I was listening to a podcast where Richard Werner was speaking about economics and banking system. It was an eye opener, I am using AI to argue against it or not and to dissect everything. Just to understand more.
What strike me a lot was: The Real Danger of CBDCs Isn't "Digital" - The push for Central Bank Digital Currencies (CBDCs) is often framed as a simple upgrade from old-fashioned cash to modern digital money. But our financial system has been digital for decades.
The real, and more concerning, change isn't the "digital" part—it's the "central" part. This represents a fundamental move toward centralization of financial power. A CBDC system could mean the central bank offers accounts directly to the public. This upends the traditional banking structure where central banks support commercial banks, not replace them.
China moved from the Soviet mono banking system to thousands of small local banks and thrived. Doubling national income every 4.5 years for 40 years and becoming the most powerful economic power (faster than Germany/America) and lifting more people out of poverty than anywhere else before in history. But we are moving in the opposite direction our central planners in Europe in Brussels and and at the ECB they are killing banks, and although now legislation stopped CBDCs in US, they are heavily thinking about that.
In a crisis, funds could flee commercial banks and rush into the perceived safety of the central bank, potentially collapsing the private banking sector and creating a single, state-controlled "mono-bank." This is a step towards central planning, not financial innovation. The most alarming feature of a CBDC is its potential for programmability. This technology transforms money from a simple medium of exchange into a tool for control.
It would give a central authority the power to write rules directly into the currency itself, enforcing instant compliance. Your ability to spend your own money would no longer be guaranteed; it could become conditional.
- Imagine transactions being denied for reasons like:
- Exceeding a personal carbon footprint limit.
- Purchasing goods or services deemed non-essential.
- Traveling outside a designated geographical zone.
- Expressing views critical of the authorities.
This isn't just a new way to pay. It's a potential architecture for surveillance and social control, where financial freedom is subject to an algorithm. The debate over CBDCs is ultimately about power, privacy, and the future of personal liberty.
Mechanisms of Control
The programmability of a CBDC could enable several forms of control that are not possible with physical cash or current digital money:
Targeted Restrictions: Money could be designated for specific purposes. For example, stimulus payments could be programmed to be spent only on essential goods like food and utilities, and not on things deemed non-essential.
Expiration Dates: Funds, such as welfare benefits or stimulus payments, could be given an expiry date to force spending and stimulate the economy.
Geographic Limitations: Spending could be restricted to a specific geographic area, as you noted, such as within a certain radius of one's home.
Negative Interest Rates: In a deep recession, a central bank could directly apply negative interest rates to citizens' CBDC holdings to penalize saving and encourage spending.
Instantaneous Freezing of Assets: For individuals suspected of illicit activities, or even for political dissidents, a government could instantly freeze or seize their funds with the click of a button.
The End of Financial Privacy
A CBDC, by its nature, could create a centralized ledger of all transactions. Even if designed with some privacy-preserving features, the potential for surveillance is immense. Authorities could have a real-time, granular view of every citizen's financial life. This data could be used for:
Social Scoring: Your financial activities could be used to create a profile of you, which could then influence your access to credit, housing, or even employment.
Behavioral Enforcement: As you mentioned, a government could use financial restrictions to enforce compliance with social policies, such as carbon footprint limits or public health mandates.
Suppression of Dissent: Donations to political organizations or media outlets critical of the government could be restricted or monitored.
The General Manager of the Bank for International Settlements (BIS), Augustín Carstens, stated, a key difference with a CBDC is that "the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”