5 Great Dangers of CBDCs

By fabio- | fabio | 20 Jul 2021

CBDCs, short to Central Bank Digital Currencies, are being currently developed by many Central Banks around the world. Crypto enthusiasts usually see them with a great amount of mistrust, as Bitcoin itself was specifically created for it to be a decentralized payment network that is independent from any government.

In this attempt at controlling cryptocurrencies, I believe the adoption and use of CBDCs pose several dangers, even to governments themselves. Let me show you a list of 5 Great Dangers of CBDCs:


1 - Your money is at risk

This is due to the concept of programmable money, which is basically the opposite of financial freedom. In the current monetary scenario, central banks are in charge of the monetary emission, but the money in your bank account or the physical bills in your wallet are yours to use. Sure, you can get into trouble from purchasing illegal goods or engaging into illicit activities. I will not delve into how these very things are arbitrary. It is not perfect, but there is some degree of financial freedom. 

However, if your wallet is no longer entirely yours, surely this can't be used for anything slightly tyrannical, right?

  • You owe new taxes that we just created? Don't worry, we will simply collect them directly.
  • Oh, you didn't spend your salary from last month? Take a -5% fine for not spending it.
  • You have money in your bank account that hasn't been moved in 1 year? Too bad you can't now, since it's expired!
  • Sorry, you can no longer purchase alcohol, since you have already spent your allowed quota of the year.

This is worrisome, to say the least. A sandbox for arbitrary centralized decisions is a dictatorial wet dream.


2 - Your personal freedom is at risk

The first reason already poses the argument regarding financial freedom. However, there is another possibility of programmable money that lies in the possibility of your counterparty/custodian (in this case, the government) in freezing your assets. This is extremely dangerous, and at the risk of being repetitive, I emphasize that the issue with this is due to its arbitrariness.

It matters little if you support your current government, or if you agree with the way things are being conducted. If a power is available to be used, it will be used at some point in time. Governments change, and not necessarily for the better. There may come one government whose decisions you disagree with and make you decide to leave the country to pursue a new life.

And you just found out that, well... You can't. Conversions against other coins have been forbidden. Especially Bitcoin. You can't even purchase plane tickets to get out of the country, because your money has inflated to the point of it being worthless.

Be no fool in this regard. The sole purpose behind CBDCs is to regain the full control of monetary policy. And to the level of an Orwellian Distopya, that is.


3 - Banks are at risk

And I mean your regular bank, not the Federal Reserve. Banks fill one specific role in the financial system, which is in connecting central banks to the people through the system of debts. Once people become the custodian of their own money, banks become irrelevant in this regard.

This situation is better explained with an example. Let's say you deposit $20,000 in your local bank branch. The same bank then loans $20,000 to a restaurant, that now has a debt with the bank, and leaves it in a deposit for an incoming bill. This deposit then transforms into a loan for a farmer... 

And no money has left the bank. It's been essentially multiplied a couple times, and banks are allowed to operate in such manner. This is downright impossible once you are your own custodian. Banks will have to remodel their entire business operation, and this can also have severe impacts in the credit offer.

I do believe however that banks will be forced to embrace and adopt blockchain technologies though, or risk being replaced. I've posted a recent article regarding a new application for Ethereum in traditional banks, that you can find here:


4 - Companies are at risk

Let's say you are the owner of a small company, that conducts several small transactions. For example, consider that you are the restaurant owner from the previous example. In most countries, taxes are charged based on profits. It is no crime to pay less taxes with the use of legal means. It is a common practice to reinvest the money in your business, instead of cashing out the profit. As the restaurant owner, you might want to purchase a new stove, or more tables, or better chairs...

However, once every single transaction is logged by the government, this gives access to much more information than it already has in its hands. With that, it can safely determine your cashflow, the customers that frequent your establishment, and to a certain degree maybe even what they ordered! I can see this leading bureaucrats to some ideas.

The main foreseeable one would be a new taxation system. Instead of charging over profits, why don't we charge over every single transaction? By the way, since your company made you an extra 100K this year, I'm sorry, but you are now considered rich, and must pay an extra 50% of everything you have.

Make no mistake, these sort of things never show up all at once, but gradually. Never forget the boiling frog fable:

If you drop a frog in a pot of boiling water, it will of course frantically try to clamber out. But if you place it gently in a pot of tepid water and turn the heat on low, it will float there quite placidly. As the water gradually heats up, the frog will sink into a tranquil stupor, exactly like one of us in a hot bath, and before long, with a smile on its face, it will unresistingly allow itself to be boiled to death. - Daniel Quinn, The Story of B


5 - The government is at risk

Last, but not least, yes, even the government is at an increased risk due to the adoption of CBDCs. And in one special manner: Cybersecurity. Several reputable crypto projects have suffered hacks in the past, even Bitcoin and Ethereum. I've recently explored a hack on one of the projects that I'm very fond of that is THORChain. Should it interest you, you can find it here:

Crypto is an incredibly new space, and we are only just scratching the surface of its possibilities. The stakes are already high enough for a small market cap altcoin. Now compare that to a CBDC, and any ill-intentioned individual (expect no shortage of it), who attempts to crack the code of the new governmental money printer is in for a massive chunk of cash.

The traditional centralised banking/financial system has several additional layers of security, and one would have to go through great lengths to even attempt a similar operation. And how did it get so robust? Yes, by learning from several attempts and attacks to it! And that happened over the course of centuries. Migrating the entire functioning of the monetary supply, even over the course of several years, is extremely risky.

Forget independent hackers who solely want profit, foreign governments can also hire freelancers to attempt a direct attack on another country. Hardly traceable, and if successful, it can be as bad as a nuclear warhead, but pointed towards a country's economy. We've seen atomic bombs, hydrogen bombs, but inflation bombs are surely a new one.



Governments are approaching CBDCs as if they were simply another payment network, or as if granting authorization for a new credit card provider to operate. This is extremely naive, and can have profound impacts on the world. It is of the uttermost importance for people to understand what CBDCs truly are, and how to prevent or downright boycott this atrocity.

The solution? In my humble opinion, the dark horse contender: a Bitcoin Economy. As the phrase commonly coined to having been said by Thomas Jefferson: "The price of liberty is eternal vigilance."

Thanks for reading!

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