CBDCs is an oxymoron as it seems contrary to true crypto ideals. Cryptocurrencies are gaining traction across the globe. Their mainstream adoption is increasing every day, and real-world use cases are also on the rise. Whether it is cross-border remittances or anonymous privacy-focused payments, cryptocurrencies are increasingly becoming part of the general psyche. And now, central banks want to capitalize on the crypto sentiment.
And everyone knows when central banks enter the field, they play big! However, is crypto the right field for central banks? Isn’t the very essence of a cryptocurrency supposed to be un-central? Well, the rise in the number of central banks vying to create a centrally-controlled digital currency will make you believe otherwise.
(Thread) In an interview with @Challenges magazine President @Lagarde discussed topics including a new policy mix for Europe, the need to bring the ECB closer to people, climate change, low rates and cryptocurrencies https://t.co/FrL73jgplO (EN) https://t.co/x8tRS3Ov79 (FR) pic.twitter.com/sJv6zuM5bl
— European Central Bank (@ecb) January 8, 2020
The fundamentals ideals of privacy, anonymity, and freedom that gave birth to cryptocurrencies post-2008 recession seem in contrast with the CBDC concept.
CBDCs are coming, whether crypto fans love it or not
From France to China, research and development are currently underway to launch central bank digital currencies. These financial instruments may represent a cryptocurrency in technical terms, but they certainly lack the privacy credentials that endeared so many people to the crypto realm. The core crypto ideals are being subverted through these CBDCs.
Lex Sokolin of ConsenSys says that the success of cryptocurrencies has encouraged the central banks to develop their crypto. The CBDC experiments within the financial ecosystem are bearing fruit as many central banks are in advance stages of development. With Bitcoin serving as a benchmark, most central banks are leaving no stone unturned to launch strong crypto that helps the host market well.
Authoritarian regimes view crypto differently
Whether it is the Chinese digital Yuan or Facebook Libra, there’s no lack of motivation. And it seems that the Coronavirus pandemic has only accelerated this trend as central banks are likely to promote a more holistic digital economy going forward. Overall, dip in the cash usage also bodes well for digital currencies.
So far, central banks have not signaled that cryptocurrencies are being developed with an intention to replace hard cash. COVID-19 pandemic has shown that governments can quickly take advantage of a situation to circumvent citizen’s privacy. Thus, cryptocurrency programs by authoritarian governments must also be viewed in the same light. Creeping government surveillance can mean that crypto’s core ideal, i.e., anonymity, isn’t made part of the CBDCs.
Another factor that shows CBDCs are not true to crypto ideals is how they are implemented across various sectors of the economy. Retail sectors may perceive it differently compared to the remittance sector. Custody and settlements are other notable aspects that demand privacy.
As the development of CBDCs progresses at breakneck speeds, governments must ponder that people who love crypto won’t get excited by a centrally-controlled virtual currency. Unless central banks force the citizens to use their crypto, don’t expect citizens to surrender their financial freedom voluntarily.