CBDCs Will Lead to Increased Bitcoin Adoption – Bitcoin Magazine
This is an opinion editorial by Pierre Gildenhuysco-founder of a Hong Kong-based social environment tech startup.
Central Bank Digital Currencies (CBDCs) are being actively developed and discussed in many major nations of the world, including 19 of the G20 countries, and around 105 others worldwide, as shown by the Atlantic Council statistics in 2022. They are developing rapidly and it is expected that some nations such as Australia, South Korea, and the United States will begin implementing CBDCs in the near future, following the lead of China, which recently began rolling out theirs in early 2022.
This is not recent news, but it is something that should be mentioned on a regular basis as it should scare us all or at least be of concern to anyone who uses any form of money in their daily lives. There is only one potential benefit to CBDCs: Essentially, governments cause the collapse of their own currencies by removing as much property of money as they can before people realize that it is no longer tradable to anyone else in their country or around the world.
CBDCs are said to be inspired by bitcoin – of course, these countries rolling these out are probably building them to be the perfect antithesis of the beautifully built bitcoin – with the only potential similarity being a distributed public ledger. However, I postulate that in the eyes of many governments “a public ledger” means being owned, and therefore only accessible by the state because they are the voice of the people (in theory).
The expected horrors of CBDCs are discussed at length by many Bitcoiners on Twitter and elsewhere, but very few I have found have had anything good to say, which I would like to change.
CBDCs will most likely implement primarily Keynesian principles, as that appears to be the prevailing school of economics in most of the Western world. Whatever principles one US CBDC adopts will likely serve as a blueprint for all others. Some of these principles could be money expiring, being automatically taxed, only being used in certain sectors, and being a completely permission-based form of transaction, meaning that people would be forced to make specific transactions that they might not want, forcing an increased time preference or being forced to forego investments in sectors of their own choosing. Buying bitcoin using CBDCs will very likely become impossible or at least increasingly difficult, as no government wants money that competes with the one they control.
This is a frightening prospect. How will bitcoiners and new users acquire more bitcoin before the fiat system inflates to collapse? Well, this will possibly create a more circular economy, as fewer will want to retain their transactional power in the form of a fully centralized and monitored system. They will likely make the decision to start paying and accepting bitcoin for every transaction. This way, they are not forced to use their money to try to “stimulate economic growth” by using their expiring CBDCs that they would otherwise have saved for a rainy day, or to avoid further unfair taxes. This is very similar to the very common practice of many businesses around the world who offer their services at a discount for cash payments to avoid paying taxes on these services.
This was especially prevalent in places like Greece, where the practice allegedly started because Greeks did not want to pay taxes to the “foreign” Ottomans who controlled the region at the time. The practice has apparently continued because people feel that an additional taxation on daily transactions by any power, whether local or foreign, is unfair and excessive. In the eyes of some, this is a form of corruption; however, it should not be labeled as such because corruption implies that the people hiding these transactions are in positions of power that they are exploiting, as opposed to being the ones being exploited by unnecessary taxation by their governments.
It is likely that the CBDC will phase out the small amount of paper currency that still forms part of world economies today. This means that these countries will rely on technological education and oral explanations of how it works. This will lead to an increase in technological knowledge in these nations, which means that it should become increasingly easier to bring otherwise reluctant members of society to bitcoin once they realize the false value it holds instead of hard money.
In other words, CBDCs would possibly be the perfect trigger to cause mass adoption and trigger a circular bitcoin economy. In the end, it doesn’t matter how much one loves their government or opposes its very existence, the sheer inconvenience of having everyone’s transactions moderated and restricted based on arbitrary metrics like carbon emissions scores or nutritional value scores is enough to turn anyone away from it monetary medium.
With people’s savings potentially being eaten away to promote faster and more spending overall – as has been done with inflationary practices for the past few decades – people will realize how bad specific Keynesian principles are. These principles are promoted and considered true by many modern economists today. Average people in the modern world apply these principles practically have to invest all their wealth to ensure they are not bankrupted by inflation, while risking potential misinvestments. Many people would be significantly more productive to society by developing their own businesses and would also be happier in general if they could just store their wealth in hard money that consistently increases in value with economic growth, instead of being forced to create meme – the economy that we have experienced in recent years. This is likely to worsen with the implementation of CBDCs.
CBDC implementation and adoption is unlikely to be an overnight change. The time it is likely to take for bitcoin adoption to happen will be highly dependent on what scare features the specific CBDCs implement. These CBDCs will cause a lot of pain and suffering over the time they are actively used. The pain they will bring and the practices they will implement are nothing new, but are merely a continuation of the practices used today. This will continue until people start interacting pseudonymously using bitcoin for their store of wealth and move completely away from any form of fiat currencies.
Creating a vibrant, successful circular economy will accelerate the adoption and incentive to use bitcoin. Harder money with higher marketability need offer no better incentive for adoption than a rapidly depreciating currency due to a decline in marketability and an increase in inflation. If nobody wants your money, why are you keeping it? Today, Zimbabwe dollars have value only as collectibles, but have no use for goods and services. In turn, this allowed several competing currencies to take its place (primarily the South African rand and the US dollar) until the dollar inevitably won out and all of Zimbabwe was dollarized. The same will likely happen to the dollar and bitcoin will take its place due to inflation and a likely CBDC that will detract from all that is good from the dollar.
There are many other steps that Bitcoin needs to take to allow for easier adoption for the larger world population. More platforms and wallets need to start offering Lightning payments and the use of SMS (text messaging) transactions, such as the recent development in South Africa. The outlook is somewhat hopeful on the front of CBDCs and their ability to push more people out of fiat and into the Bitcoin world.
This is a guest post by Pierre Gildenhuys. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
