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The New Nightmare of Central Bank Digital Currencies

By Bread | Breadonomics | 20 Aug 2021

A Twisted Tale

Imagine one day you walk into a local grocer, grab a few items from the shelves, then head over to the checkout. The cashier scans your items like normal, and you pull out your card to pay. But as you tap your card, a message flashes up onto the cashier's screen.

"I'm sorry sir, I'm afraid I can't let you purchase any garlic bread this week, that would take you over the amount of calories recommended by the Ministry of Health. New rules this week".  "Oh", you respond with a half-smile, "that's ok I guess, don't worry about it".  The cashier looks back at you awkwardly and you know there's more.  "Umm, there's also the salmon, it says you purchased salmon last week. I'm afraid you can only buy salmon every second week sir, the Ministry for Environmental Protection says it is essential to protect the oceans".  You stare blankly as the cashier takes the garlic bread and the salmon out of your bag, then leave with your other items.


On the way home, you stop at a petrol station to fill up your car. As you scan your card, a message pops up on the bowser screen: 'You have 25 litres of fuel allowance remaining for this month. Thank you for helping save the environment'. Only 25 litres left. Looks like you won't be able to take your kids to visit their grandparents this month, you need that fuel to get to work. You head into the petrol station, grab a drink and head up to the counter. As you scan your card, another damn message pops up on the screen in front of the attendant.  "I'm sorry sir," says the attendant, "it says you've exceeded the limit on purchases of sugary items for the week. The President says we have to take the War on Obesity seriously".

No garlic bread. No salmon. No visiting family. No drink.

Why are you not allowed to spend your own money?

Money is a pretty great thing, a medium of exchange that allows people to freely and readily exchange goods and services for what they really want. On the other hand, Central Bank Digital Currencies present a nightmare for freedom. Governments and technocrats have always had an interest in controlling their citizens and shaping what they can and cannot do. Of course, there's plenty of laws governments would love to force on their citizenry, but these laws would be too difficult to enforce. There's only so many police a country can afford, and those police are typically occupied with more serious matters. But what if governments had a simple, cheap way to enforce whatever policy they wanted? Something that could be used to control and punish offending citizens at the flick of switch? Central Bank Digital Currencies are that enforcement method.


Make no mistake, central banks around the world have demonstrated that CBDCs are coming (China has one already, and the USA, Australia, the EU, and the UK are all developing theirs).  CBDCs will be different to fiat currency as we know it today; the biggest difference lies is fungibility. What fungibility means is the ability to interchange items of the same kind, where each item is essentially indistinguishable from the other. For example, an ounce of gold is fungible, because you can exchange or substitute it with any other ounce of gold and it remains identical in value and function. Cash is largely fungible too. Even money in bank accounts is essentially fungible because this 'money' is stored as simple data entries. If I want to withdraw $100 from my bank account, the bank can give me any $100 note; they don't have to specifically give me the $100 note I originally deposited with them.

Cryptocurrencies are not like today's national currencies, in that most of them are not fungible. Each coin of a cryptocurrency has a unique identifier, stored on a blockchain database that validates it as legitimate. One of the biggest advantages of blockchain technology is that it makes auditing easy; every transaction of every coin is stored and distributed across a decentralised network of computers. Attempts to manipulate data by changing, adding or removing info from the blockchain is extremely difficult since all copies of the blockchain are constantly verified against each other; some chains do this in different ways to others, but the general outcome is the same. The disadvantage of this lack of fungibility however, is that transactions and coins are readily traceable between wallets. This may not seem like a big deal for most cryptocurrencies, given that wallets don't necessarily contain identifying information, but it really is. Remember not long ago when exchanges were flagging and discussing restrictions on 'dirty' or 'tainted' BTC that had been coin-joined? Or when the 'representative group' of shills and spruikers known as the 'Bitcoin Mining Council' were pushing the idea of 'clean, environmentally-friendly mined' BTC? What about when the Colonial Pipeline hackers got paid in BTC and the Feds traced and seized it back? Like it or not, every coin on the majority of blockchains has a permanent, traceable history.

Why does this matter?

Because CBDCs will be non-fungible. They will not simply be digital fiat, numbers on a spreadsheet like we already have, because CBDCs will have an identifier and a history. They will be explicitly linked to you, and every transaction you make with a CBDC will be recorded by the government on their blockchain. This is an insane level of constant reporting of every aspect of your life to the authorities, who Edward Snowden unequivocally confirmed have no qualms keeping as a permanent record.


Unlike most cryptocurrencies of today, CBDCs will not be decentralised but centrally controlled. The question is, do you trust your government not to manipulate or remove your balance, especially if you are a minority or a political activist?  Or to give a more pointed example, if you believe systemic racism is an ongoing problem in the USA, then you must believe that a CBDC system can and will be used to target racial and religious minorities. Worse still, governments will use CBDCs to control your behaviour and spending (I say will because this is already happening in China). "Obesity Crisis"? Forcibly limit the amount of fatty food someone can buy, no police necessary. "Global Warming"? Forcibly limit how much petrol someone can purchase. "Vaccine-hesitancy"? Link vaccination status to your CBDC balance and prohibit you from buying or entering whatever place the government decides. Businesses won't even have a choice to serve you or not, your money simply won't be accepted.

The more you think the worse it gets. "Economic problems"? Implement negative interest rates or expiry dates onto CBDC balances to force people to spend their money and 'stimulate the economy'. All those Keynesian, statist economists who view saving as 'hoarding' and 'selfish' are going to enjoy forcing you to spend now on what they want instead of saving for what you actually want in the future (saving is actually fantastic for the economy, see this article for a rebuttal). What about "Mass Shooting and Gun Violence problems"? Easy, just restrict people from buying ammunition. Again, there's no threats of police enforcement, violence or imprisonment necessary. You want to opt out of this new monetary system by buying gold, silver or alternative cryptocurrencies? Sorry, you're not allowed to purchase those items with your CBDC balance. 

Surely you're exaggerating!

Governments have wanted to do nearly all of these things before, it has just been too costly or difficult to enforce.  Think about the UK government introducing sugar taxes to 'tackle childhood obesity', or the Canadian deputy Prime Minister having the arrogance to blatantly refer to the savings of citizens as 'pre-loaded stimulus' to be 'unlocked'.  The Australian government attempted to ban cash for large transactions, while New York state has introduced vaccine passports to restrict entry to venues.  Imagine how much easier it would be for governments to control you if they had direct control over what you could do with your money (if you could even call it yours).

You might ask, 'why wouldn't governments just directly ban things they don't want people to buy?' Because governments need people to keep producing goods, since businesses employ people and create tax revenue.  A population with high unemployment is a population primed for civil unrest.  And of course, those businesses whose products are restricted can just be compensated with the tax dollars of others or more newly created money.  Thus you arrive at a system not dissimilar to the communist systems of years gone by, where thousands of products would be created and never sold, simply stashed away and left to rust or rot.  Don't believe me?  Ask any older Eastern European and they'll tell you the same stories about the thousands of washing-machines, televisions, crops of watermelons and new cars that never saw the light of day.

The centralised control of money has always been a disaster for society. A brief look at the history of central banking demonstrates a history of manipulation, inflation, theft, lies, propaganda, cronyism and destruction. CBDCs are just the next step in this long dark march.

What is the solution?

Oppose cash bans at all costs. Opt into alternative, hard assets now while you can. Learn about privacy coins like Monero. Take every opportunity to educate others about the dangers of CBDCs, and don't be tempted to accept CBDCs just because they come with 'free' Universal Basic Income (which I believe will be the Trojan horse for CBDCs).  Even the smallest amount of education and preparation will help.

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