CBDC: Future Technology or Dystopia?

CBDC: Future Technology or Dystopia?

What is CBDC?

Central Bank Digital Currencies (CBDC) are virtual national money. The idea of ​​creating such coins came to the authorities after the success of cryptocurrencies, which also exist only in digital form.

Unlike Bitcoin and Ethereum, CBDCs are centralized and regulated by central banks and therefore offer less freedom and anonymity. At the same time, the transition to a digital currency promises many positive changes that can favorably affect the economies of countries. In this article, FBS analysts examine the nature of CBDCs and explain which assets may outperform because of them.

Who has already started developing CBDC

The list of countries that have shown interest in creating digital currency is extensive.


The country began actively developing CBDCs in 2019, but the COVID-19 pandemic has significantly accelerated this process. In 2020, experiments on the introduction of the digital yuan were carried out in various cities in China.

In January 2021, the Agricultural Bank of China (ABC) tested the functionality of exchanging e-CNY for fiat money at regular ATMs in Shenzhen. In the spring, six of the largest financial institutions experimented with creating yuan digital wallets.

As of the end of October 2021, 140 million people have opened e-CNY wallets.

European Union

In October 2020, the ECB published a report on the possibility of creating a digital euro. The regulator assumes that the digital currency will become a complete replacement for fiat money. In mid-July 2021, the ECB announced the start of a phase to study the possibility of creating a CBDC.


One of the pioneers in the creation of CBDCs is Sweden, a country that may be the first in the world to refuse to use cash. From 2010 to 2020, the number of people in Sweden who pay for their purchases in cash fell from 39% to 9%.

More countries are testing CBDC implementation, such as Japan, the Bahamas, and Russia.

The positive side of CBDC

CBDCs can significantly change the financial system. For example, CBDCs will increase the transparency of payments and government control over the spending of budget funds, as governments will track any transactions with these digital assets.

Authorities will be able to finance state projects using smart contracts, making sure that the money is spent only for its intended purpose. As a result, officials and contractors will no longer be able to “lose” billions from the state budget. The volume of the underground economy will decrease and it will be impossible to work illegally.

For central banks, one of the main advantages of CBDCs is that it will be easier for them to regulate monetary policy. The transition to digital finance will allow them to monitor the economy and respond to changes in real time. As a result, stability and security within the system will increase. In addition, CBDCs will help banks to reduce the costs of transfers (including cross-border).

The dark side of CBDCs

The widespread use of CBDC brings not only benefits but also enormous risks associated primarily with the tightening of government control over society.

CBDC is an ideal tool for full state control over most aspects of citizens’ lives. Let’s see how this control will be exercised.

Financial transparency

The state will look at not only a person’s income but also his expenses. Authorities will be able to compare whether your expenses match your income and automatically cancel taxes on each income. And of course, the government will be able to block the user’s CBDC wallet at any time.

Consumption rationing

CBDCs allow governments to control and regulate the level and quality of consumption. Smart contracts can be set up so that people can’t buy what they’re not supposed to buy, or they’ll automatically be taxed for excessive consumption.

Movement control

CBDCs make it possible to restrict the movement of citizens without QR codes, residence permits and document verification. It is enough to limit the territory or duration of spending on digital currencies. It will be easy to regulate the flow of passengers and traffic. For example, you can pay for the subway only from 7 am to 9 am, while your neighbor can pay from 9 am to 11 am.

Support for social rating system

Suppose a country has introduced a social ranking system where some categories of the population receive more privileges and opportunities than others as a reward for certain services to society. People with a high rating can have complete freedom to manage their money. At the same time, the low-status, on the other hand, can be limited in the use of money: for example, by prohibiting high-ranking citizens from visiting establishments or by limiting consumption to the necessary minimum.

An analogue of such a system is already working in China. The current situation with QR codes is implementing the same idea.

Cryptocurrencies as an alternative to total control

As you can see, CBDCs are the exact opposite of cryptocurrencies. Decentralized digital assets are designed to give people financial freedom. In contrast, central bank digital currencies are designed to give the state a tool for total financial control over citizens.

We hope that most of the gloomy predictions above will not come true. If they do, then cryptocurrencies will become one of the alternatives for those who want full control over their lives and funds.

How will CBDCs affect markets?

With the possibility of losing control over their savings, institutional and retail investors may start buying up real assets like gold and silver in droves. Therefore, FBS analysts believe that the precious metals market can demonstrate exponential growth in the next decade.

XAUUSD, monthly chart

XAUUSD has formed a global cup. Currently, the price is forming a handle. If it breaks above the blue trend line, XAUUSD will move towards $2,500 and $3,000. By the end of the decade, the price could easily reach $3,400 per ounce.

In terms of investment, silver has even more potential than its big brother. Silver is actively used in the chemical industry, the production of batteries and the production of parts for the electrical industry, therefore the demand for this metal is constantly growing.

XAGUSD, monthly chart

XAGUSD also looks bullish, with the main target at its all-time high of $48. However, the buyers will be able to break its historical resistance on the third try. In this case, silver will quickly reach $75.

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