The advent of private cryptocurrencies was a triumph of decentralization, with the blockchain acting as a public ledger that was permanent and verifiable, eliminating the need for a middleman. But now comes the public doppelganger: central bank digital currencies (CBDCs), which are currently being either researched or trialed by a whopping 80% of monetary authorities around the world. Will CBDCs be the triumph of centralization – a reassertion of government power over money in the digital era?



A central bank digital currency is precisely what it sounds like: central banks getting into the digital currency space. Technically speaking, it is “a digital form of central bank money that is different from balances in traditional reserve or settlement accounts.” But to put it in simpler terms, a CBDC is a digital representation of fiat currency, which is issued, backed, and monitored by a central bank.

The abovementioned role affords a degree of centralized control that has hitherto not been possible. As overseer of digital money flows, central banks will become privy to all individual transactions made with CBDCs, and associated privacy concerns – and the resulting regulatory framework – will vary by national context. To this end, the central banks of seven democratic countries recently joined with the Bank of International Settlements (BIS) to declare a set of common principles for the development of CBDCs, one of which is that the new monetary instrument should be “underpinned by appropriate standards and a clear legal framework.” The kinds of monitoring and data-collection that could be dubbed “appropriate” remains to be seen. However, a Bank of Canada policy document notes that it would be striving for “a great deal of privacy” in its CBDC rollout, but would stop short of full anonymity so as to allow the detection of illicit activities such as money-laundering. It’s safe to assume that even the most libertarian-minded rollouts of CBDCs will fall short of the pure anonymity of cash.