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Unveiling the Perils of Driving a NZ Reserve Bank Digital Currency

By Andy Loader ‘Poke the Bear’ on www.voicemedia.global




The Reserve Bank of New Zealand has opened consultation on what would be the first government-backed digital NZ currency. The consultation is open until July 26.


Amidst the Reserve Bank of New Zealand’s proposition of a pioneering government-backed digital currency, a profound question emerges: at what cost does progress come? The envisaged Reserve Bank Digital Currency (RBDC) heralds a new era of financial convenience and accessibility, promising to revolutionize monetary transactions. Yet, beneath the facade of innovation lurks a disquieting reality: the encroachment of central bank control into the private domain of individual finances. As the global financial landscape braces for the advent of central bank digital currencies (CBDCs), the discourse amplifies, spotlighting the shadows cast by their implementation. Advocates laud CBDCs as harbingers of financial inclusivity and efficiency, extolling their virtues as a panacea for cash-based woes. However, peeling back the layers reveals a dystopian narrative, where the allure of convenience belies the erosion of fundamental liberties. This editorial embarks on a sobering journey through the labyrinthine corridors of digital currency, illuminating the dark corners where the specter of government surveillance looms large. From the insidious tendrils of financial exclusion to the Orwellian nightmare of total control, each aspect of the RBDC debate serves as a stark reminder of the delicate equilibrium between progress and peril. Join us as we traverse the treacherous terrain of digital finance, sounding the clarion call against the encroachment of central bank hegemony into the sanctity of private finances. In a world where every transaction is a thread in the tapestry of government control, the imperative to safeguard financial privacy and individual autonomy has never been more pressing.

“Digital cash would ensure that reserve bank money is available to all New Zealanders and able to be used digitally. It would also help enable a money and payments system that is innovative, competitive and contributes to the development of New Zealand’s digital economy,” it said.

What is a Reserve Bank Digital Currency (RBDC)? A Reserve Bank Digital Currency (RBDC) would be a digital form of NZ’s currency, which would be regulated by the reserve bank. However, a Reserve Bank Digital Currency is not simply paper currency in digital form; it is a totally new system of monetary control. Central banks around the world are actively exploring central bank digital currencies (CBDCs). In fact, several central banks have now launched their own CBDC. Yet these efforts have struggled to gain traction among citizens. While CBDC proponents present many potential benefits, those benefits do not stand up to scrutiny. In short, these proponents fail to meaningfully distinguish CBDCs from the digital dollars that exist today. Yet CBDCs are not just a story of government waste or cronyism. While CBDCs don’t offer any unique benefits, they do pose serious risks to financial privacy and economic freedom.

A CBDC’s claimed main goal is to provide businesses and consumers with privacy, transferability, convenience, accessibility, and financial security. Many individuals throughout the world have no access to bank accounts, so a CBDC would give them a way to be paid, hold their money, and pay bills. Let’s explore some CBDC fundamentals.

Would CBDC’s replace cash?

CBDCs could offer a safe and low-cost alternative [to cash].

What are the risks of CBDC’s?

A CBDC could undermine both the foundation and future of financial markets by reducing credit availability and disintermediating banks.

Are CBDC’s good or bad?

CBDCs may have some benefits, but their drawbacks are considerable. While they can improve payment efficiency and provide central banks with new monetary policy tools, they raise severe concerns about financial privacy, surveillance and social credit control (CBDC’s can be made to be programable), financial stability, cybersecurity, and commercial bank disintermediation.

Should we get rid of cash?

For instance, using cash instead of credit or debit cards may help keep some people from overspending, because you can see how little is left in your wallet after every purchase. In short, getting rid of cash would impose hardships on society’s most vulnerable people and could jeopardize our privacy.

Why would we want a RBDC?

Accessibility; a Reserve Bank Digital Currency removes the need for citizens to hold a bank account. Banks often require minimum amounts and charge fees for certain actions. Some banks even go so far as to block money movements for some customers.

Will RBDC’s be anonymous?

For example, a consumer paying a merchant using RBDC’s does not disclose personal information to anyone, including the merchant, banks and the reserve bank. However, the identity of the merchant is disclosed to the merchant’s bank (as part of the payment) and is kept confidential there.

Are CBDC’s traceable?

While cash transactions are anonymous and untraceable, CBDC transactions can be traced back, providing a record of all transactions. This traceability can be a powerful tool for combating financial crimes such as money laundering and tax evasion — although at the expense of privacy. What could go wrong with CBDC’s?

In a fully implemented CBDC system, governments could financially exclude individuals or entire groups of people with the press of a button, leaving them with nothing (for example forcing mandates as NZ has seen in 2021 with the implementation of an experimental mRNA gene therapy to the mass population). A Reserve Bank Digital Currency (RBDC) or CBDC would be a digital national currency. Like paper dollars, it would be a liability of the Reserve Bank. Unlike paper dollars, it would offer neither the privacy protections nor the finality that cash provides. That direct, digital liability—a sort of digital tether between citizens and the reserve bank—makes RBDC’s a radical departure from the digital transaction systems and creation of money already in use today. While an RBDC would not offer any unique benefits compared to existing technologies, it would pose serious risks. For example, an RBDC could spell doom for what little financial privacy protections remain.

We don’t know who’s using a $100 bill today but with an RBDC the reserve bank will have absolute control on the rules and regulations that will determine the use of that and also have the technology to enforce them. Put simply, an RBDC would most likely be the single largest assault ever to financial privacy and the threat to freedom that it would pose is closely related to its threat to privacy. With so much data in hand, an RBDC would provide countless opportunities for the government to control citizens’ financial activity and even sell the data to global companies in order for them to control markets excluding small business enterprises that have been the backbone of NZ society and the building of our nation.

How could such financial control occur?

  1. Freezing or seizing assets: Governments have long recognized that freezing someone’s financial resources is one of the most effective ways to control them. However, an RBDC could make the process easier and faster for the government by establishing a direct line between citizens and the government itself.

  2. Negative Interest Rates: While interest rates are typically thought of in terms of positive rates, an RBDC could allow policymakers to also set negative rates. In effect, a negative interest rate would result in people losing money. The argument has been made that this strategy could be used to spur spending in times of economic downturn.

  3. Programmable Spending: The programming capabilities of an RBDC could mean that people would be prohibited from buying certain goods or limited in how much they might purchase. For example, policymakers could try to curb drinking by limiting nightly alcohol purchases or prohibiting purchases for people with alcohol related offences.

Implementation of a RBDC could allow government agencies and private sector players to program…targeted policy functions. By programming a RBDC, money could be precisely targeted for what people can own (and what people can do).

Another concern is the central storage of financial information. Where a reserve bank breach puts all NZ citizens at risk, a breach at a single financial institution would only affect a fraction of citizens—leaving customers at other banks free from harm. Consider a cyber-attack on two different kinds of networks: the first one targets the banking network. Since the individual banks are separate entities, it remains functional even if one bank’s network is compromised by a hack. Next, contrast that with an attack on the RBDC network. Since all transactions go through a central authority, if it is compromised by an attack, the entire network will be disabled.

In short, An RBDC would fail to offer the benefits its proponents suggest; instead it could offer an enhanced threat to our financial privacy & financial freedoms and could undermine the banking industry. A RBDC should have no place in the New Zealand economy due to these fundamental threats which have seen some policy analysts, industry representatives, and even government officials themselves pushing back against implementation of a Digital Currency.

We would not want a world in which the government sees, in real time, every money transfer that anyone makes through a RBDC. Those calling for the rollout of a RBDC are naïve to believe that this would be done without establishing a centralized surveillance system for all financial transacting and; quite simply, even if such surveillance is not included in the [initial] design, it would be trivial to add it at a later stage. Once a door to surveillance is opened, it is virtually impossible to close. At some point, a RBDC that fails to provide a high degree of financial privacy could be used to monitor and censor the transactions of one’s political enemies and; it is foolish to think otherwise.

It is easy to see that a reserve bank monetary system in digital form could become an additional instrument of government control over citizens rather than just a convenient, safe, and stable medium of exchange. In a fully implemented RBDC system, governments could financially exclude individuals or entire groups of people with the press of a button, leaving them with nothing. If banknotes don’t exist and access to government‐controlled digital cash is revoked, then they are truly helpless.

A Reserve Bank Digital Currency is not simply paper currency in digital form: its adoption could have profound consequences for our financial system and economy. While there are no doubt opportunities for improvement in monetary systems, most of those opportunities could be addressed by innovations in the current financial services framework, without the introduction of a reserve bank digital currency that could destabilize the entire monetary system.

Creation of a RBDC will introduce significant privacy and cybersecurity risks into the nation’s monetary system and may disrupt the stability of our banking system. With a RBDC the government through the reserve bank, could have a backdoor directly into your bank account, as well as the means to monitor every digital transaction you make.

A RBDC could be a nightmare for civil liberties given that it would put the reserve bank at the centre of every financial transaction. With the government having total control over the reserve bank policies a RBDC could end up giving government visibility into all financial transactions and also the ability to revoke them.

My principal concern with the domestic use case [of a RBDC] is the blurring of the line between financial transactions and fiscal policy. A reserve bank digital currency could be one of the most dangerous developments in history. When government can simply flip a switch to block all your transactions, it controls your entire life. We need a wall of separation between financial transactions and government control.

Finally, there is no compelling demonstrated need for a Reserve Bank Digital Currency. Most consumers and businesses in NZ already make retail payments electronically using debit and credit cards, payment applications (such as EFTPOS), and the internet banking systems. Moreover, people are finding easy ways to make digital payments directly to other people through a variety of other mobile apps.

In brief, the potential benefits of a RBDC are unclear but conversely, a RBDC could pose significant and concrete risks. A RBDC could give the government virtually complete control over the monetary system… but from an individual’s perspective, a RBDC would be an historic blow to privacy and individual liberty.

Be sure to convey your thoughts on this RBNZ consultation https://consultations.rbnz.govt.nz/money-and-cash/digital-cash-in-new-zealand/user_uploads/cbdc-insights-dossier-for-public-1.pdf


“A RBDC could be a nightmare for civil liberties given that it would put the reserve bank at the centre of every financial transaction”



“My principal concern with the domestic use case [of a RBDC] is the blurring of the line between financial transactions and fiscal policy. A reserve bank digital currency could be one of the most dangerous developments in history. When government can simply flip a switch to block all your transactions, it controls your entire life”



“In a fully implemented CBDC system, governments could financially exclude individuals or entire groups of people with the press of a button, leaving them with nothing (for example forcing mandates as NZ has seen in 2021 with the implementation of an experimental mRNA gene therapy to the mass population)”




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elocal Digital Edition – May 2024 (#277)

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