An interesting article in Reason, the US magazine, about central bank digital currencies, which appear to the reverse of the libertarian, ground-up approach of Bitcoin’s original champions:
You know who thinks that cryptocurrencies are the future? Central banks, that’s who, and they’re jumping on board the crypto bandwagon. But that doesn’t mean you should anticipate the folks at the Federal Reserve stepping aside to make way for Bitcoin adoption—far from it. Instead, central bankers want to displace grassroots cryptocurrencies with central bank digital currencies (CBDC) of their own design that absolutely will not protect privacy, and that will let governments control private transactions.
In the race to adopt state-sponsored digital currencies, the United States is behind the curve. China recently banned the use of private cryptocurrencies to make room for the digital renminbi. Cambodia launched its digital currency, the Bakong, in 2020. Nigeria plans to introduce the eNaira this month. But America lags, and for very good reason.
“Depending on its design, CBDC accounts could give the Federal Reserve access to a vast amount of information regarding the financial transactions and trading patterns of CBDC accountholders,” Christopher Waller, a member of the Board of Governors of the Federal Reserve System, commented (PDF) in August. “The introduction of a CBDC in China, for example, likely will allow the Chinese government to more closely monitor the economic activity of its citizens. Should the Federal Reserve create a CBDC for the same reason? I, for one, do not think so.”
It should surprise exactly nobody that China’s digital renminbi promises only “controllable anonymity” between private parties, and that the state retains the ability to monitor transactions.
This raises the old debate that I have read about and been involved in over the years – can technology tools really help free us from the State, or will the State simply adjust and use said tools for its own purposes? Down the years I have seen how entities such as the Internet, 3-D printing, social media platforms and so forth will empower individuals at the expense of Big Government, but that’s not always worked out.
The brute fact is, in my view, is that to push back against the State, it is necessary to win battles of ideas, and that is a slog. No wonder some hope that technology can help. Maybe it has to be a mix: good ideas that are spread, and new ways of living and working that feed off them.
A few years ago, David Friedman (son of Milton Friedman) had a good book out, Future Imperfect, where he wondered about such matters. Strongly recommended. He gave a talk on the issues here.