Are CBDC’s the Big Brother That George Orwell Spoke of in 1984?

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When George Orwell wrote his best-seller 1984there were very few countries in the world (we know of) that had gone down that path.

Wait! 1984What was that all about?

The novel to start with is dystopian in nature; it paints a very dark picture of a world that could exist if we allowed it to. It is one where the government had the tools of propaganda at its disposal and was given free rein to manipulate its citizens through various means to achieve their own objectives.

Manipulation through various means? What are you even talking about?

Well, let’s get the whole communist ideal out of the way. Many people may perceive a dictatorial government that imposes strict laws on its citizens as oppressive or illiberal. Manipulation, however, is very different from compulsion.

Some theocratic or police states, for instance, will have a penal code (like all governments do) to keep criminals in check. This can also be used to clamp down hard on free speech or any form of non-violent opposition to the government as treason or criminal in nature liable for incarceration.

Governments that fall outside of this category, typically democratic ones, occasionally use indirect and tacit methods to achieve the same goal while appearing transparent.

This is where the art of manipulation comes in.

Spying Yesterday?

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This is one of the oldest forms of manipulation.

We have all heard of spying, or, as some would say — intelligence gathering. The goal would be to eventually influence an outcome in one’s favor.

Most of us will feel that intelligence gathering and probably even snooping for national security is justified, except when it comes to us.

About 40 years ago, governments needed a large force of spies and informants, including telephone operators who were plugged in around switchboards in some now-antiquated telephone exchanges, snooping on calls. Best-selling spy thriller novels have brought this narrative to the public’s attention, and movies have centered around similar concepts.

A few weeks ago, Julian Assange was released from prison. The man who leaked the biggest trove of the best-kept government secrets is still shrouded in controversy today among people torn between free speech ideals and defense of the state.

In fact, one of the biggest embarrassments for the CIA was when Edward Snowden leaked the fact that they were snooping in on Angela Merkel’s (the then German Chancellor’s) phone calls.

Why are we discussing this?

What will tapping one of their closest NATO allies’ phone achieve? It seems quite counter-productive! At this stage, we can only conjecture. Germany, as the strongest and most influential EU member, would probably have the most influence in making decisions about the EU’s relations with Russia and China.

Understanding the intricate details of the diplomatic overtures and economic discussions between the EU and these two major countries would allow the US to adjust its response and counter any potential economic advantage the other side may possess.

Spying, or snooping, is mostly carried out for technical and competitive reasons. The Hollywood industry has somehow transformed most of these instances into high-speed chases through crowded streets, with bullets flying all around the screen as 007 himself tries to prevent some detonation.

Snooping today

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So, how does the government or anyone else snoop on the data that floats across the world wide web today?

Here comes the real kicker!

Today, we live in a world where big tech has its ears inside its users mobile phones, watching every click on their tablets and tracking every search on the internet. Hidden behind this vast swathe of structured and unstructured data are untold hobbies, unsaid addictions, and untapped markets waiting to be monetized.

Most messaging services today use 128-bit encryption, making them difficult to crack. Encryption employs a sophisticated mathematical method to jumble data, rendering it incomprehensible to the human eye. Someone trying to snoop into this jumbled data would not be able to make much sense of it unless they have the decryption key. Of course, the big tech organizations guard this safely, and the custody of such keys is regularly audited by top agencies.

So anyone who gets their hands on these decryption keys, could then snoop in on conversations and data, right?

Technically, yes!

For the record, governments have been trying to get access to these decryption keys. To their credit, big tech companies have strongly pushed back, rejecting any potential requests for backdoor access to such data in an effort to prevent the use of their services as political propaganda tools.

So, if the government reading chats is controversial and attracts the undue attention of rights activists, what other ways are there to manipulate them?

Enter the CBDC

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A Central Bank Digital Currency (CBDC) is issued by a central bank in digital form.

Don’t we have enough currencies already?

Of course we do, for a moment lets leave out cryptocurrency.

The present fiat currency system that the world runs on is based on a decision that President Nixon made in 1971 not to peg the US dollar to any gold reserves. Since then, the fiat currency’s value relies solely on the full faith and credit of its issuing governments rather than any physical asset. This rule applies to most fiat currencies and works.

It is a country’s central bank that issues the CBDC, a digital currency.

Central banks also issue fiat currencies, but the government loses sight of and control over them once they leave the central bank and move from entity to entity in the financial system. Of course, it could be argued that the government could, using regulations and its network of banks, trace the trail of money, but it would come at a cost.

The CBDC’s value, on the other hand, is fixed by the government and is designed to work along with the fiat currency and not replace it.

So why would any government in its right mind want to create a parallel system to what’s already existing?

The simple answer is oversight and even the ability to control and possibly manipulate, if implemented accordingly!

First lets see how CBDC’s are organized.

CBDCs could either be centralized or decentralized. Unlike cryptocurrencies, however, CBDC’s will be centralized since the government would want to control them.

CBDCs could be implemented using many technologies, but a strategic way of implementing them would be to put them on a private blockchain.

The blockchain approach would allow the authorities to monitor the money’s trail and the identities of all the participants since all of it would be stored on the blockchain. Auditing would become much simpler.

There are various advantages to doing this. Once the government gains control, it creates numerous opportunities for both beneficial outcomes and potential misuse, should it fall into the wrong hands.

Programmable Money

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Programmable Money is one of the biggest killer apps of CBDC.

What is Programmable money?

If a CBDC is implemented using blockchain, it could build Smart Contracts into the system. Smart contracts are self-executing programs that take action on the blockchain when certain conditions or rules are satisfied. So if the government sets these rules, the system would run automatically and enforce the checks and balances it wants, eliminating the possibility of human errors and probably fraud as well.

Here are a few of the benefits as to how this may shape up: –

1. Applicable to certain groups: — Governments could, after proper authentication earmark a portion of the currency it issues, to be spent by a certain targeted group, perhaps the marginalized and underprivileged.

2. Escrow like rules: —Governments could enforce rules with regards to the payment of subsidies and the transfer of payments to their own internal departments once spending has been confirmed, just like how escrow accounts are used by banks in financial transactions.

3. Reduced Transaction Costs: —This is easily one of the greatest benefits. The transfer of fiat currency across borders incurs significant fees, thereby increasing the cost of transactions. This would lower the system’s cost and benefit the end user.

4. Time-Limit spending: —Imagine having a much better lever to control inflation. Imagine a scenario where a central bank issues digital currency to a specific group, mandating that users spend or retain 30% of it in their wallets by a specific date, failing which it expires. This would be an amazing way to stimulate spending, or sometimes, even with the right rules in place, reverse the same behavior.

As you can see, it gives the government a lot more leverage than it currently would have if implemented accordingly.

Presently, a ton of countries in Asia and the Middle East are implementing CBDCs. See the article below for more details.

Central Bank Digital Currencies Can Boost Middle East’s Financial Inclusion, Payment Efficiency

Countries like the Bahamas, Nigeria, China, India, Russia, and even Brazil are all piloting CBDCs. Most of them are in stages where they’re evaluating their effectiveness.

Recently, China tried out programmable money features on its digital yuan in Shenzhen. China is actively promoting the digital yuan and anticipates that many of its trading partners will eventually adopt it. China’s oversight in this case and its lack of transparency may serve as a deterrent, but they are still proceeding with their plans.

Snooping on people’s chats, messages, emails, blogs and vlogs is one thing, but being able to influence citizens spending and saving patterns with respect to money is a different ballgame altogether.

Many of us willingly gave up our privacy when social media emerged nearly two decades ago. If the governments of the future do get to influence how we spend our money, not based on our hobbies but based on their interests, then George Orwell’s 1984 should be made compulsory reading for higher studies.

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Are CBDC’s the Big Brother That George Orwell Spoke of in 1984? was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.