Like, hate, or fear them, central bank digital currencies (CBDCs) are on their way. There will be no stopping them. From Sweden to Thailand and China to Canada, governments the world over are experimenting with CBDCs. While most are being undertaken as pilots at this stage, China’s is all but ready for primetime.
Social Credit on Steroids
The digital dollar and yuan will be a boon to governments seeking greater oversight into monetary movements, with real-time insights into how and where funds are deployed. But these instruments could prove catastrophic for ordinary citizens, further eroding their privacy while increasing inequality.
CBDCs are everything that cash is not: easily surveilled, censored, and apportioned to those deemed “worthy” of participating in this new digital economy.
Social credit – the notion that citizens must prove themselves eligible for inclusion by kowtowing to the will of the state – is already here, and it’s not just confined to authoritarian regimes. “If the Communist Party [of China] deems you to be untrustworthy, you are denied access to plane tickets, train tickets, opening and operating businesses, and more,” writes Andrew Torba.
The Gab.com founder knows what it’s like to be on the wrong end of social credit scoring after Visa blacklisted his business and his entire family for creating the free speech network. At present, financial discrimination is deployed by payment processors at the behest of governments. In a world of CBDCs, governments won’t even need to lean on third parties, as they did when forcing payment providers to withdraw their support for Facebook’s Libra. They can just push a button and freeze out firms that don’t toe the party line.
Whether your project is in the business of free speech or 3D printing, it’s all too easy to fall afoul of the powers-that-be. And don’t think that citizens are exempted either; woe betide anyone who should have cause to send funds to a relative in Iran or Cuba. CBDCs are the endgame of the institutions that have been advancing a cashless society.
The Covid-19 pandemic accelerated that transition; central bank digital currencies will complete it.
Big Tech Won’t Keep Your Financial Secrets
When CDBCs are implemented, they’ll build upon the efforts tech companies have already expended on implementing digital payment networks such as Google and Apple Pay.
Tech companies and payment providers will be able to integrate deposits held at central banks via SDKs, enabling digital payments to be tightly integrated into apps and platforms. CBDCs will extend these capabilities, enabling money to be sent to friends, family, and merchants via messenger apps, email, and text.
Tech companies will become the new banks, providing payment rails to their billions of users, and extending their financial services to include loans and credit scoring.
The problem with this shouldn’t need restating: tech companies are terrible at protecting user data. They opaquely leak it, resell it, and stockpile it in central databases that are a honeypot for hackers. In the future, it won’t just be your Facebook account that’s stolen – it will be your entire financial identity and digital bank balance.
The Weaponization of Blockchain
Bitcoin’s permissionless blockchain provides a means of verifying financial transactions and ensuring the network’s rules governing coin issuance and double spends are maintained. With CBDCs, that utilize a permissioned blockchain component, those same characteristics will be used to surveil, control, and restrict. There will be no need for chain analysis companies to deanonymize addresses because all network participants will be known through rigorous enforcement of KYC/AML.
Of course, no one would expect a government-issued CBDC to be KYC-free: money is the state’s primary weapon, and it is not about to relinquish control just because cash has gone digital. Nevertheless, the rollout of CBDCs threatens to usher in an era of unprecedented financial surveillance and control.
Consider marijuana dispensaries in the US whose business is legal at state level but still illicit federally. At the moment, they’re able to survive through a combination of cash and censorship-resistant digital payments including cryptocurrencies. Banks simply won’t deal with companies whose commerce intersects with “grey areas” or whose business attracts the slightest whiff of moral opprobrium. CBDCs will only exacerbate that.
In an era where woke corporations boycott Facebook to appease the baying mob, it’s easy to envision a near future where financial exclusion is the price paid for anyone espousing remotely outré views. If you want to be a part of the new world order that our financial overlords are building, keep your mouth shut and your business squeaky clean.
CBDCs Are a Threat to Everyone
It’s not just citizens and small business owners who should be concerned by the emergence of central bank digital currencies. They’re also a threat to private and commercial banks, whose revenue is jeopardized by a paradigm where businesses are able to obtain credit directly from central banks, issued on a permissioned ledger controlled with a vice-like grip.
Private banks will need to adapt to stay relevant, and may push back against CBDCs, like print media initially attacked bloggers and social media-based citizen journalists. But just as newspapers have been powerless to prevent digital media from establishing hegemony, private and commercial banks will struggle to halt the CBDC juggernaut. As the digital payments war heats up, these interest groups will lobby hard to claim their piece of the pie.
When the dust has settled, the greatest loss will be to the privacy of the people. CBDCs may be good for international payments, corporate loans, and online commerce, but they’ll be bad for your privacy.
Keep the Bureaucrats out of Your Wallet
As the rise of bitcoin and cryptocurrencies have shown, cash can be digital without being dystopian. If we’re to avoid sleepwalking into a financial panopticon, where every transaction, no matter how small, is scrutinized in real time, CBDCs must be vehemently opposed. There are better ways to pay.
/Reuben Jackson
Reuben Jackson is a blockchain security specialist and freelance writer living in New York. He writes about all things cryptocurrency and technology related. You can learn more about Reuben’s work and contact him here: https://about.me/reuben.jackson
What do you think about this? Let us know in the comments section below.
The post Why the Rise of the CBDC Is Bad for Your Privacy appeared first on Bitcoin News.
via Guest Author
0 comments:
Post a Comment