DIGITAL STATE CURRENCY – THE DISCREET CHARM OF CENTRAL PLANNING?

Abstract

Over the last few years, there has been extensive discussion over proposals to introduce Central Bank Digital Currency. Among the principal benefits claimed for abolishing cash was that the new digital system would be almost cost-free, help combat crime, and give central banks room for more stimulative policy by pushing interest rates into negative territory. But what exactly is CBDC? While the terminology and some technology behind the proposed system may be borrowed from private cryptocurrencies, CBDC is something fundamentally different – it is a currency entirely under the control of the issuing government body. But a simple historical, logical or praxeological analysis shows that setting a macro-managerial system in money creation will destabilize the sound fundamentals of economic circulation. The CBDC system will undermine our privacy, expropriate wealth by negative interest rate policies, expose us to the risks of fallible digital systems. Whatever any potential merits of digital currency, the proposed CBDC system as a whole is a dystopian, counter-productive fantasy and should be treated as such.