At the beginning of the year, Techspace Africa reported that Kenya was been toying with the idea of adopting digital currency, stating that the Central Bank of Kenya (CBK) revealed it had been involved in discussions with other central banks to introduce a central bank digital currency (CBDC) and digital currency regulations. After months of research and a little bit of know-how, I don’t think this is a good thing per se for the people.
What is a Government issued Digital Currency?
Nigeria recently launched the eNaira — eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira serves as both a medium of exchange and a store of value — and this is quite honestly the best explanation of what a Government-issued digital currency is.
Also known as e-money, digital currency is a form of currency that is available only in digital or electronic form, and not in physical form. It is also called digital money or cybercash.
In Kenya, for instance, the CBDC would be a national fiat currency in digital form that is a claim on the central bank. This means that the central bank would instead of printing cash, issue an electronic equivalent.
Why I Think Central Bank Digital Currency is Bad News
The downside here – at least, to me – is the strong control that the state would retain over the blockchain network within which the digital currency would operate upon introduction.
While recently listening to one of my podcasts, I realized just how much increased control Central banks would have over money issuance and the amount of insight it’d have into how people spend their money, potentially depriving users of their privacy.
With central banks able to monitor every —and I mean every— transaction performed through its CBDC, it would leave a lot of room for it to enforce debatable monetary policies.
It can also be a major step back in privacy, freedom of movement, and democracy, more so in Africa as CBDC surveillance would allow these central banks to spy on where you are, where you have been, and what you intend to do at any given time, just by looking at your transaction history.
Such invasion of privacy would present a significant obstacle for democracy, especially during unstable governance like the upcoming election year.
Just an example, say you and a few others go to the streets to picket over said bad governance, the Government would be able to track all of you who participated in the act just by checking public transport fares or local spending in the area.
There are also the Pros of such a currency but that is not why you clicked that link! What do you think? Are you for or against these Government-issued Digital currencies?