Discussions about central bank digital currencies, or CBDCs, have been trending on social media in the past week with many people voicing concerns about its potential impact on privacy and financial surveillance. Lynette Zang, the chief market analyst at ITM Trading, warns that CBDCs will lead to a “full surveillance economy that can be controlled directly by the central bank.” This view is shared by other influencers and politicians globally, including former Congress member and 2020 US presidential candidate Tulsi Gabbard who criticized the idea of a cashless society, which she believes will allow the government to track everything individuals purchase and control their money.
However, not everyone is opposed to the concept of CBDCs, and Keynesian economist Paul Krugman has criticized Florida governor Ron DeSantis’s recent opposition to a central bank digital currency, referring to the hostility as resistance against “woke money.” Krugman claims that DeSantis may be motivated by “general paranoia.” On Twitter, Krugman also opined that the dissent toward CBDCs may be “tied in with a broader push by monetary conspiracy theory types” and claimed that the theories have been a “right-wing thing for a while.”
According to the Atlantic Council’s CBDC Tracker, 114 countries are working on CBDCs, and 11 countries have fully launched implementations. BIS (Bank for International Settlements) recently released a video about its CBDC pilot, Project Icebreaker. Natalie Smolenski, senior fellow at the nonpartisan, nonprofit organization the Bitcoin Policy Institute, criticized the project and argued that all of the benefits of CBDC interoperability can already be realized by the bitcoin Lightning Network. Smolenski does not see any need for CBDCs.
CBDCs raise concerns about financial privacy as funds would be held within a government-controlled system. With CBDCs, negative rates will be imposed on people’s accounts and individuals’ primary accounts will be threatened. “Central bank digital currencies are really about control, and also about the ability to take away principal,” said Zang, who believes that a CBDC will usher in a totalitarian monetary system that will become the economy’s new norm. Individuals’ private property and financial privacy depend on the total rejection of all CBDC schemes, according to the Libertarian Party in a tweet.
Moreover, opponents of CBDCs often cite the potential for government overreach and the infringement of civil liberties as two other concerns. Critics view the centralization of monetary policy as a threat to individual autonomy and freedom, as governments may be tempted to manipulate the money supply for political gains.
Despite the abundance of concerns, CBDCs are becoming increasingly popular, and politicians, policymakers and banks are keen to explore their potential benefits. Proponents, for instance, argue that it can help to reduce transaction costs, increase financial inclusion, and promote economic growth where traditional banking systems are limited.
In the end, the discussion surrounding CBDCs is a complex one, and opinions on the matter are likely to remain divided. While some believe that CBDCs present a threat to financial privacy and could lead to a surveillance state, others argue that it could bring numerous benefits that are worth considering. As always with any new technology, it is essential to balance its potential with its drawbacks and weigh up its impact on society as a whole.