Since cryptocurrencies have begun to gain popularity as an alternative form of money, free from the control of banks and governments, they have initiated a series of actions to limit the reach of these assets.
One of the ways to limit their development and adoption is CBDCs.
What are CBDCs?
It is the acronym of Central Bank Digital Currency, that is: Digital Currency of the Central Bank.
In short, they are the digital version (developed on blockchain or some type of distributed ledger) of traditional fiat money, such as the dollar or the euro.
Unlike Bitcoin or Ethereum, CBDCs will be under the control of central banks and, therefore, tied to lifelong monetary policies.
According to central banks and governments, CBDCs offer a solution to cryptocurrency volatility. However, Central bank digital currencies are easier to control and are therefore a tool to fight Bitcoin.
However, these digital currencies are contrary to the crypto spirit; unlike Bitcoin, its issuance is dominated by a central entity, which may also limit user access and participation.
Could governments control you through CBDCs?
One of the main concerns users have with CBDCs is privacy. As it is programmable money, banks will be able to have access to all transactions of the users.
This is because the transactions will take place on a distributed ledger, so each one will be recorded. This method does not allow anonymity and collides head-on with what we understand by cryptocurrency.
It is a serious violation of anonymity and privacy, as governments can facilitate repression of political opponents and activists.
Maajid Nawaz, activist and founder of Qiulliam, a British think tank, noted that CBDCs can create a system of social credit.
Although it may seem like science fiction, something out of an episode of Black Mirror, the truth is that it could cause exclusion situations. For example, the government could prevent you from using money on public transportation, isolating you and limiting your freedom of movement.
According to information from Crypto News Flash, the Chinese government has introduced one of these control mechanisms in its e-Cny: an expiration date.
In this way, citizens must spend their digital yuan before a certain date or they will disappear from their wallets.
By scheduling money to disappear, governments can control citizens' spending and, most importantly, saving.
CBDCs also open the doors to new monetary policies. For example, governments could apply negative interest rates by simply reducing the balances in citizens' CBDC accounts. Simply put, governments could take money from your account based on their monetary policy.
At the same time, this would allow them to control spending. For example, it would be enough for the European Central Bank to threaten citizens with "taking the money from their accounts" for people to start spending it.
Basically, CBDCs could give rise to a new monetary policy in which the government would be the real owner of our money and the property rights of the individual would be subject to the "public good" and to the need to "manage the national economy."
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