January 23, 2022

How will CBDC change our lives?

How will CBDC change our lives?

Imagine that the state knows everything about your income and expenses and controls your purchases and movements: вы можете потратить деньги только на те продукты, which you are allowed to buy, your cards are inactive at night, and you can fly on vacation more than once a year. This is not a dystopia, but quite possible consequences of integrating CBDCs, the digital currencies of central banks, into the economy. We figured out why CBDC is an ideal tool for totalitarian control over society.

The bright side of CBDC

CBDC (Central Bank Digital Currency) isfiat currencies in digital form issued by the central bank. Unlike simple electronic money, which is now used in non-cash trading, each digital currency will be a separate digital asset.

Now the financial regulators of dozens of largecountries compete in a race to be the leader in launching the CBDC. Last year, national digital currencies were already launched in Nigeria, the Caribbean and Jamaica. Since April 2020, the Chinese authorities have been testing the digital yuan (DCEP), next year the Bank of Russia is going to issue a digital ruble.

We have already written that with the mass distribution of CBDCs, they can significantly change the financial system. Among the upcoming changes there are many positive ones.

So, for example, CBDCs will reduce the number offinancial intermediaries, resulting in faster and cheaper transfers. These currencies will also simplify the process of making budget payments: pensions, benefits and tax deductions can be targeted to any citizen. To do this, you will only need to create a special CBDC wallet.

At the same time, CBDCs will increase payment transparency.and increase the authorities' control over the spending of budgetary funds, because any transaction with these digital assets can be tracked. The authorities will be able to finance state projects using smart contracts, which will allow spending money only for its intended purpose. As a result, officials and contractors will no longer be able to "lose" billions from the state budget - everything will be in a centralized blockchain, and money can only be spent on pre-approved articles.

The volume of the shadow economy will decrease. It will become impossible to work in the black, illegal transactions will become easier to trace, money laundering will be reduced.

Most importantly, CBDCs will greatly enhance the rolecentral banks: financial regulators will be able to see all transactions, freeze any user transaction, and their ability to conduct monetary policy will increase.

The dark side of CBDC

But the widespread use of CBDC brings not only benefits, but also huge risks associated primarily with the tightening of government control over society.

CBDC is the ideal tool for totalstate control over most aspects of the life of citizens. Mankind is lucky that the totalitarian regimes of the last century did not have such technologies: otherwise our past could have been even more cruel. The CBDC will give financial regulators and governments more control than they ever had before. Therefore, the race to launch national digital currencies is understandable.

Imagine a world without cash andelectronic money, and everyone uses only CBDC. In such a world, people will actually lose control over their own money. Now you can keep all your savings in cash and do whatever you want with them. But with CBDC, you can no longer dispose of them as you see fit. The authorities will be able to program them for limited use.

How it might look

Complete financial transparency

The state will see not only all incomeperson, but also their costs. And the problem is not only that working in the black will no longer work. The authorities will be able to compare whether your expenses match your income, as well as automatically write off taxes on each receipt. And, of course, the user's CBDC wallet can be blocked at any time.

Consumption rationing

CBDCs allow you to control and regulatelevel and quality of consumption. Smart contracts can be configured in such a way that people simply cannot buy what they are not supposed to, or they will automatically be taxed for over consumption.

You can ban the purchase of alcohol:the system simply will not accept payment when a person tries to buy another bottle. Such a restriction can also be used as a punishment measure: for example, by a court decision, a hooligan will be forbidden to buy anything other than food and medicine for a whole year.

But such restrictions apply not only toas a punishment, but also as a regulation of consumption. For example, to combat global warming, you can limit the amount of gasoline or meat that a person can buy (for example, no more than 100 liters of gasoline per month), and then the CBDC card will simply block all payments at the gas station. If digital currencies had existed during the Soviet era, a card system would not have been needed - CBDCs would have replaced them perfectly.

Movement control

CBDC allow you to restrict the movement of citizenswithout any QR codes, residence permits, residence permits and document checks. It is enough to simply limit the territory or duration of digital currencies. For example, you can only spend money within the city. Or for those who do not have a Moscow residence permit, a spending limit in the capital will be set - no more than a week a year.

It is very easy to regulate passenger flow and traffic with the help of CBDC. For example, you can only pay for the metro from 7 to 9, and your neighbor - from 9 to 11.

If CBDCs acted now, the authorities would notlockdowns would even have to be introduced to combat the spread of COVID-19. One could simply ban paying on public transport, limit the validity of CBDC cards to convenience stores, or block them at night, when going to restaurants, and for people over 60 years old. If you can’t buy anything and you can’t go anywhere, then why leave the house?

CBDC is an excellent assistant in the fight against globalwarming. Digital currencies help limit the carbon footprint of citizens. For example, we will be able to use a personal car only twice a week, travel by train only on weekdays, and fly on vacation no more than once a year. It is enough just to program the appropriate limits for the CBDC wallet, and we simply will not be able to buy an additional ticket or recharge our electric car. And if we still really need to go somewhere, we will have to pay for it at an increased price.

Support for the social rating system

Suppose a country has introduced a system of sociala rating in which some categories of the population receive more privileges and opportunities than others, as a reward for certain services to society. An analogue of such a system is already operating in China, and the current epic with QR codes, in fact, is the implementation of the same idea. CBDCs fit perfectly into this concept. People with a high rating can be given complete freedom in managing their money, while those with a low status, on the contrary, can be limited in the use of money: for example, banning high-ranking citizens from visiting establishments or limiting consumption to the necessary minimum.

How possible is a CBDC dystopia

Now the examples of using CBDC given above may seem like a dystopia, but some of them may well become a reality, and even in the near future.

For example, in Russia the position of the authorities regardingof the national digital currency is transparent: officials openly talk about how much easier it would be to control everything with a digital ruble. And the Federal Tax Service has been developing tax regimes for several years that allow taxes to be collected automatically. The head of the Bank of Russia, Elvira Nabiullina, in the story about the appointment of the digital ruble, openly admits that it "allows you to program its use." On December 9, Russian Prosecutor General Igor Krasnov said that the introduction of the digital ruble would reduce the risks of corruption and money laundering, as it would significantly increase the transparency of settlements.

Interestingly, 26% of Russians are ready for controlauthority over their spending. That is how many citizens of the Russian Federation, according to VTsIOM, positively assess the initiative to ban the use of cash. 49% of respondents are ready in principle for non-cash payments to be accepted everywhere. And although the majority is against the abandonment of cash, society is definitely ready for a complete transition to digital analogues of money.

In the West, less prone to publiccontrol, the likelihood of using CBDC to restrict consumption and movement is even higher than in developing countries. Such restrictions have an ethical justification: the fight against global warming and the need to limit unsustainable consumption and minimize the carbon footprint. In the coming decades, there are likely to be limits on how much energy each of us can consume, or how many energy-intensive services we can access at all. Of course, you can simply raise the price of air travel to astronomical levels. But it's not very democratic. Another way is to simply impose limits on long-haul flights.

There will be much more in the Beautiful World of the Futureprohibitions and controls than now. And all of them will be introduced for our benefit. For example, under President Biden's Infrastructure Act, by 2026, all cars in the US must be equipped with a remote shutdown feature. This is supposed to be to prevent drunk driving. But when the authorities decide to turn off the car for debts or too large a carbon footprint, it is only a matter of time. This is the same trend as with CBDC money: such a car is no longer fully owned by the owner.

Cryptocurrencies as an alternative to total control

As you can see, CBDCs are the exact opposite of cryptocurrencies. Decentralized digital assets are designed to provide people with financial freedom, and digital currencies are the center.

We hope that most of the gloomy forecaststhe above will not come true. And if this does happen, then cryptocurrencies will become one of the alternatives for those who want to have complete control over their funds and over their lives.

Where is it more profitable to buy cryptocurrency? TOP-5 exchanges

For a safe and convenient purchase of cryptocurrencies with a minimum commission, we have prepared a rating of the most reliable and popular cryptocurrency exchanges that support deposit and withdrawal of funds in rubles, hryvnias, dollars and euros.

Site reliability is primarily determined bytrading volume and number of users. By all key metrics, Binance is the largest cryptocurrency exchange in the world. Binance is also the most popular cryptocurrency exchange in Russia and the CIS, since it has the largest turnover of funds and supports transfers in rubles from bank cards Visa / MasterCard and payment systems QIWI, Advcash, Payeer.

Especially for beginners, we have prepared a detailed guide: How to buy bitcoin on a crypto exchange for rubles?

Rating of cryptocurrency exchanges:

# Exchange: Website: Rating:
1 Binance (Editor's Choice) https://binance.com 9.7
2 Huobi https://huobi.com 7.4
3 Exmo https://exmo.me 6.9
4 OKEx https://okex.com 6.5
5 Bybit https://bybit.com 6.3

The criteria by which the rating is set in our rating of crypto-exchanges:

  • Work reliability - stability of access to all platform functions, including uninterrupted trading, deposit and withdrawal of funds, as well as the period of work on the market and the daily trading volume.
  • Commissions - the size of the commission for trading operations within the site and the withdrawal of assets.
  • Additional features and services - futures, options, staking, NFT marketplace.
  • Feedback and support - we analyze user reviews and the quality of technical support.
  • Convenience of the interface - we evaluate the functionality and intuitiveness of the interface, possible errors and failures when working with the exchange.
  • final grade - the average number of points for all indicators, determines the place in the rating.

How will CBDC change our lives?

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