They are seen by central banks and traditional financial organisations as the panacea for the ills within the fiat monetary system, but central bank digital currencies (CBDCs) will need to be extremely complex, and may do more harm than good.
From the Bank of England to the European Central Bank, the buzz word is currently CBDCs. Never mind the trillions of fiat currency printed and their resulting debasement. The knight on his white horse is coming to save the day, and CBDCs will be that saviour.
As Christine Lagarde, president of the European Central Bank spits out her hatred of crypto, at the same time she fawns lovingly over the prospect of the European bank’s very own digital currency, which by her own reckoning could be another 4 years off.
However, according to a report by a London-based think-tank, consumers would be unlikely to be incentivised enough to use a CBDC. For senior research fellow Zack Meyers, “without widespread adoption, a CBDC will be an expensive failure”. He added:
“The EU shouldn’t be distracted by the prospect of a digital euro -- which may sound impressive and exciting, but may give Europeans few benefits they can’t enjoy already.”
The biggest disadvantage of CBDCs is that individual privacy can be completely taken away. The report states that a retail CBDC could be designed so that transactions could be made offline and without reporting it to a centralised ledger.
It then annuls this possibility by saying that “the ECB has ruled out anonymity”. The oft-used warcry of terrorist financing and anti-money laundering must of course be put before any individual rights of citizens.
The report ends by saying that CBDCs “unleash more competition and innovation”, but this all presupposes that central banks would be happy with the idea of a decentralised CBDC that would allow developers to build freely on top of a basic system.
The statement that Europeans should be impressed and excited by the arrival of a central bank digital currency almost beggars belief, unless of course most people are sufficiently brain-washed by mainstream media, which of course is likely.
It’s extremely doubtful that any central bank, at least in the established first world countries, would allow their CBDC to be decentralised. They want control, and therefore centralisation and the ability to know exactly what each individual is doing with their money is likely to be the plan.
True innovation is coming out of the crypto sector, and it is not controlled by central planners. Citizens need to go for what is best for them, and not be corralled into accepting a CBDC, as is the case in China. Liberty and privacy are the most important concepts here. It is hoped that citizens will be allowed to make their own choice.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.