CBDC

Japan is planning to issue newly printed 1000, 5000 and 10000 yen paper notes in the first half of 2024. Why would the country print their newer version of paper notes often? They do this roughly every 2 decades for various reasons one of which they claim, is to prevent counterfeiting. World is moving faster towards issuance of the digital currency yet Japan is printing new bills. This is because most of the Japanese still prefer to use and save in paper currency. But the young generation use credit cards, QR payment system and online banking. The timing for the renewal of paper money this time does not seem to be thought of well by the government. Anyway, it does not seem straightforward.

Why would any country print new money when they are developing the digital one. All the ATMs and registers at stores, restaurants and banks throughout the country have to be updated to process new notes. What might be the reason for printing new paper notes? Only time will tell, but most countries are already working on their CBDCs and Japan too is working and testing on its own. Its almost certain that countries will issue their CBDC and will be the topic of concern around the world for this decade and beyond.

What is CBDC?

CBDC stands for Central Bank Digital Currency. It is the digital version of the currency which is created, distributed, controlled and manipulated by the central authority. The money we use today are also digital in some way as its only numbers on the database. What is the difference between the existing currency and the CBDC? After the invention of Bitcoin in the year 2009, central banks around the world are frightened because they won’t be able to control and manipulate Bitcoin as they do with central bank issued currencies. Money has changed forever since Bitcoin and central banks will try to convince people by providing the convenience of CBDC. Its their own version of cryptocurrency which obviously is programmable and digital in its nature. But the big difference here is its centrally controlled and issuing body has full authority to do whatever they like and decide with it. The idea of CBDC started popping up in 2016 from the speech at the London School of Economics by the official of the Bank of England. Since then, most countries are actually working on their CBDCs. The central banks of China, Sweden and Australia have already tested CBDCs. It might take time but its coming from other countries too.

Central banks took the idea of token-based digital cash from Bitcoin and using it to create the CBDC so that they could provide the monetary stimulus to the people and stimulate economic demand if needed. As we saw in recent years, how they distributed the free money to the citizen. The political concept of UBI(Universal Basic Income) will become much easier to implement through CBDC. From the societal standpoint, how will central banks use the new powers of surveillance and monetary policy that would come from the issuance of publicly accessible digital currencies? There are many implications of this centrally controlled digital money.

When people use cash, people are using the second-layer money and avoiding the banking layer. But recent years, most of the people don’t use cash anymore because of online banking, QR payment system and credit cards. These daily interaction with money through bank accounts and payment apps occurs on the lower layers. With this new digital currency technology, the role of private banks in issuance of money will be actively reduced. If these CBDCs are accessible to everyone, people might not rely on private bank accounts to receive direct deposits and pay bills. Or central banks could issue digital currency for other private banks which will have less impact on how society interacts with money. If the central bank issues a CBDC only to the private banks, it will have less or no impact directly to the people and central bank can test the new technology with other private banks. If they issue CBDC directly to the people, the whole concept of money will be changed and will have enormous impact on people’s lives.

China is one of the fastest country to develop and test CBDC. It has already tested the digital Renminbi system called Digital Currency Electronic Payment(DCEP) in certain cities with limited number of citizens and businesses. China will likely use its CBDC as a tool to grow its global influence and spread adoption of its denomination. This might have the potential to be the largest financial surveillance operation in the world if its major trading partners agree to use DCEP while transacting with Chinese entities. Geopolitical tensions between China and US is rising over the past years and looks like it will continue to do so as China eyes to be the superpower of the world. China is spreading its influence and its currency denomination across the globe. It is preparing for a post-dollar world as it has agreement with Russia and are looking for the alternatives to the global dollar standard. The European Central Bank also published the report on a Digital Euro and seems ready to launch a digital euro anytime. United States is also studying on its own version of CBDC.

Its crucial to know the implications of the use of CBDC. As the digital currency is digital and programmable in its nature, anything can be possible as issuing authority can program it however they like. Nobody knows how will it be developed but we can think of various ways that can be applied to control the use of the currency. For example, the currency can be built in such a way that it has an expiry date and the currency is invalid, should the user failed to spend the currency within the pre-set date or time. This is a huge problem. The issuer of such currency will have the god-like power to dictate its user. By no means such a currency should be made acceptable but it seems like we are actually heading towards it. Recent years, we had similar kind of control and mandates while traveling in many countries. Another example we can think of is, if you drive certain pre-set distance from gasoline car instead of electric car, your CBDC can be made void because you polluted the environment and the work you have done to earn that money will be taken away in a snap.

Founder of the Rothschild Banking dynasty, Mayer Amschel Rothschild said 300 years back.

“Give me control of a nation’s money supply, and I care not who makes its laws”

Throughout the 15^th century, Florence Italy established itself as Europe’s greatest financial hub and made its currency – Florin into the base money of Medieval Economy. This was made possible by one of the biggest banking and political dynasty of the time, The House of Medici. It set the course of the European economy for centuries to come. But the central authority to its money and economy made it fall through the 18^th century. Every empire or democracy follow the same path. They lasted for 200~250 years. Last part of this fall of empire is capital control. We can see the same with the recent US Empire. In 1933, the then president Roosevelt ordered US citizens that all gold coins and gold certificates they possess, to exchange into dollar. And the dollar would be backed by gold reserve. The government held the $35 per ounce of gold until August of 1971. But in 1971, president Nixon announced that US would no longer convert dollars to gold at a fixed value and abandoned the gold standard. You can see what happened in and after 1971 at wtfhappenedin1971.com.

This central control of the currency is what results in the development of other such power which will emerge out of necessity to overcome the hegemony and ruthless monopoly. We are witnessing the rise of BRICS nation and even other countries joining them recently which is threatening the power of US dollar. Some economist even claims that the BRICS nation will dominate the global economy by 2050. Its unknown to anyone what role will CBDC play in that scenario.

We can at least hypothesize what the people in power can do if they have the programmable money at their disposal. They don’t have to even announce before robbing you off of your hard earned money. They will have announcement though, only after they have taken off money from your account. What if single bank of the world creates one single CBDC and controls each and everyones’ possession of their money? Nobody exactly knows the implication but its possibilities are scary even to think about, but there might be the solution.

Check The Bitcoin Standard for the new possible global base monetary standard.

Thank you for reading and see you on next one 😉