- CBDCs stand for Central Bank Digital Currency.
- These are backed by the government and central banks.
- Hence, there is a high possibility of interruption of politics and the worst government in the freedom of CBDCs.
CBDCs have many benefits and advantages for the users but the only issue is their freedom because they are not decentralized. These are backed by the government, which says that there can be corruption or tracking of users’ money spending by the worst governments and they can misuse their power.
What Are CBDCs?
CBDC stands for Central Bank Digital Currency, which is a form of digital currency issued by the central bank of a country. Their value is fixed and equivalent to the fiat currency of the country. Many countries are searching for ways to transition to digital currencies and hence, many countries have already implemented CBDCs.
The evolution of blockchain technology and cryptocurrency has created interest in cashless societies and digital currencies. The main goal of CBCDs is to provide transferability, privacy, accessibility, convenience, and financial security to consumers and businesses. This also decreases the maintenance cost of complex financial systems and reduces cross-border transaction costs. Cryptocurrencies are highly volatile and hence, there are risks associated with them but CBDCs are backed by the government and central banks.
There are two types of CBDCs: retail and wholesale. Retail CBDCs are government-backed digital currencies used by businesses and consumers and these eliminate intermediary risks. Retail CBDCs are also of two types: account-based retail CBDCs and token-based retail CBDCs. Wholesale CBDCs are very similar to holding reserves in a central bank. Central banks grant accounts to deposit funds at institutions or use them to settle interbank transfers.
The advantages and benefits of CBDCs are that they support the international role of the dollar, expand access to the general public, aim for financial inclusion, are free from credit and liquidity risk, and lower cross-border payment costs. The issues created by CBDCs are financial system stability, financial structure changes, privacy and protection, cybersecurity, and monetary policy influence.
These were designed to be like cryptocurrencies but they do not require consensus mechanisms or blockchain technology.
Use Of CBDCs In Political Oppression
CBDCs give politicians unprecedented power to restrict user’s movements, track their data, and, hence, ultimately control their lives. CBDCs were generated to elevate efficiency, stability, security, and reduce corruption, but there are two problems with them. First, they gave an eternal trail of data about how consumers spend money, and secondly, ‘programmability,’ which means political leaders will have the ability to dictate whether the consumer is allowed to spend money or not.
Conclusion
There are great benefits to central bank digital currency, such as a reduction in the costs of cross-border transactions and an expansion in access to the general public. But CBDCs are backed by governments and central banks, unlike cryptocurrencies. There is a greater possibility of political interruption in CBDC use. Hence, it is sure that the worst possible governments will misuse their power as CBDCs to track and control the spending of users. CBDCs can be a great threat to freedom in our country and around the world.
