Central Bank Digital Currency: A Friend or a Foe

VC Sreedhar
3 min readDec 1, 2022
Big Brother embedded in your digital currency

Digital currencies are money that is created, exchanged, and managed over digital computers connected via the Internet. Fiat currencies are money issued and managed by country government for creating wealth in the country. Fiat money are managed and exchanged by banks and other entities for goods and services. Fiat currency can be both digital currency and paper currency. Cryptocurrencies are digital currencies that is not (typically) controlled by any central entity, including central government or central banks. Central bank digital currencies (CBDCs) are digital currencies, like cryptocurrency, but issued by a central bank and are pegged to the value of that country’s fiat currency.

There are many advantages to CBDCs:

· Increases the efficiency of economic activities with in a country and cross-border exchanges.

· Reduces fraud and money laundering, and other criminal activities.

· Enables financial inclusions.

· Improves (in the long run) financial safety and stability of financial systems.

· Triggers innovations in financial systems.

CBDCs has many disadvantages too:

· Big Brother Government controls all aspects of money exchange.

· You cannot withdraw money and save it under your carpet.

· You own a personal smart device for buying and selling goods and services.

· Money is now programmable money; banks can set expiry date if you do not spend the money in your account within some period.

· The value of your money can go up or down based on profiling and personal economic activities.

· Your hard-earned saving can disappear or reduced in value to control your economic activities.

· Big economic governments (e.g., USA) can disenfranchise smaller economic governments by controlling movement of digital currency.

· Wealth can be transferred from one account, country, groups to another if the government feels threatened.

· Democracy can be threatened at will by government or people in power.

People who are most affected and disenfranchised by CBDC are the poorest people. Poorest people like to touch and feel money and that is paper money. The people who will benefit the most on CBDC are people and government with power. They hide behind rules and regulations that have been fixed to their advantage.

The world hit 8b people living. USA debt for the second time exceed its GDP, which is US$31+T. USA dollar is the strongest in many years. Other countries are buying US dollars. Who is paying for them? The poorest of the poor. USA has really not felt the pain of printing money and inflation. That is because much of the printed USA currency is sold on world currency market to keep dollar stronger. With CBDC, the control of currency on the world market will increase exponentially. There will be the greatest transfer of wealth from the poorest to the richest and especially those with world power. Remember that bitcoins are the greatest transfer of wealth from poorest people to the wealthiest. The electricity used for mining bitcoins should be used for helping poorest people. The electricity needed for bitcoin mining are being created by people working in the worst environmentally disastrous conditions, such as coal mining.

On the other hand, many of the poorest will also be uplifted in their standard of living. CBDC can help eliminate middle person in currency transactions. This elimination of middle person is what drove bitcoins and other cryptocurrency. CBDC will do the same, but with government control. If the government is not controlled by few, CBDC will make the world a better place. Only time will tell whether CBDC is a friend or a foe of the consumers, especially the poorest ones.



VC Sreedhar

VC Sreedhar is a Distinguished Engineer and VP focusing on FSS and FIntech at Kyndryl. He is ACM Distinguished Scientist and has Ph.D. from McGill University.