Intro to Central Bank Digital Currency (CBDC)

On Monday, the congressional budget office reported that “over the next decade, the dollar’s international use is expected to decline very gradually… but it will not be overtaken by either of its closest competitors, the euro or the Chinese renminbi." This is significant because Congress’ new position is that it expects the US Dollar (USD) to lose strength over the next 10 years. This will put tension on the USD, which Americans are required to use in America. In order to help secure strength in the USD, the government might need to move forward on creating a central bank digital currency (CBDC).

What is a CBDC?

A central bank digital currency is a form of digital currency issued by a country’s central bank. They are like cryptocurrencies, except their value is fixed by the central bank and equivalent to the country’s current fiat currency.

What is the difference between a CBDC and a countries current digital currency?

The overall features of a CBDC and current digital currency are very similar, but the biggest (and most important) difference is that a country’s current digital currency has a physical form option to it. If you have $1,000 in your bank account (that you can see on your phone), that is $1,000 digital dollars (digital currency). You can then go to a bank and withdraw that $1000 into a physical form (cash). CBDCs don’t have that option. Your money will only have a digital presence.

Why would the government push CBDCs?

The main push for CBDCs is to provide cheap, easy, and accessible ways for citizens to participate in financial services. It is estimated that 5% of adults (in the US) do not have a bank account and that 13% have bank accounts, but use expensive alternatives like money, orders, payday loans, and check chasing services. CBDCs would also allow the central bank to keep the currency stable and prevent things like bank runs.

The problem with CBDCs.

Currently, the financial infrastructure and cybersecurity concerns are two significant issues CBDCs could run into. However, none of these compare to the much larger issue CBDCs pose, privacy and protection.

Preventing CBDCs is the hill to die on.

Central bank digital currencies raise massive questions about citizen’s privacy and protection from the government. CBDCs would allow the government to pull money right out of your account for taxes, tickets, bills etc. It would allow the government to monitor how much money you have, where you are spending your money, and who you are donating to. The Government could also prevent you from accessing your account or prevent you from spending money at certain places. For example, maybe you have an unpaid parking ticket that you disagree with. Well, the government would be able to prevent you from buying gas until that parking ticket is paid; or they could just take the money right out of your account themselves. Every citizen would be financially enslaved to whoever controls the central bank.

CBDCs are a real threat in the United States. President Biden urged federal agencies to looking and recommend actions and regulation into cryptocurrencies and CBDCs.

Are CBDCs currently being pushed?

Many countries are running pilot programs to see the effects of CBDCs, but below is a list of countries that have already launched CBDCs.

• The Bahamas

• Antigua and Barbuda

• St. Kitts and Nevis

• Monserrat

• Dominica

• Saint Lucia

• St. Vincent and the Grenadines

• Grenada

• Nigeria

I will be on top of this topic to bring you the latest information as it becomes available.

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