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CBDCs Will Lead To Absolute Government Control

Updated: Feb 29

Many nations are actively exploring the development of digital incarnations of their currencies, commonly referred to as Central Bank Digital Currencies (CBDCs). While the United States is contemplating the creation of a digital dollar, countries such as China and the Bahamas have already initiated pilot programs for CBDCs. Even in less economically developed nations, there is growing interest in participating in this emerging trend.

CBDC's , Central Bank Digital Currency

The increasing prevalence of CBDC initiatives suggests an undeniable trend. We appear to be gradually progressing towards a cashless society, with CBDCs poised to assume a central role in our economic landscape.

Central Bank Digital Currencies (CBDCs) derive their value from government backing and are tied to the worth of the country's official currency. This sets them apart from cryptocurrencies, which lack support from any governing institution or tangible asset. The "legal tender" status granted to CBDCs enables their use for purchasing goods, settling service payments, and meeting tax obligations, capabilities that remain unavailable with cryptocurrencies at present.

Similar to cryptocurrencies, CBDCs leverage Distributed Ledger Technology (DLT) for the management of money supply and transaction tracking. Furthermore, central banks have the potential to incorporate payment services into the ledger, streamlining and enhancing the ease of transactions.

These digital currencies issued by governments are under their exclusive ownership, allowing them to establish regulations governing their circulation, usage, and accessibility. While the notion of centralized control over digital currencies may not be immediately apparent, it gives rise to several concerns and challenges:

1. Privacy Rights Infringements

The introduction of CBDCs will introduce an unprecedented level of intrusion into citizens' privacy. Each transaction, transfer, and payment will be recorded in a government database, serving both legitimate purposes such as tax collection and more concerning purposes like financial surveillance.

Governments could potentially assume the role of a "Big Brother," closely monitoring financial activities within the country. At their discretion, governments could easily prohibit specific transactions they consider "illegal." These restrictions might encompass a wide range of activities, from the purchase of legally available products like marijuana to informal payments to workers or remittances to family members in countries deemed as blacklisted.

2. Vulnerabilities in the System

CBDCs are set to be entirely centralized and hosted on private or permissioned blockchains. Although this design offers improved transaction speeds, it also introduces vulnerabilities in the form of single points of failure. In the event of a breach of just a few servers, malicious actors could gain the potential to manipulate the entire monetary supply of an entire nation.

3. Rise in Data Security Incidents

Large technology corporations are poised to take on roles akin to traditional banking institutions, serving as the backbone for global transactions. This shift also empowers service providers to gather and centralize user data for corporate purposes.

Centralized data repositories present attractive targets for cybercriminals. A potential breach of platforms like Google could result in a range of identity theft incidents today. However, in the future, hackers may not only compromise your identity but also gain access to your entire wallet balance.

4. Unpredictable Fiscal Policies

One claimed advantage of CBDCs is their capacity to streamline the implementation and enforcement of fiscal policies. Governments can readily create new digital currency units to address deflationary trends in the economy. Tax authorities will also experience increased efficiency in monitoring financial transactions and automating tax deductions.

5. Financial Control and Potential Misuse of CBDCs

The introduction of a Central Bank Digital Currency (CBDC) significantly amplifies government oversight over financial transactions within the economy. This heightened control has raised concerns about the possibility of governments using money as a tool for coercion, effectively weaponizing currency by cutting off the money supply to individuals and businesses.

Presently, political authorities must rely on intermediaries like banks and payment service providers to enforce financial discrimination policies. For instance, there have been instances where governments, such as Nigeria, instructed banks to block donations to movements like ''EndSARS'', which were protesting police brutality.

CBDCs enable national governments to freeze financial assets directly, reducing their dependence on banks. This newfound capability raises concerns, as it could potentially be used to silence dissent or discourage political criticism. For example, individuals who criticize the ruling party or participate in protests could find themselves effectively excluded from the financial system.

In certain countries, such as China, social credit systems are already in place, evaluating individuals based on various factors like their political beliefs, shopping habits, online activity, and employment history. The integration of social credit systems with CBDCs could enable governments to "punish" those who violate their regulations by restricting their ability to make financial transactions.

If this scenario appears dystopian and alarming, it underscores the perceived risks associated with CBDCs. It is essential to carefully consider these potential consequences and ensure that safeguards are in place to protect individual rights and liberties as CBDCs are adopted.

Cover Photo by Adam on Unsplash


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