A note on CBDCs

Before we move on to the next section and discuss why we are even using private banks and central banks if they have all these issues of trust, there is one more topic I wish to briefly touch on: Central Bank Digital Currencies.

With Bitcoin continuing to take a more prominent role in the public discourse by the day and its underlying properties being touted as groundbreaking, governments and central banks are reasonably getting concerned about what widespread adoption of bitcoin might mean for their own role as issuers and controllers of money. And, although they might not like the censorship resistance and lack of influence over monetary policy, there are some aspects of bitcoin that they do like, in particular when it comes to speed and ease of settling payments internationally.

In an attempt to keep up and prevent their position from being eroded, they have been working on their own central bank digital currencies, or CBDCs for short. This is a digital currency that is issued and fully controlled by a central bank where customer deposits are no longer held at private banks but rather directly at the central bank itself. It essentially takes the issues around confiscation and censorship associated with private banks and shifts them over to the central bank. Central banks then do not only hold the power to create new money and debase the currency but will also hold the aforementioned powers of confiscation and censorship. Because they are a single party through which all money flows and at which all money is custodied with no alternatives available, their control here is even greater than in the current scenario with private banks managing our money.

CBDCs could potentially offer a benefit over legacy systems when it comes to transaction costs for digital payments but only at a massive trade-off. Central banks will have in their possession perhaps the biggest tool for population control in our history, having complete power over the value and movement of the money of individual citizens. One ring to rule them all, if you will.

Speaking from the privileged position of a developed, democratic country with good checks and balances, I want to stress that I do not believe those pushing for CBDCs to have malicious intent, nor do I wish to paint a bleak picture of an inevitable future. Nevertheless, I believe we cannot overstate the incredible locus of power that is associated with the implementation of a CBDC, and I am aware of what an incredibly slippery slope it is to allow such positions to develop. Furthermore, there are billions of people that have fewer reasons to trust the proper use of such power, let alone the capacity to counter any misuse that would inevitably happen.

Over the upcoming years, we will see CBDCs being discussed together with Bitcoin as if to be a more safer alternative by virtue of it being backed by a central bank. CBDCs could not be more of a polar opposite to Bitcoin and the ideas behind it. In fact, the mere possibility of a world of CBDCs is a fundamental raison d'être of Bitcoin and is part of a dystopian future that the creators of the underlying technologies used in Bitcoin hoped to prevent. Bitcoin is created specifically as an alternative to a fully state-controlled money.

Unfortunately, a lot of people will not have the time or interest to explore the implications of a CBDC, whether for their own lives or that of future generations, and there is a big risk of these currencies becoming widely accepted without a general awareness of its underlying issues. I hope the resources presented so far help you create a more informed idea of its pros and cons.