Central Bank Digital Currencies Could Mean The End Of Democracy

dangers to democracy 8 3
 A man uses the Ethereum ATM, beside a Bitcoin ATM, in Hong Kong in May 2018. Cryptocurrencies like Ethereum differ from central bank digital currencies because they are decentralized, not under state control. THE CANADIAN PRESS/AP, Kin Cheung

In recent years, we have witnessed a growing interest in the idea of central bank digital currencies. Similar to cash, central bank digital currencies are a form of money issued by central banks.

In each country, a central bank manages the local currency and the monetary policy to ensure financial stability. Unlike cash, central bank digital currencies are expected to update national financial infrastructures to the changing needs of the economy and technology.

Led by international financial institutions such as the Bank of International Settlements and the International Monetary Fund, central banks examine technologies, conduct experiments and prepare national economic scenarios. However, central banks cannot — and should not — identify the social consequences of implementing this technology.

The transition to national digital currencies gives governments the ability to automate transactions and create conditions under which it can be spent. This raises crucial implications about democracy that must be identified and considered before central bank digital currencies become a reality.

Important questions to consider

Central bank digital currencies are expected to hand authorities the ability to completely control the finances of their citizens. States would be able to restrict citizens from purchasing any services and goods, and governments would gain a greater influence and control over people’s lives.

For example, societies will be able to decide whether limiting someone who is addicted to gambling from buying a lottery ticket is a positive feature of money. Similarly, they might also be able to decide whether welfare assistance can only be used for food, medicine and rent.

Introducing a central bank digital currency raises a number of important questions. The first is whether or not people would benefit from the new features of these digital currencies. The second is whether we can be sure these features, in the hands of governments, won’t undermine the already-trembling foundations of democracies. Both questions raise important discussions about the future and our values as a society.

There are also plenty of open questions that citizens, rather than central banks, should deliberate about. Do we want to connect personal financial information with credit systems? How about sharing health expenses or political donations with governments and corporations? What do we think about issuing different money, with different financial characteristics, to different people? What is the social importance of keeping cash alongside central bank digital currencies? Do we even need a central bank digital currency?

We don’t want to leave these questions solely for those who develop and implement digital monetary systems, or raise them too late. Currently, concerns about democracy are lagging behind the race to implement central bank digital currencies. We must have these discussions before it’s too late.

 Get The Latest By Email

Weekly Magazine Daily Inspiration

Maintaining democracy

When it comes to decisions related to the central bank digital currency infrastructure, each country should examine whether structural changes are required for maintaining democratic supervision and proper checks and balances.

This not only applies to central banks, but also to security agencies and authorities in charge of anti-money laundering and tax collecting, who will most likely have access to user information and be able to freeze accounts and confiscate funds.

It is up to democratic institutions to guarantee that actions like freezing bank accounts of political dissidents won’t become a common practice.

There will be those who will argue that central banks are only examining and preparing the infrastructure and, when the day comes, it will be governments who fill in the details. But this kind of answer is unacceptable. It detaches designers of the system from those responsible for running it and, most importantly, from those who will be affected by it.

Diverse discussion needed

Deliberation requires a diverse mix of public representatives, including the marginalized, elderly and poor, those living in remote places and people with disabilities. Social organizations, academia, citizens and the press should highlight different perspectives.

The bottom line is that central bank digital currencies are not just a matter of technology, but also a matter of political power and social justice. They have the potential to unleash unintended, unwanted and unexpected societal consequences — only time will tell what these consequences are.

Although central banks are responsible for platforming social issues to the public stage, democratic institutions must take the lead for this issue. Countries should implement digital currencies only if they can ensure that their governments and authorities will not cross red lines. These rules and regulations must be drawn immediately by democratic institutions, rather than exclusively by central banks.

Ultimately, what lies ahead of us is not just a technological advancement in payment, but a fundamental change in the world’s financial infrastructure. This change is expected to cause shifts in the social and political fabric of societies, and we must prepare for it in a democratic way.The Conversation

About The Author

Ori Freiman, Postdoctoral Fellow, Centre for Ethics, University of Toronto

This article is republished from The Conversation under a Creative Commons license. Read the original article.

You May Also Like

follow InnerSelf on

facebook icontwitter iconyoutube iconinstagram iconpintrest iconrss icon

 Get The Latest By Email

Weekly Magazine Daily Inspiration




baseball player w;ith white hair
Can We Be Too Old?
by Barry Vissell
We all know the expression, "You're as old as you think or feel." Too many people give up on…
a stick figure climbing the stairs to success and finding the words "What's Next?"
The Accumulation-Happiness Myth Is Fueled by False Beliefs
by Lawrence Doochin
When we are taught that we should have something or achieve a certain thing and we aren't yet…
food too old to eat 7 24
Another Way To Know What’s Too Old To Eat
by Jill Roberts
Avoiding unseen food hazards is the reason people often check the dates on food packaging. And…
a young child walking and holding her father's hand
A Few Simple Things I’ve Learned Along The Way
by Peter Ruppert
Sometimes, when we are laser-focused on our goals and making our mark on the world, the relentless…
climate change and flooding 7 30
Why Climate Change Is Making Flooding Worse
by Frances Davenport
Although floods are a natural occurrence, human-caused climate change is making severe flooding…
nordic diet 7.31
Does The Nordic Diet Rival Its Mediterranean Counterpart For Health Benefits?
by Duane Mellor and Ekavi Georgousopoulou
Every month there seems to be a new diet doing the rounds online. One of the latest is the Nordic…
made to wear a mask 7 31
Will We Only Act On Public Health Advice If Someone Makes Us?
by Holly Seale, UNSW Sydney
Back in mid 2020, it was suggested mask use was similar to seat belt wearing in cars. Not everyone…
coffee good or bad 7 31
Mixed Messages: Is Coffee Good Or Bad For Us?
by Thomas Merritt
Coffee is good for you. Or it’s not. Maybe it is, then it isn’t, then it is again. If you drink…

New Attitudes - New Possibilities

InnerSelf.comClimateImpactNews.com | InnerPower.net
MightyNatural.com | WholisticPolitics.com | InnerSelf Market
Copyright ©1985 - 2021 InnerSelf Publications. All Rights Reserved.