Now that the nature of a central bank digital currency (CBDC) is dawning on the people who still bother to read or listen to the news, they are beginning to wonder why the hell we’d want one. And you’re not the only one asking that question. Nor the only one coming up with a rather dystopian answer.

Neel Kashkari is an insiders’ insider. His CV reads like a dream or nightmare, depending on whether he’s your son or you’re an American taxpayer.

After leaving investment bank Goldman Sachs, he was assistant secretary for the US Treasury for Financial Stability during the height of the global financial crisis, held other roles at the US Treasury, oversaw the TARP programme which bought up the dodgy investments that triggered the sub-prime crisis, and then became a central banker.

This completes the tour of government, investment banking and central banking which is the ultimate trifecta of the sort of people who go to Davos.

Kashkari’s take on CBDCs given at Columbia University is utterly jaw dropping, with my emphasis added:

I keep asking anybody, anybody, at the Fed or outside the Fed, to explain to me what problem this [CBDC] is solving.

I can send anybody in this room $5 with [digital wallet] Venmo right now. No, seriously. So what is it that a CBDC can do that Venmo can’t do? And all I get is a bunch of hand waving.

I get a bunch of, ‘Well, maybe it’s better for financial inclusion. Maybe it’s better for cross border remittances.’ Maybe? Is there any evidence that it is?

They say, ‘What about China? China is doing it. Well I can see why China would do it.

If they want to monitor every one of your transactions, you could do that with a Central Bank Digital Currency. You can’t do that with Venmo.

If you want to impose negative interest rates, you can do that with a Central Bank Digital Currency, you can’t do that with Venmo.

And if you want to directly tax customer accounts, you can do that with a central bank digital currency, you can’t do that with Venmo.

Why would the American people be for that?

So… it would appear that there’s no point in having CBDCs, other than imposing radical government policies which make your life worse, right? Unless of course you believe governments will use their powers to improve your life. In which case, you need to take a look at this.

The UK government’s response to the claim that CBDCs are only good for bringing about a dystopian future is simple: “BINGO!”

According to the Telegraph, quoting Bank of England governor Andrew Bailey and Chancellor Jeremy Hunt in a new report, “On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely a digital pound will be needed in the future.”


The part that made me laugh out loud is that the only plausible benefit of CBDCs has specifically been ruled out by the UK government.

You see, theoretically under CBDCs, you no longer need a bank account. In fact, banks’ role as a deposit institution and payment channel become irrelevant. CBDC technology makes them obsolete. Everyone just banks with the Bank of England and be done with it.

Right now, your bank transfer between accounts at the same bank is instant, whereas to another bank can take a day, and an international one another day. Under CBDCs, we’re all with the same institution and so all transactions just happen.

I know, it’s almost worth accepting CBDCs just to get rid of banks in our lives, isn’t it?

But… what is the UK government’s response to that benefit, according to the Telegraph?

However, it is understood that the Bank is not exploring a route that would involve a direct relationship with the public where people could open an account at the Bank of England.

So the one and only benefit of a CBDC is not being considered…

Which is not a surprise given the Bank of England was created to protect the banking system.

Of course, according to the report quoted by the Telegraph, the dystopian nightmare features of CBDCs are also not on the table. Which only gets us back the beginning: then why have a CBDC in the first place?

Many people believe that governments foster innovation. I’ve always believed the opposite. And, conveniently, there’s a book that supports my claim, written by my friend Deirdre McCloskey, whose luggage I lugged through tear gas around Paris in 2016. It’s called The Myth of the Entrepreneurial State.

The truth is that governments co-opt innovation and use it for ill. Nuclear power is perhaps the best example. The Manhattan Project didn’t create nuclear energy as a side effect of The Bomb. It commandeered thorium reactor research and turned it into weapons research, setting safe nuclear power back… well, we still don’t have thorium reactors, despite their clear benefits over uranium ones.

Other examples abound. But the point is that CBDCs may be another example to add to this list.

Innovation gave us cryptocurrencies to evade government control of the financial and monetary system. Governments are trying to co-opt and bastardise the underlying technology to turn it into a tool of control.

The only trouble is, that that’s the only plausible “benefit” of CBDCs. And so it’s going to prove difficult to lure us in. And by difficult, I mean expensive.

Well, I suppose if you have complete control of the monetary system and can issue money ad lib then nothing is expensive anymore. And so… the government of China has been handing out vast amounts of its CBDCs just to encourage people to use it.

When the Chinese government is the one doing it, it’s obvious this is just bait, right? But our government?

Perhaps our best hope is to behave like the Nigerians. Nobody can smell a dodgy digital financial scheme better than Nigerians, after all. And they’re refusing to fall for the CBDC ploy, with only 0.5% of Nigerians having used the CBDC despite the government’s best efforts.

Yes, let’s treat the government’s CBDC like nothing more than a scam email promising you free money. Because nothing is free.

Unless, of course, you think the rest of the population is liable to be enticed by free money. In which case, it’s time to look for a way out.

Nick Hubble
Editor, Fortune & Freedom