The European Central Bank (ECB) recently announced that its Governing Council will move forward with the digital euro project, foreseeing a possible first issuance of this currency in 2029. The ECB claims that “a digital euro will preserve Europeans’ freedom of choice and privacy and protect Europe’s monetary sovereignty and economic security. It will foster innovation in payments and help make European payments competitive, resilient and inclusive”. However, there are many layers to be analyzed.
CBDCs are not a pioneer invention from the European Union. In 2019, China launched the digital Yuan (e-CNY), which has been having negative consequences for Chinese citizens’ privacy and financial freedom.
The Chinese CBDC is becoming a surveillance tool, with the Chinese State being able to monitor and analyze payment behavior in detail. To begin with, there are several restrictions on the amounts of e-CNY an individual can accumulate and spend, that often depend on how much personal information one is willing to give the government. Such control can possibly culminate in forcibly transferred funds, frozen wallets and declined payments (with some cases having happened already). Then, despite not being associated with ID’s, e-CNY wallets have to be associated with phone numbers, which can easily lead to an user’s identity. In sum, the easy traceability of the digital Yuan facilitates the Chinese government power and ability to touch on people’s personal funds if their financial activity is considered suspicious or just unlikeable.
Granted, the European Union is not China. Yet, there are past occurrences within member-States demonstrating that, sometimes, belonging to Eurospace is not a guarantee that your money will always be safe and sound. In 2013, many people who had bank accounts in Cyprus saw certain amounts of their funds being removed by government decision. In 2014, the Bulgaria National Bank closed down the Corporate Commercial Bank, leaving dozens of thousands of citizens unable to use or withdraw their money. In 2015, in a climate of heavy economic crisis, Greek banks were shut down, Greek ATMs faced a maximum withdrawal cap of 60 euros and transactions from Greek accounts to foreign accounts were prohibited. On a broader scale considering western democracies, there is the recent case in which the Canadian government froze the accounts of thousands of truckers due to anti-mandate protests.
It is not clear yet in what ways the digital Euro will be implemented. But, in any case, there are risks that should be taken seriously – as well as solutions.
The Bitcoin Solution
Despite its benefits for privacy and financial freedom, Bitcoin still faces skepticism and backlash. People are suspicious of it because of several myths, such as “Bitcoin is not a real currency,” “Bitcoin is a scam” or “Bitcoin is not worth it because it will eventually be banned.” But that’s what they are: myths.
Bitcoin has everything to be considered a real currency. Every currency should have six main characteristics: portability, durability, divisibility, uniformity, acceptability and limited supply (scarcity). Bitcoin has all of those, sometimes with advantages:
- Portability: Bitcoin is highly portable, as it is digital and can be transferred anywhere in the world within minutes, using the internet or even offline methods (like hardware wallets or QR codes). In fact, its digitality makes it more easily portable than cash and, especially, gold.
- Durability: Being a digital asset recorded on the blockchain also means that Bitcoin is immune to becoming worn out or destroyed, unlike physical currencies. As long as the network exists and the data is stored, Bitcoin remains intact.
- Divisibility: Each Bitcoin can be divided into up to 100 000 000 units, which are called satoshis – in honour to Satoshi Nakamoto, the pseudonym used by the founder or founders of Bitcoin. This means users are able to get and transfer a certain quantity of satoshis instead of an entire Bitcoin.
- Uniformity: Bitcoin is uniform, as Bitcoin units are identical in value and function. One Bitcoin is always equal to another Bitcoin, regardless of who owns it or where it was mined.
- Acceptability: Many individuals, institutions, and some governments are already accepting Bitcoin as payment or investment. The exact quantity of Bitcoin users is discussed, ranging from 100 Million and 560 Million, but even the lowest number is very significant. Considering the 100 Million figure, the number of Bitcoin users is close to the population of the Philippines and the Democratic Republic of the Congo, which are, respectively, the 14th and 15th most populous countries in the world. If we consider, in turn, the 560 Million figure, the number of Bitcoin users surpasses the population of the United States and is only behind the population of India and China.
- Limited Supply (Scarcity): Bitcoin has programmed scarcity, having a hard cap of 21 million coins. At the moment, there are around 1 Million Bitcoins left to be mined.
On the misconception that “Bitcoin is a scam,” there are several aspects that need to be clarified. Bitcoin can be used as a vehicle for scams, but that does not mean it is a scam itself. Any currency, because of its monetary value, is susceptible to becoming a vehicle for misleading practices – there are also many scams involving regular money. Besides this, some people tend to mistake general crypto scams with Bitcoin. These scams often involve the creation of a new crypto currency or token in which the creator has the full ability to control the system, the supply and the liquidity. While Bitcoin is one type of crypto currency, it has core characteristics that make manipulation difficult – mainly the fact it is completely decentralized. Bitcoin does not have a central authority, meaning that no one can change the rules. In addition, every transaction is permanently recorded on a public blockchain and, even though users’ identities are not displayed, law enforcement can detect suspicious movements, making Bitcoin a more difficult option for criminals than, for instance, cash.
And this takes us to the deconstruction of the third aforementioned myth – the one claiming that Bitcoin is not worth it because it will eventually be banned. In reality, Bitcoin’s decentralized nature makes it extremely hard to ban. Since it is not owned by a single company or owner but yet runs on thousands of computers around the world, all working together, it cannot be fully shut down by a government or even a set of governments. Even in countries that tried to ban it, people kept using it quietly through apps and VPNs.
In fact, many people from countries facing totalitarianism or economic crises are turning to Bitcoin to save their finances. In Venezuela and Zimbabwe citizens are getting Bitcoin, in order to protect themselves and their money from astronomical inflation rates. In Myanmar, people are using Bitcoin to protect their privacy and journalists to receive their money after the junta imposed harsh capital controls. Bitcoin also helps raise funds for disaster relief and countries affected by war.
What is already happening around the world shows that Bitcoin is not just an edgy innovation – it can truly be a tool for human rights and a path to liberty. And it should be something to keep in mind considering the potential risks of CBDCs. In difficult financial scenarios, getting Bitcoin can mean protecting your finances, your freedom and everything you built throughout your life.
*Beatriz Santos is the Chief Communications Officer (CCO) at We Are Innovation. She is based in Lisbon, Portugal. Beatriz started publishing articles through her University newspaper and eventually moved to national and international reach outlets, including the well known Portuguese outlets NOVO and Observador. Her professional career includes international communications experience with the ATREVIA agency and the European Parliament. She also has two published books and is an essential part of the Students For Liberty organization in Portugal. With a focus on positive change and global cooperation, Beatriz actively seeks partnerships across the globe to promote innovative initiatives.
Source: We Are Innovation
