CBDCs: the Good, the Bad & the Totalitarian with Nik Bhatia - WBD469

Location: Los Angeles
Date: Friday 4th February
Company: USC Marshall School of Business
Role: Author and Adjunct Professor of Finance


Bitcoin empowers individuals, the threat to the state is clear.
As the New German Chancellor Olaf Scholz asserted in December
2020: “We must do everything possible to make sure the currency
monopoly remains in the hands of states.” 


As a response to Bitcoin, the major world economies are pilot
testing CBDCs, and pressure is being applied to low and
middle-income countries. In October 2021 the IMF stated in its
Global Financial Stability Report that “Emerging markets faced
with cryptoization risks should strengthen macroeconomic policies
and consider the benefits of issuing central bank digital
currencies.” 


The privacy concerns emanating from CBDCs are being exacerbated
by the same organisations promoting them; in another IMF
statement in late 2020 they stated a person's online search and
purchase history is a suitable data source for undertaking a
credit assessment. In addition, the anonymity of cash is known to
be an issue for governments around the world. 


Whilst there are obvious benefits to enabling better payments
processes to citizens, CBDCs could also facilitate state controls
on how and when people spend money. The Bank of England is
considering using smart contracts within a CBDC; the FT raised
concerns about the potential for severe restrictions on personal
freedom mirroring China’s “social credit” system.


As we have seen, these fears are no longer being seen as
theoretical threats that don’t apply to those living in western
democracies. What is currently happening in Canada is giving even
the most centred observers pause for thought. Bitcoin is the only
obvious tool to provide freedom of currency denomination in a
secure, trustless way, outside of the purview of
Governments. 


In this interview, I talk to the Author and Professor of Finance
Nik Bhatia. We discuss the rationale for CBDCs and their
limitations, a new form of heavily surveilled ‘free’ banking,
Bitcoin as a discovery and a right, and how the Lightning Network
makes Bitcoin a currency.