What is a CBDC?
Central Bank Digital Currencies (CBDCs) are digital versions of a country’s official currency, issued and regulated by their central bank.
Overview of digital currency:
There is a growing interest in digital currencies among central banks worldwide. Claiming as an advantage: digital currencies’ ability to advance financial inclusion, providing accessible banking services to unbanked or underbanked individuals. Additionally, digital currencies can modernize payment systems, enabling faster and more efficient domestic and cross-border transactions. By leveraging digital technology, CBDCs have the potential to revolutionize the way people make payments and conduct financial transactions.
However, along with the potential advantages, there are also major concerns surrounding any CBDC currency implementation. Two prominent concerns are the potential impact on user right of privacy and data security. All digital currencies rely on digital ledgers to record all transactions. That means all transactions create a record… which is viewable forever. The danger of a long-term insight into spending habits, is that it allows for insight into one’s psyche and establishes a predictable pattern. In short, not only are specific transactions viewable, but patterns are as well. Predictable patterns make anyone an easy target. Concerns about the potential for surveillance, and about unauthorized access to financial information, are paramount for consumer confidence.
Striking a balance between transparency and individual privacy is crucial in the design and implementation of Central Bank Digital Currencies. Moreover, the introduction of CBDC currency could disrupt the role of traditional banks and other financial intermediaries, potentially affecting financial stability and profitability. The failure of central banks to carefully consider the potential implications and develop appropriate regulatory frameworks to ensure a smooth transition to CBDCs will cause instability in the financial system. Additionally, there are technological risks and cybersecurity threats that need to be addressed to ensure the security and resilience of CBDC currency systems.
Claimed Advantages of Central Bank Digital Currencies
Advancing Financial Inclusion with Digital Currency
The claims in support of digital securities, include the potential to significantly advance financial inclusion by providing access to banking services for the unbanked and underbanked populations. Because traditional banking systems often exclude these individuals due to various barriers, such as distance, lack of proper identification, or low-income levels. A digital currency is accessible through digital wallets on smartphones or basic mobile phones, eliminating the need for physical banks. It is believed that this accessibility empowers people in remote areas or those lacking proper identification to participate in the formal financial system. Thus allowing them to receive wages, make payments, and engage in other financial activities.
Moreover, digital currencies claim to offer a safe and secure means of payment, reducing reliance on cash. The digital nature also enables easy and transparent tracking of financial transactions, aiding in combating illicit activities like money laundering and tax evasion. For persons they taut do not need identification to sign up.
Improving Payment Systems through Digital Currency
The implementation of digital currencies can lead to significant improvements in payment systems. Central Bank Digital Currencies can operate on distributed ledger technology (DLT) or blockchain, enabling faster and more efficient transactions compared to traditional banking systems. Domestic transactions can be settled instantly, reducing processing times and transaction costs. Additionally, cross-border transactions can become more seamless and cost-effective, as CBDCs can facilitate direct peer-to-peer transfers between countries, eliminating the need for intermediaries and multiple currency conversions.
Furthermore, CBDC currencies can enhance the efficiency of government payments and welfare distribution. Direct distribution of benefits and stimulus packages through CBDCs can reach recipients in a timely and transparent manner, ensuring better-targeted support during economic downturns or crises. Further reducing or all together eliminating mail theft of those benefits.
Enabling Innovative Financial Solutions via Digital Currency
One aspect that proponents of digital currencies find most exciting about CBDCs is their potential to enable innovative financial solutions. Programmable money, made possible through smart contracts, allows for automated and conditional payments, creating new opportunities for businesses and individuals. For instance, it could enable automatic tax payments or conditional transfers triggered by specific events or actions.
Additionally, CBDC currencies can facilitate the integration of decentralized finance (DeFi) applications, providing more accessibility to a wide range of financial products and services.
Concerns and Challenges of Central Bank Digital Currencies
Privacy and Surveillance
The introduction of digital currencies has sparked significant concerns regarding individual privacy and surveillance, and rightfully so. As Central Bank Digital Currency transactions are recorded on a blockchain or distributed ledger, it magnifies the potential for extensive monitoring and tracking of financial activities. This level of transparency could lead to an unprecedented intrusion into individuals’ financial lives, compromising their privacy and exposing sensitive financial data to potential misuse.
To understand this concern firsthand, all you have to do is log into your Google or YouTube accounts and view your history. When viewing the big picture of one’s interests in a single list, it is clear to see the kind of things that spark one’s interests. Insight like that makes influence of that person’s future decisions a sinch to the trained manipulator. Say for example, Bob’s YouTube history contains BBQ, bass fishing, and weight loss tips, a picture of Bob’s stature forms. Or for example Sally’s YouTube history shows police brutality, peace rallies and individual rights, a picture of Sally’s political views forms.
The widespread adoption of CBDC currencies brings about legitimate reasons to be pessimistic. The erosion of individual privacy and the potential for excessive surveillance. While the technology behind CBDCs may offer convenience and efficiency, it is essential to critically assess the trade-offs between these benefits and the potential loss of personal freedoms and financial privacy. Society must tread cautiously to ensure that CBDC implementation is not a gateway. One that leads to a dystopian financial landscape where citizens’ every financial move is subject to scrutiny and control.
CBDC Currency Control over the Individual
The very nature of Central Bank Digital Currencies could give governments and central banks unprecedented control over citizens’ financial transactions. This level of oversight raises fears of potential abuse of power, surveillance capitalism, and the erosion of personal freedoms. Central banks may claim that the design of digital currencies is to combat illicit activities. The reality may be far more sinister. With governments leveraging CBDCs to exert unwarranted control over their citizens’ economic choices and behaviors.
This is reality in China. Those that do not share the views of the government find their assets frozen or even deleted. Speaking out against that which one does not believe in costs them everything.
It is easy to dismiss such concerns. On claims that I am doing nothing wrong so I do not need to worry. But we do not live in a world where we all share the same political views or personal beliefs. When regime changes occur and we find ourselves living under those in power with different beliefs than our own. We will then be facing a choice. Abandon who we are as an individual in favor of conformity or silence our voice of dissent.
Without the ability to speak out against a regime that does not share our ideals, how could we rally to replace them?
The single greatest gift our founding fathers secured for us under the First Amendment, was our God given right to dissent. The right to voice our disagreement is the central component of liberty itself.
“The freedom of individuals verbally to oppose or challenge police action without thereby risking arrest is one of the principal characteristics by which we distinguish a free nation from a police state.” (Houston v. Hill, (1987) 482 U.S. 451, 462-63)
Technological Risks and Cybersecurity
CBDC currency systems must be highly secure and resilient to withstand technological risks and cyber threats. Hacking attempts, data breaches, or network failures could have severe consequences for financial stability and public trust. Central banks must invest in robust cybersecurity infrastructure. Conduct thorough testing and continuously update their systems to stay ahead of emerging threats. Otherwise, the risk of unauthorized access to personal financial information looms large. Leaving individuals vulnerable to identity theft, fraud, and other malicious activities. Including absolute terrorism, if the correct hack were to occur, the entire global monetary system could be a hostage. Bringing the chosen target to its knees.
Additionally, the reliance on digital technology for Central Bank Digital Currencies raises concerns about inclusivity for those without access to digital devices or reliable internet connections. Measures must be taken to ensure that vulnerable populations are not left behind in the shift towards CBDC currencies. Meanwhile, proponents claim an advantage is the inclusion of those that are too remote to access a bank. Overlooking how that same person is equally too remote for an internet connection or cell service.
Digital Currency Impact on Commercial Banks
The introduction of digital currencies could potentially disrupt the role of traditional commercial banks and other financial intermediaries. If CBDCs gain widespread adoption, people may shift their deposits from commercial banks to central bank-issued CBDCs. Impacting banks’ deposit base and profitability. This shift will lead to changes in lending patterns and credit availability. Potentially affecting the overall stability of the banking sector.
To mitigate such risks, central banks need to devise appropriate regulations and mechanisms to ensure coexistence and collaboration between CBDC currencies and commercial banks. Maintaining financial stability while fostering innovation.
Monetary Policy and Financial Stability
Implementing effective monetary policies in a CBDC ecosystem poses unique challenges. CBDCs may impact the transmission mechanism of monetary policy. And central banks need to adapt their tools to maintain control over interest rates and inflation. The introduction of CBDCs could also lead to changes in the velocity of money and overall economic behavior. Requiring careful evaluation and adjustment of monetary policy frameworks.
Moreover, there are concerns about potential fluctuations in demand for CBDCs, which could influence the stability of the financial system. Central banks must prepare to address any systemic risks that may emerge with the introduction of CBDCs.
The Effect of Digital Currency on Credit
One of the key components to the US economic power base is credit. Alexander Hamilton met great resistance when he argued in favor of permitting the federal government to receive and extend credit. Lending allows for growth. Growth leads to faster profits. Faster profits leads to more employees to meet demands. More employees results in more money in the market to spend at other locations. Economic boom results.
Banks do not hold all of our deposits, they actually maintain around 10% (high end estimate). The other 90% is for lending out. Allowing for the extension of credit. Interest is the creation of money where none before existed. That created money is an organic source of capital. When the banks do not have access to deposits because all of the individuals have their own money in their digital wallets, lending becomes impossible.
The pro and con arguments above result in a paradox. We cannot have a complete digital currency system to provide complete oversight and obtain the claimed security by removing all traditional money. While simultaneously maintaining a system that allows for lending based on cumulative deposits to extend credit.
Regulatory and Cross-Border Challenges of Digital Currencies
Regulatory Framework and Interoperability
Developing a regulatory framework for Central Bank Digital Currencies is complex, especially considering the global nature of digital currencies. International cooperation is crucial to establish common standards and interoperability between different CBDCs. This collaboration ensures seamless cross-border transactions and reduces friction in the global financial system.
Proponents claim harmonizing regulatory approaches will also help address issues related to anti-money laundering (AML) and combating the financing of terrorism (CFT). Further touting that cooperation between jurisdictions can enhance the effectiveness of these measures and minimize potential loopholes.
While simultaneously exclaiming that even without identification this plan will allow anyone to finally gain access to banking.
Furthermore, the AML system that claims to combat the financing of terrorism, is actually a daily means to have your bank and many other industries spy and report on other Americans, which includes you.
Lack of Government Oversight in AML Policy is Unconstitutional
Did you know that all policy decisions on AML have been delegated to a private company? FINRA determines when reporting is required. Their commands include an extensive list that could put you in a position to be reported for simply wanting privacy. The FINRA list is extensive.
However, our constitutional mandates were clear:
Article I. Section. 1. “All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.”
Section. 8. “The Congress shall have Power … To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”
When Congress delegated power, it was to a “Department… thereof.” See 31 U.S.C. § 5313(a) (“When a domestic financial institution is involved in a transaction for the payment, receipt, or transfer of United States coins or currency… shall file a report on the transaction at the time and in the way the Secretary prescribes.”) The Secretary had no authority to delegate that power to a private corporation.
We certainly do not want to assist in any terrorism activities that harm our country. Equally so, a non-elected entity creating laws that mandate spying on each other, is abhorrent to a country that prides itself on freedom.
Political Power was Reserved to Ourselves
Our state and national governments are founded on the principles that the political power is reserved to the people. Granting unelected officials policy power, results in loss of that reserved power.
Preamble. “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
Amendment IX “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”
Amendment X “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
We are not alone in our belief. As an article from Oct. 30, 2023 reports this very issue of unconstitutional delegation of power is being litigated in the D.C. Court of Appeals.
Global Economic Implications of Digital Currency
CBDCs can have significant implications for the international monetary system. The widespread adoption of CBDC currencies could impact global trade, exchange rate stability, and currency sovereignty. Central banks are failing to carefully assess the potential consequences of digital currencies on the existing monetary and financial order. The view is singular when considering both the benefits and challenges they present.
Central Bank Digital Currency Conclusion:
Digital currency offers an “interesting” avenue for advancing financial inclusion, improving payment systems, and enabling financial innovation. However, their implementation also brings forth concerns related to privacy, individual autonomy, sovereignty, commercial banks, lending, monetary policy, and cybersecurity.
Regulatory Approach is Fatally Flawed
The present approach of racing towards full scale implementation of CBDC currencies fails as a powerful tool for enhancing financial systems that is beneficial to societies worldwide. Because of the shortsighted gain of surveillance and control. While overlooking the delicate balance of economy that has evolved over great periods of time.
The author of our Constitution James Madison letter to Thomas Jefferson 17 October 1788. “It is a melancholy reflection that liberty should be equally exposed to danger whether the Government have too much or too little power, and that the line which divides these extremes should be so inaccurately defined by experience.”
Too little power, we lose liberty to crime. Too much power and we live under an authoritarian government. In either scenario, liberty loses. Digital currency as it is heading towards is leading us towards the latter. Especially if such power is granted to an unelected entity as they did with FINRA.
Central banks and governments are failing to establish the necessary balance of regulatory framework that ensures privacy and security. The current path is a race to a Chinese regime state of authoritarian control over finance. With the inevitable result of oppression over dissenting voices.
Individual Solution Requires Action Now
Regulations that force a person holding all wealth in cash to convert to Central Bank Digital Currencies are dangerous to democracy. For if you dare speak out against the government, with a click, all wealth is vanishes, including retirement and back to work you go. But if that same person held their wealth in a precious metal IRA, those assets would not be deletable. Meanwhile, that person would appear poor. Thus no leverage for the government, and all the dissent one could disseminate would be effectively untouchable.
“We are mindful that the preservation of liberty depends in part upon the maintenance of social order. [Citation.] But the First Amendment recognizes, wisely we think, that a certain amount of expressive disorder not only is inevitable in a society committed to individual freedom, but must itself be protected if that freedom would survive.” (Houston v. Hill, (1987) 482 U.S. 451, 471-72)
The current path’s design allows for oppression of expressive disorder. According to the Supreme Court, under that lack of protection “freedom would [not] survive.”
