CBDCs

As Central Bank Digital Currencies (CBDCs) continue to gain traction worldwide, I consider it essential to explore the potential downsides and risks they pose to individual rights and liberties and the wider socioeconomic system. Although CBDCs are said to offer potential benefits such as increased efficiency, they threaten financial freedoms, individual privacy and autonomy besides the fundamental right of individuals to resist control and tyranny. What are the potential hazards of CBDCs?

1. Erosion of Cash Transactions: One of the most significant threats posed by CBDCs is the potential decline or disappearance of cash transactions. Cash provides financial privacy, anonymity, and a vital escape from potential state surveillance or control. A world without cash could lead to the marginalization of vulnerable populations, such as the unbanked or those without access to digital infrastructure, further exacerbating socioeconomic inequalities (Mayer, 2019).
2. Financial Surveillance and Discrimination: The widespread use of CBDCs could enable governments and central banks to monitor, govern and control every transaction, leading to unprecedented financial surveillance. This level of control could result in financial discrimination, where disfavoured individuals or groups are denied access to financial services based on their political beliefs, social status, or other factors. In turn, this could pave the way for authoritarian regimes to suppress dissent and infringe upon individual rights (Svensson, 2019).
3. Overreach in Monetary Policy: CBDCs would give central banks greater control over monetary policy, potentially allowing them to manipulate interest rates, engage in unconventional policy measures, and even impose negative interest rates. Such actions could lead to unintended economic consequences, including inflation, market distortions, and reduced savings, ultimately undermining individual financial autonomy (Bindseil, 2020).
4. Accelerated Centralization of Power: By enabling central banks to wield greater control over financial transactions, CBDCs could accelerate the centralization of power. This shift could weaken traditional banks and financial institutions, leading to the consolidation of financial services under the control of central banks and governments. In turn, this concentration of power could facilitate corruption, abuse of power, and a loss of democratic accountability (Farrell & Newman, 2019).
5. Loss of Financial Privacy as a Human Right: Financial privacy is a fundamental human right that allows individuals to exercise their freedoms of expression, association, and political participation. CBDCs threaten this right by enabling extensive surveillance and control over financial transactions, potentially chilling free speech and dissent (Zohar, 2018). Defending the right to financial privacy is crucial in preserving the values of a democratic society.

6. Exacerbation of the Digital Divide: CBDCs could widen the digital divide, leaving behind individuals without access to the internet or digital devices, as well as those with limited digital literacy (Carstens, 2019).
7. Dependence on Unreliable Technology: As CBDCs rely on digital networks and technologies, they are vulnerable to technical failures, which could disrupt the financial system and undermine public trust (Bordo & Levin, 2017).
8. Disintermediation of Banks: CBDCs could lead to disintermediation, where individuals and businesses shift their deposits from commercial banks to the central bank, thereby weakening traditional banking systems and reducing credit availability (Niepelt, 2020).
9. Loss of Seigniorage Revenue for Governments: CBDCs may reduce seigniorage revenue for governments, as the demand for physical cash declines. This loss of revenue could lead to fiscal challenges for governments and potentially higher taxes (Brunnermeier, James, & Landau, 2019).
10. Compromised Financial Innovation: CBDCs could stifle financial innovation by centralizing control over the money supply and limiting competition between private sector financial service providers (Fernández-Villaverde, Sanches, Schilling, & Uhlig, 2020).
11. Misallocation of Central Bank Resources: The development, implementation, and maintenance of CBDCs could divert central bank resources from their core functions, such as maintaining price stability and ensuring financial stability (BIS, 2020).
12. Reduction of Monetary Policy Flexibility: CBDCs could constrain the ability of central banks to conduct unconventional monetary policies during crises, as the public may choose to hold CBDCs instead of riskier assets, reducing the effectiveness of central bank interventions (Kumhof & Noone, 2018).
13. Risk of Run on Banks: The existence of CBDCs might encourage bank runs during periods of financial stress, as individuals and businesses could quickly and easily shift their deposits from commercial banks to the central bank, exacerbating financial instability (Engert, Fung, & Hendry, 2018).
14. Threats to Individual Property Rights: CBDCs could enable governments to confiscate or freeze citizens’ digital assets more easily than physical cash, raising concerns about the protection of individual property rights (Raskin & Yermack, 2016).
15. Ineffective in Informal Economies: In countries with large informal economies, CBDCs may not provide significant benefits, as cash transactions would still dominate, and central banks could struggle to enforce compliance with regulations (Meaney & Dyson, 2018).

While Central Bank Digital Currencies would benefit the control freaks, they present substantial risks and dangers to individual rights and liberties. In the face of growing interest in CBDCs, I argue that we must urgently prioritise the defence of our freedoms, privacy and autonomy, and resist the advancement of tyranny. Rather than blindly embracing CBDCs, we must seek alternative, transparent financial systems that promote decentralisation and individual freedoms while protecting and upholding the values of a free society. By doing so, we can ensure that the digital age becomes an era of empowerment and liberty for all. I for one will continue to argue for individual rights in the face of unprecedented financial centralisation, and by extension, tyranny. The writings are not just on the wall, they are about to be enshrined in law.