By Richard Martin
Central Bank Digital Currencies are not just digital money, which is simply money represented symbolically in digital ledgers.
They are much more; they represent the switch to fully Programmable Money.
They are similar to loyalty program points, usable in only certain conditions and for specified purposes and durations.
With Programmable Money, the state no longer has to convince or coerce intermediaries to prevent use of money in proscribed exchanges or encourage its use in favoured transactions.
This is part of a wider trend toward private disintermediation, where private parties can contract directly without going through a third party.
Private disintermediation is generally a net positive, as it gives greater power to the parties to the exchange as they don’t have to convince a 3rd party to the transaction, nor do they have to conform to the 3rd party’s rules.
On the other hand, Programmable Money empowers the government as the unique intermediary for all monetary transactions, obviating the requirement to coerce or convince parties in specific transactions, especially intermediaries and other 3rd parties.
In other words, the state wishes businesses to be simple order takers who do the will of the government, rather than exercise their own free will or that of the owners/entrepreneurs.
When the government forces businesses to do its bidding, this is the very definition of fascism, turning the free market business owner and entrepreneur into executors of the government’s will, what the Nazis called Betriebsführer (shop or factory manager).
As Programmable Money, CBDCs will allow the issuer to take even this limited freedom of action and initiative away from the contracting parties and the intermediaries.
The government issuer of Programmable Money can build automatic functions in to the currency to achieve what it views as desirable outcomes or characteristics through predetermined activation and deactivation protocols.
This could include building in functionality to ensure a specified duration of validity (spend before date); specified use cases (only for approved exchanges); geographical constraints (only in certain territories); types of users (e.g., not for minors); and manipulation of currency denominations akin to stock splits, merges, and swaps (1 unit is now 10 units, or vice versa).
The fact that China is implementing a “digital yuan” should have us all concerned about this, especially if it becomes the norm in supposedly free societies.
© Richard Martin
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