What does the creation of CBDCs mean for the future?

Central Bank Digital Currencies (CBDCs) are a hot topic within the crypto space. Primarily, discussion about these CBDCs have been centred around their potential abuses- how CBDCs might give governments additional power to surveil their population, how CBDCs might allow them to block transactions, and many more.

But this Wednesday, at the World Blockchain Summit held at Marina Bay Sands, several crypto execs gave their opinions on what CBDCs have to offer- and discussed whether or not their creation and rollout would really cause the dystopian world that many fear is already in the works.

CBDCs’ aren’t inherently evil

While veterans of the crypto space may already be criticising CBDCs for the potential abuses that they enable, the panellists were none too quick to condemn CBDCs. In fact, they acknowledged the potential benefits that a CBDC might bring.

Cris D Tran, executive advisor for Uniultra Foundation, pointed out that not all banking services are always available. Sometimes, these services are only available during office hours, meaning that people cannot transfer money to each other after banks stop operating at night.

A CBDC which does not rely on individual banks to process payment orders or which can be programmed to automatically be transferred at a given time for recurring transactions or taxes would indeed save people a lot of time from having to manually order these transactions every single time.

That being said, the panellists noted that privacy advocates have a very real concern when it comes to CBDCs, since everyone would be able to see and identify blockchain transactions.

However, Cris also argued that how much CBDCs actually serve to reinforce surveillance also depends on how maximalist the CBDC itself is.

“It really depends on how much the end-users trust the government and how much they trust the CBDC. Governments can also limit where CBDCs can be used in a good way. In Vietnam, CBDCs can be used in the e-commerce sector, but they cannot leave the industry. In this way, while CBDCs are being deployed, everyday consumers may never interact with them.”

Just because it’s there doesn’t mean it will be used

The panellists also pointed out that people do have a very real choice of whether or not to use the CBDCs that are rolled out, and that the extent that CBDCs are used for surveillance will be limited by the adoption of such CBDCs.

Sheraz Ahmed, Managing Partner of Storm Partners, argued that “if no one uses the CBDC that is under heavy surveillance, then the CBDC will be useless”.

As such, governments, or rather, anyone who designs a CBDC or cryptocurrency for global usage will still have to contend for users to actually transact using the CBDC.

Sheraz, however, also pointed out that there are possibilities that central banks or governments may incentivise CBDC usage by providing monetary rewards for using it. He cited the recent Worldcoin launch, where anyone who signed up to get their iris scanned would receive free tokens. The worry, according to Sheraz, is that while people may not necessarily want to use CBDCs, they may find themselves using it still, because to avoid it would be to leave money on the table.

“Most of us have stated that we would opt for a private stablecoin or more privacy respecting CBDCs. But how many of us would stick by this if we were given free money to use CBDCs?”

Max Carmichael Jack, Co-founder of Elixir Digital, echoed this sentiment, going a step further to suggest that if governments offered tax breaks for CBDC users, this would create a long-term incentive to use the CBDC, since not using it would mean missing out on the tax breaks year after year.

No dystopia in sight

That being said, the panellists also argued that it was unlikely for a single CBDC to become the default currency worldwide.

For starters, many countries are already developing, or have already deployed CBDCs, and while many CBDCs will likely be designed to be interoperable, no individual government has the power to compel all other countries to use their CBDC.

In addition, many CBDCs are not developed solely by governments, but by a mix of public and private partnerships, which means that the CBDC rollouts that emerge will hardly be pure, top-down actions that force users to use the CBDCs.

As such, the panellists believe that the CBDCs that emerge will eventually still have to protect privacy to some extent.

The universal CBDC dystopia, therefore, is not something that we should be worried about.