Florida Governor Ron DeSantis has banned CBDCs from the state, arguing they would transfer too much power from the individual to the state.
Big Brother, the ubiquitous all-seeing dictator in George Orwell’s anti-totalitarianism novel 1984, has creeped into numerous crypto media headlines over the past few weeks. In Orwell’s book, Big Brother is an entity who sees what everyone thinks and does, keeping the citizens of the fictional nation of Oceania in a position of extreme servitude to the government.
Blockchains, unlike a government or dictator, are decentralised networks with no owner or ruler. So why has the image of Big Brother been cropping up so much?
It has something to do with the new-ish kid on the block: central bank digital currencies, otherwise known as CBDCs.
A CBDC is a digital form of national currency that’s issued and regulated by a country’s central bank. They digitally represent a country’s fiat currency.
In China, a CBDC known as e-CNY (a representation of the yuan) is already in use, and many government workers are now paid in CBDC.
Unlike traditional physical currencies, which exist as cash and bank deposits, CBDCs are purely digital and typically use distributed ledger technology, such as a blockchain, for their implementation.
They are not the same as cryptocurrencies. Although they are similar in the sense that they both use distributed ledger technology, cryptocurrencies are decentralised, independent networks, while CBDCs are issued and owned by a central bank or government reserve.
What’s the point in having a CBDC? Doesn’t online banking do the job just fine?
Not really, no. It’s 2023 – we can genetically modify actual human beings and enjoy safe self-driving cars – but it still takes 3-6 days to send a payment overseas (with a hefty fee).
The main objective for using CBDCs is that they offer faster and cheaper transactions, both domestically and overseas. They also promote financial inclusion for those who may have difficulty access traditional banking services in countries with less developed economic infrastructures, since digital assets are easier to access than physical cash.
Sounds great! What’s the issue, then?
CBDCs require the collection and storage of transaction data, giving governments unprecedented access to personal financial information. Some have expressed concerns that if a CBDC is implemented without strict privacy regulations, it could become a dangerous weapon of mass surveillance.
Last week, Florida governor Ron DeSantis signed legislation banning CBDCs from the state, referring to them as “Big Brother’s Digital Dollar”.
The legislation prohibits the use of a federally-sanctioned CBDC as money in Florida. It also bans the use of CBDCs issued by any foreign government reserve or bank, including China’s digital yuan.
The Governor said: “I think anyone with their eyes open could see the dangers that this type of an arrangement would mean for Americans who want to exercise their financial independence, who would like to be able to conduct business without having the government know every single transaction that they’re making in real time.”
DeSantis went as far as arguing that a CBDC would provoke a huge transfer of power from individual consumers to a central authority.
As of March 2023, there were 11 countries and territories with CBDCs (Bahamas, Antigua and Barbuda, St. Kitts and Nevis, Monserrat, Dominica, Saint Lucia, St. Vincent and the Grenadines, Grenada, and Nigeria), and 32 countries have CBDCs in development.
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