In recent weeks Jerome Powell at the Federal Reserve and Christine Lagarde at the European Central Bank have commented on the likelihood of implementing digital currencies in the next years. The positives have been well explained. More transparency, ease of use and lower cost.
The European Central Bank has stated that “a digital euro would guarantee that citizens in the euro area can maintain costless access to a simple, universally accepted, safe and trusted means of payment. The digital euro would still be a euro: like banknotes but digital.
All this sounds good. So, why should we worry about a central bank “digital currency”?
The first one is privacy. The central bank would control almost all transactions in a currency and have all the information of how deposits and savings are kept. The gradual implementation of the central bank digital currency would involve important risks of privacy but also concerns about the central bank controlling the amount of savings and their form. A central bank that controls all transactions and how savings are kept is also able to act against those savings by “dissolving” them with monetary policy.
The most important risk of a digital currency is that it would provide unlimited power to central banks to increase the money supply and direct it where governments want it.
A digital currency could open the risk of eliminating all controls on government spending, as politicians would be the first recipients of all newly created money and able to do so without budget control. As such, a digital currency could be a dangerous tool used for the nationalization of the economy
If governments are given a tool that allows them to spend all they want and take control of the economy, do you really believe they will not use it?
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