In the 21st century privacy is the primary concern. Governments and tech giants are trying hard to catch up with as much data (private data) about any individual as they can.

Adding to this governments come up with CBDCs. Which is a great threat to financial privacy.

In this article, We are going to focus on some of the serious issues to individual privacy. Many countries nowadays planning to launch CBDCS. (central bank digital currency)

Some are doing planning and some are already running pilot projects. But you are shocked to know that CBDCs are the greatest threat to privacy.

imf -on-cbdc
https://twitter.com/IMFNews/status/1491768795316121607

What is CBDC?

Central bank digital currency (CBDC) is programmable virtual money that is backed and issued by the country's central bank.

CBDC is pegged by the country's fiat currency. This CBDC currency is nothing but 1:1 to fiat currency.

CBDC is based on a technology called blockchain which was formed (firstly used by) Satoshi Nakamoto in bitcoin.

Where decentralized blockchain nodes are decentralized and no one control's it. On the other hand nodes and issuance of currency are only controlled by government entities. Which validates and verifies transactions. It's a private and permissioned ledger.

Surveillance Foreground before CBDC


Social Credit System:

Here we are looking into china's example. China had a system called social credit since 2014. They actually rank their citizens based on social credit.

In other words, It's a game of life. Where each citizen is assigned 1000 social points and they can gain or lose points based on their behaviors.

Good behavior is like praising the government on social media. If you criticize them online it will be led to a drop in your social credit score.

For eg, a good score of 1000+ gives you benefits in Chinese society.

> Employment

> Easier access to credit

> Cheaper public transport

> Tax benefits

Bad score -1000

> Denied access to social services

> Exclusion from public transport

> Denial lines of credit

> Denied licenses and permits

With the social credit system, governments can easily rectify who will beneficiaries or who will punish hard.



Risks associated with CBDC:

Greater Financial Surveillance:

It is very much easy and possible to keep track of any individual or any other entity with programmable CBDC through blockchain. CBDC itself runs on a government-backed private blockchain.

It is so easy for them to track, and verify any activity on the blockchain. They have more power like incentivizing or invoking financial rights. CBDC is a great tool for surveillance.

We go through them some of them below.

Spending pattern:- Combination of digital identity and CBDC is a big risk to any individual. How does he behave financially? Where does he spend his money? How does he spend his money? Which subscriptions does he opt for? like porn subscriptions.

CBDC makes it much easier for governments to track anyone personally like never before.

Invoking spending rights:- CBDC is a programmable smart contract deployed on it. If the smart contract has an expiry date or has specific predefined rules mentioned in it.

That means currency becomes useless if not used within that time frame or It will be worthless if you try to spend it for an unspecified reason. It also limits how much money you can hold.

eg. If you are restricted to travel anywhere then you will not be allowed to book a flight ticket with that money.

Personalized Inflation:- Government can program CBDC in such a way that smart contracts enforce various rules like varying interest rates and tax rates, goods prices, preventing purchases, or automatically deducting fines.

Based on who they are, Religion, Gender, Age, Special group of people, or Social activist who raise their voice against the ruling leader.

Social Censorship:

Digital identity attaches to CBDC government easily modify your habits, behavior, social presence for better understanding we go through the below example.

By the CBDC if the government implements a rule which only allows citizens a certain allowance of junk food per month. If the citizen goes over the CBDC allowance for junk food, they would force to buy healthy meals allowed by the smart contract.

Card or the application wouldn't work. The government could control citizens even down to what they eat.

The government can decide how money is to be spent by their citizens, the clothes they wear, and the places they go. People you transact with or even down people you spend money with.

If one of your friends is on the social bad end of things and you were on the good. It is possible for the government to stop you from enjoying a meal together, going to see a movie together, or shopping at the mall together.


CBDC is a thin line between Democracy and Anarchy.