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The popularity of cryptocurrencies like bitcoin (BTC) and the Ethereum network’s ether (ETH) has skyrocketed over the past year. So popular that central banks of certain economies have expressed their intentions of releasing their iteration of virtual money known in the crypto space as central bank digital currencies (CBDC). Albeit the benefits and convenience, these CBDCs would offer when launched, it also comes with several risks.
CBDC and international security
The former intelligence analyst at the Canadian Security Intelligence Service – Jessica Davis looked upon the risks involved with CBDCs as these could potentially complicate intelligence, and even make it a tool for shady individuals to exploit
CBDCs are said to both feature several opportunities and risks for the international community and it is believed that it will be extremely difficult to alleviate the negative effects brought by CBDCs due to sovereign monetary policies. Another thing worth noting is that these CBDCs are likely to be utilized by authoritarian forms of government like China as a form of mass surveillance tool and for illegal financing opportunities.
For those unaware, China launched a few months back their virtual money dubbed the digital yuan. Of course, knowing that country, the above-mentioned surveillance tool could already be in full swing.
Fed governor on CBDCs
In line with this, on August 5, Federal Reserve Governor Christopher Waller touched on the topic of CBDCs. One of the highlights of his speech entitled “CBDC: A solution in Search of a Problem?” was China’s state-backed digital currency.
That majority from the crypto community is already acquainted with what the country would do with their CBDC, Waller argued the idea on to how many of these non-Chinese firms would come signing up to a CBDC from a communist country that will pretty much track down and monitor every transaction they’re making. He also pointed out the probability of such a move from these companies to happen which is pretty low.
A lot of private individuals who are into cryptocurrencies don’t like the idea of CBDCs according to YouTuber Uneducated Economist. In his video, he explains that they’re not into it since these people don’t want to be tracked and monitored as these will likely be done by these CBDCs. This is about what Waller said in his speech as he seemingly admitted that central bank digital currencies are about “tracking and tracing.”
The cryptocurrency community is well aware that digital currencies have been a hot topic being debated and caused alarm within international security and even in the criminal underworld. The digital payment feature offered by these cryptocurrencies allows unlawful financial activities via inconsistent regulation, anonymity, and transaction speed.
CBDC v bitcoin and other cryptocurrencies
These CBDCs are another iteration of digital currencies, though unlike bitcoin and similar currencies as of late, these have the backing of the state’s central bank just like a typical banknote. Also, these are not tied to private corporations and not even the blockchain. With that in mind, these CBDCs will experience price fluctuations together with its real-world counterpart, not to mention that it is being governed by a central authority.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
