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The imposition (NOT adoption) of a Central Bank Digital Currency (CBDC) will not happen overnight. After all, citizens in the Eurozone were given two months to redeem their national currency for euros. Also, the central banks learned a valuable lesson in the 2016 demonetization of larger banknotes by India's central bank and the serious cash shortages that ensued. Currently, Nigeria is attempting to push its people into using its CBDC by limiting cash withdrawals. In all of these cases, cash is still an option for people. In my prediction, that will not be an option.

For simplicity, I am going to use the United States and its central bank, the Federal Reserve, but the roadmap will be similar for other countries. There are three points to remember about the Federal Reserve for the purpose of discussing CBDCs:

• It is owned by its member banks, not the United States government.
• Its mandates are maintaining stable prices, maximizing employment, and moderating long-term interest rates.
• Its main tools for monetary policy are adjusting the federal funds rate (the rate banks charge for overnight loans of excess funds), the discount rate (the interest rate banks pay when borrowing from the Federal Reserve, and the reserve requirements (the fraction of deposits that banks must hold in liquid assets)

The transition to a CBDC world will, in my opinion, will have several phases: Introductory, Voluntary, Consolidation, Monetary Control, and, finally, Total Control.

The Introductory Phase:
"Coming Soon: FEDCoin, the Next Generation Currency! Exchangeable One-for-One with US Dollars, you can spend FEDCoin at your favorite merchants. Open a FEDCoin account and get an incredible X% APY on ALL of your deposit! No minimum deposit! Free debit card! You can even delay payments for up to 30 days!" The CBDC will be announced, along with details about FEDCoin accounts, to gather feedback.

The Voluntary Phase:
There will be a big push to give everyone a FEDCoin account. US Government payments might be required to be deposited in a FEDCoin account. Signs will pop up at retailers: "FEDCoin Accepted Here" or "X% Discount for Using FEDCoin." The convenience, and possible savings and earnings, will pull people in. Just like Internet-only banks, FEDCoin accounts will be online-only. The FEDCoin app will allow check deposits, balance inquiries, and sending/receiving funds via QR-Codes. The debit card would be used when a smart phone is unavailable. FEDCoin, being programmable, will allow a purchaser the option to delay the debiting of funds by up to 30 days, interest free, similar to using a credit card.

The Consolidation Phase:
After all the kinks have been worked out of the FEDCoin system and the adoption rate slows, the Consolidation Phase will begin. This phase has two steps, which could occur in either order. I believe it will be in the following order, due to the logistics of redeeming all of the banknotes that currently exist.

Step 1:
All banknotes will be forcibly redeemed for FEDCoin. There will not be any advance notice. I do not believe Congress must pass a bill for this to take place. All circulating banknotes (paper money) are Federal Reserve Notes, meaning holders of these banknotes are unsecured creditors of the Federal Reserve. The Federal Reserve will just be calling in its own notes. This is a frequent occurrence for loans, being paid off early. Given the chaos in India when its central bank forcibly redeemed just the larger denomination banknotes, holders of Federal Reserve Notes will be given at least 30 days, and more likely 60 or 90 days to turn in all currency. To tamp down dissent, the Federal Reserve will claim that only terrorists, drug smugglers, and tax evaders need cash.

Step 2:
All deposit accounts at banks will be converted (in the case of the owner not having a FEDCoin account) or rolled into a FEDCoin account. Banks will either become lending companies (people will still need loans) or disappear altogether. Technically, a bank accepts deposits AND loans out money, so no more banks. Some people will cheer at this.

At this point, all US Dollars are now in FEDCoin accounts. All legal transactions are done with FEDCoin. All your income and outgo flows through your FEDCoin account.

The Monetary Control Phase:
The Federal Reserve's mandate to maximize employment (or minimize unemployment) drives it to stimulate the economy. According to Keynesian economic theory, the way to stimulate an economy is by increasing the aggregate demand in that economy. Up until this point, its main tool to increase aggregate demand is to manipulate the federal funds rate, a very blunt tool and one that takes 12-18 months to take effect. The Federal Reserve knows that lower interest rates stimulate an economy. However, if holding cash is an option, then the interest rate cannot be reduced below zero. If interest rates are negative, a prudent person would just withdraw all his money and just hold cash. But holding cash is no longer an option, the Federal Reserve having demonetized all outstanding banknotes. Now, negative interest rates are an option. Imposing a negative interest rate, using the programmable FEDCoin, would incentivize people to spend more, stimulating the economy immediately. Use it or lose it. There would be no point in saving money if you end up with less than when you started. Deposits will have a built-in expiration date or depreciation rate.

The Total Control Phase:
The success that the Federal Reserve has in forcing spending has not escaped the notice of the political party in power. After if a programmable currency could be used for monetary control, it could also be used for social control. Social agendas could be implemented without the hassle of passing legislation. The Federal Reserve would get a "suggestion" restrict the purchase of, or add large "fees" to certain items, in the name of "saving the taxpayers' dollars", "public health", or "for the environment" and how that helps the Federal Reserve in carrying out its mandates. Soon, there are whispers and rumors of transactions being denied at certain types of retailers, such as liquor stores, strip clubs, and gun shops.

The incredible power of a programmable currency, being directed by people unbound by Constitutional limits, will not be given up without a fight. With no shortage of ideas on how to "improve" the world still to be implemented, the party in power will want to stay in power. After monetary control and social control will come political control. A big story breaks about a prominent and vocal critic of the party in power who has his account locked for several days. It gets unlocked with the excuse that some low-level employee entered the wrong code. But the unspoken message was loud and clear. Criticism of the party in power is lessened and donations to the party out of power drop off. Donations to some advocacy groups opposed to some of the agenda being imposed are blocked. There is no robust debate on politics and policies any more. Elections are held and the party in power increases its grip on the levers of power, gaining a supermajority in both houses of Congress. Laws are quickly passed to ensure the party will never lose power. People keep their heads down and don't talk much to strangers. Anyone who emigrates forfeits their FEDCoin account.

At this point, people are in a digital prison, unable to make a better life for themselves or their children by saving or investing. While the government boasts how the people's health has been improved by restricting consumption of food that "science" claims is bad for them or the environment, the food that is available has been mass-produced and over-processed, organic and natural food suppliers having been forced out by people being unable to afford their higher prices. Large corporations use their influence to have any upstart competitor's products restricted.

Pretty scary scenario, right? I hope I am wrong about all this, of course. But human nature and the laws of economics will drive this process.

What might stop this process? I thought of several things that might prevent us from being put into a digital prison.

• Mass adoption of cryptocurrencies worldwide, where, as long as one can VPN to servers and nodes to transact with crypto, the "holding cash" option is still available.
• Hyperinflation, followed by a complete currency collapse, where no-one will want any currency associated with the government.
• A country or group of countries creating a currency backed with (and redeemable in) gold, or a basket of commodities, with banknotes circulating worldwide.

If you think of others, please suggest them in the comments. If you see things turning out differently, please explain why in the comments (please give me another reason to hope).

I hope to discuss how cryptocurrencies fit in a CBDC world in a future article.

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