In this criticism it is argued that CBDCs are similar to bitcoin but better, since they have the backing of the State, which is what provides the trust. So once we have CBDCs, bitcoin will no longer be necessary and will disappear.
This is one of the easiest FUD arguments to refute, since its starting premise is false. The straw man fallacy is a type of argument in which a person distorts or oversimplifies their opponent’s position or argument to make it easier to attack or refute. Rather than engaging with the real argument, a weaker or exaggerated version of it is constructed (the straw man) and that false version is then refuted. This criticism uses the straw man fallacy in its reasoning.
CBDCs, or Central Bank Digital Currencies, are not “like bitcoin”. Bitcoin is exactly the opposite of CBDCs. If CBDCs are ever implemented, bitcoin will be even more necessary than it is today. Bitcoin is not a technologically interesting novelty that has become fashionable. Bitcoin’s value proposition does not lie in its use of cryptography or a blockchain. These are some of the tools Satoshi used to achieve his goal: creating digital money that functions like cash --- that is, money that can be transferred from person to person without the need for a trusted third party.
Imagine we go back to an era when flying was impossible, there were no airplanes, and then the first one is invented. The States, which control the railways, say: “let’s build railways with wings”. To fly? No, they won’t fly --- but they have wings just like the airplane. They are like airplane wings, but with State backing. Quite absurd, right? Well, the analogy fits rather well. Using a blockchain and all the cryptography is the equivalent of the wings, and it only makes sense for achieving decentralization (flying). If it’s not meant to fly, the wings are just extra weight and volume that create a lot of inefficiency.
As we have seen in previous chapters, in bitcoin decentralization is the key --- it is the intended goal and the essence of Satoshi’s invention. Decentralization is the property from which all others flow, including resistance to censorship, resistance to confiscation, and resistance to devaluation. If it were centralized, it would have none of the properties we value. How could there be resistance to censorship if a central entity controlled it? The C in CBDC stands for central. In other words, no CBDC will ever have the properties that bitcoin has, no matter how much cryptography and blockchain it uses. And it does not depend on whether new algorithms are invented --- it depends on the letter C: centralized.
CBDCs are in fact even worse than the current fiat system. In the fiat system, though based on fraud and theft, there is still a thin thread of freedom, since commercial banks exist --- they serve the population, hold their customers’ deposits, and carry out economic transactions. And although the State can order them to freeze the accounts of those it deems necessary, it is not directly the State that has this power; there remains a thread of independence and freedom. With CBDCs, commercial banks would lose the main functions they perform today. It is hard to conceive of something worse as money than fiat money, but some States seem intent on achieving it. They have devised a system combining the worst of bitcoin (the inefficiencies of the blockchain and the traceability of transactions) with the worst of the fiat world (centralization and control), and taken it one step further. CBDCs would grant even more power to the State, combining a social control system similar to the one that exists in China with the current fiat system --- all in one.
In the first chapter we saw that one of the desirable properties of good money is resistance to censorship and confiscation. CBDC-based money would score an absolute zero on this property, since it implements precisely the mechanisms by which censorship and confiscation are decided by the central authority. To the three basic functions of money — medium of exchange, store of value, and unit of account --- they intend to add a fourth: instrument of control. Money through which they could implement whatever policies they wished --- for example, automatically deducting a percentage of your savings at the end of the month in case of a State emergency, with whatever excuse they dream up. A world where you do not own your money, because to buy anything you need not only the money itself but also State authorization to approve the transaction you wish to make. Perhaps the day will come when there are quotas on how much meat you can buy each month, or perhaps you will not be able to take a flight because you have exceeded your CO2 footprint. Do not assume that crime will disappear under total control. Nor assume that only what you believe should be prohibited will be prohibited. What will disappear under absolute control is freedom.
If implemented, CBDCs would grant even more power to the State and lead toward the absolute subjugation of the individual to the State. If the goal is to create a society of slaves, a planet-prison --- the world described by Orwell in his famous novel 1984↗ --- CBDCs are the perfect tool. A tool dreamed of by any totalitarian dictator who seeks to impose their ideas and rules on the entire population.
Bitcoin is exactly the opposite --- it empowers the individual and places a certain limit on the concentration of power through the separation of money and the State. CBDCs are to slavery what bitcoin is to freedom. So if States force us to use CBDCs, bitcoin, far from becoming obsolete, will be more necessary than ever.