Crypto leaders should stop flirting with CBDCs

As a researcher with a background in politics and social policy, I am deeply concerned about the rising trend of central bank digital currencies (CBDCs) and their potential impact on privacy, democracy, and financial freedom. While some crypto leaders have expressed reservations about CBDCs, others have embraced them despite the risks they pose to the core principles of blockchain technology.

As a crypto investor, I strongly believe that central bank digital currencies (CBDCs) pose a significant threat to the decentralized nature of digital assets and the financial freedom they offer. In contrast to blockchain-based cryptocurrencies, CBDCs are issued and controlled by governments, allowing them to exert absolute control over currency.

As an analyst, I’d rephrase it this way: In my analysis, the International Monetary Fund (IMF) acknowledged that most groundbreaking cryptocurrency developments have originated from the private sector up to June 2023. However, the IMF commended central banks for their efforts in keeping pace through the exploration of Central Bank Digital Currencies (CBDCs) and establishing government-controlled instant payment systems, such as Brazil’s Pix, which have shown remarkable potential.

Central banks produce an innovative type of digital currency called CBDCs (Central Bank Digital Currencies). Operated through a closed-loop system, CBDCs are subject to centralized and programmable control. This feature grants authorities the ability to monitor and manipulate transactions in real time. The capabilities include imposing spending limits, setting expiration dates on savings, and even freezing or confiscating funds remotely. By 2030, according to Citigroup’s forecast, around $5 trillion worth of CBDCs will be in circulation globally.

Some cryptocurrency industry heads have expressed private apprehensions over the growing influence of Central Bank Digital Currencies (CBDCs), fearing potential threats to privacy, democratic values, and increasing authoritarianism. In contrast, others in the crypto community have publicly endorsed CBDCs, despite their seeming contradiction with the core principles of decentralized technologies they advocate for.

Crypto leaders should stop flirting with CBDCs

As a blockchain technology analyst, I’d like to highlight that Consensys, the company behind MetaMask and Infura, is widely acknowledged for its foundational role in the blockchain industry. Consensys is not only collaborating with central banks through partnerships such as the one with Visa, but also actively contributing to building infrastructure that connects central banking systems with traditional financial institutions. Similarly, other significant cryptocurrency projects, including Ripple (XRP) and Stellar (XLM), are making strides in enabling their blockchains to facilitate Central Bank Digital Currencies (CBDCs) development.

Ripple’s native digital asset, XRP, functions on a decentralized public ledger similar to Bitcoin (BTC) and Ethereum (ETH). However, in the year 2021, Ripple unveiled a Central Bank Digital Currency (CBDC) platform on a distinct, private ledger tailored for governments, central banks, and financial institutions. With this configuration, these entities can maintain full authority over their newly issued digital currencies.

In contrast, Stellar promotes the development of central bank digital currencies (CBDCs) on its public blockchain. However, it proposes modifications that enable central authorities to strengthen governance. The CBDC Handbook by Stellar recommends managing monetary policy and functionality centrally but maintaining a decentralized structure for the technological foundation and service provision.

In an ideal scenario, prominent blockchain entities such as Ripple and Stellar, with their strong ties to the banking sector, could employ their clout to oppose Central Bank Digital Currencies (CBDCs) based on moral principles, notwithstanding the enticing commercial opportunities they offer. However, in reality, it is equally significant for them to publicly debate the potential risks of CBDCs, especially the concern of granting governments excessive financial power and control.

Blockchain innovators might take pride in seeing their once overlooked technology become a topic at prestigious platforms like the IMF and Davos. However, this acknowledgement doesn’t equate to a triumph for blockchain’s core values. In fact, it could lead to the opposite outcome: The implementation of Central Bank Digital Currencies (CBDCs) undermines some of the fundamental features of blockchain, such as immutability and decentralization.

As a analyst, I would rephrase it as follows: I have often pondered whether governments can be trusted with immense power. History has shown us that the answer is generally “no,” even in democratic nations. For instance, in 2022, Canada’s Prime Minister Justin Trudeau invoked the Emergencies Act unconstitutionally to freeze the bank accounts of anti-lockdown protesters. Likewise, United States President Franklin D. Roosevelt set a precedent in 1933 when he signed an executive order compelling citizens to surrender their gold to the federal government under threat of heavy fines and imprisonment.

As a crypto investor, I understand that central bank digital currencies (CBDCs) might come with consumer protections. However, it’s crucial to recognize that governments will maintain significant power to alter the rules governing these digital currencies in the future. This means they can modify, adjust, and even redefine the terms of use for this new form of money at their discretion.

As a crypto investor, I can’t help but notice the increasing trend of Western governments imposing financial sanctions on their own citizens for political reasons. It’s important to recognize that the adoption of Central Bank Digital Currencies (CBDCs) could unintentionally strengthen this power. It’s not a complex concept – these measures, when used, can become more accepted and potentially even normalized in society.

Critics have derided and dismissed cryptocurrencies due to high-profile collapses like FTX and scams within the industry. However, despite these setbacks, the technology, functionality, and ethos of cryptocurrencies render central bank digital currencies (CBDCs) unnecessary. The benefits of quick, affordable, and universal transactions that CBDCs aim to provide are already being met by cryptocurrencies themselves.

As a financial analyst, I would rephrase the statement as follows: By implementing Know Your Customer (KYC) regulations, governments have the ability to identify and track crypto transactions, assess income tax, and combat money laundering activities effectively, all while maintaining a reasonable level of decentralization in the system.

The implementation of Central Bank Digital Currencies (CBDCs) might pave the way for a concerning trend toward increased authoritarian control. It is crucial that visionaries and influential figures in the realms of blockchain technology and beyond become aware and take action against CBDCs. Advocates can bolster their efforts by advocating for decentralized alternatives, as well as openly expressing their opposition and questioning the necessity of CBDCs. This collective stance will encourage others to join in the discourse and potentially prevent the normalization of authoritarian monetary systems.

Millions, potentially even up to a billion people, could be attracted to the ongoing bull run in the markets. Let’s seize this opportunity to broaden awareness that Central Bank Digital Currencies (CBDCs) aren’t the sole solution for the future.

Callum Kennard is the founder of Guava Studio, an e-commerce and Web3 marketing agency based in the United Kingdom. He holds a degree in politics and social policy from the University of Brighton.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of CryptoMoon.

2024-05-03 01:41

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