Central Bank Digital Currencies and Programmable Money

As I posted here, the development of central bank digital currencies is evolving quite quickly.  A relatively recent interview with the Deputy Governor, Financial Stability of the Bank of England, one of the world's most influential central banks, provides us with a fascinating look at how governments could use CBDCs, particularly when linked to a digital identity.

 

As background, here is some information on Sir Jon Cunliffe, the interviewee in question:

 

 

Here is the link to the 2 minute-long interview with Sir Jon Cunliffe which appeared on Sky News on June 7, 2021.

  

Here is the transcript of the interview:

 

"At the moment, at the Bank of England we issue bank notes, the notes that everybody holds in their pocket but we don't issue any money in digital form.  So, when you pay with your card or your phone on a digital transaction, you're actually using your bank account, you're transferring money from your bank account to somebody else's.  A central bank digital currency, a digital pound would actually be a claim on the Bank of England issued by us directly to the public.  As I say, at the moment, we only issue digital money to banks, we don't issue to the general public.  So, it will be a digital pound and it will be similar to some of the proposals being developed in the private sector.  You mention bitcoin, they use the same technology, they're not bitcoin, they aim to have a stable value.  They're called stable coins and some of the technology companies, the Big Tech platforms, are just thinking about developing digital coins of that sort and a central bank digital currency would be a digital coin, actually a digital note issued by the Bank of England...."

 

Here's the CBDC sales pitch with my bolds:

 

"Any of these proposals, whether they are stable coins or central bank digital currency, they do offer the potential to bring down cost.  So, at the moment, the average cost , I think, for a credit card transaction is about,  just over half a percent but, of course, if you're a small tea room in (indistinct), you're going to be paying more than that, in some cases well over one percent for that transaction.  So, it could be cheaper, it could be more convenient."

 

Notice the use of conditional words and phrases like "could" and "offer the potential".  In other words, we are being sold the very concept of a central bank digital currency based on lower transaction costs and convenience.

 

Here's the money shot:

 

"And these new forms of money offer the ability for them to be integrated more with other things through their software.  So, you can think of smart contracts in which, you know, the money would be programmed to be released only when something happened.  You could think, for example, of giving your children pocket money, but programming the money so that it couldn't be used for sweets.  There's a whole range of things that money could do, programable money as it's called, which we can't do with the current technology."

 

Programmable money.  Remember that.

 

Further along in the interview (which is not supplied on the link), Cunliffe refers to the Bank of England's recent discussion paper "New forms of digital money" as shown here:

 

Here is a key excerpt from Section 2.2 which also refers to "programmable money":

 

The Bank of England is using the COVID-19 pandemic as the catalyst for the development of a CBDC as shown on this illustration from the discussion paper:

 

Note this key sentence:

 

"Importantly, despite these trends, cash remains a vital payment method for some. In 2020, the FCA found that 1.2 million adults in the UK were unbanked."

Well, we can't have that, can we?  How can we control these "unfortunates" who remain bankless?

Here's one additional commentary on central bank digital currencies for those of you who don't believe that they will be used for nefarious purposes from the brilliant mind of Agustin Carstens, the General Manager of the Bank for International Settlements (BIS), the central bank for central bankers:

Let's repeat the key sentences:

"...for the general use we intend to establish the equivalence with cash and there is a huge difference there.  For example, in cash, we don't know, for example, who is using a one hundred dollar bill today we don't know who is using a one thousand peso bill today.  A key difference in the CBDC is that central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability..."

Programmable money is the absolutely most frightening aspect of central bank digital currencies.  Not only will central banks and, by extension governments, be able to track your every expenditure, they will be able to control what you are allowed to spend it on just as parents control what their children spend their allowances on.  Let's look at some examples:

 

1.) given the fixation on battling global climate change, authorities could prevent you from purchasing more gasoline than your personal "ration" allows, prevent you from travelling on vacation and only allow you to pay for approved household heating products.

 

2.) purchasing of unhealthy foods, cigarettes, alcohol and other items that the powers that be have deemed unsuitable.

 

3.) as a means of economic stimulus during and economic downturn, the powers that be could devalue or even cancel an individual's holdings of CBDCs on a regular basis to force people to spend their "savings".

 

4.) if your behaviours are seen to contradict the government narrative, your CBDC "savings" could be frozen or deleted.  Think "antivaxxers" or those who complain about governments as two vulnerable groups.

  

5.) control of government social payments including Universal Basic Income schemes.

  

Let's close with this thought.  Given that the governments of the world's so-called advanced economies are all moving toward a digital identification system through the use of a vaccine passport and/or imbedded microchip (i.e. Sweden for one example), it will be a relatively simple move to add digital currencies and the accompanying programmable features to an individual's digital identification.

 

The Next Step in the Global Reset - Resetting the Monetary System

On April 19, 2021, this statement appeared on the Bank of England's website:

 

The Bank of England will work together with the United Kingdom's Her Majesty's Treasury to explore the implementation of a potential United Kingdom Central Bank Digital Currency or CBDC.  This move is not unexpected given that other central banks around the world are exploring or experimenting with digital currencies.

Let's start by putting digital currencies into perspective.  According to Michael Casey, Chief Content Officer at CoinDesk, the panel moderator at the recent Davos Agenda Resetting Digital Currencies session:

"We're talking about the disruption of money.  A technology so deeply-rooted into the structure of society that we so often just take it for granted....This isn't just another digital upgrade to our existing bank centric  system of money.  With digital currencies, the money itself is software.  It's programmable and when that happens, a lot of our assumptions about what money is and how it functions may need to be reexamined."

  

Now, let's go back to the Bank of England's statement.  Here is a quote from the statement:

  

"A CBDC would be a new form of digital money issued by the Bank of England and for use by households and businesses. It would exist alongside cash and bank deposits, rather than replacing them.

 

The Government and the Bank of England have not yet made a decision on whether to introduce a CBDC in the UK, and will engage widely with stakeholders on the benefits, risks and practicalities of doing so.

 

The Taskforce aims to ensure a strategic approach is adopted between the UK authorities as they explore CBDC, in line with their statutory objectives, and to promote close coordination between them. The Taskforce will: 

 

1.) Coordinate exploration of the objectives, use cases, opportunities and risks of a potential UK CBDC.

 

2.) Guide evaluation of the design features a CBDC must display to achieve our goals.

 

3.) Support a rigorous, coherent and comprehensive assessment of the overall case for a UK CBDC.

 

4.) Monitor international CBDC developments to ensure the UK remains at the forefront of global innovation.

The Bank of England will also set up two forums as follows:

 

"1.) A CBDC Engagement Forum to engage senior stakeholders and gather strategic input on all non-technology aspects of CBDC. The Forum will have an important role in helping the Bank and HM Treasury understand the practical challenges of designing, implementing and operating a CBDC. It will consider issues such as – but not limited to – ‘use cases’ for CBDC, functional needs of CBDC users, roles of public and private sectors in a CBDC system, financial & digital inclusion considerations, and data & privacy implications. Members will be drawn from financial institutions, civil society groups, merchants, business users and consumers.

 

2.) A CBDC Technology Forum to engage stakeholders and gather input on all technology aspects of CBDC from a diverse cross-section of expertise and perspectives. The Forum will have an important role in helping the Bank to understand the technological challenges of designing, implementing and operating a CBDC. Members will be invited by the Bank and drawn from a range of financial institutions, academia, fintechs, infrastructure providers and technology firms."

In March 2020, the Bank of England released a discussion paper on CBDCs.  The discussion paper noted that a Central Bank Digital Currency would be an electronic form of central bank money that could be used by households and businesses to make payments and that the monetary system in the United Kingdom would change as follows:

 

"Any CBDC issued by the Bank of England would be denominated in pounds sterling just like banknotes and would be introduced alongside rather than replacing cash and bank deposits.  It would not be a cryptocurrency."

 

One of the reasons for the Bank's interest in CBDC is because methods of payments are changing as shown in this graphic:

 

Here is a quote from the discussion paper:

 

"The use of banknotes - the Bank’s most accessible form of money – is declining, and use of privately issued money continues to increase, with technological changes driving innovation. 

 

These developments provide the public with new ways to pay for goods and services, which support and enable the digital economy, but also present new risks. 

 

They raise an important question for the Bank: 

 

As the issuer of the safest and most trusted form of money in the economy, should the Bank provide the public with electronic money – or a Central Bank Digital Currency (CBDC) – as a complement to physical banknotes?"

Here is a graphic showing the declining use of physical currency, one of the alleged drivers behind the move to CBDCs:

 

Now, let's "follow the money".  The World Economic Forum/Davos Overlords have long had an interest in digital currencies as shown here:

 

The January 2021 Davos Agenda featured two sessions about Resetting Digital Currencies as shown here:

 

Note the presence of the current Governor of the Bank of England, Andrew Bailey, among the speakers at this session:

Here is a video of the Session 1 panel:

 

Here is a video of the Session 2 panel:

There is also a very significant additional connection between Central Bank Digital Currencies, the Bank of England and the World Economic Forum as shown here:

 

 

So, there you have it.  Mark Carney, former Governor of the Bank of England (2013 to 2020) and the Bank of Canada just happens to be a member of the Board of Trustees of the World Economic Forum.

  

Given the Bank of England's current foray into exploring the development and implementation of a digital currency and its links with the World Economic Forum and its elite leadership, one of the great cheerleaders of the digital currency movement, we can pretty well assure ourselves that digital currencies are going to be a bedrock of the economy in the not-too-distant future.  While the Bank of England states that physical currency will circulate as it is now, my prediction is that physical currency will completely disappear, allowing the ruling class to further control our behaviours and track our spending.

Let's close with the opening comments from World Economic Forum insider Michael Casey as I noted above as a reminder of where we are headed:

"We're talking about the disruption of money.  A technology so deeply-rooted into the structure of society that we so often just take it for granted....This isn't just another digital upgrade to our existing bank centric  system of money.  With digital currencies, the money itself is software.  It's programmable and when that happens, a lot of our assumptions about what money is and how it functions may need to be reexamined."

Digital Dollars - Bailing Out Main Street America Using Digits

As my long-term readers know, I have a particular fixation with the transformation of our economy into a cashless reality.  I have recently posting this musing on why I believe that the Federal Reserve will be forced to implement a non-physical dollar as part of its next economic recovery efforts.  Thanks to Congress and its response to the COVID-19 pandemic, we now have a roadmap for how the initial phases of this plan will be implemented.

Under the H.R. 6321 "Financial Protections and Assistance for America's Consumers, States, Businesses and Vulnerable Populations Act" as introduced by Rep. Maxine Waters (D-Cal) as shown here:

...we find the following under Title 1, Section 201 Direct Stimulus Payments for Families:

"(1) DIGITAL DOLLAR.—The term ‘‘digital dollar” shall mean—

(A) a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal reserve bank; or

(B) an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).

(2) DIGITAL DOLLAR WALLET.— “Digital dollar wallet’’ shall mean a digital wallet or account, maintained by a Federal reserve bank on behalf of any person, that represents holdings in an electronic device or service that is used to store digital dollars that may be tied to a digital or physical identity.

(3) MEMBER BANK.—The term ‘‘member bank’’ means a member bank of the Board of Governors of the Federal Reserve System.

4) PASS-THROUGH DIGITAL DOLLAR WALLET.—The term ‘‘pass-through digital dollar wallet’’ means a digital wallet or account, maintained by a member bank on behalf of a qualified individual, where such qualified individual is entitled to a pro rata share of a pooled reserve balance that the member bank maintains at any Federal reserve bank."

The Federal Reserve banks have terms which they must follow when establishing digital dollar wallets:

"TERMS OF DIGITAL DOLLAR WALLETS.— Federal reserve banks shall ensure that digital dollar wallets established under this section—

(A) may not be subject to any account fees, minimum balances, or maximum balances; (B) shall pay interest at a rate not below the greater of—

(i) the rate of interest on required reserves; and

(ii) the rate of interest on excess reserves;

(C) shall provide access to debit cards, on- line account access, automatic bill-pay and mobile banking services, customer service, and such other services as the Board determines, except that digital dollar wallets shall not include overdraft coverage.

(D) shall provide, in conjunction with the United States Postal Service, access to auto- mated teller machines to be maintained on be- half of the Board by the by the United States Postal Service at branch offices;

(E) shall be prominently branded in all ac count statements, marketing materials, and other communications of the Federal reserve bank as a ‘‘FedAccount’’ maintained by the member bank on behalf of the United States of America;

(F) may not be closed or restricted on the basis of profitability considerations; and

(G) shall provide holders with reasonable protection against losses caused by fraud or security breaches."

Here are screen captures of the key pages for posterity:

According to the legislation, each of the twelve Federal Reserve banks "...shall make digital dollar wallets available to all citizens and permanent lawful residents of the United States..."   Digital dollar wallets may also be offered by member banks (commercial banks that are part of the Federal Reserve system) with total consolidated assets in excess of $10,000,000,000.

Please note that the House Democrats' latest version of the bill as introduced by Nancy Pelosi , "Take Responsibility for Workers and Families Act" does not contain any language around the use of a digital dollar in its section on direct payments to American families.

It is interesting to note this advancement of the digital currency agenda by both Congress and the Federal Reserve.  While the final approved legislation may not actually include the words "digital dollars", we know what Washington really intended in the original draft of the legislation.  Digital currencies are coming whether we like it or not.