The Road to Central Bank Digital Currencies

The upcoming launch of the Federal Reserve's new instant payment system, FedNow, appears innocuous on the surface. Touted as a way to enable real-time bank payments around the clock, who could complain about faster and more flexible digital transactions?

But make no mistake, FedNow may prove to be a slippery slope towards centralized control over money itself. As cash payment options dwindle and systems like FedNow proliferate, we inch closer to direct central bank digital currencies (CBDCs) issued by the Federal Reserve.

CBDCs already loom large globally. According to the Atlantic Council, over 90 countries representing nearly the entire global economy are exploring state-controlled digital currencies. China continues to lead the pack - its CBDC pilot already reaches 260 million people and covers a wide range of transactions.

Meanwhile, the U.S. conveniently lags in retail CBDCs designed for public use. But it is quietly building capacity for interbank and wholesale CBDCs out of public view. Could FedNow provide the perfect backbone for this digital money control?

Beneath the surface, CBDCs threaten profound implications for privacy and freedom. They provide unprecedented potential for centralized surveillance of financial transactions in real-time. Unlike cash, CBDCs cannot be used anonymously by design.

While central bankers and governments sell CBDCs under the guise of efficiency and modernization, expanded control and oversight of the population may be closer to the truth. The combination of CBDCs and technologies like facial recognition could lay the groundwork for social credit dystopias.

We ignore these risks at our peril. Now is the time for transparency and democratic oversight before it's too late.

The Allure of Central Bank Digital Currencies

Why are governments and central banks around the world racing to launch their own digital currencies? Some arguments in favor include:

• Increased financial inclusion - CBDCs could help bring the unbanked or underbanked into the modern financial system. Of course, this benefit could also be achieved through less coercive means.

• Payment efficiency - By eliminating middlemen and settlement lag, CBDCs allow for instant payments and (in theory) reduced transaction fees. But decentralized cryptocurrencies already enable this, minus the central point of control and financial surveillance.

• Monetary policy control - CBDCs grant central banks greater ability to directly control the money supply during economic downturns through tools like "helicopter money" stimulus programs. However, centralized tinkering with the money supply is precisely what devalues currency and reduces purchasing power over time.

• Technological innovation - Governments view CBDCs as an opportunity to modernize aging financial market infrastructure. But innovation for its own sake is a poor reason to hand over expanded monetary control to untrustworthy authorities.

Under the guise of these benefits, central planners neglect the profound risks CBDCs pose to privacy and freedom.

Expanded Government Surveillance and Control

Due to their programmable nature, CBDCs allow unprecedented oversight and control over citizens' finances:

• Central banks can directly monitor people's purchases, transactions, and overall financial behavior in real-time through CBDCs. What kinds of digital data trails will people leave behind for authorities to scrutinize when making routine purchases?

• Money held in CBDCs can be frozen with the click of a button. Banks freezing digital currency wallets could become a new method for political and social control.

• Smart contracts built on top of CBDCs could impose programmable conditions or restrictions on how people spend their money. Want to donate to a cause the government doesn't like? Your CBDC could be programmed to deny the transaction.

• Because CBDCs reduce financial privacy to zero, any current or future bans on goods or services deemed illegal, immoral, or against the public interest can be strictly enforced. Financial freedom and individual sovereignty itself comes under threat.

If these risks sound far-fetched, consider the Canadian government's chilling crackdown on the Freedom Convoy protesters. Authorities froze the bank accounts of peaceful citizens who had broken no laws but opposed restrictive COVID policies. CBDCs would make such financial coercion efficient and irresistible.

The Perfect Storm for Social Credit Systems

The rise of CBDCs alongside increased mass surveillance through facial recognition and AI provides the perfect storm for Chinese-style social credit systems based on financial and social compliance.

Under such a system, your economic livelihood could depend on measures of social, political, and financial obedience. Purchase organically grown produce? Take public transit to reduce your carbon footprint? Congratulations, your social credit score just went up, enabling greater economic privileges.

By contrast, did you donate money to an organization deemed questionable? Voice support for a protest on social media? Sorry, your social credit score has now been reduced, along with your ability to participate in society.

Rather than speculative fiction, these systems are already developing. Both China and Canada have begun experimenting with social credit scores, where certain behaviors can limit people's financial and social opportunities. CBDCs would only exacerbate these trends.

Resisting the Rush Towards Digital Authoritarianism

Rather than sleepwalk towards a Chinese-style dystopia, free societies must demand a say in any development of CBDCs or social credit systems:

• Slow down and delay the deployment of CBDCs to allow for proper debate on the risks to privacy and freedom. Technology should empower people, not central planners.

• Scrutinize the authoritarian abuse of financial data in places like China. These are cautionary tales, not models to emulate. Respect autonomy.

• Evaluate less coercive alternatives like decentralized blockchain and cryptocurrencies that do not require centralized points of control.

• Develop democratic checks and balances, opt-out mechanisms, and accountability measures prior to implementation of any expansive government-administered digital currency or social credit system. Mass financial surveillance and coercion must be explicitly prohibited.

• Demand transparency from governments, central banks and corporations on current data collection practices and plans for developing CBDCs or social credit systems. Shine a light on what's happening behind closed doors.

Heinous Schemes Disguised as Gifts

Both CBDCs and social credit systems may be sold as providing convenience, inclusion, and technocratic optimization of society. But at what cost? Handing direct control over money and finance to unaccountable central planners paves the road to digital authoritarianism.

Yet, diabolical schemes rarely advertise themselves as such initially. They are packaged as bargains that bear gifts of technological advancement and social harmony. Only once adopted and entrenched do the authoritarian urges emerge.

There is still a slim window to resist the inertia pulling us towards this dystopian future. But this window is closing, and the slope is indeed slippery. We ignore this at our collective peril.