This is an opinion editorial by Pierre Gildenhuysco-founder of a tech startup for the social environment based in Hong Kong.
Central bank digital currencies (CBDCs) are actively developed and discussed in many of the world’s major nations, including 19 G20 countries and around 105 others around the world, as shown by Statistics from the Atlantic Council in 2022. They are making rapid progress and some nations such as Australia, South Korea and the United States are expected to start implementing CBDC in the near future, following the lead of China, which recently started rolling out theirs in early 2022. .
This is not recent news, but it is something that should be mentioned periodically, as it should scare us all or at least worry anyone who uses any form of money in their daily life. There is only one potential benefit to CBDCs: in essence, governments cause their own currencies to collapse by removing as many holdings of money as possible before people realize it is no longer salable to anyone else in their country or at all. the world.
CBDCs are said to be inspired by bitcoin – of course, these countries that are launching them are likely building them to be the perfect antithesis of well-built bitcoin – with the only potential similarity being a distributed ledger. However, I postulate that in the eyes of many governments, “a ledger” denotes being owned, and therefore accessible only by the state because they are the voice of the people (in theory).
The expected horrors of CBDC are discussed at length by many Bitcoiners on Twitter and elsewhere, but very few I have found have had anything good to say, which I would like to change.
CBDCs will most likely implement Keynesian principles primarily, as it appears to be the prevailing school of economics in most of the Western world. Whatever principle a US CBDC adopts will likely serve as a model for all others. Some of these principles could be money that can expire, be automatically taxed, be spent only in certain industries, and be a completely permission-based form of transaction, meaning that people will be forced into specific transactions they may not want, forcing with greater time preference or being forced to forgo investments in sectors of their choice. Bitcoin purchases using CBDC will most likely become impossible or at least increasingly difficult, as no government wants money that competes with what it controls.
This is a terrifying prospect. How will bitcoiners and new users acquire more bitcoins before the fiat system inflates to collapse? Well, this will likely create a more circular economy, as fewer people will want to keep their transactional power in the form of a fully centralized and supervised system. They will most likely make the decision to start paying and accepting bitcoins for every single transaction. That way, they don’t have to spend their money trying to “stimulate economic growth” by spending their maturing CBDCs that they would otherwise have saved for a rainy day, or to avoid further unfair taxes. This is very similar to the extremely common practice of many businesses around the world providing their services at a discount for cash payments to avoid paying taxes on those services.
This was especially prevalent in places like Greece, where the practice would start because the Greeks didn’t want to pay taxes on “foreign” Ottomans. who controlled the region at the time. The practice has evidently continued because people believe that additional taxation on daily transactions by any power, local or foreign, is unfair and excessive. In the eyes of some, this is a form of corruption; however, it should not be labeled as such because corruption implies that the people hiding these transactions are in positions of power that they are exploiting, rather than being the ones being exploited by unnecessary taxation from their government.
CBDCs are likely to phase out the small amount of paper currency that is still part of the world’s economies today. This means that these countries will rely on technology education and word of mouth about how it works. This will cause an increase in technological know-how in these nations, which means it should be easier and easier to ship otherwise reluctant members of society to bitcoin once they realize the false value they hold instead of hard money.
In other words, CBDCs will likely be the perfect trigger to cause mass adoption and spark a circular bitcoin economy. At the end of the day, no matter how much one loves their government or opposes its very existence, the sheer discomfort of having everyone’s transactions moderate and limited based on arbitrary metrics, such as carbon emission scores or value scores nutritional is enough to turn anyone away from that monetary medium.
With people’s savings potentially consumed to promote faster and more comprehensive spending, as has been done with the inflationary practices of the past few decades, people will realize just how bad specific Keynesian principles are. These principles are now promoted and considered true by many modern economists. The average people in the modern world practically use those principles to have to invest all their wealth to make sure they don’t go bankrupt from inflation, running the risk of potential misinvestments. Many people would be significantly more productive for society by developing their own businesses and would also be happier overall if they could simply store their wealth in valuable cash that constantly appreciates value with economic growth, instead of being forced to create the meme economy. that we have experienced in recent years. This would likely get worse with the implementation of CBDCs.
The implementation and adoption of the CBDC is unlikely to be an overnight change. The time it would likely take before bitcoin adoption takes place would depend heavily on what terrifying features the CBDC specs implement. These CBDCs will cause a lot of pain and suffering over the time they are actively used. The pain they will bring and the practices they will implement are nothing new, they are simply an advancement of the practices currently used. This will continue until people begin pseudonymously interacting using bitcoin for their wealth deposit and completely move away from any form of fiat currency.
Creating a vibrant and successful circular economy will accelerate the adoption and incentive to use bitcoin. Harder money with higher saleability doesn’t have to offer a better incentive for adopting a rapidly declining currency due to declining saleability and rising inflation. If nobody wants your money, why do you keep it? Today, Zimbabwean dollars are only worth as collectibles, but are not used for goods and services. In turn, this allowed more competing currencies to take over (mainly the South African rand and the US dollar) until the dollar inevitably won and all of Zimbabwe became dollarized. The same will likely happen to the dollar and bitcoin will take its place due to inflation and a probable CBDC that will take away all that is good from the dollar.
There are many other steps that Bitcoin will need to take to enable simplistic adoption for the wider world population. More platforms and wallets will need to start offering Lightning payments and the use of SMS (text message) transactions, like the recent development in South Africa. The outlook is somewhat confident on the CBDC front and their ability to push more people out of fiat and into the world of Bitcoin.
This is a guest post by Pierre Gildenhuys. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.