CBDCs: Corrupting Money

CBDCs: Corrupting Money

The Blockchain Industry: A Threat to Financial Freedom

This article examines the rise of Central Bank Digital Currencies (CBDCs) and their potential impact on financial freedom. It also explores the motivation behind governments pursuing CBDC programs, the failures of traditional fiat currencies, and the steps individuals can take to mitigate the risks associated with CBDCs.

All Fiat Fails

Fiat currency, the dominant form of money in our lives, may seem natural and inevitable, but it stands as a dead end in the context of monetary history. For thousands of years, gold and silver served as the preferred forms of money. However, over the past 100 years, fiat money has been disconnected from precious metals, leading to disastrous consequences. In fact, 61 out of 62 documented cases of hyperinflation occurred in the era of fiat money. This departure from sound money principles has caused significant economic damage, even in cases where hyperinflation has been avoided. A “regular” inflation rate in double digits can have a cumulative destructive effect, halving the purchasing power of a currency in as little as seven years.

To visualize this trend, a chart demonstrates the rise of hyperinflations over time. Additionally, another chart showcases the detrimental impact of inflation on purchasing power.

Why CBDCs Now?

Recognizing the intrinsic flaws of fiat currencies, some policymakers attempt to reform failing monetary systems by introducing new fiat currencies. This approach, seen in the eurozone, aims to delay the inevitable collapse by consolidating weaker currencies. However, this quick fix strategy only prolongs the problem and leads to money printing and mounting debts. Unfortunately, CBDCs function as a slightly more sophisticated attempt to reform these failing monetary systems without making any fundamental changes. Instead, CBDCs shift more power into the hands of governments, exacerbating the erosion of citizens’ purchasing power.

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The Ultimate Corruption of Money

The effectiveness of fiat currency as a reliable store of value has long since eroded due to permanent inflationary policies. By preventing independent saving and incentivizing debt, fiat currencies contribute to a society dependent on the state. CBDCs do not reverse this trend. As a store of value, CBDCs would further erode purchasing power by allowing central banks to digitally “print” money at an unprecedented rate, potentially even implementing an expiration date on currency units.

CBDCs as a VoAGI of Exchange

The freedom to transact is a prerequisite for personal freedom. By replacing cash with CBDCs, the central bank gains control over almost every economic transaction in society. Unlike current payment systems, which are relatively decentralized, fully implementing CBDCs grants the central bank the ability to block payments and realize a totalitarian’s dream. China’s advanced CBDC program illustrates this potential reality. With the majority of developed countries already possessing a smartphone penetration rate of over 80%, a fully cashless society controlled by a state-managed CBDC is within reach.

How Seriously Are Governments Pursuing CBDCs?

Currently, 130 countries, representing 98% of global GDP, are pursuing CBDC programs. Of these, 11 countries have already launched their CBDCs, with 21 in pilot stages and the rest in various stages of research and development. However, growing opposition to CBDC rollout exists, as seen in the introduction of an anti-CBDC bill by U.S. Senator Ted Cruz, and outright bans on federal CBDC use in Florida and North Carolina.

CBDC development in the EU is progressing, with the European Central Bank (ECB) considering the introduction of a digital euro. Fabio Panetta, a member of the ECB board, warns against support for independent cryptocurrencies, urging focus on reliable digital settlement assets such as CBDCs. The Bank of England is also transparent about its intention to roll out a CBDC, known colloquially as “britcoin.”

Mitigating CBDCs

To mitigate the risks associated with CBDCs, individuals can stay informed about these developments and educate others about the dangers posed by full state control of money. By using cash whenever possible, individuals can challenge the argument that cash is no longer in demand and should be replaced by a surveilled central bank-controlled digital currency. Furthermore, Bitcoin offers an alternative. While currently used as a means of preserving purchasing power, Bitcoin could become the only way to spend money freely if cash is banned and CBDCs are introduced. Additionally, opposition to CBDCs should be voiced, and support for Bitcoin should be considered.

Conclusion

The introduction of CBDCs poses a threat to financial freedom and perpetuates the ills of traditional fiat currency. While a black market for currency could emerge, true salvation lies in organic, bottom-up Bitcoin adoption. Bitcoin’s superior monetary characteristics and independence from state control make it the ideal alternative to both failing fiat currencies and future CBDCs.

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This article is an opinion editorial by Josef Tětek, a Bitcoin analyst at Trezor. The views expressed in this article solely represent those of the author and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.

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