Reading Time: 2 minutes
- Edward Snowden believes CBDCs can annihilate savings and make negative interest rates enforceable.
- Prior to Snowden, Dr. Prasad, a Cornell professor, outlined the risks associated with CBDCs.
- Dr. Prasad theorized that at the time of a dire economy, the US could enforce negative interest rates to propel spending.
Edward Snowden has recently outlined his concerns regarding Central Bank Digital Currencies (DBDCs), claiming these government-backed coins can annihilate savings and make negative interest rates enforceable.
Edward Snowden, former computer intelligence consultant at the National Security Agency (NSA) turned whistleblower, declared via a tweet yesterday that CBDCs are “just a useful policy tool for casually annihilating the savings of every wage-worker in the country if they don’t spend them fast enough.”
Snowden’s remarks come after Eswar Prasad, a professor of trade policy at Cornell University, talked about the risks associated with digital versions of national currencies in an article for The New York Times. In the article, Prasad hypothesized a dire strait scenario for the economy where the US could enforce negative interest rates to propel spending. Dr. Prasad asserted:
If cash were replaced with a digital dollar, however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest.
To keep up with the rapidly evolving digital world, a number of central banks have started exploring the possibility of launching a digitized version of their currencies. Such currencies, dubbed CBDCs, are virtual like crypto-assets. However, they come with explicit downsides — with the most prominent one being privacy concerns.
The Bahamas has already rolled out a digital iteration of its Bahamian Dollar, called the Sand Dollar. Other countries like China, Japan, and Sweden, among others, have conducted multiple pilot trials to prepare for the final roll-out.
CBDCs: “Newest Danger Cresting the Public Horizon”
Being of the same mind as Dr. Prasad, Snowden argued that CBDCs are “a perversion of cryptocurrency, or at least of the founding principles and protocols of cryptocurrency.” He said that govcoins are cryptofascist currencies, meaning they secretly support and admire all things crypto. Snowden added:
[CBDC is] an evil twin entered into the ledgers on Opposite Day, expressly designed to deny its users the basic ownership of their money and to install the State at the mediating center of every transaction.
Snowden is not the first crypto advocate to slam CBDCs, and certainly won’t be the last one either. In late July, Rich Checkan, president and COO at Assets Strategies International (ASI), said CBDCs are terrible for user privacy, adding that “central bank digital currencies were concocted in hell by Satan himself.”
Ironically, banking giants have been unquestionable advocates of CBDCs. In September, the banking giant HSBC admired CBDCs as a form of digital money that can encourage economic growth. The bank even called govcoins a banking innovation, saying they are transparent, stable, and don’t pose threats to customers.
On the contrary, HSBC slammed cryptocurrencies and stablecoins, citing the regulatory uncertainty in the space as a major downside.