There is a growing recognition that central bank digital currencies (CBDCs) are not worth the risk. To address these concerns, some policymakers are turning to open-source coding as a means to promote transparency and gain public trust. However, while transparency is valuable, it is not a cure-all solution.
For those familiar with cryptocurrency, the concept of open-source code is well-known. It involves publicly sharing the source code of a project instead of keeping it confidential. Bitcoin is a prime example of open-source code, as its code is freely available for anyone to see.
Open-source coding offers several advantages. It allows for external audits, enabling the discovery of vulnerabilities that may have been overlooked by the original designers. It also helps establish trust by allowing people to verify that certain features, like supply caps, are truly embedded within the design.
However, open-source coding is not a magic solution, especially when it comes to the issues surrounding CBDCs. A case in point is Brazil, where the central bank published the source code for its CBDC pilot program. Within days, people noticed that the code contained tools for surveillance and control. In a decentralized cryptocurrency, users could choose an alternative path, but with CBDCs, users have limited recourse due to their centralized nature.
Similarly, Norway’s central bank published the code for its CBDC project but later made it clear that this move did not signify a long-term commitment to open-source code. This highlights the fact that what is open source today may not remain open source in the future, particularly when decisions are made by centralized entities like national governments.
Even in the United States, previous commitments to open-source technology have not necessarily translated into ongoing support. The Federal Reserve conducted CBDC research and pilots, including an open-source CBDC model developed in collaboration with MIT. However, the Federal Reserve appears to have abandoned the project, demonstrating that previous statements do not guarantee future commitment.
These examples underscore the fact that transparency alone cannot address the fundamental problems associated with CBDCs. While policymakers deserve credit for embracing transparency, the public should not be misled into thinking that it can solve all CBDC-related issues.
It is important to remember that decentralized cryptocurrencies not only offer transparency but also empower individuals to act on that information. This has sparked a revolution in how people perceive money and finance. CBDCs, on the other hand, risk centralizing money to an unprecedented extent, granting governments immense power over citizens’ economic choices.
In conclusion, while open-source technology has been crucial for the development of cryptocurrencies, it is essential to recognize that CBDCs cannot replicate the benefits of decentralized cryptocurrencies. The problems associated with CBDCs extend beyond the actions of central banks and raise fundamental questions about the extent of government power.