The latest report by The Bitcoin Policy Institute goes for the lowest hanging fruit. It tries to convince US politicians that “CBDCs will erode the distinction between America and authoritarianism,” which is true. To accomplish that, The Bitcoin Policy Institute appeals to the cheapest trick in the book: comparing the US to China. The move is so crazy that it just might work.
The controversy doesn’t end there, The Bitcoin Policy Institute’s main proposal is that “The value of natively digital currencies for individual users can be fully realized with a combination of bitcoin and privately issued stablecoins.” That statement will not sit well with bitcoin purists. Is the whitepaper able to convince the reader that this “combination of bitcoin and privately issued stablecoins” is a good idea?
Before judging, let’s read the organization’s reasoning.
The Bitcoin Policy Institute Plays The China Card
Let’s not beat around the bush, CBDCs are surveillance technology. Programmable money comes with potential problems and gives too much power to the issuer. To convey that idea, The Bitcoin Policy Institute paints a picture of current-day China:
“Perhaps the most striking illustration of Chinese state power, however, has been the rapid development of its surveillance régime. Under President Xi Jinping, who ascended to the presidency in 2013, China has become the world’s leading market for surveillance technology.”
Then, the whitepaper describes what is known about the Chinese CBDC project. Is it similar or completely different from what they’re working on in the west?
“The People’s Bank of China, the country’s central bank, has been researching and developing a CBDC–the digital yuan, or e-CNY–since 2014. The digital yuan uses a state-run, private blockchain network to issue digital cash that is a direct liability of the Chinese central bank. This network records all transactions made with its native digital asset.”
Surprise! It’s almost identical to what the Australian Central Bank is testing in their CBDC pilot project. It also confirms what the Australian report said, “Central banks globally are actively exploring the potential role, benefits, risks, and other implications of CBDC.”
After that, The Bitcoin Policy Institute describes the mainstream media and “some American lawmakers” narrative around the issue. This is a commonly held opinion on the situation:
“It may be tempting, for some, to view the acceleration of US government power through the lens of “global competitiveness.” For example, the introduction of a CBDC by China has prompted concern by some American lawmakers that the US is “falling behind” technologically.”
No, it’s not. The technology just doesn’t make sense unless you admit to be an authoritarian regime. It’s as simple as that.
BTC price chart for 09/28/2022 on Bitstamp | Source: BTC/USD on TradingView.com
CBDCs, The End Of Financial Privacy
Full KYC is basically a given in high-level CBDC discussions, but to have official confirmation is more convincing. To set the stage for this act, The Bitcoin Policy Institute quotes “a January 2022 white paper” in which “the Federal Reserve stated that a US CBDC would need to be fully identity-verified.”
“Financial institutions in the United States are subject to robust rules that are designed to combat money laundering and the financing of terrorism. A CBDC would need to be designed to comply with these rules. In practice, this would mean that a CBDC intermediary would need to verify the identity of a person accessing CBDC, just as banks and other financial institutions currently verify the identities of their customers.”
The fact of the matter is that “CBDCs provide governments with direct access to every transaction in that currency conducted by any individual anywhere in the world.” Even if it’s not advertised or even considered in the original version.
“Those calling for the rollout of a CBDC are naïve to believe that this can be done without establishing a centralized surveillance system for all financial transacting. Quite simply, even if such surveillance is not included in the V1 system design, it would be trivial to add it at a later stage. Once a door to surveillance is opened, it is virtually impossible to close.”
Simply put, CBDCs “represent an extension of this state control over economic life.”
The Stablecoins Angle
From a bitcoiner’s point of view, the idea that the world needs “a combination of bitcoin and privately issued stablecoins” is near sacrilegious. Let’s read The Bitcoin Policy Institute’s case for it:
“Both bitcoin and private stablecoins will enable instant, low-cost digital transacting both domestically and across borders. Digital dollars and stablecoins will continue to be subject to AML/KYC compliance by the platforms that facilitate transacting with them. In this currency ecosystem–which is with us already–the creation of CBDCs is, quite simply, unnecessary.”
That might not convince the bitcoiner, but it paints a clear picture for US politicians. And those are the document’s target audience.
The Bitcoin Policy Institute’s Closer
To close the whitepaper off, The Bitcoin Policy Institute is not afraid to go here:
“As the world goes the way of China in the 21st century, the United States should stand for something different: it should stand for freedom. For this reason, the United States should reject central bank digital currencies.”
Cheesiness aside, The Bitcoin Policy Institute is 100% right on this one. CBDCs are a threat to society. Privacy is a human right and financial privacy is already limited as it is.
Featured Image by Lucas Sankey on Unsplash | Charts by TradingView