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Why Bitcoin will always be the superior digital currency

These days, many countries are considering introducing their own Central Bank Digital Currencies (CBDCs). 

The Bank of England recently released a research paper discussing the possibility of creating its own digital currency, saying it has “not yet made a decision on whether to introduce CBDC”.

In July 2021, the Bank of Canada issued a discussion paper called “The Positive Case for a CBDC”, citing it “could be an effective competition policy tool for payments” and “could also support the vibrancy of the digital economy”.

But no country is moving faster on this front than China.

The Central Bank of China has already introduced a digital yuan, which is expected to eliminate physical cash, and provide a centralized payment-processing network.

As China continues to expand its CBDC implementation beyond its trial run in some cities, more of its citizens will be forced into using the government’s app to identify themselves, store their wealth and make everyday purchases. That means the Chinese government will be able to track purchases and even freeze or close personal accounts, for whatever reason they see fit.

That is a terrifying prospect – and it highlights one of the many reasons bitcoin will always be superior to any currency that is issued and controlled by any government.

The Bitcoin network uses blockchain technology to track the status of the network, including user balances and transactions. This allows transparency and decentralization by nature. Perhaps most importantly, this means that the system cannot be controlled or influenced by any one person, company or government.

China’s digital yuan – and any CBDC under consideration – have the complete opposite fundamentals. With a CBDC, one central bank has ultimate control and power over the currency, not to mention the ability to track and even reverse everyday purchases.

It’s a particularly worrisome situation in China, where its government has been pushing a social credit system that, at its core, rewards or punishes people for their economic and personal behaviours. As the country implements its digital yuan more broadly, there are fears China could use its CBDC to extend control over even more of its citizens’ rights and freedoms.

Dave Bradley, Chief Revenue Officer, Bitcoin Well

We don’t face that threat in western countries yet, but that’s not to say we are immune from the possibility. (And if Meta’s recent announcement that it’s shutting down the face recognition system on Facebook is any indication, our society is definitely not keen on being monitored, controlled or surveilled in any way.)

From 2013 to 2017, the U.S. Department of Justice ran Operation Choke Point to monitor and crack down on payments for what the government deemed “high-risk activities”, ranging from online gambling and payday loans to pornography and surveillance equipment sales. These activities were not illegal but they offended the government’s moral compass – a slippery and scary slope.

Most recently, in October 2021 U.S. President Joe Biden and his government backed down from requiring the IRS to collect data on every bank account with more than $600 in annual transactions.

Infringements like these on our privacy are unacceptable. But the likelihood of them happening will grow exponentially if, and when, western governments introduce their own CBDCs.

Aside from a potential loss of personal freedom and privacy, CBDCs would introduce another undesirable outcome: even greater inflation than we’re experiencing today. Governments, including our own here in Canada, are printing money faster than ever, which simultaneously drives inflation and devalues personal wealth.

As Saifedean Ammous writes in his fantastic book, The Fiat Standard: The Debt Slavery Alternative to Human Civilization, “CBDCs would allow for the implementation of…inflationist schemes with high efficiency, allowing for increased central planning of market activity. Government spending would proceed unabated by whatever little discipline credit markets currently exert. Real-world prices are likely to rise, which would lead to more control over economic production to mandate prices.”

To sum this up, CBDCs could lead to higher inflation, less personal autonomy and more government meddling. For those reasons, whenever I’m asked if the introduction of CBDCs will kill bitcoin and its relevance, my answer is a resounding, “No.”

Central bank digital currencies are not the same thing as bitcoin. They aren’t even competitors with bitcoin, nor will they ever replace bitcoin. They are a distraction. In my opinion, CBDCs will only create greater demand for bitcoin and its many advantages.

Bitcoin offers individuals the profound ability to own sound money, protect their wealth from inflation and keep governments from micro-managing their finances. That is certainly not what CBDCs will do, and it’s why we should all be very apprehensive about giving central banks the ability to issue, oversee and control digital currencies. 

No CBDC can, or ever will, stack up to bitcoin.

Dave Bradley is the Chief Revenue Officer at Bitcoin Well

Find him on Twitter at @BitcoinBrains


This story was first published in the Western Standard – visit the original article here.