🏦 CBDCs: What You Need to Know

👋 Hi finance enthusiasts and fellow investors!

This week's newsletter is a bit late. I've been very busy the last few days with a company I co-founded.

This week I talked with a friend about CBDCs. Are they good or bad? Let’s take a look! 👇

This newsletter is for educational purposes only. It’s not financial advice.

What Are CBDCs?

CBDC stands for Central Bank Digital Currency. It’s a digital version of a national currency, issued by central banks. They work through digital wallets or accounts, using blockchain or similar tech.

In simple terms, a CBDC is the digital dollar (or euro, yen, pound, etc.) that politicians have been discussing. The aim is to digitize money, eliminate cash, and create a centralized system for digital payments.

CBDC Status June 2024, Source: cbdctracker.org

Problems and Risks of CBDCs

• Governments can freeze or seize your assets easily (unlike cash).

• Programmable money could let governments control how you spend. Imagine this combined with a social credit system! 😬

• Governments can enforce policies quickly, like freezing bank accounts (as happened in Canada during protests). CBDCs would make this easier.

• Big concerns about privacy and surveillance!

• No cash fallback—complete reliance on a single system.

• Central banks could manipulate the economy more easily by controlling money flow.

So, what’s in it for regular people? 🤔

Benefits and Opportunities of CBDCs

• Faster transactions and settlements.

• Better financial access for people without bank accounts.

• Reduced costs for printing and distributing physical cash.

• Easier tax collection.

• Possible integration with tech like blockchain and smart contracts.

SO yes, there are benefits, but most seem to favor governments, not citizens.

What’s Next?

Over 100 countries are looking into CBDCs. Many are already testing or launching them. The future of CBDCs will depend on how they are designed and whether the public trusts them.

I think CBDCs are coming. Sadly, most people won’t care. A few ads in the media and a little free money for everyone in your local CBDC, and people will just accept it.

My View

CBDCs bring major concerns about surveillance, government control, and the loss of financial freedom and privacy.

Cryptocurrency, in contrast, offers a decentralized solution. It protects individual freedom. But I don’t believe crypto is the answer to everything, as some think.

What Can You Do?

Even if CBDCs seem inevitable, you can still take action:

• Weigh the convenience of CBDCs against the risks.

• Discuss CBDCs with friends and family and share the pros and cons.

• Diversify by keeping money in cash, foreign currencies, or cryptocurrencies.

• Push for laws that protect privacy and financial freedom.

• You don’t need to overwhelm people and talk all day about CBDCs, but it’s worth starting a conversation.

That’s it for this week! Please share the newsletter with your friends and family! 🙏

Enjoy the weekend!

Cheers,

Stefan
Co-Founder of CryptoExplorer & InvestmentExplorer