Digital Currency or Digital Control: Decoding CBDC and the Future of Money
Nicholas Anthony (Cato Institute, $21.95, 160 pages)
Version 1.0.0
Central Bank Digital Currencies (CBDCs) are being researched and developed by central banks and policymakers, and author Nicholas Anthony warns it is nothing less than “an attempt to reinvent money as we know it.” CBDCs are inspired by cryptocurrencies such as Bitcoin but are actually “not a cryptocurrency at all … in all the characteristics that matter.” Cryptocurrencies were privately created monies designed to be decentralized and out of government control. They were provided by the market as part of an open and permissionless system, resistant to censorship, based on clear rules, and having a fixed supply. CBDCs, on the other hand, are centralized, provided by the state, closed and permission-based, censorable, created through opaque and discretionary monetary policy, and are virtually unlimited.
Anthony maintains the Human Rights Foundation’s CBDC Tracker which documents the threat to civil liberties presented by central bank digital currencies. He adeptly introduces readers to the jargon and design of digital currencies, evaluates their financial positives and negatives, and predicts their potential consequences. He finds that CBDCs would not satisfactorily address a number of pressing economic issues, including increasing financial inclusion or more effective monetary policy, and would likely worsen existing problems. Most importantly, however, Anthony warns about the loss of financial privacy and individual liberty if the state could track digital payments. While many financial transactions are presently trackable, Anthony says that consolidating that data for use by government presents new dangers, including if such personal data was exploited by hackers or corrupt government officials. The loss of privacy is not limited to mere financial transactions because, Anthony argues, our purchasing history tells detailed stories about who consumers are. If CBDCs are both the currency in which transactions are made and the settlement mechanism for all retail transactions, the government would be collecting the complete stories of all its citizens. In other words, the main beneficiary of CBDCs would be the state: “the only ‘benefit’ of CBDCs accrues to governments seeking to solidify their control over money and finance.” He concludes the brief book by calling for laws banning CBDCs, although one might wonder why states that show little compunction about destroying liberty would give up such a powerful tool for their arsenal of surveillance.
