According to the numbers compiled by the Atlantic Council in 2022, central bank digital currencies (CBDCs) are currently being actively researched and discussed in several significant nations throughout the world. These nations include 19 of the G20 countries, as well as approximately 105 others globally. They are advancing at a rapid rate, and it is anticipated that some countries, such as Australia, South Korea, and the United States, will begin implementing CBDCs in the not-too-distant future, following in the footsteps of China, which has just recently begun launching theirs in the beginning of 2022.
This is not breaking news, but it is something that should be addressed from time to time since it should terrify all of us, or at the very least, it should be of some concern to anyone who makes use of any form of money in their day-to-day existence. There is only one possible advantage to using CBDCs, and that is for governments to bring about the demise of their own currencies. They do this by stripping money of as many of its characteristics as they can before the public becomes aware that it can no longer be traded with anyone else in their country or anywhere else in the world.
It has been suggested that bitcoin served as an inspiration for CBDCs; however, the only potential similarity between the two is the use of a distributed public ledger. Countries that are currently in the process of rolling out CBDCs are probably building them to be the perfect antithesis to the beautifully built bitcoin. On the other hand, my supposition is that the term “a public ledger” connotes ownership and, thus, that it can only be accessed by the state. This is due to the fact that governments represent the voice of the people (in theory).
On Twitter and elsewhere, a lot of Bitcoin users go into detail about the potential horrors that CBDCs may bring, but very few of the Bitcoin users I’ve discovered have anything positive to say about them, which is something I’d like to see improve.
Because Keynesianism is the economic school that appears to be most widely accepted in the western world, it is quite likely that CBDCs will predominantly apply Keynesian ideas in their operations. Whichever principles a CBDC in the United States decides to embrace will almost certainly become the standard for all of the others. Some of these principles could include money that can run out, money that is automatically taxed, money that can only be spent in particular industries, and money that is a fully permission-based form of transaction. This means that people will be forced to make specific transactions that they may not want, forcing a higher preference for time, or forcing people to forego investments in industries of their choosing. Because no government likes a currency that is in competition with the one that they control, it is highly likely that purchasing bitcoin with CBDCs will become impossible or, at the very least, increasingly difficult.
This is a really frightening possibility. How are Bitcoin users and new adopters going to get their hands on additional bitcoin before the monetary system collapses under its own weight? Because of this, fewer people will wish to keep their transactional power in the form of a fully centralized and monitored system, which will likely result in the creation of an economy that is more circular. They will almost certainly come to the conclusion that it is in their best interest to begin paying in and accepting bitcoin for each and every transaction. They are not compelled to spend their money in an effort to “stimulate economic growth” by spending their dwindling CBDCs, money that they would have otherwise put away for a cloudy day if they had the option to do so. In addition, they are not compelled to spend their money in an effort to avoid additional unfair taxes. This is quite comparable to the extremely widespread practice, found in many countries throughout the world, in which companies offer discounts on their services in exchange for cash payments in order to sidestep the obligation of paying taxes on those services.
This was especially widespread in areas such as Greece, which is claimed to have been the origin of the practice. According to the legend, the Greeks purportedly started the practice because they did not want to pay taxes to the “foreign” Ottomans, who ruled the region at the time. Evidently, the practice is still in place because people have the perception that an additional levy imposed on day-to-day transactions by any power, whether it domestic or international, constitutes an unjust and disproportionate burden. Some people view this as a form of corruption; however, it should not be labeled as such because corruption suggests that the people who are hiding these transactions are in positions of power that they are exploiting. However, the people who are hiding these transactions are actually the ones who are the ones who are exploited by unnecessary taxation by their government.
There is a relatively tiny quantity of paper currency that is still used in today’s world economies, and it is quite likely that CBDCs will eventually eliminate this practice. This indicates that these nations will rely on technology instruction and explanations passed down through oral tradition in order to comprehend how it functions. This will lead to an increase in technological know-how in these countries, which means it should become simpler to convert people of society who are otherwise resistant to bitcoin once they discover the false worth they are holding instead of a hard currency.
In other words, CBDCs have the potential to be the ideal catalyst for widespread adoption of bitcoin and the beginning of a bitcoin circular economy. The sheer inconvenient of having everyone’s transactions moderated and limited based on arbitrary metrics, such as carbon emission scores or nutritive value scores, is enough to sway anyone away from using that monetary medium, regardless of how much affection one has for their own government or how strongly one opposes the very idea that it exists. In the end, it does not matter how much affection one has for their own government.
People will come to the realization that specific Keynesian concepts are harmful when there is a possibility that their savings will be depleted in order to encourage faster and more general spending. This is something that has been done with the inflationary policies of the previous several decades. The majority of economists working in the modern era support and acknowledge the validity of these concepts. People living in the modern world who use such concepts basically have no choice but to invest all of their wealth if they want to avoid becoming bankrupt as a result of inflation, even though doing so exposes them to the possibility of making poor investments. Instead of being forced to create the meme economy that we have experienced over the past few years, many people would be significantly more productive to society by developing their own businesses, and they would also be happier overall if they could just store their wealth in hard money that consistently appreciates in value with economic growth. This would prevent them from having to engage in the practice of creating memes. The introduction of CBDCs is quite likely to make this situation much more difficult.
The incorporation and utilization of CBDC is not going to happen overnight, that much is certain. The length of time that it would most likely take for bitcoin to become mainstream would mostly be determined by the frightening features that particular CBDCs decide to install. During the period of time in which they are utilized, these CBDCs will be the source of a significant amount of anguish and distress. The suffering that they will cause and the methods that they will put into place are not something brand new; rather, they are merely an expansion of practices that are already in use. This will continue until individuals begin transacting with one another anonymously using bitcoin as their store of wealth and completely shift away from all forms of fiat currency.
The adoption of bitcoin will accelerate, and there will be more of an incentive for people to use it if a thriving, prosperous circular economy is created. Harder money with a higher salability needs to offer no greater incentive for adoption than a quickly failing currency due to a loss in salability and an increase in inflation. This is the only way to ensure that harder money with a higher salability will be adopted. Why do you still hold onto your money if no one is interested in buying it? To this day, Zimbabwean dollars are only valuable to collectors because they can no longer be used to purchase goods or services. As a result, this opened the door for a number of other currencies to take its place, most notably the rand of South Africa and the dollar of the United States. Eventually, the dollar triumphed, and the entire country of Zimbabwe adopted its use. The same thing is likely to occur with the dollar, and bitcoin will end up taking its place as a result of inflation and a potential CBDC, both of which would take away everything that the dollar has going for it.
There are a huge number of additional stages that Bitcoin will need to take before it will be simple enough for the majority of people around the world to accept. It will be necessary for additional platforms and wallets to commence supporting Lightning payments and the utilization of SMS (text message) transactions, similar to the recent advancement that took place in South Africa. The potential for CBDCs and their capacity to lure more people away from traditional currencies and into the realm of bitcoin is viewed as having some cause for cautious optimism.