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Updated: Jan 31

Central bank digital currencies, or CBDCs, are essentially a digital version of fiat currency backed by a government. It seems to be gaining momentum with central bankers around the world, but is meeting with increasing push back from civil society. The primary hurdle that all central banks will have to jump over is convincing the public that user privacy is protected. Central banks however, want as much control over money as possible. In fact, from the perspective of central bankers, they should have total control. And they have been openly telling everyone as much.

- Augustin Carstens – General Manager, Bank of International Settlements.

18th October 2020.

Seriously?!! Clearly, it’s “absolute control” that they are after. So, let’s get this straight. At the extreme ends of the control spectrum, it could mean that, at one end of the spectrum

1. if Herr Carstens wants to buy a pound of bacon at his local deli, the central bank can program digital currencies assigned to Herr Carstens to decline the purchase if bureaucrats in a central bank think that Herr Carstens is dangerously obese.

and at the other end of the spectrum:

2. any individual or government agency could transfer millions of dollars to, say, the Azov Batallion in Ukariane, simply because it aligns with the political leanings of the politicians/central bankers of day.

- The Hill TV – Robert Kennedy Jr Slams “FedNow” Government Digital Banking.

This isn’t going to fly with the citizens.

The central bank can apply controls to its payment systems to interfere with, slow down, or prevent member transactions. Subsequent to the implementation of central bank digital currencies (CBDCs), it may be able to interfere directly with any or all transactions, whether involving individuals, institutions, or member banks”.

- Catherine Austin Fitts and Carolyn Betts, Esq. - The Solari Report

The success or failure of CBDCs will ultimately turn on striking an agreeable balance between central banks’ desire for control (ostensibly to prevent illicit activities like money laundering and terrorism financing), while preserving an individual’s right to privacy.

Added to concerns about privacy is the increasing evidence that national security agencies routinely gain unauthorized access to banking information illegally. The CIA and FBI have allegedly become notoriously corrupt and have abused their position to target political opponents in the US and around the world. CBDC user information and the potential for abuse of power to gain access to that information are significant concerns that need to be addressed to allay public fears. There needs to be a robust framework to provide transparency, security and oversight.

There are several measures that governments can adopt to demonstrate their commitment to protecting the privacy and civil liberties of CBDC users. But the sine qua non, or non- negotiable measures are:

Court Sanctioned Warrants

Require that government and national security agencies obtain warrants based on probable cause before accessing CBDC transaction data. This legal requirement ensures oversight and protects against unwarranted intrusion.

Legislation That Makes Data Minimization and Anonymization Mandatory

Legislative bodies across the world must pass legislation to limit and minimize the collection of user data to what is essential. These laws should clearly define the limits of government surveillance and specify penalties for any unauthorized access or misuse of data. The digital systems adopted by central banks must also anonymize transaction information wherever possible. The less data available for collection, the lower the risk of misuse.

Protect Whistleblowers :

Whistleblowers are one of the main souces of information about abuse within government. There must be unequivocal protection for whistleblowers who uncover abuses of power within government agencies. Encourage, and possibly reward individuals who come forward with information about potential wrongdoing.

User Consent and Control:

Empower individuals to have management and authority over their data. Allow users/citizens to opt out of particular data collection practices and provide them with tools to manage their privacy settings.

International Collaboration:

There has to be collaboration amongst international organizations to establish a single global framework and standards for CBDC security, privacy and oversight. International standards will help prevent abuses that may cross borders, keeping the grimy fingers of security agencies away from our data.

These measures would be paramount for the success of any CBDC and, indeed, for CBDCs to have any prospect of being adopted globally. There are, of course, other measures that will be needed depending on the country, Exisiting political and administrative structures, the demographic, culture, socio-economic and geo-political sensitivities all have an impact on CBDC implementation. Factors such as (1) state of the art encryption and security protocols, (2) independent audits and oversight, (3) public awareness and education of citizens rights and protections and (4) a quick and efficient system for legal recourse in the case of violations, would have to be carefully interwoven into any CBDC project. An open dialogue between governments, technology experts, civil society, and the public will be critical to gain trust and to strike the right balance between security and individual rights.

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