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In recent years, we have witnessed a growing interest in the idea of a central bank digital currency. Similar to cash, central bank digital currency is a form of currency issued by the central bank.
In each country, the central bank manages the local currency and monetary policy to ensure financial stability. Unlike cash, central bank digital currencies are expected to update the nation’s financial infrastructure in response to the changing needs of the economy and technology.
Led by international financial institutions such as the Bank for International Settlements and the International Monetary Fund, central banks review technologies, conduct experiments and prepare national economic scenarios. However, central banks cannot – and should not – determine the social consequences of implementing this technology.
The transition to a national digital currency enables governments to automate transactions and create the conditions under which it can be used. This has crucial implications for democracy and must be identified and considered before central bank digital currencies become a reality.
Important issues to consider
Central bank digital currencies are expected to give authorities complete control over their citizens’ finances. The state will be able to restrict citizens from purchasing any services and goods, and the government will gain greater influence and control over people’s lives.
For example, society will be able to decide whether limiting the purchase of lottery tickets by people addicted to gambling is a positive feature of money. Likewise, they can decide whether welfare assistance can only be used for food, medicine and rent.
