The CBDC is a digital version of the national currency - for example, the dollar or the euro - backed directly by the central bank. This means that such projects are fully centralised and controlled by the state, which makes them radically different from cryptocurrencies like Bitcoin.

Consequently, banks and governments have complete control over the networks of such currencies, in addition to being able to see every transaction. At the same time, Bitcoin, Etherium and other full-fledged coins are not regulated in any way, and it is simply impossible to prohibit a certain transaction from a wallet outside of an exchange.

In any case, the concept of digital national currencies is gaining momentum. In China, for example, this payment instrument has undergone more than one round of testing.

What’s wrong with CBDC?

In an interview with Filecoin Foundation president and Protocol Labs general counsel Martha Belcher, Snowden compared central bank digital currencies to the Scrooge McDuck character from the famous “Duck Stories” cartoon in the late 1980s. Here’s his line.

Scrooge had a huge vault full of coins, dollar notes and the like. However, if he needed money, a huge magnet would slide out of the top of the vault and simply pull dollars out of the pockets of everyone in town. That’s what CBDC is all about.

Edward Snowden

In other words, CBDCs could serve as a means of additional control over the financial flows of the citizens of an entire country. At the same time, they themselves would be effectively deprived of any influential tools to manage their own finances. Note that the massive adoption of CBDC implies a gradual rejection of cash banknotes, which are now the main traditional form of money, still inaccessible to the full control of central banks.

Governments around the world are at various stages of exploring or introducing digital currencies. The Bahamas, for example, released a digital version of its national currency for testing back in 2020, but the palm is still held by China, whose government was one of the first in the world to create its own CBDC.

The Central Bank has also repeatedly made proposals to create a “digital ruble”

According to Decrypt’s sources, Snowden has previously criticised CBDCs, calling them “crypto-fascist currencies” that could “accidentally destroy every wage earner’s savings”. During Camp Ethereal 2022, he continued this thought with the following quote

We do not realise that we have been immediately subjected and collectivised to a central authority in the economy. The dollar is one today in its electronic form. But cash is a kind of physical inherited form of currency. As we move towards the proliferation of electronic versions of cash, our freedom is becoming more and more restricted. And increasingly we are being asked to cross that line, which is a huge concern.

Towards the end of his report, Snowden revisited the Scrooge McDuck analogy as he discussed the Canadian government’s crackdown on a local trucker protest. Recall that in February, a Canadian Supreme Court judge froze millions of dollars in funds in an attempt to limit funding for a convoy of protesters.

The thought of Canada doing this – and I think most people consider Canada to be a pretty enlightened state – is actually a stark illustration of concern. Whether you are for or against this particular protest is irrelevant. The main problem is that at the snap of our fingers we become vulnerable and can’t even use our money. It’s the same giant magnet that pulls money out of your pockets.

The digital vault of the modern day Scrooge McDuck

The upshot is that the adoption of CBDC is primarily in the interests of centralised public bodies. It is difficult to speculate exactly what the long-term effects on the economy from this process will be, but it is clear for certain that there will clearly be restrictions on ordinary citizens involved. This is why Bitcoin, along with other popular coins, remain a major alternative financial system that is clearly worth getting involved with.

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