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The Risks to Society of Central Bank Digital Currencies

There is much written about CBDCs but little on the risks to society a CBDC would create.
I see these risks falling into three categories:

  1. economic
  2. financial
  3. human rights

Human Rights Risks

If designed inappropriately, CBDCs have the potential to be used as tools of surveillance and control by governments. Every transaction is recordable and any authority with access to the CBDC ledger could see all transactions. They could also control individuals through the ledger – such as putting expiry dates on their CBDC, limiting how much they can hold, varying interest rates and prices depending on who they are, preventing purchases and automatically deducting fines.

The combination of digital identity and CBDC is also a big risk. Access and addressability are needed for digital payments but these are different to digital identity. In a world of programmable money, digital identity can go beyond just enabling access to your funds. Use of those funds can be made conditional on attributes of your digital identity. If those funds are in CBDC, then the central bank and by implication, the government can control directly how you spend and receive money.

Be wary of anyone advocating for digital identity to be connected to CBDC – while digital identity is needed to find fraudsters, money launderers and other criminals, there is no monetary reason to combine CBDC with digital identity.

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