Imagine waking up, starting your day as usual, getting ready for work, and planning your daily expenses. You reach for your wallet and realize that you need to withdraw some cash from the ATM to pay for your transportation, lunch, and other expenses over the next few days. You head to the nearest ATM, but there’s a long line stretching around the corner. Frustrated, you try another, only to find the same long line. Actually, there is a long queue at every machine!
This is not the beginning of a dystopian work of fiction. This scenario has become a reality for many Nigerians in recent months as commercial banks in Nigeria have rationed newly designed Naira notes, capped cash withdrawals and “encouraged” people to use the Nigerian central bank digital currency — eNaira.
A special characteristic of Nigeria is that the majority of Nigerians are below 40 years old, very crypto-savvy, and more willing to take certain risks. This might be why the people who stand behind implementing CBDC‘s there think that Nigerians will adopt eNaira quickly. After some recent talks with folks from Nigeria it became clear that a lot of them are wary of using a digital currency controlled by the central bank, with fears that their financial transactions may be monitored or restricted by the government. This lack of trust in the government and financial institutions has only been exacerbated by recent economic policies that limit access to cash and restrict the use of physical currency.
For those living in countries with well-established democracies, it may be easy to overlook the impact of certain small changes happening in parallel. However, when examined from a different perspective, it becomes clear that these changes can lead to serious concerns. This is not just a reality for developing countries like Nigeria but for the Western world as well.
The recent case of the Canadian Freedom Convoy serves as an example. Even without the introduction of CBDCs in Canada, individuals behind the movement had their accounts blocked by the government. This highlights the possibility of similar events happening in the future and raises concerns about how new tools could be exploited by those in power.
Recent events surrounding the banking and financial system in the US have brought to light some interesting developments. However, before we delve into those, let’s take a step back and consider the trend towards going cashless. Have you heard discussions in your own country about moving away from physical cash and towards bank-issued cards? This shift seemed to have accelerated during the COVID-19 pandemic, with concerns raised about the potential spread of the virus via cash transactions. More recently, the International Monetary Fund (IMF) has been advising countries on how to implement CBDCs. Have you heard about CBDCs being proposed for wholesale payments? And have you noticed a shift in the narrative towards retail oriented digital currencies? It’s worth noting that there isn’t necessarily a difference between these two types of CBDCs, except perhaps in terms of scalability.
Another development to keep an eye on is the FedNow instant payment system, which is intended to be used by financial institutions of all sizes and individuals across the United States. The system promises safe and efficient instant payment services that operate 24/7/365. But what exactly sets it apart from a potential US Central Bank Digital Currency? It enables instant payments through a network, it’s digital money and it’s administered by a Central Bank — the Fed. Pretty much the only difference is that it is not being officially called a CBDC or digital US dollar.
One thing to bear in mind is that change in the financial system tends to happen slowly rather than overnight. While people may not immediately accept the idea of a CBDC, for example, they may become gradually accustomed to it, much like a frog in a pot of water whose temperature is gradually raised. We’ve seen the opposite of this in Nigeria, which served as a testing ground for a CBDC rollout. Lesson learned, boundaries are clear now — although it is still worth keeping an eye on what’s happening there.
Now, let’s turn our attention back to the US financial system. With the Federal Reserve printing money in response to the pandemic we’ve seen inflation rise. The Fed has raised interest rates as countermeasures, which resulted in treasury bonds becoming a toxic asset for banks, banks failing… and the Fed trying to “help” by printing more money! The Fed’s balance sheet has grown by $391.50 billion in just the past two weeks, which begs the questions: where does this all lead? What is the limit? Are we on the cusp of even bigger problems on the horizon — like hyperinflation? 391.50 billion US Dollars at current exchange rate is the equivalent of 13,850,000 Bitcoins — almost two thirds of the maximum supply!
Corruption of the power
Throughout history, political philosophers have expressed concerns about the potential dangers of entrusting too much power to entities that cannot be relied upon, a topic that science fiction literature continues to frequently explore in its speculations about the future of humanity… Alexis de Tocqueville warned about the government “bribing the public with the public’s money,” while John Edward Acton famously stated that “power tends to corrupt and absolute power corrupts absolutely.” With the introduction of Central Bank Digital Currencies, these concerns take on new urgency. CBDCs allow for the creation of an unlimited amount of money out of thin air, controlled only by those who stand behind it. This absolute power to control and exclude those who do not comply with their values — such as those who prioritize freedom, independence, self-custody, and sovereignty — and could have dangerous consequences for humanity.
This leads us to a conclusion that we need to diversify. We have to give ourselves a chance to function even when the current financial system is against us. Luckily, we live in times where we have a chance to use what Bitcoin and crypto has to offer. It requires a bit more effort but opens up opportunities that are worth taking.
Consider the words attributed to Thomas Jefferson, one of the founding fathers of the United States and the “father of freedom” — an advocate for individual rights and liberties:
“I believe that banking institutions are more dangerous to our liberties than standing armies. If…people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless…”
Achieving true financial inclusion and empowering individuals to be sovereign, to take control of their financial lives, requires educating people on the importance of self-custody, financial literacy, and the risks of relying on centralized entities. With the current state of the financial system and the warnings it presents, it is crucial to have digital currency solutions that are stable, reliable, decentralized, permissionless, and censorship-resistant that are a viable alternative to fiat and central bank digital currencies. Fortunately, these solutions already exist — like Bitcoin and the whole infrastructure built around it, and individuals need only to reach out and start using them.