The US Federal Reserve announced that it is considering a central bank digital currency (CBDC), not least because of the extensive capabilities such a tool would enable. The bank said it was the right moment to consider a CBDC, underling four areas of economic impact the tech. might have.

In January, the Bank of America forecast that the US will have a CBDC this decade, calling the eventual implementation “inevitable”.

The authority noted in a tweet on Wednesday that it hasn’t taken a decision on whether to implement a CBDC, but revealed that it is exploring benefits and risks associated with it “from a variety of angles, including through technological research and experimentation.”

The FED also posted a series of FAQs, explaining why the central bank is considering the technology now. They noted that technological advancements like digital wallets, mobile payment apps, cryptocurrencies and stablecoins could “improve on an already safe and efficient U.S. domestic payments system.”

Knowing that CBDC’s will unlock tools for direct fiscal policy interventions – potentially circumventing money creation via private-debt – the FED noted four points for introducing the tech.

It could provide households and businesses a convenient, electronic form of central bank money, with the safety and liquidity that would entail; give entrepreneurs a platform on which to create new financial products and services; support faster and cheaper payments (including cross-border payments); and expand consumer access to the financial system.

The announcement of the announcement three months after the FED released a cost-benefit report about a prospective central bank digital currency. The paper also underlined faster settlements and cheaper transactions.

CBDCs Threaten Individual Sovereignty

According to data from the Atlantic Council, 9 central banks have launched a CBDC, 14 have a pilot project, 16 have one in development and another 87 are in the research stage with their CBC. In total, 67 central banks (countries) are moving ahead with plans to roll out CBDCs.

Central Bank Digital Currencies exist at the behest of central bankers, having none of the properties of sound money like Bitcoin or Litecoin. By design and structure, CBDCs are the very antithesis to decentralised cryptocurrencies. The technology will enable harvesting of data, raising taxes, enforcing sanctions on individuals directly while bringing behaviour economics to a never-seen-before level.

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If it is deemed that people over 40 are not spending enough in the economy, a central bank could create a negative yielding scenario to encourage spending for that cohort, for example. The reach of such capabilities is theoretically unlimited, opening the door to incentive and punishment programs for the food people (or individuals) eat, what vehicles they can drive – if any – where they can spend their money or buy bitcoin with it – everything.

Murphy’s law states that whatever can happen, will happen, i.e. if the technology enables infringements on individual liberty and sovereignty, then the rest follows. In Canada, bank accounts of political dissidents were frozen en masse, and Western leaders failed to condemn Prime minister Trudeau’s actions, attracting the ire of Romanian Euro-parliamentarian Christian Terhes, as well as prominent figures in the cryptocurrency industry.

Conflicting Interests?

The Bank of International Settlement (which is often referred to as the Central Bank of Central Banks) revealed its intentions as early as July 2021. In an interview the general manager of the BIS, Agustin Carstens, admitted the end goal of CBDCs.

He said:

We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”

Still, a US CBDC does not directly threaten Bitcoin, and may even accelerate adoption. In fact, the general manager’s comments are in stark contrast to Fed Chairman Jerome Powell’s statements, who recently emphasised that a China-style central bank digital currency wouldn’t work in the United States.

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