‘Open-source’ CBDCs Incapable of Protecting  You From Government

A review of present initiatives shows that governments seeking to implement central bank digital currencies (CBDCs) reveal plenty of evidence that they plot to abuse their people. In his exclusive publication on Cointelegraph, political analyst Nicholas Anthony at the Cato Institute’s Center for Monetary and Financial Alternatives considers governments worldwide likely to exploit CBDCs avenues to abuse their subjects. 

Policymakers Leaning Towards Open-Source Coding in CBDCs

The Friday, May 10 publication on Cointelegraph illustrated that studies on CBDCs suggest the initiatives are vulnerable to exploitation. Some policymakers increasingly lean towards open-source coding to bolster transparency and win the public’s trust. Anthony warns that transparency is welcome but hardly offers a silver bullet.  

Anthony considers the open-source code to imply publicly publishing the project’s source code rather than concealing it as a trade secret. Bitcoin runs on an open-source code that is open and free for all to interact with.  

Anthony considers that an open-source project harbours multiple advantages; the key among them is the openness to external audits. A critical scrutiny could easily spot a vulnerability not apparent to the initial designers. The audit can help discover nefarious elements embedded within the project’s code. 

Anthony reflects on the open-source code behind Bitcoin, indicating its availability for free verification. The 21 million supply cap is beyond an advertising slogan; instead, it rests within the design, thus a source of trust. 

Anthony argues that open-source coding is hardly the silver bullet, particularly in resolving the shortcomings plaguing CBDCs. A review of Brazil’s case where the Banco Central do Brasil (Central Bank of Brazil) availed the source code behind the pilot CBDC led to the detection of surveillance tools and controls embedded into the design.

The Brazil case prompts Anthony to question whether CBDCs align with decentralised cryptocurrency on a path for the centralised money that is digitally available under government control. 

Anthony warns that central banks often rely on unelected officials to steer policies and initiatives, hence lacking direct answers to the public. Though governments quickly stomp out potential currency competition, individuals will likely embrace alternative money.

US Open-Source Code in CBDCs Questionable

Anthony considers that transparency is critical to understanding how a system works. However, he warns that transparency is inadequate to enable citizens who desire to change the system. 

A review of the US open-source code is illustrative, particularly for Title 12 and Chapter 35, where the design seeks exceptions. A similar case arises in sections 3413 and 3414, where various exceptions are sought to enable the government to ignore the user’s right to financial privacy.

Transparency is critical to understanding how governments sustain the scale of financial surveillance. However, transparency cannot single-handedly fix the problem. 

Norway is another instance where the open-source code shows inadequacy to become the silver bullet to fix the CBDCs’ vulnerability. The Norwegian central bank’s code illustrates that the open source is dynamic, particularly when a centralised entity such as the national government is involved. 

Norway’s central bank admitted that its current focus on the CBDCs hardly represents the long-standing devotion to the open-source code. 

The published author on financial privacy considers that the United States had, in its statements, ruled out its approach as assuring future commitment to open-source coding. 

The US Federal Reserve (Fed) has undertaken CBDC research for several years. A notable project is collaborating with MIT in the ‘Project Hamilton’ to help create the open-source CBDC model. 

CBDCs Vulnerable to Government Control

Anthony indicates that Project Hamilton’s results hardly bind the Fed to any open-source model. He suggests that the Federal Reserve appears to have abandoned the initiative. 

Anthony acknowledges that CBDC development is still in the early stages. Nonetheless, he hails the policymakers for embracing transparency, though not to fool the public that transparency is the panacea that will fix all challenges the CBDC poses.

Using open-source technology is the cornerstone of crypto development, though it warns individuals to utilise the information derived from the decentralised space. Doing so is critical towards revolutionising how individuals perceive money and finance. 

Anthony rules out the capability of CBDCs to revolutionise finance perception, given the existing questions on the power exercised by the government. CBDCs suffer the risk of centralising the money where the government has virtually unchecked power over the individual’s economic choices.