There is a particular trend with many national banks and state governments. They tend to negate emerging technologies and opt to forestall it before it sees the light of the day or before it enjoys mainstream adoption. For example, the Bank of Canada like many other national banks (although it is now researching CBDCs) maintains some reservations regarding how risky Central Bank Digital Currencies are.
Why Governments Have an ‘Attack First’ Attitude
When Coinstituency posed James Cassidy, Owner and CEO of GameCredits, with the question of why National Banks have an “Attack First Attitude” to emerging technologies like CBDCs, he explained that “Central banks tend to be politically sensitive institutions and thus they will often keep their cards close to their chest when looking at new, disruptive technologies. From a typical Central Bank’s position, it is infinitely more preferable to adopt a neutral or even skeptical position until they have fully understood the political, technical and financial ramifications of a new advent such as blockchain and cryptocurrency. According to Cassidy, it makes good sense for Central Banks to put a cryptographic wrapper around their national currencies.
Why National Banks Are Looking Into CBDCs Now
Cassidy notes that having a purely cryptographic national currency affords the bank and government many luxuries and this is why many nations are now swinging to the rhythm of this nascent technology. Some of the benefits that he considers governments to be eyeing with this development includes:
100% total tax compliance
In the coming days, citizens will no longer have the ability to withdraw physical cash and keep it hidden from tax authorities; this way, citizens of the future will possess no realistic means of avoiding taxes. The government can and will simply deduct the required amount of unpaid tax out of the citizens’ account. You can imagine that this alone is a massive victory for governments and Central Banks as it provides certainty in regards to yearly revenues.
No More Run-Ins with Banks
There will be no more run-ins with banks nor the national currency they support as citizens will not be able to withdraw funds into cash nor move their digital currency around freely. This allows the practice of fractional reserve banking to continue unabated as neither the Central Banks nor commercial banks have to concern themselves with the prospect of a deluge of depositors looking to frantically withdraw their money
Easy Surveillance of Citizens’ Transactions:
With a government run national blockchain, the Central Banks and government will have far greater transparency into what the citizenry is doing with their money. With all transactions happening on a public ledger, data collection on individuals’ habits and thus the health of the national currency can be conducted with ease.
Predictable Monetary Policy
This is one of the biggest benefits Central Banks will gain. With the ability to both control and see into what is happening with their national currency like never before. Tools used to aid the nation’s currency will in theory be more effective as they control more facets of the system.
It appears that Central Banks have a lot to gain from the development of CBDCs partially to the detriment of society for reasons of creating more taxable avenues and even threats to privacy. Although these emerging currencies have a whole lot of benefits, it is arguable that there are a number of considerable demerits
What do you think about the attitude of the government to these emerging technologies?
Share with us in the comment section.