The Chinese are leading the charge for Central Bank Digital Currencies. That country is racing ahead with its different trials. We are fortunate this is happening because it will alert the world to what a danger this is.
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Cryptocurrency is taking the world by storm. We are seeing more news about it. This gave the government hacks the idea that it would be good for them to get into the game. After all, if would allow the unbanked to be banked, more efficient distribution of money, and a less expensive system to operate.
There is a problem with what the government's are looking at implementing.
We see the world of cryptocurrency filled with this terms:
- decentralized
- open-source
- immutable
- transparent
Unfortunately, few, if any, of these will apply to CBDCs. Instead, we can pull out the antonyms which would better reflect what is being proposed.
Programmable Money
One of the technological breakthroughs with cryptocurrency is that it is programmable. This opens up a world of possibilities whereby the use cases could be isolated. Tokens can be created for specific purposes, perhaps for certain time periods. For example, a company might develop a token during a particular promotional event. After that it expires, much in the same way as a coupon does.
At this point, we are at the beginning stages of this innovation. Few have really played with it. That will change as more developers get involved. Of course, we can see how this could be fantastic utility in a world where tokens are openly created as use cases dictate.
In the hands of government politicians and bureaucrats, this is a different matter entirely. We can easily see how programmable money is going to be used against the different populations. Whereas cryptocurrency offers decentralized control, this is putting more powers in the hands of governments around the world.
If anyone things this is a good idea, let your mind wander as you read the next section.
Proven Programmable Utility
The Chinese are the case study and it is already not looking good.
Recently, they decided to test out this capability to see what could be done with it. Not surprisingly, they were able to come up with a way of isolating the utility (use case) for the e-CNY. They simply coded the money for a specific purpose.
This is going to be distributed via a lottery system. Hence, people will be able to get a hold of it like with other trials that were run. There is, however, a difference this time.
The free e-CNY will arrive with a pre-programed utility for covering fees from subway, bus tickets or shared bike services.
On the surface, this seems like a good deal. They are basically issuing mass transit tokens which is beneficial to the people who get them. Nevertheless, like most things, the danger lies not in what is taking place at this time but the potential down the road.
"But instead of issuing free digital yuan to lucky citizens that they can use wherever the e-CNY payment is supported, the latest test comes with a theme called "low carbon summer transportation" that gives away the e-CNY as allowances to encourage citizens to take more public transportations.
The bold is mine for emphasis
Now the government has the ability to directly start influencing people and implementing its agenda through the money. While this situation seems harmless, it can get a lot worse.
The simply fact is governments have proven they cannot be trusted with power. Give them the ability to do something and they will abuse it.
Politicalized Money
We are in one of those times where things are extremely polarized, politically. This is putting us on very dangerous ground as governments around the world seek to gain more power.
In the United States, the President as the ability to issue what are called "Executive Orders". These are Orders that do not involved Congress, granting the President powers to unilaterally act on certain matters.
Each new President tends to issue a flurry of Executive Orders. Many are to kickstart the agenda of the new administration. A fair portion, however, are Orders that reverse the ones of the predecessor. In other words, Orders are issued negating the previous Orders.
Why is this important?
It is easy to envision what could take place in a polarized political arena and how money will suddenly become politicized. The new administration would naturally seek to "punish" those who were in opposition, of course, citing some moral authority.
At the same time, the government hacks would be in charge of not only fiscal but monetary policy. Certainly anyone who looks at the track record of any countries Congressional or Parliamentary bodies knows their understanding of the economy, business, and the overall financial state of things is very poor. Yet now we are looking at the idea of them taking over monetary policy also.
One of the most dangerous aspects of this power is the ability to send interest rates negative. We are getting a good example of how ineffective that is by watching the EU, since the ECB went negative 7 years ago. However, this wouldn't stop the political establishment from following the same course of action.
We also could see ease in raising and collecting taxes. After all, this can be programmed into the money. Nothing will be overlooked. In fact, they could collect the tax each time money went into the account. Of course, they could also determine that if money was not spent in a certain period of time, it would simply expire.
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Programmable money is a wonderful and powerful concept. It is due to the later as to why everyone should opposed CBDCs. This is simply too much power in the hands of politicians. When there is the freedom to choose if one wants to engage in a particular token, then it is fine since people have options. However, if people are forced into using a particular form of money, then we are back to tyranny.
This time, on a larger scale.
China is showing everyone the power of CBDCs. Simply from watching their early experiments, we see it is power that is ripe for abuse. Since we know governments cannot be trusted, it is up to us to reject these at every level.
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