and greater efficiency, concerns about their potential threat to personal sovereignty do not go away.
A global network of CBDCs is on the way.
According to Atlantic Councilthe majority of countries have launched or are in the process of launching a central bank digital currency (CBDC), with African countries standing out as the outliers in this case.
Proponents argue that minimizing the cost of currency, making cross-border transactions faster and safer, and tackling the problem of counterfeit currency are valid reasons for implementing CBDCs.
Bank for International Settlements (BIS) Managing Director Agustin Carsten echoed that sentiment last year, saying CDBCs have the potential to bring global financial stability while minimizing associated risks.
Additionally, Carsten strangely implied that only central banks have the right to oversee monetary systems, not “big tech” or private cryptocurrencies.
“The soul of money does not belong to big tech or an anonymous ledger.”
Over the past few weeks, all G7 countries have moved into the development stage of their respective CBDC programs. Mexico has revised its rollout date to sometime in 2024, and the digital ruble is operating a test pilot, signaling strong momentum toward a global network of CBDCs.
The problem with CBDCs
Speaking recently on Fox News, an investment banker and former US government official catherine fitts detailed a scathing account of the CBDCs, calling their implementation “the last closing of the door.”
Fitts spoke of a general ignorance of the issue of how many are sleepwalkers in a system where our assets become the assets of central banks – thus making citizens extensions of the state.
“We don’t understand that when this door closes behind us, we will literally be sitting in a system where central banks believe our assets belong to them…”
In a CBDC system, authorities can potentially control an individual’s spending. Examples include blocking specific purchases or merchants, limiting spending and transfer amounts, and even imposing expiration dates on money. As such, CBDCs are not currencies; instead, they are a “financial transaction control grid,” Fitts warned.
She concluded that we cannot let propaganda persuade us that CBDCs are practical or necessary.
The digital book to limit transfers
Although Fitts’ account is largely hypothetical, there are examples found elsewhere that are factual, supporting his arguments to a large extent.
On February 4, the Bank of England (BoE) and the UK Treasury released their CBDC roadmap and announced a four-month consultation to find out public opinion on the digital pound.
According to Telegraph, the Treasury’s initial plans limit user transfers to a few thousand pounds to avoid the possibility of bank meltdowns resulting from rapid outflows. The Treasury said transfer limits encourage adoption while balancing implementation risk. However, he added that “these limits may change in the future”.
Although the Treasury may lift transfer limits in the future, the initial imposition of a limit inspires little confidence in those who are fed up with political shenanigans and double talk – all the more so when commentators like Fitts point to the link between CBDCs and financial tyranny.
Digital yuan pilot program moves forward
The People’s Bank of China (PBoC) launched its digital yuan program in 2014. It has since undergone several phases of testing and development. In November 2020the first public test pilot was launched in Shenzhen, followed by an expansion to 10 additional cities in April 2022.
Individuals participate in the program by registering to participate in a lottery through China’s four major banks. Randomly selected winners receive a portion of the allocated funds. In the Shenzhen trial, 50,000 winners received digital “red envelopes” worth 200 yuan ($30) each. Beneficiaries were able to spend the money at local retailers.
By September 2022, the program has been expanded to the provinces, with trials in Guangdong, Hebei, Jiangsu and Sichuan. Most recently, in March 2023, Fujian Province was included in the program.
social credit system
The financial tyranny of the CBDC described by Fitts is concerning enough on its own. However, when combined with a social credit system, it becomes the stuff of dystopian nightmares.
China’s social credit system was first announced in 2014, coinciding with the launch of the Digital Yuan Research Group. The planning document highlighted the importance of managing “complete credit information” and promoting social cohesion to foster greater trust within society.
“is an effective method for enhancing social sincerity, boosting mutual trust in society, and reducing social contradictions, and is an urgent requirement for strengthening and innovating social governance and building a harmonious socialist society.”
THE system applies to individuals and businesses and works like credit scores in the West. Points are added and deducted based on desired and undesired behavior – as determined by the state. Thus, for example, late payment of business taxes would result in a deduction.
Since the Social Credit Score system is still in the pilot phase, the ultimate consequences of a low score are unknown. However, based on reports, the penalties include banning travel on trains and planes, banning children of low-scoring parents from attending certain universities, informing employers of hiring decisions, the increased likelihood of audits and inspections and public shame.
Reports also say there may be regional variations in scoring, with specific actions resulting in a points deduction in some cities but not others.
There is no logical argument against deterrence and the suppression of serious crimes. But citizens say trivial offenses are also punished, such as jaywalking, walking an off-leash dog, cheating in a video game and not visiting parents often enough, raising serious questions about political excesses.
Alex Gladstein, director of strategy at the Human Rights Foundation, said an integrated CBDC social credit system sets a chilling paradigm. The concerns are justified, given the Communist Party’s history of human rights abuses and lack of transparency.
“When the government can take away financial privileges for posting the wrong word on social media, saying the wrong thing on a parent call, or sending the wrong photo to loved ones, individuals are self-censoring and demonstrating extreme caution. In this way, the control of money can create a social chilling effect.
Skeptics would say that social credit systems would never see the light elsewhere, especially in the “democratic” West. However, in December 2022, the Italian government deployed a digital identification program in Rome and Bologna to reward “Net Zero” practices. Some argue that digital IDs are a precursor to a social credit program.
Game over for freedom?
Over the past few weeks, many notable people have expressed unease over a coordinated attack on the crypto industry via the banking system, AKA “Operation Chokepoint 2.0”,
Although the program is not directly related to the push towards CBDCs, former Coinbase CTO Balaji Srinivasan has no doubt that the two are linked.
In a March tweet, Srinivasan said the upcoming FedNow payment system is the precursor to the US CDBC system – warning that the unprepared will be locked into a digital financial fence.
The latest developments have seen law firm Cooper and Kirk call on Congress to investigate the “secret war on crypto”. They argued that the recent regulatory actions were illegal and unconstitutional and aimed at hampering the digital asset industry.
They recommended several measures to hold regulators accountable, including reminding agencies that they are subject to Administrative Procedure Act and must follow due process and check whether regulators have intentionally suppressed private sector innovation.
Chris Blecdecentralization advocate and CEO of Blec report, told CryptoSlate that CBDCs are sold on efficiency, convenience, and improving society. But behind the message of hope hides an attempt”eliminate our financial privacy and micro-manage our lives.”
Nonetheless, Blec said the war is not lost and it is up to each of us to fight back by:
- Bottom-up action – buy decentralized private cryptocurrencies like Bitcoin.
- Top-down action – using the political system to support anti-CBDC representatives.
“The bottom-up method is to buy stateless, incorruptible currencies like Bitcoin. The top down backs politicians like Ron DeSantis, who have sworn to use the violent force of government to fight government itself.
Although the action of both approaches can slow the implementation of CBDC, Blec doubts that they can be completely stopped. He said the end of CBDCs would require significant societal changes, especially in political governance and how we treat each other.
Rather grimly, Blec doesn’t believe society is capable of ending CBDCs. However, he remains optimistic about the possibility of positive change after the collapse of society and the end of the current cycle.
“I don’t know if that’s realistic in our current society. However, I feel more and more optimistic about our company NEXT.
It’s hard to imagine people coming together to oppose CBDCs, or authoritarianism in general, regardless of their differences. However, glimpses of national unity are emerging in France, Holland and elsewhere.
Yet the reality is that many are still under the spell of disunity over matters of little real importance, while others are afraid to stand up and be counted.
Pain is inevitable, whether through adherence to CBDCs or resistance against them. The choice we all face is whether we should endure the pain of submission or resistance.
Ultimately, the future of individual freedoms and privacy hangs in the balance. The question is, what will you do to protect them?