Recent news from Europe prompts a quick offer of perspective. The president of the European Central Bank (ECB), Christine Lagarde, recently announced plans to launch a digital version of the euro. The Banks of England, Japan, and Canada quickly made similar announcements, as did the Swedish Riksbank and the Swiss National Bank. All this follows an announcement late last year that the People’s Bank of China (PBOC) would launch a digital yuan.
The word “digital” tends to dazzle many people and make them feel as though any such effort is welcome –– that it would be more modern and better than what had existed. But that is not what is going on here. The banking systems in these countries, including China, already do a fine job of digitizing business and individual transactions with all the modern speed and convenience people associate with the word “digital.” The central bankers’ real reason for a digital currency is not modernity or safety or convenience, or any other of their stated explanations: their real reason is control.
These central banks want to drive out paper currency because it is the last method by which people and businesses can perform their transactions anonymously. If digital alternatives to paper money can do that –– and they can –– then the authorities will have the ability to track everybit of business, no matter how innocent or small. Existing arrangements already facilitate much government surveillance. Banking, even before it was digitized, left a record that could be made available to the authorities. Credit and debit card transactions certainly do the same. Even the so-called “shadow banking system” –– on-line lenders that are separate from the established banking institutions –– leaves an electronic record of who is doing what. Only paper currency leaves no trail to follow.
Aside from any government’s seemingly constant desire to know all and control all, there are legitimate reasons to get rid of anonymous transactions. For one thing, they often support criminal activities, including the worst sin of all as far as governments are concerned: tax evasion. Anonymous transactions allow people to hide their spending, making it hard for the authorities to compare it with their declared income. Anonymous transactions might also allow people to send assets out of the country when the government would rather they did not. Still, this recent quest to surveil leaves an uneasy feeling –– if not a down right creepy one –– that the digital payment system(s) will reach the point where one cannot stop for a cup of coffee or tea or buy a snow cone for a child without an official electronic record of the transaction.
Perhaps the need to snag tax-evaders and those committing other crimes is worth the loss of privacy. This would not be the first time that people voluntarily gave up something for the sake of some collective interest expressed by the authorities. But the press by these central banks, especially the ECB, carries no little irony and hypocrisy when set against Brussels’s histrionic outrage about the dangers to privacy from technology platforms like Google and Facebook. At least with the private platforms, people have the option of walking away. They won’t be able to do that from a completely digitized currency.