CBDC: Totalitarian nightmare, or freedom from tyranny?
The crypto community fears CBDCs for good reason. But, are we missing a golden opportunity?
Central Bank Digital Currencies
Few things get more hate from freedom loving crypto bros than central bank digital currencies (CBDC). Once cash goes away, they say, you can kiss your privacy and freedom goodbye.
Fear of CBDCs being used to enforce Chinese-style “social credit” scores, “carbon” scores, or vaccine mandates probably top the list. The loss of financial privacy also ranks highly among the fearful.
The fear takes many forms on social media:
Danger!
Dictatorship!
So scary.
Eek! I can’t express my views anymore! Or, drive my lawnmower!
Danger Will Robinson!
Financial privacy
Thing is, we all gave up any notion of financial privacy decades ago. Right up to 1970, the only person that truly knew where you got your money or how you spent it was you.
Your bank didn’t ask, or care. You could walk into a bank with a million dollars in cash, make a deposit and walk out with a smile, no questions asked.
The Bank Secrecy Act (BSA) changed all that in 1970. Uncle Sam got all bent out of shape when he realised them Wall Street Bois were using numbered Swiss bank accounts to evade taxes on their stock market gains.
By today’s standards, the BSA was pretty benign. It mandated basic record keeping requirements at banks and financial institutions.
The BSA also kicked off the anti-money laundering swamp of stupidity that we all get to muck around in to this day. Funny thing is, back then, people got angry that banks were suddenly required to ask for ID.
They even challenged it all the way to the Supreme Court.
The lower courts agreed BSA was an infringement on our rights. The Supreme Court didn’t agree though, so bing, bang, boom, it became law.
BSA was pretty weak. It was super easy to get around the requirements, cash was still king for transactions and Uncle Sam didn’t like that at all.
The powers that be kept trying to wrench down on financial privacy. All through the 80s and 90s, they used the “War on Drugs” as an excuse to snoop into your financial business.
In the late 90s, they tried to pass the FATF-40 in the United States, which is the forty recommendations of the global Financial Action Task Force (led by the US, of course).
It mandated things like, Know-Your-Customer (KYC) rules, Suspicious Activity Reports (SARs) and all kinds of other privacy busting stuff. People found out about it and got angry again.
They got so angry and wrote so many nasty letters to their representatives that the whole thing died in its tracks. Not to worry though, the powers that be seized on the 9/11 attacks to ram the same rules through in the USA PATRIOT ACT just a few years later.
No one said a peep.
If we truly cared about our financial freedom, it would be a simple matter to restore it. Just repeal the BSA and the USA PATRIOT ACT and all the other AML rules that have been passed in-between and since.
Easy.
CBDCs are coming
Given the low financial literacy, low political participation and general ignorance and apathy of the voting public writ large, when CBDCs finally come along, most folks won’t care.
The ones that do will hoot and holler. They’ll complain. They’ll sue to block in court. They’ll lose. And, we’ll all just forget about it, roll over and take whatever comes.
That happened with the BSA.
That happened with the USA PATRIOT ACT.
The USA PATRIOT ACT passed the House 357–66 and 98–1 in the Senate, with hardly a whiff of complaint from the public. Keep in mind, HALF of the USA PATRIOT ACT was devoted to implementing the FATF-40.
The same FATF-40 the public overwhelmingly rejected just three years previous. It didn’t matter that “money laundering” and “terrorist financing” played ZERO role in the 9/11 attack.
In fact, every single piece of AML legislation introduced over the last 50 years has passed with near-zero resistance. Each one that passes is a privacy busting, state overreach that steals more and more of our privacy.
People today are so accustomed to being interrogated at the bank they think it’s normal. Never mind something as insane as KYC to open an account at a crypto trading platform.
That should be an unthinkable infringement on the right to free association and freedom to transact.
Instead, we just follow along.
No questions asked.
Which is why I think CBDCs will be no different. People might whine. They might post nasty tweets on TwiXter. But, in the end, they’ll just take their lumps and move on.
CBDCs are a once-in-a-lifetime opportunity
The funny thing about the fear around CBDCs is, it presumes that the same corrupt, incompetent morons that currently run the global economy will be running the show with a CBDC.
Of course, for the reasons noted above, chances are very good that will be true. But, it doesn’t HAVE to be that way.
A central bank digital currency contains enormous power. If implemented poorly (like by the morons that currently control currency issuance), then yes, it will be a disaster.
But, the same qualities that make a CBDC a dystopian nightmare for “the people” could also completely constrain and reign in the abuse, corruption, and idiocy of central bankers if we program it in the other direction.
There is nothing saying a CBDC has to be closed-source and programmed to simply replace cash. As the major DeFi protocols like Curve, FRAX, AAVE, Uniswap and others have shown, “code is law” works.
For instance, FRAX performs market operations much the same way a central bank does. But, those market operations are completely automated.
No one at FRAX can simply mint more money out of thin air to, let’s say, “bail-out” a failing DeFi protocol. New FRAX issuance, liquidity balancing, selling or repurchase of shares, loan issuance, repayment, liquidation, and collateral management are all automated and governed exclusively by code.
Likewise, every operation a Central Bank undertakes could be hard-coded, immutable and automated with a CBDC. Just as privacy guardrails, limitations on money seizure, tracking, and just about anything else related to private and commercial transactions could be coded in too.
If done well, a CBDC could remove human intervention and decision making from monetary policy entirely. Instead, that policy could be written into code, publicly available to audit, and with no allowance for deviation without an act supported by two-thirds of Congress.
The code could very easily dictate the rate of new currency issuance, open market operations, enforce collateral and reserve requirements, and prevent the holding or purchasing of toxic or insolvent assets.
No more bailouts. No more buying Treasuries to fund endless debt spending. No more inflationary war funding. No more under-collateralised banks. No more unfunded liabilities.
The power to control money
Legacy financial institutions, central banks and their spawn rely on the opaque nature of closed-door, centralised monetary policy decisions and unbacked fiat currency to strip wealth and productivity from us.
A well-programmed, freedom-first, centrally constrained CBDC can do the opposite. It can shine a light on the malfeasance and corruption endemic in global finance.
It can ensure via code as law that monetary policy is serving the needs of the PEOPLE. It can ensure that the playing field is level. It can restore financial privacy.
It can not only stop, but reverse financial privacy encroachment through AML mandates. It can enforce fiscal discipline. It can eliminate deficit spending.
And, a well-programmed CBDC should do that. It’s easy to forget that the people in “power” work for US. They certainly forget it all the time.
They forget that every time they make monumental policy errors that enrich the wealthy, while forcing austerity among the masses. We can put an end to a lot of nonsense with a CBDC.
Not to mention, the most powerful, completely decentralised and most secure network ever conceived exists right now. It’s called Bitcoin.
And, as a public, impenetrably secure, immutable, decentralised network secured by energy, we also have a means to tie the security of an open, auditable CBDC to that network to ensure no back-door deals or code modifications can be pushed through.
Conclusion
Fear of CBDCs is warranted. If we allow the same knuckleheads that are running the show right now to use CBDCs against us, then they are a disaster for freedom.
But, the power of a CBDC is not unidirectional. We can, and should, push a CBDC that works for us and against those who would arrogate themselves to the power of the money printer, or monetary policy.
With a thoughtful approach, spearheaded by the deep well of knowledge of crypto innovators, and in collaboration with conscientious legislators, we are at the moment in time when, WE THE PEOPLE, could truly liberate ourselves.
We have the technology to finally cast off the yoke of financial oppression that has been wielded by kings and despots since the dawn of civilisation. It is a terrible error to reflexively reject a CBDC because of fear.
It is absolutely imperative we seize this moment to create a CBDC that empowers the people and restrains the excesses born of unchecked monetary authority.
Clock’s ticking.
These are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.
