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?
Action Line: Keep some cash on hand.
Read more about CBDCs here:
- Do You Want “New Forms of Money?”
- French Banker Endorses New International CBDC System
- Is the Fed about to Launch a Financial “Death Star?”
- How Your Survival Guy Feels About Digital Dollars
- The Dangers of a Federal Reserve Digital Currency
E.J. Smith - Your Survival Guy
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