Cointime

Download App
iOS & Android

CBDCs: How Dangerous Are Central Bank Digital Currencies?

Validated Individual Expert

Blockchain technology is ushering in a new form of currency and central banks are taking advantage of this.

Central Banks around the world are in the process of creating and implementing a new type of digital currency — Central Bank Digital Currency (CBDCs).

CBDCTracker.org

CBDCs are Worldwide

According to CBDC Tracker, almost all countries of the world are experimenting with CBDCs and are in various phases of development and implementation.

There are nine countries and territories that have already launched their CBDCs which include:

  • The Bahamas
  • Antigua and Barbuda
  • St. Kitts and Nevis
  • Monserrat
  • Dominica
  • Saint Lucia
  • St. Vincent and the Grenadines
  • Grenada
  • Nigeria

There are also +80 other countries with CBDC initiatives and projects underway and just recently a pilot CBDC program was launched by the New York Feds.

What is a Central Bank Digital Currency?

A Central Bank Digital Currency is an equivalent to digital cash, issued by a central bank and pegged to the value of the country's fiat currency.

Privacy Concerns of CBDCs

However, unlike physical cash, which has the ability to be transacted anonymously, digital cash is not anonymous and can be programmed. It is this programmability of digital cash which is of greatest concern.

The programmability of digital cash gives the power to (central) banks direct insight into purchases and the identities of the transacting parties as well as the ability to block or censor any transaction.

This new form of ‘digital cash’ may pose the single greatest threat to personal liberty and freedom in our lifetime.

Concerns of Programmable Digital Money

Due to the technological nature of ‘digital money’, much more control over its usage can be made when compared to traditional cash.

This is a new type of money that has many ‘features’ which have not been previously possible with traditional money.

CBDCs give the ability for (central) banks to block, censor, incentivize or discourage any type of transaction.

This can include:

- Capping Cash Balances

Banks have the ability to disincentive saving money by putting a cap on cash balances and then charging a negative interest rate on balances over the cap. While this may sound like science fiction, it is already in place in the Bahamas CBDC, (The Sand dollar).

- Specific Use Only

CBDCs could be programmed to only be spendable at certain retailers, during specific periods and/or only spendable by specific individuals.

- Negative Interest Rates

While it is common to expect a positive interest rate in your bank account, CBDCs can be programmed to include negative interest rates as a form of disincentive.

- Expiry Dates

Unlike traditional money, CBDCs could be programmed to expire after a specific date, in this way creating an incentive to spend it before it expires.

- Taxation per transaction

Mandatory taxation could be imposed on every CBDC transaction as a form of tax revenue for the state and could be imposed on all and every transaction.

The term ‘digital cash’ doesn’t fully encompass the possibilities available to (central) banks when they have the power to program money, effectively transforming this ‘digital money’ into a state-issued token, which then would only be able to be spent under their predefined conditions.

How Dangerous are CBDCs?

Central Bank Digital Currencies are a tool with the power to effectively turn digital money into a state-issued token.

CBDCs are set to be implemented across the world in each and every country which has an existing central bank.

This new form of digital money gives (central) banks a level of transactional granularity and control over the use of money which has never existed before.

While they may tout the benefits of digital money to help control the money supply and reduce illegal or illicit transactions, the freedom we once had to anonymously spend cash would be non-existent with this digital money.

Our ability to spend this ‘digital money’ would be at the discretion of the governing body and the level of programming embedded in the money.

November of this year is set to be the beginning of the ISO 20022 standard, a standard that will be used by central banks and financial institutions in the cross-border and international money movement and a key component of this new financial system.

While CBDCs have been touted as a means to fight fraud and enable greater financial stability, they also have the (likely) potential to be abused.

CBDCs have the potential to become the greatest single threat to personal liberty and freedom in our lifetime.

While it is likely we can do little to prevent the adoption and implementation of CBDCs by banks and world governments, as individuals we do have the power to educate ourselves and be well-prepared for this new global financial system.

Comments

All Comments

Recommended for you

  • Pandu Financial Group received the first round of strategic equity investment of tens of millions of Hong Kong dollars, led by Longling Capital

    Pando Financial Group announced it has received tens of millions of Hong Kong dollars in strategic equity investment led by Longling Investment. Pando Financial Group stated that it plans to use the newly injected funds for key growth areas, including market expansion, innovative product development, key talent recruitment, and technology upgrades, aiming to accelerate the layout of opportunities in the era of virtual assets through these strategic initiatives. Currently, the group's asset management scale has reached $500 million. Pando Asset, a subsidiary of Pando Financial Group, established its headquarters in Zurich in 2022 and issued the Pando 6 spot virtual asset fund (Bitcoin/Ethereum spot ETPs) on the Swiss Exchange. Another subsidiary of Pando Financial Group, Pando Limited, obtained licenses from the Securities and Futures Commission in Hong Kong, including Type 1 (securities trading), Type 4 (advising on securities), and Type 9 (asset management), as well as public fund qualifications, and was approved to manage investment portfolios with more than 10% invested in virtual assets and issued several excellent performance actively managed ETF products.

  • Hong Kong Monetary Authority launches industry consultation on “renaming virtual banks as licensed digital banks”

    Hong Kong virtual banks released their annual reports for 2023 last week. The eight virtual banks collectively lost about 2.99 billion yuan last year, a decrease of about 12% compared to the total loss of about 3.4 billion yuan in 2022. In response to the occasional feeling of "unreality" brought about by the term "virtual" in recent years, the Hong Kong Monetary Authority has initiated a consultation on renaming with the eight virtual banks, the Hong Kong Bankers Association, the Hong Kong Restricted Licensed Banks and Deposit-taking Companies Association, with the aim of renaming virtual banks as licensed digital banks, for a period of one month. It is reported that in the Asian region, similar banks have different names in different places. South Korea and Singapore issue licenses under the name of "digital bank", with Singapore further dividing them into digital full banks (DFB) and digital wholesale banks (DWB).

  • Chairman of the Russian State Duma Financial Market Committee: I do not support a complete ban on the circulation of cryptocurrencies in Russia

    Anton Gorelkin, Chairman of the Financial Market Committee of the Russian State Duma, said that he does not support a complete ban on the circulation of cryptocurrency in Russia. He explained in a post on Telegram that this restriction is not intended to ban the use of all cryptocurrencies, but rather to regulate the establishment of cryptocurrency exchange platforms within the legal framework of Russia. Anton Gorelkin also believes that the establishment of a legitimate cryptocurrency infrastructure in Russia is influenced by geopolitical realities, and this requires consideration of factors related to international relations. He further added that allowing such infrastructure may expose Russian companies to Western sanctions. In addition, Anton Gorelkin pointed out that this restriction may be lifted in the future, and users can still use foreign cryptocurrency exchanges and over-the-counter trading services as before. However, the impact on many over-the-counter cryptocurrency services in Moscow is still uncertain.

  • Ethereum L2 TVL is $39.98 billion, of which Base TVL is $5.57 billion

    According to L2BEAT data, the current Ethereum Layer2 TVL is $39.98 billion, with a 7-day increase of 0.69%. The top five TVLs are:

  • Hong Kong Exchanges and Clearing Limited: The total market value of Bitcoin and Ethereum futures ETFs reached HK$1.2 billion in the first quarter, with an inflow of HK$592 million

    According to data disclosed by Brian Roberts, head of securities product development at the Hong Kong Stock Exchange, shows that after the approval of virtual asset futures ETFs for public offering in Hong Kong by the China Securities Regulatory Commission on October 31, 2022, three virtual asset futures ETFs investing in Bitcoin and Ethereum futures were listed on the Hong Kong Stock Exchange. Since their launch, these ETFs have been popular with investors and have a high trading volume. The daily trading volume has increased from HKD 8.9 million in 2023 to HKD 51.3 million in the first quarter of 2024, and they have also attracted HKD 529 million in capital inflows. As of the end of March 2024, the total market value has reached HKD 1.2 billion, an annual increase of 255%.

  • Cryptocurrency market financing totaled $1.02 billion in April, involving 161 financings

    On May 6th, it was reported that the total financing amount in the cryptocurrency market in April reached 1.02 billion US dollars, involving 161 financing deals. This is slightly lower than the total investment of 1.09 billion US dollars in March, which had 186 deals. However, cryptocurrency venture capital has exceeded 1 billion US dollars for the second consecutive month this year, marking the first time since the end of 2022 for the industry.

  • The total open interest of ETH contracts increased to $10.68 billion

    According to Coinglass data, the total open positions of ETH futures contracts on the entire network are 3.39 million ETH, equivalent to approximately 10.68 billion US dollars. Among them, the open positions of Binance ETH contracts are 1.16 million ETH (approximately 3.64 billion US dollars), ranking first.

  • Suspected MakerDAO multi-signature wallet deposited 750 MKR to Binance 2 hours ago

    According to Spot On Chain monitoring, MakerDAO has been depositing MKR into CEX. Two hours ago, the multi-signature wallet 0xbba (possibly MakerDAO) deposited 750 MKR (approximately $2.19 million) at an average price of $2920 to Binance.

  • BASE network TVL exceeds $1.5 billion

    According to DefiLlama data, BASE Network TVL is currently at $1.527 billion with a 24-hour increase of 0.53%. The top three ecological protocol TVL rankings are as follows: Aerodrome TVL reached $670 million with a 7-day decrease of 7.5%; Uniswap TVL reached $228 million with a 7-day decrease of 3.52%. ExtraFinance TVL reached $104 million with a 7-day decrease of 8.25%;

  • Russian tax authorities will start collecting taxes in digital rubles from 2025

    The Russian tax authorities will start using digital rubles for taxation from 2025, and banks will be given the power to prevent "suspicious" CBDC transactions. According to Klerk, the latest tax law amendment signed by Russian President Putin at the end of last year states that the Russian tax authorities will "switch to using digital rubles for taxation from 2025". The media added that the Ministry of Finance hopes to "start paying pensions and other social benefits with digital rubles". As part of the expanded pilot program, government agencies promise to actively adopt digital rubles in 2024.