When I was a child I earned money for good behavior, and my mother dropped a coin into the piggy bank which she kept on the Fridge. I would be allowed to count my wealth as I pleased, but had to get parental approval for spending it. It was very easy to punish me by taking the money box away. Central bank digital money, CBDC, as engineered now around the world will make the government the custodian of our personal wallets, treating us as children. Imagine a world without physical cash, with no banknotes -- just digital tokens that claim value because the government is prepared to honor them to settle a debt. The moment the government posts that coin X is no longer honored -- that coin vanishes. And it does not help to hide coin X in the mattress or in an overseas account -- no one will accept X as payment.
What an ironic turn of events. Digital coins were invented under the banner of freedom and liberty, a challenge to excessive government control. But within a few years that very technology is used to give government a measure of control that far exceeds the chokehold of the worst despots in history. Once the government has custody of our wallet, it can lock it, and make it impossible for its registered owner to spend a dime. Suspects and criminals will be flashed out at once. No need to chase a bail jumper. You freeze his money, and he surfaces at once. Panacea!
But how long before the government will say to John Doe, you bought too much alcohol this month, no more money for booze. You drove too much and polluted the air so you cannot use your money on gas anymore. And what about political enemies? What good is the First Amendment right if you cannot buy a banner, or travel to a demonstration?
Digital money comes with a hefty package of advantages and unprecedented benefits. It is most alluring, and practically speaking, unstoppable. It shares with its predecessors the dilemma of trust. Bitcoin put its trust in the common faith of the community at large. Alas, we know that communities are subject to opinion-storms that can collapse the faith-dependent coin. CBDC, like legacy money, is backed by the power of government, which is invariably tempted to use its power to excess, convinced that they know best what is good for the people.
So where do we go from here?
Market based digital money.
CBDC, anyway you look at it, yields too much power to government. They will outmaneuver any regulatory guard rails put on it by Congress, tempted to abuse their power to honor or nullify any coin they issue, to bear their power, to keep the good order at the expense of freedom and at the price of privacy.
It is best then to shift the power to digitize money from the government to the private sector. There will be no e-Dollar, the old dollar will remain in force. Alas, any private enterprise commanding public trust will be free to mint digital money claim checks. Namely tokens bearing a nominal money value, which are purchased at par and redeemed at par value, (allowing for some service fee to be incorporated). To pay, say a $100 debt, a payer will pass to the payee a commercial token issued by a respected bank (or by any entity with public trust), denominated for $100. The payee will be able to instantly redeem the token with its issuer, or to hold this token for use as payment to a third party who also can redeem the money at will, or hold it as further payment.
According to this vision digital money claim checks will be issued by competing commercial entities. These digital coins will enjoy all the benefits associated with digital currency, but the government will stay out of it. Issuers, mints, will have to comply with government regulatory control, but these mints will have the courts as protection against government heavy hand.
Commercial mints will gain popularity on account of standing up to government overbearance. Thereby they will serve as a shield between the unprotected citizen and the government that wishes to guide him for what it thinks is best.
One will envision dozens of mints allowing for any citizen to spread his money among them, so unlike with CBDC there is no central authority that holds all our money in one wallet which they decide when and how to use.
But that is not good enough.
Even when spread among several mints, having all our money listed by mints that are subject to court ordered divulgence means that the government can attain perfect visibility on assets, payments, and financial behavior. Thereby the government can financially choke every citizen. Unable to make payments large or small, a marked citizen will be forced to surrender. Now that is a wonderful vision, to think of fugitive criminals crawling from their hiding places into the open simply because all their money was nullified. But what about non-criminals which will be categorized as inconvenient to the state? What about the universal sense of privacy and freedom?
It is not a superficial whim. Freedom from being observed, unmonitored life, is essential for well being. And the wellbeing of the population at large is the most precious social asset. Happy, forward looking, free people are creative people, entrepreneurs. It's American freedom that is behind the booming American economy: The freedom to try, to test, to explore, the freedom to go against common wisdom -- in private, unmonitored. It is therefore that the commercial digital money claim checks issued by private entities will better be using any of the technologies that offer solid cryptographic privacy, withstanding quantum computers and other government power tools.
BitMint*LeVeL is one of them. It allows cash-like privacy. Cash can be paid from payor to payee, which are strangers to each other, with no third party monitoring. That is the capability offered by BitMint*LeVeL. In fact, the connection between a digital coin and its human owner is so cryptographically sophisticated that even in theory it cannot be breached. The LeVeL mutates and evolves to stay one step ahead of any cryptanalytic predator. (Much as Covid outmaneuvers Pfizer). The mint, or the government with a court order will always have the power to suspend trade with a suspect digital coin, but it will not have the power to flash out the owner of that coin. If the coin owner has nothing to hide, they will step up, and demand to restore trade with the suspended coin. . If the money was transferred as part of an illegal scheme, then its owner will stay in the dark but lose his ill-gotten money.
There are other cryptographic ways to ensure the secrecy of the owner of a listed coin. These are the technologies that would allow us to benefit from digital money while safeguarding our sense of financial freedom, the pre-requisite for creativity, innovation, and economic growth.
As of now this writing is just another blog, hollering in the desert, while governments around the world turn around the bitcoin-freedom idea and recast it as CBDC-freedom-no-more reality.
The fight for freedom has different looks at different times. In our time freedom is hinged on how we steer ahead the new technology of money.