Thursday, May 6, 2021

WARNING: Central Bank Digital Currency Will Be 100% Trackable Currency

The Financial Times reports:

What CBDC [Central Bank Digital Currency] research and experimentation appears to be showing is that it will be nigh on impossible to issue such currencies outside of a comprehensive national digital ID management system. Meaning: CBDCs will likely be tied to personal accounts that include personal data, credit history and other forms of relevant information.

There are two very important implications here:

1. Central banks will have to kill off private sector cryptocurrencies.

There is just no way that CBs are going to allow private crypto that can provide an end-run around CBDC.

2. And this is not fully appreciated at all. Once a CBDC is established and becomes the method of general exchange, it will be very easy for governments to block any kinds of exchanges it desires to block. In other words, it provides the opportunity for cancel culture and authoritarianism at an entirely new level.

Bottom line: It is not clear why bitcoin was originally created or by whom but may lead to being one of the worst inventions ever created by man.



  1. Well, the state enforces its rules through the use of guns, but I wouldn't conclude therefore that guns are a terrible invention. I would say that the state is the worst invention ever created by man, not any dual use objects that it chooses to use.

    Bitcoin could still be a boon for "black markets."

    1. It seems to me that a necessary quality of black markets is anonymity. How do you get that with Bitcoin?

    2. Good point.

      What needs to be considered is that cryptos evolve and privacy cryptocurrencies are a real thing that are changing the game.

      This point is not being addressed here at EPJ. The cryptocurrency discussion seems to remain superficial, and that isn't serving anyone.

      (Yes, leviathan can ban crypto, but it can also ban, and has banned, gold.)


    3. But when gold is banned, it can still be used in transactions secretively, on the sly. Can that be said of Bitcoin when it is banned? Seems like it would be tracked, and therefore there wouldn't be a black market in Bitcoin.
      I haven't read a lot about Bitcoin though, so maybe I'm wrong.

    4. Mark A, I guess I was crudely using "Bitcoin" to mean any crypto, since if the government really got aggressive on a specific coin, then I'd expect users to migrate to others, including those with anonymity that is harder to crack (e.g., Monero and Dash).

      But, even just with Bitcoin itself, it takes significant effort and resources to track down users and prohibit trades; even the state has to wrestle with the limitation of scarce enforcement resources. "Black markets" don't necessarily require anonymity, just trades that occur through unconventional channels or that are more difficult for the state to prohibit. Agorists trading on Tor might ultimately be trackable if they use Bitcoin, but is the state going to devote tons of effort to this? And "black markets" are very adept at innovating to stay ahead of enforcement.

  2. How long before bitcoin is banned?

  3. I disagree with RW at my own peril. Wenzel was one of the first to correctly note that AOC would be big trouble. Wenzel was one of the first to correctly note that Donald Trump would be horrible for liberty and that Trump’s 2016 election would lead to a ground-swell of Socialism. His opinion regarding Covid-19 has been consistent — and consistently correct — from day one. His calls on inflation have also been correct. Inflation, however, is very tricky because the ingenuity of the free market can ease the pain of an increase in the money supply, so much so that one may think that there has not been inflation. The pain of the truth of that prediction, however, is slowly starting to creep over the nation.

    In the present case, however, I disagree with RW. It's not because I am a Bitcoin fanboy. I own Bitcoin, but I’m not a fanboy. In fact, I have a softer place in my heart for altcoins -- what some call sh*tcoins -- than I do Bitcoin.

    I also agree that the government will try and get into the crypto business.

    Here is my thinking: We have heard the saying, "Never in writing, always in cash."

    Writing leaves a trail; cash does not. "Gold has no smell." The same principle is true of cash.

    Would the State rather track a cash-dealing drug dealer or a Bitcoin-dealing drug dealer? According to the wisdom of “never in writing; always in cash,” the State would rather have the drug deal done in Bitcoin.

    The government will not outlaw Bitcoin because Bitcoin is a useful tool of the government. Sure, Bitcoin or other altcoins will hurt Gov Coin, but if Bitcoin is outlawed, then those people who wanted to use Bitcoin to try and get around the system -- whether to trade in drugs or to get wealthy or to simply act and do business with greater speed than the current regulatory system allows -- will not grudgingly turn to Gov Coin. Why would they? Gov Coin would have many of the things that crypto users now hate.

    Would a drug dealer, currently using Bitcoin or an altcoin, use Gov Coin if the State bans Bitcoin? Will Libertarians who love Bitcoin begin using Gov Coin if the State bans Bitcoin? Will those who believe in holding onto Bitcoin flock to Gov Coin once the State bans Bitcoin?

    No, no, and no.

    Of course, there are some who will love Gov Coin. People like Kamala Harris, who wears a mask and kisses her husband while he is wearing a mask, although they have both been vaccinated, will love Gov Coin.

    Every evil under the sun that the State now does with fiat currency will be multiplied by 100 if there is a Gov Coin. Why would anyone turn to it? They wouldn’t, at least they wouldn’t just because the State takes away a person's preferred cryptocurrency.

    If Bitcoin and altcoins are outlawed, crypto users will shuffle their way back to cash -- partly as a sign of defeat; partly as a way to frustrate Gov Coin proponents.

    Now, if the State outlaws Bitcoin AND cash -- fiat currency -- and replaces fiat currency with Gov Coin, that will be a significant problem. Granted, RW mentioned that Gov Coin would need to become the general and preferred method of exchange. I don’t know if Gov Coin will reach that status unless and until cash is banned.

    1. "I don’t know if Gov Coin will reach that status unless and until cash is banned."

      This is just one more area where importing the unwashed masses of the third world backfires. Many of these people (and I use that term loosely) don't have basic bank accounts and lack the ability and intelligence to use cryptocurrencies. Couple this with the government's inability to keep power grids functioning in places like Texas and California (it turns out you have to have electricity for digital currencies to work, who knew?) and you have massive holes in the plan.

      What happens when massive inflation wipes out the purchasing power of the money? Are people going to prioritize keeping their smartphones on vs feeding their kids?

  4. The solution from a libertarian perspective is obvious. The US government can simply decree that Bitcoin will be the currency. This way we no longer have to worry about "cancel culture and authoritarianism at an entirely new level", because it will be a private sector entity doing it and therefore completely okay, just like being silenced by Twitter, Facebook, etc. is cool.