Ten countries have launched a digital currency, with China expanding the pilot project it’s been running for the past two years. In India, the government aims to have a digital rupee in place by 2023, when the European Commission also plans to introduce legislation for a digital euro. In the US, a recent executive order from Biden has made research into a national CBDC a priority while in New York a pilot for a digital dollar has just begun.
Leading the race for digital ID is India, which started the rollout of its biometric system Aadhaar in 2009. Now, with most of the country’s 1.3 billion population having exchanged fingerprints, iris scans and photos for a 12-digital unique identification number, digital ID is effectively compulsory for participation in Indian life. Internationally, there are suggestions that the two systems should be linked. At a recent meeting between the International Monetary Fund and World Bank Groups, speakers agreed it would be good if CBDCs and digital ID were paired “as a package”.
Such a system would potentially affect every aspect of an individual’s life and create a completely new kind of society.
Is a digital future inevitable?
Yet there’s an almost complete lack of public debate on the subject, at least of the official kind customarily led by politicians and institutions in western democracies. The official commentary on CBCDs and digital ID by the media and think tanks rests on the assumption that such developments are inevitable, part of the progress towards a future that’s already written. It focuses on the benefits, citing the “resilience” of digital currencies and the “convenience” of digital ID with only passing references to privacy concerns.
Meanwhile, a minority worries about the unprecedented potential for control afforded by the digitalisation of our world. It’s as if two parallel discourses are being conducted by two sets of people with entirely different interests, with little or no dialogue between them.
The divide in the discourse about the digital reflects a very real split between institutions and people. On one side are governments, the finance sector and their allies in supra-national institutions; on the other are citizens, the ordinary people who make up civil society. In a discourse dominated by the first, more powerful group, there’s an occlusion of the fundamental questions. Will these developments promote human dignity? What do they mean for the freedoms and rights that have long taken as central to the good society?
Such questions don’t even rise to the surface, so buried are they under a narrative of inevitability which suggests that modern life is so entirely subject to the impersonal forces of technology and progress that there is nothing to discuss.
Monitoring spending is a possibility
In the absence of a genuine public debate, I suspect we are being led in a direction that is not in our best interests.
Let’s start with the main “people’s concern” around CBDCs. Unlike cash, a digital currency exists in a network run by parties beyond the control of the person who owns the money: the (central) bank and the companies facilitating the financial transactions. There is no way for buyer and seller to exchange outside this system. This key feature of digital currency gives rise to its programmability, the fact that the controlling body could set things up so that the money can only be spent in a certain way or within a certain timeframe.
Discussing the possibility of a CBDC in the UK in 2021, Sir Jon Cunliffe, a deputy Governor at the Bank of England said that programming a digital currency for commercial or social purposes is something the British government needs to consider: “You could think of giving your children pocket money, but programming the money so that it couldn’t be used for sweets,” he said. “There is a whole range of things that money could do, programmable money, which we cannot do with the current technology.”
Elsewhere, financiers are openly considering limits on how much digital money people should be allowed to spend without their data being collected. Fifty euros per transaction and a monthly spending limit of €1,000? wonders Fabio Panetta of the European Central Bank. The proposed measures mimic limits on cash payments over a certain amount: in Portugal it is illegal to exchange more than €3,000, while in Greece the limit is a mere €300. Cash or digital, if governments have their way, it seems that most of our spending will be monitored like parents overseeing children’s pocket money.
Covid passes and carbon credits
How did we get here?
Part of the answer seems to lie with Covid.
A few months into the crisis, the World Economic Forum came up with the idea of the Covid Pass, a vaccination passport it claimed would be the key to reopening global travel. The benefits of the pass would extend beyond disease control to include “mandatory carbon offsetting for each flight passenger, to preserve the environmental benefits of reduced air travel during the crisis”.
Two years on, the WEF claims that the time for carbon allowances – rationing the amount of individuals’ air travel– has arrived. Until recently, writes Mridul Kaushik, there was no appetite for such a measure: “There have been numerous examples of personal carbon allowance programs in discussions for the last two decades, but they had limited success due to a lack of social acceptance, political resistance, and a lack of awareness and fair mechanism for tracking ‘My Carbon emissions.”
But everything, he continues, changed with Covid: “COVID-19 was the test of social responsibility. A huge number of unimaginable restrictions for public health were adopted by billions of citizens across the world.” In other words, given the right reason, the crisis showed that people will accept more restrictions than policymakers had ever dreamed possible.
Specifically, it unleashed a long-held desire to introduce controls on public behaviour to limit the generation of carbon. Australia’s in partnership with fintech start-up CoGo, has just created the first app allowing customers can track their personalised carbon footprints of their spending and buy carbon credits to offset it.
Yet carbon offsetting is fraught with doubt and vested interests. The idea of a carbon footprint dates from 2004, when oil giant BP launched its carbon footprint tracker with the help of advertising firm Ogilvy and Mather.
While compensating for one’s carbon use quickly caught on, it soon emerged that offsetting schemes were being used to salve consciences while business went on as usual. One investigation in the US found that “individuals and businesses who are feeding a $700 million global market in offsets are often buying vague promises instead of the reductions in greenhouse gases they expect.”
By 2021, Greenpeace was calling it greenwashing: “Whether you are filling up at the pump, booking a flight or simply browsing supermarket shelves, you are being targeted by marketing campaigns trying to persuade you that everything is fine … Offsetting has become the most popular and sophisticated form of greenwash around.”
Why then there is so much enthusiasm for carbon offsetting among politicians and policymakers?
A clue comes from COP 27, where there was enthusiastic talk about how carbon credits are soon going to become part of the finance system. “Carbon is moving very quickly into a system where it’s going to be very close to a currency,” said former Bank of England advisor Michael Sheren. “Basically being able to take a ton of absorbed or sequestered carbon and being able to create a forward-pricing curve, with financial service architecture, documentation.”
Follow the money. Or rather: follow the carbon and it will lead to a host of commercial interests. As Brett Scott, the author of the recently published book Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets, points out, banks, payment companies and fintech start-ups stand to gain commercially from the death of cash, while governments are keen on maximising tax revenues and the power to ban activity they don’t like.
So it’s not surprising that these converging interests have formed a powerful coalition to persuade the public that digital is best.
Drifting towards surveillance capitalism
The resulting communications strategy draws on the superficial appeal of cashless payments and the unspoken principle of modernity that life should get ever-easier. “To make incursions into face-to-face commerce, it showcases the surface-level “feel” of digital payments – their slickness or apparent convenience – rather than drawing attention to the deeper structures that underpin them,” writes Scott.
The strategy also deploys the fear of being left out: “Because ‘we’ all want this, no individual dissenter can stand against it, and if they try, they will be left behind … This messaging is reinforced by an entire marketing industry that specialises in telling us to get ready for the change we are apparently driving, lest we are bypassed by a ‘rapidly changing world.’”
Swiping their smartphones and cards to buy a coffee, most people seem to accept the shift to digital payment without question. Concerns about how it excludes those without bank accounts have been forgotten by the socially-minded who, just a few years ago, were stressing the importance of financial inclusion. There is little concern about the erosion of the informal economy that depends on spontaneous transactions: the fetes and odd jobs, the donations to the busker and the homeless.
Yet there are also growing levels of discomfort at the potential for a kind of surveillance capitalism that would form a Western counterpart to China’s social credit system.
Launched through a series of pilots in various cities, the Chinese social credit scheme aims, according to the founding document published by the State Council in 2014, to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step”. Points can be deducted for behaviour such as bad driving and awarded for service to the community. Penalties for a low credit score include travel bans: by the end of 2019, the authorities had stopped 23 million people from buying flights, according to the National Public Credit Information Centre.
Although the government has promised to make it nationwide and compulsory, so far China’s social credit system has been voluntary and piecemeal. In the meantime, the use of Covid apps has given a foretaste of how it could work when fully operational, with citizens banned from taking transport and going to work unless their phone shows a green code that needs constantly updating with Covid tests.
A Big Tech social credit system?
Concerns about the rise of a Western-style social credit system have been growing for some time. Writing in 2019, Mike Elgan highlights how the Big Tech firms of Silicon Valley began monitoring customers’ behaviour on social media as a way of deciding whether they were entitled to goods and services. Being cancelled by Twitter may not change your life. But being cancelled by Uber, WhatsApp, or Airbnb could be very inconvenient.
Recently, the rise of extra-legal social credit measures has accelerated as private companies take censorship into their own hands. In September 2022, PayPal abruptly closed the accounts of several organisations in the UK, including the Free Speech Union. It then tried to introduce new terms to its Acceptable Use Policy which would allow the company to fine users $2500 for posting material it considers “objectionable”.
Following current trends, it’s likely that digital controls in a Western context would serve, not the values of Asian Communism, but a blend of commercial interests and woke thinking.
But there are signs that the people being offered the first centralised digital currency may already be deciding it’s not for them. Having banned cryptocurrency, Nigeria is having trouble persuading its citizens to use Africa’s first CBDC: “eNaira is seen as a proxy for the challenges facing the continent’s biggest economy and a symbol of distrust in the ruling elite.”
Should we in the West let politicians and corporations know how feel about such a measure before they try it here too?