How to Prepare for Central Bank Digital Currencies

As was widely anticipated, the entirety of the G7 and, more broadly, the G20 and, maybe ultimately, the G140 are gearing up to roll out the dreaded Central Bank Digital Currency.

What does the global financial system look like in the era of CBDCs, as they are called?

Nobody can say for sure, but there are degrees of likelihood over what will happen versus what won’t happen (in our lifetimes).

In the worst case scenario projected by the most dire conspiracy theories, cash will be banned, CBDC wallets will be registered to an individual at birth, and their entire lives will be governed by their CBDC wallet and their conduct in society.

Bad actors will have their money taken or restricted as to where geographically it functions, tax returns will no longer need to be filed since all taxation will occur automatically, and crime and vice will miraculously vanish as all the world’s money is thus in the control of governments.

It has even been suggested that this new digital money might come with a “use by” date, or else it expires.

These scenarios, however, while harbouring a grain of potential truth, are generally wildly bombastic.

The problem with banning cash outright is the estimated 10 percent of people worldwide who, for whatever reason, do not have a bank account. And the risk of automated taxation is that people just transact in goods rather than monetary instruments, as was the case at the dawn of civilization.

Silver and gold, despite what the Keynesian monetarists proclaim as gospel, are very much viable forms of currency. Trading in services is another form of barter that could easily be revived and is still practiced today around the world.

So what preparation is needed?

Well, here’s the thing.

For the segment of society who aspires to affluence and power, participation in and compliance with the digital banking system will be a pre-requisite for everything from getting US healthcare coverage to obtaining admission to the best universities to achieving professional employment.

For the blue collar sector, participation in and compliance with the digital banking system will be the entry fee for getting the best contracts, getting promoted, and being properly pensioned and insured.

But there are certain  – uh, let’s call them ‘programs’ – one can undertake that might provide some insurance against the 24/7 surveillance that government monitoring of one’s wallet implies.

Though governments would love it, silver and gold are not likely ever going to be eliminated from the portfolios of sovereign wealth funds down to under-the-mattress mom and pop allocations of a percentage of the value, just in case. So acquiring and building such a stash is likely to become the first off-the-books target that individuals and institutions will be looking to acquire as the CBDC universe advances.

The Fate of Crypto

There are still probably more than a few hundred thousand crypto enthusiasts out there who have yet failed to grasp why Bitcoin’s success as a form of legal tender will never transcend the status of novelty.

If anything, Bitcoin has proven that

  1. Bitcoin is not truly ‘decentralized’ despite the fact that the dataset that constitutes its entire transactional history exists on a peer-to-peer network of unaffiliated computers. However, this network constitutes a centralized platform that is maintained because each node agrees to a basic set of rules and formats. So it is definitely not decentralized in the truest possible meaning of the word. It is merely distributed.
  2. Bitcoin is not secure, as evidenced by the fact that each year, the dollar value of fraudulently obtained Bitcoin seized by law enforcement increases.
  3. Bitcoin is not really anonymous since in order to spend any sizeable dollar value of Bitcoin in the real world forces the holder into the KYC/AML set of rules that ultimately reveals the real beneficial owner of any amount of Bitcoin. While true that a wallet and its beneficial owner can remain anonymous within the Bitcoin blockchain, it’s nowhere near as anonymous as cash and can’t possibly compete with the anonymity afforded by the possession of gold and/or silver coins or bars.

There are many more features of Bitcoin and other crypto coins that are ‘not as advertised’, and the slow unwinding of the whole crypto experiment will ultimately reveal these vulnerabilities to even the staunchest crypto fanatic.

So it is highly unlikely that there is any future for cryptographic puzzles like Bitcoin to have any place in the digital banking universe, and even less so the thousands upon thousands of what are most aptly known as “shitcoins”.

At the end of the day, apart from squirrelling away a portion of your wealth in gold and silver and real estate, there’s probably not much that can be done to prepare for the era of Central Bank Digital Currencies. The whole point of the exercise is to make all humanity enslaved to the elite ruling class through debt and centralized digital money.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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