Central Banks all around the world are in the process of releasing Central Bank Digital Currencies (CBDCs). According to the Atlantic Council CBDC Tracker, 134 countries are exploring a CBDC.

The rush to release CBDCs is both innovation and control; there is a potential to tokenize every person and object on the planet.

CBDCs could promote financial inclusion and provide payment stability, but on the other hand, they could infringe on basic privacy rights and usher in a new era of control.

Here’s why central banks are moving forward with CBDCs, the benefits, and the risks, and how they may change the world we live in. 

Central Bank Digital Currencies: Inclusion and Innovation

CBDCs could change the face of finance through programmable money, instant cross-border transfers, and empowering the unbanked.

They promise faster, cost-efficient transactions and could offer precise policy tools for governments. Tokenization, where assets and identities become digital tokens on a blockchain, could transform ownership, making everything from homes to cars tradable, but the vision of prosperity hinges on efficiency and inclusion. 

Risk Control, Privacy, and Tokenization Terrors with CBDCs

The dark side – The Bank of International Settlements (BIS) has been accused of harboring reforms that could chip away at our personal freedoms.

​Investigative journalist Witney Web warns of the “debanking” of people who may speak out about issues that the government does not approve of. Bitcoin’s decentralized network differs from CBDC’s centralization, where every transaction can be tracked.

China’s CBDC the Digital Yuan, is an example of the government tracking and tracing their citizens with social credit system scores attached to their digital ID where individuals are rewarded or punished for behavior.

Another glaring issue is privacy. Unlike Bitcoin distributed ledger with anonymity, no single entity controls it, CBDC’s data is stored in a centralized database, which could make it susceptible to data breaches and hackers. Every transaction you make is tracked in real time.

The banks could have full oversight and see how you spend your money. The European Central Bank’s proposal of having a phone chip for its digital euro emphasizes that specialized hardware chips embedded in mobile devices are essential for offline transactions. This proposal raises concerns about surveillance and overreach of data collection. 

Striking a Balance: Liberty or Tyranny? 

Privacy technology like zero-knowledge proof (it lets you prove something without showing what it is) could be an option to facilitate anonymous but secure CBDC transactions but will governments adopt it?

We saw with the Canadian Trucker protest that trust is thin, and with the flick of a switch, the government can lock your bank account without notice.

The Nigerian eNaria CBDC: 

Another example is the eNaria (Nigeria’s CBDC)  adoption was low until the government forced cash shortages to push their citizens to use the eNaria which led to businesses shutting down, people unable to pay for essentials, and a deep loss of public trust.

It is important there are clear guidelines and independent oversight.  Privacy and security should be blended to reassure citizen trust. 

CBDCs, Rounding it all Up

Central banks want CBDCs to help innovate, compete with cryptocurrencies, and control monetary systems.

The positives are efficiency and inclusion, which could become the drivers of prosperity. The negatives are surveillance, loss of privacy, and tokenization, which may bring oppression. Once control is centralized without privacy protections, it will be difficult to reverse. 

The future of money is being written now, and major value is on the table. The stakes are high as pilot programs expand globally. 

The choice between digital liberty and digital tyranny will come down not only to design but to resistance.