There are 105 countries currently researching the possible implementation of a Central Bank Digital Currency. It is going to become their preferred digital fiat and the way for settlements to be carried out. But do people really understand what the effects can be?
Wealth Transfer
Many fiat currencies are racing downward as they are increasingly pumped into economies. Their supply is dictated by central banks on the advice of academic economists. Consequently, the wealth in the hands of the middle class has been moving to the hands of a few elites.
For those a little economically below the middle class, COVID sent them into abject poverty. These account for about 100 million of the examined global population. At the same time, the number of billionaires was increasing steeply.
The question is; how do people accept CBDCs if fiat monies keep failing? Logically, they are simply different forms of the same fiat currencies.
That might be true in a certain way. CBDCs will only be given to the public as a digital version of different currencies. They will simply replace handy cash and stay on digital platforms.
But there is a significant difference between CBDCs and current digital systems of payment. CBDCs are programmable. This is probably great news for central banks.
More Power to Central Banks
Central banks have been using interest rates and tightening or easing policies to control inflation. But over time, they have either been too late or too early. And the policies are usually the cause of booms and busts the global economy sees from time to time.
A CBDC is so powerful. It creates a direct link between the central bank’s wallet and that of the user. It can, therefore, be used to manipulate the economy to the littlest level.
The technology can enable the central bank to determine how user spend their money. It can be used to put a time limit on spending before the money is no longer available. To make it worse, the bank can switch off individuals’ or groups’ wallets.
This is why crypto proponents keep pushing the idea of Bitcoin above CBDCs. It is the complete opposite as it is absolutely decentralized. It lets owners transact with whom they want on what they want
It is now a tussle between centralized authorities and decentralized options that Bitcoin guarantees.