Bitcoin Policy Institute: CBDC is a senseless hypercontrolling tool, countries should adopt Bitcoin

Analysts at Bitcoin Policy Institute called on U.S. authorities to abandon the development of the state-owned cryptocurrency (or Central Bank Digital Currency, CBDC) in favor of stablecoins and Bitcoin. We highlighted the main points of a new report to better understand the dangers of CBDC, as well as the pros of Bitcoin.

Summary

The report right from the start makes a good point: if the 20th century has been called “The American Century,” the 21st century is “The Chinese Century.” China was the first country in the world to develop and implement CBDC and is now finishing testing it. In some strange way, other civilized countries have taken China as an example of digital policy and now, with a considerable lag, are preparing to create their own CBDCs.

The authors of the report, Texas Bitcoin Foundation director Natalie Smolenski and former Kraken exchange development manager Dan Held, are trying to draw the attention of governments to the fact that CBDC does not solve any real economic problems.

Government cryptocurrencies in the form of CBDC will only “extend government control into the last unsupervised areas of personal economic life.” CBDC is an instrument of hypercontrol, nothing more.

The report states:

“As the world goes the way of China in the 21st century, the United States should stand for something different: it should stand for freedom,” the release said. “For this reason, the United States should reject central bank digital currencies.”

Why is CBDC bad?

Here are just a few of the disadvantages:

• With the widespread implementation of programmable money, the authorities will have the ability to prohibit, demand, incentivize, or cancel transactions. Never before in human history has there been such a flexible and total instrument of economic control.
• CBDC creates a single point of failure for the state. It is a fully centralized payment system with a single center of control, which is dangerous and unreliable.
• CBDC’s operation generates so much personal data of citizens, including their preferences and payments, that any leakage of such data would be fatal.
• The CBDC is under complete government control, which means it does not solve monetary policy problems in any way. For example, the state can continue to create uncontrolled debt and emission, causing excessive inflation. CBDC does nothing to solve these critical problems of modern economics.

The human factor can and will lead to abusive economic policies. Awareness of this bottleneck gradually leads from public to decentralized private money. There is already a successful example of the latter, and it has proved its vitality — it is Bitcoin.

Pro Bitcoin

Here are just a few arguments in favor of Bitcoin mentioned in the report.

Bitcoin is a private payment vehicle that does not collect personal information. It is a decentralized system with limited emission, effectively solving the trust problem (the system has no intermediaries, including the state agent).

The report also considers the low transaction fees and instant cross-border transactions that can be done without digital currencies. The report says that even if there is an alternative to digital currencies, it must be private, uncensored, and free.

Referring to the above-mentioned characteristics of digital currencies, the authors of the report state:

These are characteristics of bitcoin: a global cryptocurrency issued by a protocol rather than by a bank.

As an intermediate or compromise solution, the report’s authors suggest using stablecoins, which combine some of the properties of both CBDC and Bitcoin. Because of this reasonable compromise, stablecoins that already exist and are in widespread use could be a real replacement for CBDC.