We keep hearing about the cost of living crisis, climate change and any number of other crises, so you’d think the central governments and central banks of the world would have other things to occupy them. But, it seems that nothing breeds new ideas like a crisis. Hence the emerging rhetoric of public digital currency. Or as Prime Minister Rishi Sunak once called it ‘Britcoin.’
So, why have they drawn so much energy from the Central Banks and government?
Well, theoretically despite all the possible issues with them, they would be subject to democratic accountability and control, allowing central governments and banks to track criminal syndicate and illicit activities including money laundering. This could also be used to help reduce crimes such as tax evasion, encouraging governments to tackle the rich, instead of ordinary citizens.
Furthermore, advocates for this type of currency argue that this digital version of cash could operate as a public good as it comes directly from the central bank, instead of being subject to the sometimes uncertain whims of private banks.
Advocates also argue that they would provide a safe alternative to digital cryptocurrencies which are currently highly speculative, volatile and outside regulatory control, making them easy to be used for scams.
They also argue that such a currency would be more financially inclusive, improving transaction speeds and economic efficiency and bolster confidence in the currency.
However, it does seem that advocates are trying to provide a solution for a problem or problems that do not exist. After all, why would someone who likes cryptocurrency precisely because it is outside regulatory frameworks suddenly want a government backed digital alternative? Secondly, why would anyone who doesn’t have a bank account suddenly be inclined to open a digital wallet? And furthermore, if governments really want to lower transaction fees and bank charges, why don’t they use their brains and legislate to that end?
There are also other valid concerns present regarding these sorts of currency.
A report by the IMF itself notes that such currencies would naturally accumulate sensitive data, and a lot of it, into one single place. This would increase security risks by making the payoff for potential thieves all the greater.
Then of course, there is the fact that these currencies would give governments sweeping powers of surveillance and control. Allowing them to instantly punish citizens and consumers for behaviours that they deem undesirable, by fining them or even locking them out of their accounts at the flick of a switch.
This builds into the fact that such currencies are likely to be programmable, meaning that their use can be restricted. This would of course confer huge powers to the government over how citizens spend their money. Allowing them to enforce supposedly ‘green and climate-friendly’ choices. Or to blacklist certain companies, products and countries.
As such, it is right that we all view such currency suggestions with scepticism, and ask just why governments and central banks want to implement them. Is there something lurking underneath the surface here, or is it simple paranoia?
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