Central bank digital currencies (CBDC) are the shiny new play thing for governments around the world. From the moment the concept began to gain popularity amongst policymakers in the mid-2010s the starting gun was fired.
Now the mad dash to create a digital Rupee, Peso and even Pound, is fully under way. Unlike conventional currency which can be withdrawn as physical notes and coins, a British CBDC would only be displayed and accessed digitally.
It is not abundantly clear what the purpose of a digital pound would be. As technology has developed, our financial system has inevitably become more digitalised. At a time when there are a growing range of places for consumers to put their money, there is little public clamour for the specific creation of a digital pound and little clarity on where it would fit in our financial ecosystem.
The Treasury and the Bank of England have insisted that a “Britcoin” would not be intended to replace cash, although its creation would give state-backing to its already steady decline.
While its necessity has not been demonstrated, the societal risks presented by the prospective creation of a CBDC are numerous. In a worst case scenario, centralised digital currencies open the door to new kinds of authoritarianism never seen before in the UK.
A centralised digital pound would place the state at the heart of all financial transactions as an all seeing eye. Every piece of spending would be recordable and anyone with access to the core “ledger” could see these transactions. Meanwhile, if Britcoin kills cash, it kills the most privacy-preserving form of currency available. In an age where privacy is routinely sacrificed on the altar of “safety” and “security”, the risk is that a CBDC becomes another tool in an ever more encroaching surveillance state.
Short of monitoring a person’s physical whereabouts, there could be no better way to follow their day-to-day activities than how they spend their money. Indeed the Treasury have made the surveillance benefits of a CBDC explicit in their policy document, setting out that “competent authorities” may need access to digital pound transactions to gather intelligence.
You could be forgiven for thinking that this threat sounds far-fetched. The benefit of living in a liberal democracy is that we can trust our government to act in our interests, not in their own interests at our expense. But in recent years governments and corporations have increasingly come alive to the possibility that finances can be a legitimate target for surveillance, control and even censorship.
In Canada, this recently manifested in the form of government decrees demanding that groups of truckers protesting vaccine mandates have their assets frozen. Look back across the past 15 years and you can find numerous examples of unpopular or controversial individuals and groups having their bank accounts forcibly closed due to concerted political hostility towards them.
The Treasury have insisted that a Britcoin would not be “programmable” and therefore controllable but these promises are nothing more than words and at points in their policy document, they actively contradict this guarantee by lauding the prospect.
This kind of state control over our finances could lead to the imposition of expiry dates on the public’s private funds. Limits could be placed on how much CBDC a person can hold at one time. Interest rates and prices could be varied depending on someone’s identity. Purchases could be prevented and taxes and fines automatically deducted. Funds could be frozen if a citizen acts in a way the government or third party provider disapprove of.
In the absence of clear technical and legal guarantees preventing this kind of programmability, the creation of a CBDC would be nothing short of a gift to a nefarious future government, creating a web of financial surveillance and control to be manipulated.
A Britcoin could be created and the Orwellian threat of state-led financial censorship may never come to fruition in the UK. But in the absence of a clear necessity and with the spectre of greater state surveillance, exclusion and control looming in the background, we urgently need to consider whether this is a path we want or indeed need to go down.
Mark Johnson is advocacy manager at Big Brother Watch
