The International Monetary Fund (IMF) and central banks are fretting over what could happen if enough consumers use digital currencies instead of national currencies. Some of the controversy is of their own making, as central banks consider issuing central bank digital currencies (CBDC) to combat the rise of private cybercurrency including Facebook’s proposed libra.
The IMF said digital currencies could make illegal activity easier, as well as cash flows across borders, and could reduce the power of central banks and nations to control monetary and fiscal policy.
But what the central banks and IMF call bugs, consumers call features. Individuals trading national currencies for digital currencies specifically are trying to get out from under the control of central banks. They don’t want governments and bureaucrats to determine the value of their holdings, and they like the idea of being able to send money anywhere they want, any time they want, without limit or oversight.
Given that central banks also control monetary policy and national currencies, it’s hard to see how CBDCs will gain much traction. They might allow easier capital transfers, but they would still need extensive government oversight which would eventually make them the same as bank transfers.
Consumers want less government intervention, not just a different kind.