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The Subtle Push to Control Your Money

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By Naiyana Somchitkaeo @ Shutterstock.com

The IMF has released a new how-to guide to governments on implementing central bank digital currencies (CBDCs). Part of the release was a chapter titled “Capital Flow Management Measures in the Digital Age (2): Design Choices for Central Bank Digital Currency.” In it, the IMF researchers spent time introducing ways to use CBDCs to control how people use their money. Here are a couple of pertinent paragraphs about the programmability of your future money:

Central banks are already using programmability to control domestic flows of CBDC. Several central banks have either launched or piloted CBDCs that have digital wallets with different caps on how much CBDC can be stored in them and how many transactions can be made within a specific period. The purpose is to ensure that use of the CBDC does not reach a level that could disintermediate banks or lead to unmanageable outflow of bank deposits. Such programmability at the interface level, in this case the digital wallet, can also be applied to cross-border transactions, which would essentially be a form of smart CFM. For instance, if a central bank intends to limit access to its CBDC in specific countries, restrictions on the location where the CBDC is used can be implemented by coding geofencing into the user interface (Box 1).12 Since geofencing would be applied only to nonresidents, the CBDC could still be used for transactions in the home country, even when its residents are travelling abroad.

Geofencing? Aren’t fences used to control livestock?

One important distinction is between programmable payments and programmable money. While the former involves setting conditionalities on payments, the latter implies setting conditionalities on the money itself. This could be the case if a specific digital token is “earmarked” to be used in one or more predetermined ways. Programmable money could create limits in the fungibility property of money, that is, that all money can be equally used for all purchases. The application of smart CFMs requires programmability on payments, not on money.

Earmarking money for specific purposes? Limiting money’s fungibility? The rough translations of these terms are rationing and prohibition. Central bankers working for the governments of countries will be empowered to set limits on what you can or can’t buy. Does that sound like an improvement in the monetary system to you?

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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