CBDCs Will Lead to Increased Bitcoin Adoption CryptoBlog

This is an opinion piece by Pierre Gildenhuysthe co-founder of a Hong Kong-based tech startup.

Central Bank Digital Currencies (CBDCs) are being actively developed and discussed in many major countries around the world, including 19 of the G20 countries and about 105 more worldwide, as shown by statistics from the Atlantic Council in 2023. They are progressing rapidly and it is expected that some countries like Australia, South Korea, and the United States will start implementing CBDCs in the near future, like China, which has recently started launching theirs in early 2023.

This is not recent news, but it is something that should be mentioned periodically, as it should scare us all or at least worry anyone who uses any form of money in their daily life. There’s only one potential benefit to CBDCs: essentially, governments cause their own currencies to collapse by stripping as many properties of money as possible before people realize it’s not there. is more salable to anyone else in their country or in the world.

CBDCs are said to be inspired by bitcoin – of course, those countries deploying them are likely building them to be the perfect antithesis to beautifully constructed bitcoin – with the only potential similarity being a distributed public ledger. However, I posit that in the eyes of many governments, “a public ledger” means being owned, and therefore only accessible to the state because it is the voice of the people (in theory).

The expected horrors of CBDCs are discussed at length by many Bitcoiners on Twitter and elsewhere, but very few that I found had anything good to say, which I would like to change.

CBDCs will most likely primarily implement Keynesian principles, as this appears to be the dominant school of economics in much of the western world. Whatever principles a CBDC adopts in the United States will likely serve as a model for all others. Some of these principles could be money that can expire, be automatically taxed, be spent only in certain areas, and be an entirely permission-based form of transaction, meaning people will be forced to transact they may not want, forcing an increased time preference or being forced to forego investments in sectors of their choice. Bitcoin purchases through CBDCs will most likely become impossible or at least increasingly difficult, as no government wants money in competition with the one it controls.

It’s a terrifying prospect. How will Bitcoiners and new adopters acquire more bitcoin before the fiat system collapses? Well, maybe it will create a more circular economy, because fewer people want to hold their transactional power in the form of a fully centralized and supervised system. They will most likely make the decision to start paying and accepting bitcoin for every transaction. This way, they don’t have to spend their money trying to “stimulate economic growth” by spending their expiring CBDCs that they would otherwise have saved for a rainy day, or to avoid unfair additional taxes. This is very similar to the extremely common practice of many companies around the world who discount their services for cash payments to avoid paying taxes on these services.

This was especially prevalent in places like Greece, where the practice is said to have started because the Greeks did not want to pay taxes to the “foreign” Ottomans who controlled the region at the time. The practice has obviously continued because people feel that additional taxation on current transactions by any power, whether local or foreign, is unfair and excessive. In the eyes of some, this is a form of corruption; however, it should not be labeled as such because corruption implies that the people hiding these transactions are in positions of power that they exploit, instead of being those who are exploited by unnecessary taxes from their government.

It is likely that CBDCs will phase out the small amount of paper money that is still a part of global economies today. This means that these countries will rely on technology education and word of mouth about how it works. This will lead to an increase in technological know-how in these countries, which means that it should be increasingly easy to integrate otherwise reluctant members of society into bitcoin once they realize the false value that they hold hard money instead.

In other words, CBDCs may be the perfect trigger to drive mass adoption and spark a circular bitcoin economy. In the end, no matter how much one loves its government or opposes its very existence, the simple inconvenience of having everyone’s transactions moderated and limited based on arbitrary metrics, such as emission scores carbon or nutritional value scores, is enough to turn anyone away from this monetary means.

With people’s savings potentially eaten away to promote faster and more inclusive spending – as has been done with the inflationary practices of the last few decades – people will realize how bad specific Keynesian principles are. These principles are promoted and held to be true by many modern economists today. Average people in the modern world using these principles practically have to invest all of their wealth to ensure that they are not driven out of business by inflation, while running the risk of possible bad investments. Many people would be much more productive for society by developing their own businesses and would also be happier overall if they could simply store their wealth in hard money which is constantly increasing in value with economic growth, at the instead of being forced to create the same economy that we have experienced in recent years. This would likely get worse with the implementation of CBDCs.

Implementing and adopting CBDCs will likely not happen overnight. How long it would likely take for bitcoin adoption to happen would highly depend on the terrifying features implemented by the specific CBDCs. These CBDCs will cause a great deal of pain and suffering for the duration of their active use. The pain they will bring and the practices they will implement are nothing new, but are simply an extension of the practices currently in use. This will continue until people start interacting under a pseudonym using bitcoin for their store of wealth and move away from any form of fiat currency altogether.

Creating a dynamic and successful circular economy will accelerate the adoption and incentivization of the use of bitcoin. A harder currency with higher salability should offer no better incentive for adoption than a currency in rapid decline due to lower salability and rising inflation. If no one wants your money, why are you keeping it? Today, Zimbabwean dollars are only valuable as collectibles, but have no use for goods and services. This, in turn, allowed several competing currencies to take its place (mainly the South African Rand and the US Dollar) until the dollar inevitably won and all of Zimbabwe became dollarized. The same will likely happen to the dollar, and bitcoin will take its place due to inflation and a likely CBDC that will take away everything good from the dollar.

There are many more steps Bitcoin will need to take to enable simplistic adoption for the world’s largest population. More platforms and wallets will need to start offering Lightning payments and the use of SMS (text message) transactions, like the recent development in South Africa. The outlook is somewhat optimistic on the CBDCs front and their ability to push more people out of fiat and into the Bitcoin world.

This is a guest post by Pierre Gildenhuys. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.