As part of its focus on financial inclusion, the International Monetary Fund (IMF) held a public forum on the benefits and risks of central bank digital currencies (CBDCs). At the forum, a senior IMF official suggested that CBDCs could be an effective tool for monitoring consumption patterns. Comments that confirm the fears of many cryptocurrency users about central bank digital currencies.
The CBDC to control citizens
In recent years, states have been realizing the importance of the digital economy. But rather than embracing cryptocurrencies, the trend of countries is to develop central bank digital currencies. Beyond the fact that this type of asset is exposed to the inflation that hits fiat currencies, it presents a risk of citizen surveillance. This is at least what an IMF official has confirmed.
During the forum Central Bank Digital Currencies for Financial Inclusion: Risks and Rewards, Bo Li, Deputy Director of the International Monetary Fund explained his vision of the Central Bank Digital Currency. For him, CBDC can help control how people use their money.
With CBDC, one can control precisely what people can and cannot hold. But, we can also program the uses of the money, for example to restrict it to food purchases.Bo Li
The Deputy Director of the International Monetary Fund gave the example of China. The country systematically monitors its citizens, including their financial transactions. The information collected is used to determine eligibility for social credit in the country.
Let me give you an example. In China, this transaction data can be used by service providers for credit underwriting. These providers can know how much coffee I drink every day, where I buy it, do I use Uber on a daily basis, what hours of the day I work…Bo Li
As surprising as it sounds, this blatant violation of privacy was praised by the audience. “This is a great example of how different countries will take different directions to serve their societies in their digital spaces,” said panelist Cecilia Skingsley, head of the BIS Innovation Hub. “It can be good to give a little bit of privacy in exchange for security,” she continued.
The CBDC, a threat to our freedom and our finances
China, Nigeria, Australia, …, it is a total of a hundred countries that are developing CBDCs. Through this asset, states hope to strengthen financial inclusion and especially to face private cryptocurrencies.
CBDC, unlike cryptocurrencies, present a risk to the finances and freedoms of citizens.
This is because CBDC is really just a digital version of the national fiat currency. As such, it is exposed to loss of value like fiat currency. Yet, in many parts of the world, such as Latin America, citizens are turning to crypto en masse to protect themselves from inflation of their national currency. So the CBDC does not protect their finances from inflation.
Moreover, the central bank’s digital currency poses a threat to users’ freedom. Indeed, as Bo Li confirmed, it is easy for state authorities to monitor all transactions made via CBDC. Such monitoring is a major violation of privacy and a danger to human rights. Critical voices such as activists, political opponents or journalists wishing to escape repression could easily be identified through their financial transactions. This is the opposite of cryptocurrencies like Bitcoin that facilitate the fight for human rights.
The states that develop CBDCs do not necessarily want the welfare of their citizens. Many countries are simply obsessed with the idea of increasing control over their citizens. Bo Li’s words have just the merit of revealing the real intentions of the rulers in developing CBDC. No wonder freedom fighters like Edward Snowden call CBDC “the perversion of crypto”.
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.