Big Brother Watch Reports on CBDCs, But Does it Really Have Our Back?

Monopoly: Go Green Edition – Wikimedia Commons

At the end of November 2023, Big Brother Watch (BBW), the civil liberties and privacy campaigning organisation, released what they called a “groundbreaking new report” exploring “international Central Bank Digital Currency (CBDC) projects and their severe impact on privacy, surveillance, and financial exclusion.” I read the report to see if it aligns with my view of CBDCs and also to see what new information it had to offer.

One simple statistic underscores the momentum behind the global CBDC tsunami – “more than 130 central banks around the world are currently researching, piloting or have introduced a form of Central Bank Digital Currency.” The report delved a little deeper into eight of these projects to highlight the threats to freedom posed by CBDCs.

One piece of information may please women enormously: In the Uruguayan pilot project, uptake by men constituted 75% of the total participants, proving that men really might be far more stupid than women. Be that as it may, here are my observations from the report.

Cash and the central banks’ double game

Three out of the eight central banks studied in this report cite declining cash use as a factor in introducing a digital currency. Let’s first understand the reasons for declining cash use before deciding on whether central banks are using it as a false pretext for pushing CBDCs. I think there are two main reasons.

The first is that our current electronic payment systems have proved to be more efficient (but less private) than cash in moving money around by increasing the speed and reliability of transfer and obviating administrative handling costs associated with the physical transfer of bundles of cash, or writing cheques.

The second reason is that banking authorities are in fact waging a war on cash. The BBW report confirms this – central banks like the Bank of Israel have themselves already greatly restricted the use of cash with laws that place limits on how much cash can be exchanged in a transaction. The report also adds that “the country’s [Israel] tax authority is explicit in its goal to reduce the public’s use of cash”, claiming that this will undermine organised crime.

Both of these reasons clearly demonstrate why declining cash use is a false pretext for pushing CBDCs. In the first instance, vast improvements in payment efficiency imply that CBDCs are a solution looking for a problem. In the second instance, the central banks themselves are actively promoting declining cash use ... and then trying to use that as an excuse to introduce something else. How about just stopping the war on cash?

Furthermore, by removing cash, they’re exacerbating a problem they claim to be solving – the lack of access to banking facilities. Lack of access to banking facilities is experienced by the great unbanked about whom central banks pretend to care so much. The Israeli authorities acknowledge there are more than a million Israelis without a bank account, but getting rid of cash will only make life harder for them because a digital currency will raise the banking hurdle even higher, not lower it.

Looking at Nigeria, the rollout of the eNaira between November 2021 and May 2023 was, by all accounts, a failure. The BBW account paints a picture in which a benign, albeit hapless, Central Bank of Nigeria (CBN) was thwarted in its success by “a few technical issues” and a “currency crisis” in early 2023 that led banks to “limit cash withdrawals”. The CBN was in the process of swapping old notes for new notes when businesses stopped accepting old notes, causing a “a sharp contraction in the amount of cash in circulation in a largely cash-based economy”.

By November 2021, only 0.8% of people with bank accounts had downloaded a wallet. By May 2023, only 6% of the population had taken up wallets but fully 98% of those wallets had never been used. BBW concluded that “despite a major government push and a crisis with hard currency it appears that the eNaira has not enjoyed significant success”. That’s not just a gross understatement; it ignores the more nefarious role the CBN played in aggravating the cash shortage that accompanied the rollout of its eNaira.

Not mentioned by BBW is that, in December 2022, the CBN limited cash withdrawals of individuals and businesses. According to this CBN memo to banks, these limits were instituted “in line with the Cashless policy of the CBN”. The CBN also instructed that “customers should be encouraged to use alternative channels (internet banking, mobile banking apps…eNaira, etc.) to conduct their banking transactions.” Failure by banks to comply with the new policy would result in “severe sanctions”. In a country of 219 million people, those with smart phones are estimated to number 25 – 40 million. The result was that banks locked customers out after cash machines dried up and caused hardship to millions of people who struggled to buy basic necessities. 

Like the Bank of Israel, the Nigerian central bank is also waging a war on cash. Which makes no sense in an economy so heavily dependent on cash.

So it’s clear – the desire to replace cash is driven solely by central banks and not the general public. The general public doesn’t need or want a CBDC, but the central banks are desperate for them. And the aim is to strengthen their control over the money supply and monetary policy by exponentially expanding control over consumer spending in the economy. CBDCs will afford central banks the power to track every single transaction, and to place limits on how, when and where money is spent. The potential scope of such control is frightening.

How we should think about cash when campaigning against CBDCs

Numerous campaigns focus on defending cash and promoting its use. I don’t disagree with that. Cash use continues to be a reality in the economy simply because existing payment systems cannot address two essential needs – access to banking for those shut out, and privacy. A digital currency will only exacerbate this problem.

That said, I don’t believe a significant increase in cash use is a realistic campaigning goal, for the simple reason that electronic payment systems have won the battle they set out to fight – efficiency of exchange. Whatever decreases in privacy that were traded off in that battle have now largely been accepted or tolerated, but we can’t move the privacy line any further back with CBDCs. We’re going to have to accept that there is a whole generation of young people whose smart phones are an extension of their bodies and who view cash as a quaint relic that will disappear once their grandparents have gone to a better place.

Sadly, the reality is that the next generation is far more likely to view CBDCs as a natural progression of a world that is already familiar to them – the digital world. My guess is that it'll be far easier to explain to them why CBDCs must absolutely be resisted rather than why cash use should be augmented, so that’s where our energy should be focussed. Defend what remains of cash by all means, but we must focus on clearly articulating why CBDCs do not solve any current problems and only create huge threats.

BBW’s conclusions

The conclusions in BBW’s report will come as no surprise to the freedom lovers who subscribe to A Plague on Both Houses. The report’s conclusion is best captured in its opening paragraph under the heading “Policy Analysis”:

“The introduction of a centralised digital currency stands to dramatically reshape the entire financial landscape, posing a threat to various human rights and fundamental freedoms, all while incurring substantial costs. A particular cause for concern lies in the potential for widespread population surveillance and intrusions on privacy, as well as exacerbating existing inequalities. Given the magnitude and gravity of these risks, the burden of proof for CBDCs to demonstrate substantial benefits over the current financial system is considerable. However, central banks have yet to present a compelling case for CBDCs as a viable solution to any existing problem.” [emphasis added]

On privacy, the report has this to say:

“CBDCs inherently lend themselves to surveillance by generating individuals’ financial data that would otherwise not exist in a centralised format… Even democratic states have chilling track records of engaging in expansive surveillance. For instance, the UK was found to have led decades-long mass surveillance programs to capture citizens’ private communications, unlawfully and without even parliament’s knowledge… A UK CBDC would not just tempt surveillance – it could legally require it. The Bank of England has said that a CBDC would need to comply with anti-money laundering (AML) and counter-terror (CT) regulations, and that privacy features would be subject to meeting compliance requirements and government objectives in relation to financial crime.” [emphasis added]

Indeed. We know how sweeping and ill-defined counter terror powers can be used as a dragnet for all sorts of activity that the government of the day disapproves of. CBDCs would serve as a highly effective lever for policing all manner of dissent.

On programmability, the report has this to say:

“In the worst case scenario, programmability features could enable complete government control over how money is spent. The process could begin innocuously…However, this functionality could open the door for a world in which governments dictate how CBDCs are spent… At their worst, CBDCs could be used as a tool of digital authoritarianism, a way to exert total control over the public’s transactions. This could result in financial censorship without due process or avenues for recourse”. [emphasis added]

On financial exclusion and the unbanked:

“The Financial Conduct Authority estimates that 2.1 per cent of UK adults are unbanked compared to, for example, the estimated 55.2 per cent in Nigeria…. This is not to say that the UK does not have issues of financial exclusion that need addressing, but… there are more straightforward and efficient ways to support access to financial services without completely overhauling the entire financial landscape at the expense of the public’s privacy. Such measures may include ensuring continued access to cash, upholding the integrity of cash infrastructure, improving financial and digital literacy, and supporting local and community-based methods of access to cash.” [emphasis added]

On digital identity:

“CBDCs are inherently incompatible with privacy. Research suggests that issuing such currencies without a comprehensive national identity system would be difficult, if not “nigh on impossible” [quoting an FT article]... Tying CBDCs to national digital identity systems raises a number of privacy and surveillance concerns. It is wholly possible that payments or access to services could be made conditional based upon identity… Beyond concerns of surveillance and security, implementing CBDCs with a digital ID system would redefine individuals’ ability to access the economy, making it dependent on having both a digital identity and a CBDC… It is possible that CBDCs could introduce new digital ID capabilities such as biometric checking (e.g. fingerprint, voiceprint, facial recognition technology) for identity Verification…Again, the Nigerian CBDC presents a worrying case study here. The eNaira offers a “Tier Zero” account for customers without an existing bank account and verified national insurance number. However, researchers who tried to open a Tier Zero account were asked to provide bank account details and biometric details; making the supposedly more accessible option more intrusive than a standard bank account.” [emphasis added]

Echoing the view of the House of Lords Economic Affairs Committee that concluded that CBDCs were a “solution in search of a problem”, the report had this to say:

“The UK proposal has yet to make a convincing case as to how a CBDC would directly benefit members of the public. When coupled with the array of privacy and surveillance risks, it seems unlikely that the public would voluntarily engage with a new digital currency in significant numbers, whether from lack of interest or lack of trust.”

In short, we have nothing to gain and everything to lose from CBDCs. Which leads us into a discussion of BBW’s recommendations for dealing with the CBDC threat.

Build the gallows but ask the government not to hang anyone

Despite BBW’s vaunted claim to producing a “groundbreaking new report”, there is in fact nothing new in it. If there is a shock factor in BBW’s report, it is caused by a bone-jarring disconnect between the articulation of the threat and what to do about it. You’d think that an organisation claiming to work “relentlessly” to “reclaim our privacy, defend our civil liberties and protect freedoms for the future” would don its cape, leap into the Batmobile, and lead a campaign to put a stake through the heart of the nascent CBDC vampire. But no. After being depressed by a 74-page lamentation on the CBDC hellscape, I was expecting a bracing double shot of neat Bourbon as the cure. What I got instead was tepid, dirty dishwater in the form of these recommendations:

-          “Any exploration of a CBDC should maximise user privacy”;

-          “Any CBDC system must ensure privacy by design and that the central bank collects only the minimum data necessary for functionality”;

-          “User data must not be shared without meaningful, informed and freely given consent”;

-          “Programmability functions must be prohibited by law”.

Why didn’t I think of that? Silly me. Perhaps the reason I didn’t think of it has something to do with what our government, and nearly every other government around the world, has done over the past four years. It has: waged economic warfare on its populace by putting us under house arrest for a disease that posed a miniscule risk of death if you were under 75 years of age and in moderately good health; invoked medieval witchcraft by inventing arbitrary rules to keep everyone six feet apart; told us that the only way to get our freedom back was to surrender our bodily autonomy and succumb to an experimental injection; legislated for and instituted industrial scale censorship of its lies and propaganda about all of this, and much else besides.

I’m a bit irritated that the authors of the report don’t share my cynicism about how CBDCs will pan out. But I’m actually more irritated by the fact that, in making these recommendations, they don’t even seem to share the cynicism that they themselves have expressed throughout the report. Despite their own indictment of CBDCs, they suggest that as countries all around the world are busy developing CBDCs, “it is reasonable to expect that the Bank of England will learn from other central banks as it moves through its own process of developing one.” Mind-boggling.

Enjoining the public to view government action with naïve optimism, BBW published a template email telling members of the public to harangue their MPs with these not-so-stern words:

“The proposals are still in the early stages and there is still time to shape the development of a digital pound, which is why I am asking you to raise my concerns with the Treasury at the earliest convenience.” [emphasis added]

BBW has produced an 82-page report telling us that CBDCs are the devil’s own work…but these intrepid freedom fighters are telling you to tell your MP to “shape their development”! I’m quite sure BBW understands perfectly well that a payment system that comes neatly packaged with all the bells and whistles for financial enslavement will, sooner or later, be abused by its makers and controllers. It should not be allowed to see the light of day.

Now, under the “email your MP” section of BBW’s webpage publicising its report, you can personalise BBW’s anti-radical message to MPs. If, like me, you think CBDCs should be scrapped altogether, I would suggest that you don’t merely wag your finger at our naughty MPs and beg them to “shape the development” of our CBDC prison cell. Instead, you might want to delete the last paragraph of the draft message – the one that begins with: “The proposals are still in the early stages…” – and replace it with this one:

“A CBDC poses a threat to human rights and fundamental freedoms, all while incurring substantial costs. It has the potential for widespread population surveillance and intrusions on privacy, as well as exacerbating existing inequalities. Given the magnitude and gravity of these risks, the burden of proof for CBDCs to demonstrate substantial benefits over the current financial system is considerable. However, central banks have yet to present a compelling case for CBDCs as a viable solution to any existing problem. In short, we have nothing to gain and everything to lose from CBDCs. I am therefore asking you to work towards the goal of scrapping this project entirely and getting the Bank of England to focus its efforts and our taxpayer funds on financial stability problems that currently pose a major threat to our economy – inflation and the potential impact on the banking sector of record-high debt levels.”