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

  • Tokenization platform AgriDex completes $5 million Pre-Seed round of financing

    AgriDex, a tokenization platform on the Solana blockchain, announced the completion of a $5 million Pre-Seed round of financing, led by Endeavor Ventures, with participation from African Crops Limited, Oldenburg Vineyards, and former Goldman Sachs and Citadel executive, Hank Oberoi. It is reported that AgriDex is expected to launch its platform and token, AGRI, in the third quarter of this year. According to its white paper, AgriDex has reserved 5% of the total token supply, or 50 million tokens out of 1 billion tokens, for airdrops.

  • UXUY Completes $7 Million Pre-A Round of Financing, with Investments from Binance Labs, Bitcoin Magazine, and Other Institutions

    UXUY, the next-generation decentralized multi-chain trading platform incubated by Binance Labs, announced the completion of a $7 million Pre-A round of financing. Since its establishment, its total financing amount has exceeded $10 million. UXUY is an important builder of the Bitcoin ecosystem, and more than 100,000 traders use Bitcoin Lightning Network services through UXUY. UXUY's current round of financing has received investment from well-known institutions in Asia, North America, and Europe, such as Binance Labs, UTXO Management (Bitcoin Magazine), JDI Ventures, Bixin Ventures, SWC Global, Matrix Partners, CMS Holdings, Dewhales Capital, Comma3 Ventures, Satoshi Labs, YBB Capital, GBV Capital, Web3Vision, Pentos Ventures, NGC Ventures, Alti5, Metalpha, and GSR. The funds raised by UXUY in this round will be used for the construction of the Bitcoin ecosystem infrastructure, and will be committed to promoting the efficient and low-cost trading of Lightning Network Taproot Assets, Ordinals BRC-20, Runes, and other assets. Jordan, co-founder of UXUY, said: "We are pleased to be strategic partners with all investors! This year, we have successfully built a bridge between the Bitcoin Lightning Network and the multi-chain ecosystem. UXUY will continue to promote the use cases and popularization of the Lightning Network in trading scenarios, and make more contributions to the Bitcoin ecosystem." According to RootData, a Web3 asset data platform, UXUY is a next-generation decentralized multi-chain trading platform based on MPC wallets. UXUY actively participates in the construction of the Bitcoin Layer2 ecosystem, fully integrates into the Bitcoin Lightning Network and Taproot ecosystem, provides Lightning Address DID services to users, and becomes an important bridge connecting the Bitcoin and Ethereum ecosystems. As a decentralized multi-chain trading platform, UXUY provides immediate cross-chain trading services for Coin, Token, and Inscription among public chains through the establishment of uPool.

  • Taiwan's administrative agency passed four new anti-fraud laws to bring cryptocurrency traders under control

    It was announced that Taiwan's administrative management agency has passed the "New Anti-Fraud Law" to regulate cryptocurrency traders. In the future, businesses or individuals providing virtual asset services or third-party payment services must complete anti-money laundering measures and register their services or log in. Failure to do so may result in a maximum of 2 years in prison or a fine of up to NT$5 million. Businesses or individuals outside of Taiwan providing virtual asset or third-party payment services must register their companies or branches according to company law and complete anti-money laundering measures and service registration or login. Otherwise, they are not allowed to provide virtual asset services or third-party payment services in Taiwan. Qiu Shuzhen, the deputy chairman of Taiwan's financial regulatory agency, stated that there are currently around 60 to 70 cryptocurrency traders in the market, of which 25 have passed the anti-money laundering review by the financial regulatory agency. In the future, all traders will be required to declare and undergo review, and a cryptocurrency traders' association will be established for legal, administrative, and association management. Accounting professionals will also be enlisted to assist with internal control.

  • EigenLayer TVL falls back to $14.794 billion

    According to DefiLlama data, the total value locked (TVL) in Ethereum's re-staking protocol EigenLayer has fallen below $15 billion, currently at $14.794 billion.

  • The EU is considering including cryptocurrencies in the 12 trillion euro investment market, and its impact may far exceed that of US ETFs

    The European Securities and Markets Authority (ESMA) is consulting with the investment product advisory industry and experts on whether cryptocurrency assets should be included. This move could open up a broader market for cryptocurrencies, far exceeding the market size of spot Bitcoin ETFs. The plan aims to expand the scope of UCITS (EU Transferable Securities Collective Investment Scheme), with the UCITS market reaching as high as €12 trillion. If successful, this would be a key step in mainstreaming cryptocurrency assets in Europe.

  • SlowMist: The hacker who stole 1,155 WBTC may be from Hong Kong

    According to SlowMist analysis , the IP address associated with the theft of 1155 WBTC has been traced to Hong Kong (VPN use cannot be ruled out). Earlier reports indicated that a certain address was suspected to be a victim of phishing attacks and lost 1155 WBTC, worth 71 million USD. Subsequently, the fraudsters sold all 1155 WBTC and exchanged them for 22960 ETH, and used a large number of wallet addresses to send and launder the funds.

  • Web3 game developer Seeds Labs completes $12 million seed round of financing, with participation from Solana Foundation and others

    According to Cointelegraph, Web3 game developer Seeds Labs has announced the completion of a $12 million seed round financing, with participation from Avalanche's Blizzard Fund, Solana Foundation, Krust, Hashkey Capital, UOB Ventures, Signum Capital, IVC, and Emoote.It is reported that Seeds Labs, a Solana ecosystem game infrastructure developer, was established in 2021, and its Web3 game Bladerite is scheduled to be released this month.

  • The total subscription volume of Hong Kong Bitcoin ETF yesterday was 101.6, and the Ethereum ETF showed net redemption for two consecutive days

    The Hong Kong Bitcoin spot ETF had a net purchase of 101.6 bitcoins and a total holding of 4350 bitcoins on May 8th. The daily trading volume was 2.67 million US dollars, and the total net assets were 270 million US dollars. The daily BTC purchase came from Bosera HashKey and Huaxia Bitcoin ETF.

  • Trump announces he will accept cryptocurrency donations for his presidential campaign

    Donald Trump announced that he is accepting cryptocurrency as a form of donation for his presidential campaign.

  • 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.