Category: CBDCs

South American countries Brazil and Peru are looking to introduce CBDCs by 2022, according to two recent reports from local agencies.

More Countries Joining the CBDC Train

Both countries are jumping on the CBDC bandwagon as several nations worldwide are rapidly developing and launching their own digital currencies. For example, last month Nigeria became the first leading African economy to launch a CBDC, called eNaira.

According to Julio Velarde, president of the Reserve Bank of Peru, the country is working on the early stage of development for a national CBDC. The pilot program will focus on aiding the payment system.

We have been working on a digital currency. We are in a lot of projects with several central banks: with India, Singapore, Hong Kong and with a lot of [other] central banks, thinking of a digital currency that is going to be the one that will prevail in the future.

Julio Velarde, president, Reserve Bank of Peru

On the other hand, Brazil’s Central Bank (BCB) president Roberto Campos Neto revealed the institution would start working towards the development of a Brazilian CBDC in 2022. This comes after the financial institution told the Brazilian Senate it planned to launch the final version of the digital real (Brazil’s local currency) in 2024.

[Crypto] is already starting to affect even the national accounts, which means it has become a relevant investment instrument.

Roberto Campos Neto, president, Central Bank of Brazil

According to the BCB, Brazilians have acquired around US$4.27 billion worth of crypto and held close to US$50 billion so far this year.

Fernanda Guardado, the bank’s deputy governor for International Affairs and Corporate Risks, said the BCB is taking a careful approach towards developing the digital real. She added that crypto assets are viewed more as a financial asset highly demanded by Brazilians.

Are CBDCs Not What They Tell Us?

Not everyone is so keen on the idea of nations developing CBDCs. Last month, former US National Security Agency consultant and whistleblower Edward Snowden said that CBDCs are just an instrument of central banks and governments to surveil its citizens. In his own words:

CBDC is something closer to being a perversion of cryptocurrency, or at least of the founding principles and protocols of cryptocurrency – a cryptofascist currency, an evil twin entered into the ledgers on Opposite Day, expressly designed to deny its users the basic ownership of their money and to install the State at the mediating centre of every transaction.

Edward Snowden, former NSA consultant

Edward Snowden, a former consultant to the US National Security Agency (NSA) and exiled privacy advocate, is well known for his stance against government surveillance. He recently suggested that China banning Bitcoin was a good thing, and this past week wrote that CBDCs are not, “as Wikipedia might tell you, a digital dollar”.

CBDCs – It Isn’t What They Tell You It Is

Snowden is unambiguous in his view that CBDCs, as advertised, are not what they appear to be. They are not, he argues, a “digital dollar”, nor are they an example of a “state-level embrace of cryptocurrency”.

Instead, a CBDC is something closer to being a perversion of cryptocurrency, or at least of the founding principles and protocols of cryptocurrency – a cryptofascist currency, an evil twin entered into the ledgers on Opposite Day, expressly designed to deny its users the basic ownership of their money and to install the State at the mediating centre of every transaction. 

Edward Snowden

He jokingly refers to the US dollar as a “napkin” and says that “once that napkin is securely stowed away in your purse – or murse – the bank no longer gets to decide, or even know, how and where you use it”. This of course stands in stark contrast to a CBDC, where the state intermediates or “imposes itself in the middle of every last transaction”.

Banks Are Threatened by Crypto

Snowden recognises that cryptocurrencies, due to their decentralised nature, are “regarded by both central and commercial banks as dangerous disintermediators; precisely because they’ve been designed to ensure equal protection for all users, with no special privileges extended to the State”.

These upstart crypto-competitors represent an epochal disruption, promising the possibility of storing and moving verifiable value independent of State approval, and so placing their users beyond the reach of Rome.

Edward Snowden

CBDC proponents argue that it will make everyday transactions safer (by removing counterparty risk), and easier to tax (by rendering it impossible to hide money from the government). However, Snowden is deeply sceptical, suggesting it is merely evidence of an ever-encroaching surveillance state.

Opposition to such free trade [crypto] is all-too-often concealed beneath a veneer of paternalistic concern, with the State claiming that in the absence of its own loving intermediation, the market will inevitably devolve into unlawful gambling dens and fleshpots rife with tax fraud, drug deals, and gun-running.

Edward Snowden

It’s Closer Than You Think

If the idea of governments intermediating every single transaction sounds dystopian but something for your future self to be concerned about, be warned – it’s already here.

Last week, the IMF confirmed that more than 110 nations are currently involved in developing or experimenting with CBDCs. These include countries such as Australia and New Zealand. Unsurprisingly, China leads the pack and has confirmed it is embracing smart contracts in its CBDC – no doubt this will be integrated into its social credit system.

Even critics would acknowledge that CBDCs have practical benefits. That isn’t really the question that matters. Instead, we should be asking whether (and how) CBDCs are able to operate in a manner that is consistent within a Western liberal democratic framework premised on human rights.