Amidst cryptocurrency booms and innovations in blockchain technology, governments have been showing great interest in creating their own digital monetary imprint through what is called a central bank digital currency (CBDC)..According to the Atlantic Council, a NATO-aligned think-tank, the number of countries investigating a CBDC has exploded from 35 pre-COVID-19 to 130 today..China, for example, has a pilot program covering more than 260 million people which allows transactions for public transit, stimulus payments and e-commerce. Russia’s “digital ruble” went into action last month as an optional currency..Canada also joined the retail-level CBDC race in 2020 when the Bank of Canada announced it was planning to “build the capacity to issue a general purpose, cash-like CBDC should the need to implement one arise.”.The possible “need” was not specified..Earlier this year, the Bank launched online public consultation on the features Canadians might want from a digital dollar. The process closed in June after only five weeks, and its results so far are not published. So it’s hard to tell just who those CBDC aficionados, capable of providing meaningful feedback on such a complicated topic within such a compressed timeframe, actually were..The Bank of Canada did, however, admit the enthusiasm is just not there..A recently released analysis, Unmet Payment Needs and a Central Bank Digital Currency, concluded there’s a decided lack of consumer drivers for adopting CBDC in Canada. Canadians, we should note, already have access to a host of convenient, simple and low-cost digital means of exchange: credit cards, debit cards, e-mail, e-transfers and cryptocurrencies, to name a few. And all of these are readily convertible into cash..What we don’t have is a centralized, official, government-run digital currency that isn’t convertible to cash..Nevertheless, the Bank of Canada claims the need for one exists, and it is to address the alleged payment gap through a “new form of money [that] would be issued by the Bank of Canada and provide benefits similar to cash.”.Why would we go cashless if the need for cash still exists — just to create the very gap that the bank would fill with its CBDC? The reasoning seems absurd.. Flow of funds .Another reason to create a CBDC is to counter the proliferation of cryptocurrencies. These, the bank stated when announcing the aforementioned public consultation, “Could compromise the role of an official, centrally issued currency — the Canadian dollar — in our economy and pose a risk to the stability of our financial system.”.That rationale sounds more plausible, and more worrisome. It’s plausible in light of the difficulties the Justin Trudeau government had in seizing donations made in crypto to last year’s Freedom Convoy..In all, nearly $25 million was raised for the truckers and other protesters across a variety of crowdfunding platforms and conventional banking means..As the accompanying graphic from the Rouleau Commission shows, virtually all of those donations were stopped by the government and never reached the protesters. Except for an unknown amount of cash – and Bitcoins..About $800,000 out of $1.2 million worth of Bitcoins were distributed to about 100 truckers through a process devised by one of the Convoy organizers, Nicholas St. Louis, just before the government moved to seize the related crypto 'wallets.'.The crypto crowdfunding’s success was primarily due to Bitcoin’s foundational technology, called blockchain..Blockchain is decentralized, 'living' on many computers, or nodes, around the globe. No single entity has control. In this way, a cryptocurrency cannot be shut down..Blockchain is also immutable. Every time a transaction occurs, it is permanently recorded and added to the ever-lengthening, unbreakable chain of information secured through advanced encryption (hence the name 'crypto'). Most important, this chaining is done through a democratically distributed consensus mechanism, which verifies the validity and security of transactions and operates without the need for a trusted intermediary, such as a bank..While the technical underpinning of a CBDC and crypto can be similar, presenting the former as a replacement for the latter is seriously misleading..Even if a CBDC adopts blockchain at the design level (and it doesn’t need to) the consensus mechanism is no longer democratically distributed but is held within a set of government agencies, more remote from ordinary consumers even than our big chartered banks..Most important, a CBDC would be a liability of the central bank itself..Unlike now, when your bank or credit card institution is liable for your deposits and respective transactions, a government agency would have the direct responsibility to hold, transfer or remit CBDC funds to you..In creating a direct link between every citizen and their central bank, such a setup would render financial privacy and personal sovereignty a thing of the past and every individual subject to even greater government oversight and control..Had Freedom Convoy supporters made their contributions (or organizers attempted the distributions) under a Canadian CBDC instead of using Bitcoin, it’s all but certain nothing would have made it to the truckers..And that creates a far more plausible scenario for why the Bank of Canada and its allies might gaslight the public about the cashless society’s inevitability and the pressing need for a CBDC..As the Bank of Canada itself admits, Canadians don’t want and don’t need a government-run digital currency. Governments may have other ideas. Privacy-minded and freedom-loving people should beware..The original, full-length version of this article was recently published in C2C Journal..Gleb Lisikh is a researcher and IT management professional and a father of three children. He lives in Vaughan, Ontario and grew up in various parts of the Soviet Union.
