Central Bank Digital Currencies and Programmable Money

Digital Identity Future

This article was last updated on April 16, 2022

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As I posted here, the development of central bank digital currencies is evolving quite quickly.  A relatively recent interview with the Deputy Governor, Financial Stability of the Bank of England, one of the world's most influential central banks, provides us with a fascinating look at how governments could use CBDCs, particularly when linked to a digital identity.

As background, here is some information on Sir Jon Cunliffe, the interviewee in question:

Central Bank Digital Currencies 

Here is the link to the 2 minute-long interview with Sir Jon Cunliffe which appeared on Sky News on June 7, 2021.

Here is the transcript of the interview:

"At the moment, at the Bank of England we issue bank notes, the notes that everybody holds in their pocket but we don't issue any money in digital form.  So, when you pay with your card or your phone on a digital transaction, you're actually using your bank account, you're transferring money from your bank account to somebody else's.  A central bank digital currency, a digital pound would actually be a claim on the Bank of England issued by us directly to the public.  As I say, at the moment, we only issue digital money to banks, we don't issue to the general public.  So, it will be a digital pound and it will be similar to some of the proposals being developed in the private sector.  You mention bitcoin, they use the same technology, they're not bitcoin, they aim to have a stable value.  They're called stable coins and some of the technology companies, the Big Tech platforms, are just thinking about developing digital coins of that sort and a central bank digital currency would be a digital coin, actually a digital note issued by the Bank of England…."

Here's the CBDC sales pitch with my bolds:

"Any of these proposals, whether they are stable coins or central bank digital currency, they do offer the potential to bring down cost.  So, at the moment, the average cost , I think, for a credit card transaction is about,  just over half a percent but, of course, if you're a small tea room in (indistinct), you're going to be paying more than that, in some cases well over one percent for that transaction.  So, it could be cheaper, it could be more convenient."

Notice the use of conditional words and phrases like "could" and "offer the potential".  In other words, we are being sold the very concept of a central bank digital currency based on lower transaction costs and convenience.

Here's the money shot:

"And these new forms of money offer the ability for them to be integrated more with other things through their software.  So, you can think of smart contracts in which, you know, the money would be programmed to be released only when something happened.  You could think, for example, of giving your children pocket money, but programming the money so that it couldn't be used for sweets.  There's a whole range of things that money could do, programable money as it's called, which we can't do with the current technology."

Programmable money.  Remember that.

Further along in the interview (which is not supplied on the link), Cunliffe refers to the Bank of England's recent discussion paper "New forms of digital money" as shown here:

Central Bank Digital Currencies

Here is a key excerpt from Section 2.2 which also refers to "programmable money":

Central Bank Digital Currencies

The Bank of England is using the COVID-19 pandemic as the catalyst for the development of a CBDC as shown on this illustration from the discussion paper:

Central Bank Digital Currencies

Note this key sentence:

"Importantly, despite these trends, cash remains a vital payment method for some. In 2020, the FCA found that 1.2 million adults in the UK were unbanked."

Well, we can't have that, can we?  How can we control these "unfortunates" who remain bankless?

Here's one additional commentary on central bank digital currencies for those of you who don't believe that they will be used for nefarious purposes from the brilliant mind of Agustin Carstens, the General Manager of the Bank for International Settlements (BIS), the central bank for central bankers:

Let's repeat the key sentences:

"…for the general use we intend to establish the equivalence with cash and there is a huge difference there.  For example, in cash, we don't know, for example, who is using a one hundred dollar bill today we don't know who is using a one thousand peso bill today.  A key difference in the CBDC is that central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability..."

Programmable money is the absolutely most frightening aspect of central bank digital currencies.  Not only will central banks and, by extension governments, be able to track your every expenditure, they will be able to control what you are allowed to spend it on just as parents control what their children spend their allowances on.  Let's look at some examples:

1.) given the fixation on battling global climate change, authorities could prevent you from purchasing more gasoline than your personal "ration" allows, prevent you from travelling on vacation and only allow you to pay for approved household heating products.

2.) purchasing of unhealthy foods, cigarettes, alcohol and other items that the powers that be have deemed unsuitable.

3.) as a means of economic stimulus during and economic downturn, the powers that be could devalue or even cancel an individual's holdings of CBDCs on a regular basis to force people to spend their "savings".

4.) if your behaviours are seen to contradict the government narrative, your CBDC "savings" could be frozen or deleted.  Think "antivaxxers" or those who complain about governments as two vulnerable groups.

5.) control of government social payments including Universal Basic Income schemes.

Let's close with this thought.  Given that the governments of the world's so-called advanced economies are all moving toward a digital identification system through the use of a vaccine passport and/or imbedded microchip (i.e. Sweden for one example), it will be a relatively simple move to add digital currencies and the accompanying programmable features to an individual's digital identification.

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