Digital Banking and the Dangers it Poses

By Bridie Mae Strowe ’24

Whether we like it or not, technology has etched its way into every aspect of our lives, and it’s become one of the most controversial topics in our world today. Technology gets people worked up, and it makes sense! Change is difficult to accept, especially when it threatens our daily routines, but over 100 governments have begun to accept the technology involving the one thing that gets people more angry than when other people gain their basic rights: money.

In the perfectly put words of Pink Floyd, “Money… It’s a crime.” There has been much discourse over whether CBDCs are a violation of citizens’ financial rights or not. But let’s put that aside for a moment, because you’re probably wondering, ‘What’s a CBDC?’ I’ll back up…

The acronym, CBDC, stands for ‘Central Bank Digital Currency,’ and it means pretty much what it sounds like! It’s a bank, run by a country’s government, that establishes a standardized digital currency.

The argument of governments and supporters of CBDCs is that the current banking system has become slow and outdated. The requirements to open a bank account leave many without one, particularly people without social security numbers or distinct proof of citizenship in their countries. Another issue is that even if someone does have a bank account, many banks have monthly fees that range from $4 to $25 (According to CNBC, 2021). While this doesn’t seem like much, these fees can add up quickly. For these reasons, CBDCs can be extremely beneficial for some people.

However, on the flip side, CBDCs put power over accounts directly into the hands of the federal government. I hope it’s needless to say this poses a major threat to democracy. This gives the government power to simply cut off your supply of funds if you do something they don’t like. CBDCs give the government power to do this in addition to tracking financial interactions (sales and purchases), and they even have the ability to create money and directly control the economy. While they may make a decision that is amazing for the economy, it could suck for the individual citizen; these are the dangers of CBDCs.

There are both wins and losses when dealing with a central digital (and federal) banking system, but many have already chosen to accept the pros with the cons. The US government is currently debating whether a CBDC is a good idea, but the Federal Reserve has already stated that if we do develop one, we’ll have it in tandem with our current financial system. This indicates that the Feds are seriously considering a US CBDC, whether this is good or bad is up to the people to decide. Currently, Jamaica is the most recent country to join this long list of CBDC converters, countries including the UAE, Ghana, South Africa, Malaysia, Singapore, Sweden, and Thailand. For governments, the CBDC trend is spreading faster than political movements and COVID combined!