Digital Currencies: If You've Got Nothing To Hide, You've Got Nothing To Fear

Life is full of worries, it seems never-ending and probably gets worse the longer you spend on social media. Is the government trying to force us to live in “15-minute cities?” Do we only have a few years to prevent “climate extinction?” Was the “Hamas attack a ‘false flag’ staged by Israel?” 

The mix of conspiracy theories and real threats can be overwhelming. Some we can discard immediately (no, the Earth is not flat) and others may be intriguing but aren’t worth the time (did Oswald act alone? I don’t know, but I can’t add anything to the debate so I’m not wading in). The third area concerns “threats” which sometimes sound paranoid but have some truth to them. One in this third group that I find interesting is digital currencies.

What are Digital Currencies?

If you’re like me, you pay for everything with credit cards or online transfers. Personally, I can’t remember the last time I carried cash. In fact, in Canada, physical currency represents less than 5% of the overall money supply, the rest is just data in record tracking systems. Given this, aren’t we already using digital currency? Not quite. 

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What we are really doing when we pay bills online or use credit cards is manipulating digital representations of physical cash. Electronic records are what we might call virtual representations of physical cash. You can still go to the bank and get physical cash. True digital currencies would eliminate this. Instead of money in your wallet, you would possess a “digital wallet,” possibly on your smartphone, that would contain some or all of your digital currency (password-protected and encrypted for security purposes). The key difference would be that money would only be available in electronic form.

The Good

If we have “virtual” cash, why wouldn’t we move to a currency that is entirely digital? There are a few advantages to digital currencies, but some depend on who controls them. Let’s look at a few of the common advantages first: 

• Increased security – Unlike our current currency, which is not dependent on who possesses it, digital currency would be linked to a digital identity preventing its use by anyone but the “owner.” Linking digital identities to the “digital wallet” would enable central banks to authenticate all transactions reducing fraud, money laundering, and the financing of terrorist activities. They might even protect individuals from accidental loss.

• Increase access to financial services – As digital currencies could be stored and spent using digital wallets, citizens might not need bank accounts. People living in remote areas or who otherwise are underserved by traditional banking systems might have better access to financial services.

• Simplify tax collection – as all transactions would be recorded by the system and linked to unique individual identification, the process of collecting taxes could be simplified. 

• Increase transaction efficiency – payments could be streamlined, reducing settlement times and enabling faster transactions.

• Enhanced monetary policy – real-time visibility to cash flows could improve central bank control of monetary policy enabling economists to more efficiently monitor the health of the economy and more effectively manage inflation, interest rates, etc.

This sounds pretty good, doesn’t it? So why are many so adamantly opposed to it? It comes down to how these “advantages” could be abused. 

The Bad

When examined with a less trustful eye we see that the security benefits result in what to many would be a disturbing lack of privacy. Eliminating fraud, money laundering, and financing of terrorism is all well and good but it requires that all transactions be linked to a digital ID. Put simply, increased security/safety means decreased privacy. 

• Simpler tax filing is enabled by tracking every single penny you spend. Want to give your child an allowance? Tracked. Need to pay the babysitter? Tracked. Want to give your grandchild some birthday money? Tracked. In addition to the privacy issues, how long do you think it would be before the government decided that all these little “transactions” should be taxable?

• As the currency is entirely digital it might be vulnerable to hacking attempts and as it’s linked to your digital ID all your personal information could be stolen. Centralizing the data adds additional risk. Today a breach at a bank only affects the bank’s customers. Centralizing all data would mean that a single attack might threaten every taxpayer in the country.

The Ugly

More government control means a greater risk of government abuse:

• The system could be used for surveillance purposes. Currently, the location of your cell phone is always known (otherwise you couldn’t receive calls/texts). This technical requirement enabled the US National Security Agency (NSA) to gather information from and track the movement of “hundreds of millions of devices” as part of the War on Terror.   

• It would make freezing and seizing of assets easier. One need only think back to the Freedom Convoy in Canada to see how this could be abused. Regardless of where you stand regarding the actual protests, the fact remains that Canadian Federal Court Judge Richard G. Mosley ruled against the Trudeau government’s use of the Emergencies Act finding “the government’s use of the act to be “unreasonable” and an unjustified infringement of individual rights.” 

• Restrictions on what you’re permitted to buy or who is permitted to participate in the economy could become an issue. A CBDC’s programable nature means governments could prohibit people from “buying certain goods or limited in how much they might purchase.” For example, alcohol purchases might be restricted to limit how much people could drink in a week.

“In a fully implemented CBDC system, governments could financially exclude individuals or entire groups of people with the press of a button, leaving them with nothing. Governments like the CCP could target dissidents, sexual minorities, ethnic minorities, or religious minorities. If banknotes don’t exist and access to government-issued digital cash is revoked, then they are truly helpless.”
-- Alex Gladstein, Human Rights Foundation

These last two bullets are the ones that usually raise the most concern (although letting Big Brother see everything you buy does raise the hackles of many people). You don’t have to be a conspiracy theorist or paranoid to think CBDCs might be a bad idea.

“We would not want a world in which the government sees, in real-time, every money transfer that anyone makes with a CBDC.”
-- Federal Reserve Chair Jerome Powell

Conclusion

CBDCs, as a stand-alone system, provide an interesting mix of advantages and disadvantages. Where one falls on the topic likely depends on one’s comfort with technology and change, and trust in governments and public institutions. For myself, I am not comfortable with the government knowing everything I do, and believe we should be wary of letting the government see too much. After all, it’s not without reason that Cardinal Richelieu was alleged to have said "Give me six lines written by the hand of the most honest man and I'll find enough to hang him." The real concern however comes when CBDCs are combined with Social Credit Systems like that being developed by the government of China which we will examine in a future article. 

Wrong Speak is a free-expression platform that allows varying viewpoints. All views expressed in this article are the author's own.