Public concern about CBDCs and surveillance is “misplaced” according to OMFIF

OMFIF, the Official Monetary and Financial Institutions Forum, recently published an article espousing the view that public concern regarding CBDCs (central bank digital currencies) being a threat to privacy is largely “misplaced”.

While many have expressed their concern that CBDCs indicate a decisive step towards an Orwellian future, the London-based think tank believes that the proposed framework for CBDCs is comparable to the current financial system, where it is theoretically possible for banks to monitor customer spending in real-time. OMFIF points out that there is a robust system of regulation that balances the right of personal privacy with “authorities’ legitimate needs for transparency“.

If we assume that a CBDC will be a digital representation of a fiat currency backed by a central bank, issued to citizens and small businesses via accounts held and managed by private sector institutions and limited in scale, we see something that closely resembles the existing management of private money current (checking) accounts operated by the banking system.

OMFIF, “How real is the CBDC threat to privacy?”

However, the OMFIF fails to mention one of the most defining features of a CBDC, which is the ability to “program” it on a monetary level. According to the US Federal Reserve programmable money is “a digital form of money and a mechanism for specifying the automated behavior of that money through a computer program“.

Essentially, this means that a government could theoretically program a CBDC so that a user would only be able to use it to pay for particular items, automatically deduct fines, or set an expiry date on the use of the CBDC.

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CBDCs appear to have become an inevitability, with over 80% of countries currently either researching or in the process of developing a CBDC.

OMFIF believes that unless people live in “countries with a more restrictive view of citizens’ rights to privacy” the advent of CBDCs should not be too much cause for worry. However, even ostensibly “free and democratic” states have recently seen government overreach using political punishment via the financial system. The question remains – what would this look like when CBDCs are widely implemented?