The centralization, and digitalization, of national currencies would capture every single financial transaction on a centrally-kept blockchain.
Once widely adopted, this means no more “off-market” transactions, like paying for your plumber to work after hours.
To pay for a good or service, you won’t be able to use fiat currency any longer. You’ll be forced to use the new digital, national money.
Obviously, cash will be long gone by then. It’s already a strong trend, which the global pandemic has only accelerated over the past year or so. Contactless payment limits have been raised, and cash no longer accepted in places.
Once cash is no longer accepted throughout society, it becomes easier to enforce a form of money that is being tracked on a central ledger.
Think of it as an assembly line, with boxes on the conveyor belt. Each one of these boxes represents a single transaction, like the payment for your morning espresso.
The assembly line never stops, and it never ends. The boxes never fall off, as new ones come along.
This has many potential benefits for governments around the world.
To start with, this would facilitate fraud prevention and tracking. Central authorities could now monitor and control the flow of money.
Governments may want to introduce their own forms of central currency to benefit from both digital money whilst retaining control and regulatory oversight over them. Something they can’t do with other forms of crypto.
As Christine Lagarde, European Central Bank’s President, stated in a recent event:
“For those who had assumed that it might turn into a currency — terribly sorry, but this is an asset and it’s a highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money-laundering activity.”
This could lead to a new form of surveillance, something that has been at the front of the public mind, even before the start of the pandemic.
If every time you spend a penny on a good or service, whether online, in person or in-store, it gets recorded in an immutable ledger — you are also being tracked, in a sense.
You can’t erase or alter past transactions, since each has a unique “hash” or identifier and any tampering leaves marks. No more hiding.
This may be positive in terms of combatting fraud and criminal activity. The ultimate level of transparency would be enforced across society.
However, there’s a flip side to that: personal privacy. Though you, as an individual, may not be identified on a personal level, your transactions will be there — forever.
This may not be such a concern for honest citizens in “democratic” nations. However, in other places, this may curb personal liberties and freedom of thought even further.
In a country known for suppressing political dissidents like China, where a “Social Credit System” is already in place and a city with 2.6 million cameras has been built, consequences could be significant.