Berentsen and Schar (2018) posited that CBCD could be used to track money laundering and other illicit activities that threaten a country’s security. This is a business case for the invention of this form of fiat money or fiat-blockchain money. In the work of Barontini and Holden (2019: 7), 70% of central banks are actively exploring CBDC and five are in the pilot stage. It is believed that Nigeria and China are among the countries in the pilot stage.
However, there are issues to be considered regarding the case against CBDC. To do this, three main subheadings will be used and concluded with a discussion question.
Data Centralisation:
It is believed in the tech sector that few companies control the data in web2 platforms. As such many policies and regulations have been made to control them, and also, they face a penalty when they go against such regulations. An example is the GDPR, a data privacy law applicable to all businesses of all sizes (Privacyshied, 2022). Many companies have been called to parliament to share insight about their company’s data policy.
Data Decentralisation
While the government was enacting regulations to control data privacy, the inventors worked on innovation to solve the problem. This is one of the ethos of web 3. It is a decentralised internet where no company or other individuals controls your data. The web 3 innovation birthed crypto, NFT, metaverse and others. Does the web 3 innovations have the capacity to solve the data centralisation problem of web 2?
CBDC Fueling Centralisation and Monopoly of Data.
The creation of CBDC is a reserved strategy of the government to control citizens’ money and transaction information. With CBCD, the government will arm itself with the tool required to track how you earn and what you spend your money on. As such, they can make policies to limit your spending; when you owe a fine, it will be deducted automatically. This could be termed the monopoly of data. With this, the government will be super powerful.
Here are the interesting questions for discussion;
- How do you think the taxation and credit system will work with the CBDC, knowing the government controls your money?
- Does government control over your money influence favourable policies or unfavourable policies?
- There is a wave of carbon footprint per individual innovative project being worked on by the government. How will it work with CBDC?
References:
Berentsen, A. and Schar, F. (2018) “The case for Central Bank electronic money and the non-case for Central Bank cryptocurrencies,” Review, 100(2), pp. 97–106. Available at: The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies | St. Louis Fed.
Barontini, C., and H. Holden. (2019). “Proceeding with Caution – a Survey on Central Bank Digital Currencies.” BIS Paper No. 101.
European Union - Data Privacy and ProtectionEuropean Union - Data Privacy (2022) European Union - Data Privacy and Protection | Privacy Shield. Available at: https://www.privacyshield.gov/article?id=European-Union-Data-Privatization-and-Protection#:~:text=GDPR%20is%20a%20comprehensive%20privacy,for%20the%20movement%20of%20data (Accessed: December 7, 2022).