The World Doesn’t Need Central Bank Digital Currencies (CBDCs)

In Nicholas Anthony’s new book Digital Currency or Digital Control?, the author sets up and knocks down arguments for central bank digital currencies (CBDCs), driving home the point that implementing this technology drastically reduces financial privacy and freedom.

Anthony, a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives and fellow at the Human Rights Foundation (HRF) who created the institution’s CBDC tracker, has been vocal for years about the dangers of CBDCs, as he has spoken on the topic at events such as The Bitcoin Policy Summit and the Oslo Freedom Forum.

He has now put his message into book form as a means to provide a comprehensive overview of what’s at stake when it comes to CBDCs.

“The public has largely been left out of the [CBDC] policy debate,” writes Anthony in the book’s introduction.

“That’s where this book comes in. It contains everything you need to know to get you up to speed on CBDCs so you can know the stakes before they are created,” he adds.

CBDCs Eliminate Financial Privacy

Anthony opens a chapter of the book entitled “CBDCs Will End Financial Privacy” by stating that “Americans have a right to privacy that is protected by the U.S. Constitution.”

He goes on to explain how financial privacy has been reduced in the digital era and how “a CBDC could spell doom for what few protections remain.”

Anthony also writes that “third-party intermediaries that currently exist (e.g., banks, credit unions, payment apps) create a sort of air gap between the government and the general public,” highlighting the fact governments currently have to go through a process to obtain the financial records of its citizens. CBDCs would eliminate this buffer.

And he drives home the point that CBDCs would give central banks the ability to surveil every transaction we make, which contrasts starkly with the privacy that using cash or even bitcoin or other cryptocurrencies provides.

CBDCs Limit Financial Freedom

Anthony warns that CBDCs would give the government the power to restrict certain purchases. For example, paternalistic governments might seek to limit its citizens’ purchase of alcohol or even sweets, arguing that it’s best for its citizens’ health.

Governments could restrict other purchases via CBDCs as well as stop their citizens from spending money in certain jurisdictions.

“A CBDC could have been programmed to allow transactions only with businesses deemed ‘essential,’” writes Anthony. “Or in the case of travel restrictions, a CBDC could freeze transactions and alert authorities of spending made outside an allowed travel radius.”

Such capabilities, Anthony argues, only give more power to not only leaders of authoritarian governments but those of liberal democracies, as well.

The author provides examples of how China froze the personal finances of Jimmy Lai, a newspaper publisher based in Hong Kong who supported pro-democracy protests in the region, and how Canadian Prime Minister Justin Trudeau froze the bank accounts of truckers who protested COVID-19 restrictions in 2022.

CBDCs will only make it easier for leaders to unilaterally paralyze dissidents financially.

Failed Rollouts Of CBDCs

Thus far, a handful of countries including China, Nigeria and The Bahamas have issued CBDCs, and evidence has shown that the public isn’t interested in using them.

Anthony points out that adoption of the eNaira, Nigeria’s CBDC, only reached 6%, and that was after the central bank created a cash shortage so severe that it led to protests and riots in the country.

Heritage Falodun, a Bitcoin consultant based in Nigeria and CEO of digital asset platform DigiOats, further explained why Nigerians are rejecting the eNaira in an interview on the new renaissance capital podcast.

“Nigerians question this innovation and ask ’Is this technology really addressing such problems like inflation, difficulty in accessing foreign exchange and difficulty in making seamless cross-border remittance transactions?’” said Falodun. “When you look at the eNaira, is it solving those problems? No, it’s not.”

Nic Carter, co-founder and General Partner at crypto venture capital firm Castle Island Ventures, also noted in a post on X that he was hard-pressed to find anyone in The Bahamas using the Sand Dollar, the Bahamian CBDC, during his recent trip to the country.

Beware A False Bill Of Goods

While government and central bank officials may argue that CBDCs promote financial inclusion, Anthony argues that the powers that be have all of the tools that need within parameters the current financial system.

He states that the existing financial system already does a good job of providing services to welfare recipients in the US, stating that SNAP (Supplemental Nutrition Assistance Program) and EBT (Electronic Benefits Transfer) cards currently provide services to the unbanked.

“The financial system does not need to be reinvented to effectively subsidize a prepaid card,” he writes.

He also states that bitcoin, money that can be used permissionlessly by anyone with an internet connection, and even stablecoins, which don’t require know your customer (KYC) regulations to use, are inherently more inclusive than CBDCs.

For this reason, and many others, Anthony and his colleagues at the Cato Institute want to be clear that there is no good version of a CBDC and that the primary reason for governments and central banks issuing them is so that they can exert more control over their citizens.

“Governments of all types recognize that the traditional financial system is an effective tool for control,” writes Anthony.

“The only thing a CBDC is in a unique position to do is to expand the ability to apply these controls to everyone.”