It looks like governments are seriously preparing to launch digital versions of their money or so-called Central Bank Digital Currencies (CBDC). For example, The White House released recently an executive order covering digital assets.
A positive step towards the wider adoption
I believe this can be seen as a positive step towards the wider adoption of cryptocurrencies in general because government-backed cryptocurrency is most likely going to be the one that “mainstream users” will use, simply because of is “trusted” and “backed by the central bank”.
Furthermore, it’s quite sure CBDCs will be easier to use than for example Bitcoin or altcoins, or so-called tokens.
Mainstream abandons traditional cryptos
This may mean that Bitcoin and altcoins market share declines instead of gaining more users. “Traditional” cryptocurrencies may stay in the interest of “crypto circles” as well as some investors, but “mainstream” users turn their backs on them as there’s an easier and “more secure” alternative to use.
A huge leap toward a dystopian society
I believe this is ultimately a huge leap towards a dystopian society, actually a dystopian world. The executive order directs: “agencies to work with our allies and partners to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks.” and “mitigate economy-wide (i.e., systemic) financial risks posed by digital assets and to develop appropriate policy recommendations to address any regulatory gaps.”
Which is my view says directly that the US is going to lead international efforts to regulate cryptocurrencies at a detailed level, meaning ultimately they will be regulated almost in every country as tightly for example banks. This kills innovation and decentralization not to mention privacy.
As an increasing number of governments are preparing CBDCs, this raises serious questions about privacy and control, especially as these CBDCs may be able to gain remarkable market shares quickly.
The most-held cryptocurrency in the country
Almost any government can make its CBDC the most-held cryptocurrency in the country with a push of a button. They need only create “wallets” for everyone based on for example social security numbers, etc., and airdrop a few CBDCs to every citizen. In a such scenario, what are the ways for Bitcoin and altcoins to compete?
The government-backed digital currency is most likely programmable
The government-backed digital currency is most likely programmable, meaning it can be altered when the government decides.
It will be most likely easy to track, not only transactions but also people using it, and for what they use it. It may become easily politicized, but even more, as it can be easily given, restricted, and taken.
In plain words, Central Bank Digital Currency puts enormous power in the hands of bureaucrats.
They will not allow in the long run competing decentralized currencies
It can be argued that for example, the crypto dollar backed by the federal reserve doesn’t have anything in common with cryptocurrencies such as Bitcoin.
However, as governments around the world launch their state-backed digital currencies, it’s clear that cryptocurrencies in general face tightening regulation as states want to take control back.
Most likely they will not allow in the long run competing decentralized currencies at all because those may undermine official digital currencies.
Of course in most countries traditional cryptocurrencies will not be entirely banned, but the same will be achieved through regulation.
That may lead in some countries even to the situation in which “traditional” cryptocurrencies such as Bitcoin and altcoins such as Ethereum will even be compared to fake money, and creating & using them will be punished heavily.
Orwellian nightmare
It seems some of the crypto community’s shared dreams from the beginning started to materialize in the form of wide adoption.
However, it seems that the dream may turn into an Orwellian nightmare – which is a reality to some extent for example in certain countries.
Add gov controlled digital currency to the surveillance machine, and that’s it!
Technology is out there, cameras have been installed, policing budgets get boosted, AI is more and more utilized, facial recognition technology works almost perfectly, in some countries “social credits” are used, and data is collected – if not publicly, in secrecy, and so on.
The only missing piece is a 100% trackable payment vehicle – which government-issued digital currencies make most likely a reality. It’s the final step in the dystopian society.