by Peter Schiff, Schiff Gold:
You had better get ready for the world of central bank digital currencies (CBDCs) because they are coming. And they are coming fast.
According to a recent survey by the Bank for International Settlements (BIS), as many as 24 CBDCs could be in circulation by 2030.
This means even more government control over your money.
According to the BIS, 93% of the 86 central banks surveyed said they are conducting work on developing a CBDC. Meanwhile, “The uncertainty about short-term CBDC issuance is fading.”
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The survey suggests there could be 15 retail and nine wholesale CBDCs circulating by 2030.
CBDCs exist as virtual banknotes or “coins” held in a digital wallet on a computer or smartphone. The difference between a central bank (government) digital currency and peer-to-peer electronic cash such as bitcoin is that the value of the digital currency is backed and controlled by the government, just like traditional fiat currency.
Central bank digital currencies are part of a broader “war on cash.”
A cashless society is sold on the promise of providing a safe, convenient, and more secure alternative to physical cash. We’re also told it will help stop dangerous criminals who like the intractability of cash.
But there is a darker side – the promise of control.
The elimination of cash creates the potential for the government to track and control consumer spending. Digital economies would also make it even easier for central banks to engage in manipulative monetary policies such as negative interest rates.
So far, the Bahamas, the Eastern Caribbean, Jamaica and Nigeria have issued retail CBDCs. Many other countries, including China, India, and the US have launched pilot programs. Based on the BIS survey, “More than half of central banks are conducting concrete experiments or working on a CBDC pilot.”
Last year, the Federal Reserve released a “discussion paper” examining the pros and cons of a potential US central bank digital dollar. According to the central bank’s website, there has been no decision on implementing a digital currency, but this pilot program reveals the idea is further along than most people realized.
Ultimately, it would take a congressional act to establish a digital dollar as legal tender.
Imagine if there was no cash. It would be impossible to hide even the smallest transaction from the government’s eyes. Something as simple as your morning trip to Starbucks wouldn’t be a secret from government officials. As Bloomberg put it in an article published when China launched a digital yuan pilot program in 2020, digital currency “offers China’s authorities a degree of control never possible with physical money.”
The government could even “turn off” an individual’s ability to make purchases. Bloomberg described just how much control a digital currency could give Chinese officials.
The PBOC has also indicated that it could put limits on the sizes of some transactions, or even require an appointment to make large ones. Some observers wonder whether payments could be linked to the emerging social-credit system, wherein citizens with exemplary behavior are ‘whitelisted’ for privileges, while those with criminal and other infractions find themselves left out. ‘China’s goal is not to make payments more convenient but to replace cash, so it can keep closer tabs on people than it already does,’ argues Aaron Brown, a crypto investor who writes for Bloomberg Opinion.”
Economist Thorsten Polleit outlined the potential for Big Brother-like government control with the advent of a digital euro in an article published by the Mises Wire. As he put it, “the path to becoming a surveillance state regime will accelerate considerably” if and when a digital currency is issued.
What Can We Do About It?
We probably can’t stop governments from issuing CBDCs, but we can avoid using them. Initially, they will coexist with cash. Simply rejecting CBDCs and sticking to cash will slow down implementation.