Thread

What Are We Talking About?

Central Bank Digital Currencies (CBDCs) are digital versions of dollars, euros, or other national currencies, issued directly by central banks and potentially programmable with built-in rules. Imagine money that can:

• Expire if not spent by a certain date

• Only work for approved purchases

• Be frozen or redirected remotely

• Track every transaction you make

• Change its value based on who holds it

Over 130 countries are exploring CBDCs as of late 2025. China's digital yuan is already deployed. The Federal Reserve and European Central Bank are actively researching implementations. This isn't speculation—it's coming.

Why Does This Matter?

To understand the danger, we need to understand how money currently works and what CBDCs fundamentally change.

How Money Works Now: The Banking System

Today, when you deposit money in a bank:

1. The bank holds your deposits as liabilities they owe you

2. They lend most of it out, keeping only a fraction in reserve

3. Your spending power depends on your bank honoring withdrawal requests

4. Banks compete for your business, limiting their control over you

This creates a distributed system. No single entity controls all money or all transactions. The Federal Reserve sets policy, but commercial banks implement it through millions of independent decisions. If one bank fails or abuses customers, you can switch to another.

The system has problems—banks can be irresponsible, regulations can be captured, crises can spread through interconnections. But it has one critical feature: no single point of control.

How CBDCs Would Work: Direct Central Bank Control

With retail CBDCs, you hold money directly at the central bank:

1. No commercial bank intermediary—just you and the Fed

2. The central bank sees every transaction in real-time

3. Money can be programmed with conditions built into the currency itself

4. No alternative—if CBDCs replace cash and bank deposits, exit is impossible

This creates a centralized system. One entity controls the currency, sees all uses, and can modify behavior directly through programming.

The Core Danger: Building From Imagined Futures

Here's where the fundamental risk lives, and why programmable money is qualitatively different from what we have now.

Two Ways to Build Anything

When you build something—a business, a family budget, a society—you face a basic choice:

Build from what you have (wealth-based):

• Start with verified resources

• Expand only when you've proven capacity

• Growth is sustainable because it's grounded in reality

• Failures are local and recoverable

Build from what you imagine (debt-based):

• Borrow from expected future income

• Expand based on projected growth

• Growth can be rapid but depends on predictions being right

• Failures cascade because they're built on assumptions

Both approaches exist in healthy economies. You might take a mortgage betting on future income (debt-based), but you still need a down payment and verified employment (wealth-based constraints). The balance matters.

Why Programmable Money Shifts This Balance

Current banking regulations constrain how much can be extracted from imagined futures. Banks must hold capital reserves, maintain liquidity buffers, pass stress tests. These rules force building from verified positions—you can't lend unlimited amounts based purely on optimistic projections.

Programmable CBDCs bypass these constraints entirely.

Example: Expiring Money

Imagine the central bank wants to "stimulate the economy" during a slowdown. With programmable CBDCs, they could:

1. Issue stimulus payments with 90-day expiration dates

2. Force spending by making the money worthless if not used

3. Mandate it can only be spent on certain approved categories

4. Track compliance in real-time

This forces economic activity now based on the assumption that forced consumption will create future growth. But what if:

• The economy needs saving, not spending?

• People need to pay down debt, not accumulate more consumption?

• The recession is structural, requiring business model changes rather than demand stimulus?

• The "approved categories" channel money to politically connected industries?

Forcing spending from imagined growth scenarios extracts from the future. If those scenarios don't materialize, the debt still exists—in this case, malinvestment that makes the underlying economy weaker.

Example: Conditional Transfers

Now imagine the government wants to ensure "proper" use of benefits:

1. Unemployment insurance only works for "essential" purchases

2. Food assistance can't be used for "unhealthy" items

3. Child tax credits must be spent on "approved" child-related goods

4. All definitions controlled by whoever holds power

This isn't about whether these goals are good. It's about the architecture of control.

With cash or bank deposits, enforcement requires active surveillance and prosecution—expensive, visible, subject to due process. With programmable money, enforcement is automatic, invisible, and unchallengeable. The money simply won't work for unapproved uses.

The decision about what's "approved" happens in committee meetings and policy documents most people never see. The enforcement happens in code most people can't read. The result is control without consent.

The Surveillance Trap

Even without programmability, CBDCs create comprehensive surveillance capabilities far beyond anything currently possible.

Current System: Partial Visibility

Right now:

• Cash transactions are completely private

• Bank transactions are visible to your bank and (with warrants) law enforcement

• Credit card companies see your purchasing patterns

• No single entity sees everything

This fragmentation protects privacy through distributed knowledge. Your bank knows some things, your credit card company knows others, merchants know what you bought from them. Assembling complete pictures requires coordination, warrants, compliance with privacy laws.

CBDC System: Total Visibility

With retail CBDCs:

• Every transaction flows through the central bank

• Complete purchasing history available to one entity

• Real-time tracking of all economic activity

• No technical limitation on surveillance

The initial promise is always: "We won't look without good reason." But:

• Definitions of "good reason" expand over time

• Access controls can be changed by policy, not law

• Emergencies justify exceptional measures that become permanent

• Once infrastructure exists, using it is just a policy decision

Historical pattern: Every surveillance capability created "for good reasons" eventually gets used for broader purposes. Patriot Act surveillance, designed for terrorism, used for drug enforcement. Financial surveillance, designed for money laundering, used for political targeting.

With CBDCs, the infrastructure for total economic surveillance exists from day one. The question is not whether it will be used broadly—it's how long until the first expansion.

The Exit Problem: Nowhere to Go

The most dangerous aspect of CBDCs is what happens when they become mandatory.

Current System: Multiple Options

Today, if you don't trust the banking system, you can:

• Hold physical cash

• Use credit unions or community banks

• Engage in barter or alternative currencies

• Move assets offshore

• Exit the system partially while still participating in the economy

These alternatives limit systemic abuse. If banks become too predatory, people withdraw. If government policy becomes too controlling, people shift to cash. The possibility of exit constrains bad behavior.

CBDC System: Mandatory Participation

If CBDCs replace cash and dominate deposits:

• No alternative currency exists domestically

• International alternatives can be banned or controlled

• Holding "unauthorized" currencies becomes criminal

• Participation in the economy requires using the surveilled, programmable system

At that point, every economic decision you make happens under central bank visibility and control. Your options become:

1. Comply with whatever conditions are programmed into the money

2. Drop out of the economy entirely

3. Engage in illegal activity

There is no legitimate exit.

This is unprecedented in modern economies. Even authoritarian states with capital controls typically allow some cash use, some informal economy, some escape valves. A mandatory CBDC system closes these entirely.

The Crisis Ratchet

The path to comprehensive CBDC control follows a predictable pattern:

Phase 1: Introduction

• "Voluntary" parallel system alongside cash and bank deposits

• Focused on convenience: instant payments, lower fees, financial inclusion

• Limited programmability, privacy protections promised

• Adoption incentivized through small benefits

Phase 2: Expansion

• Cash gradually removed from circulation

• "Not enough demand" to maintain cash infrastructure

• Government payments shift to CBDC-only

• Major retailers stop accepting cash for "efficiency"

Phase 3: Crisis Exploitation

• Economic or security crisis creates "emergency"

• Temporary measures grant expanded surveillance/control

• Expiring money, conditional transfers, negative interest rates

• "Temporary" measures become permanent

Phase 4: Lock-In

• Cash effectively extinct

• Bank deposits converted to CBDC

• Alternative currencies prohibited

• No exit remains

Each phase seems reasonable in isolation. Taken together, they create irreversible centralization.

What This Means For You

If comprehensive CBDCs are implemented:

Your economic freedom depends entirely on not being flagged.

The system doesn't need to actively oppress everyone. It just needs the capability to oppress anyone, instantly, without due process. That capability changes behavior even when unused.

When your money can be frozen remotely:

• Will you donate to controversial causes?

• Will you criticize powerful institutions?

• Will you participate in protests?

• Will you make purchases the government might disapprove?

Most people won't. Self-censorship is the most effective censorship.

When your spending is fully visible:

• Will you make purchases you're embarrassed about?

• Will you support organizations under political scrutiny?

• Will you deviate from "normal" purchasing patterns?

Most people won't. Conformity is the safest path.

When your money has expiration dates or conditions:

• Can you save for long-term goals?

• Can you build resilience against emergencies?

• Can you make decisions based on your judgment vs. programmed incentives?

Most people can't. The architecture enforces short-term thinking.

This isn't about what any specific government will do with these powers. It's about what becomes possible once the architecture exists.

The Alternative Path

There is a different approach to monetary systems that doesn't require centralized control or comprehensive surveillance.

Build from verified positions rather than imagined futures:

• Currency backed by real assets, not projected growth

• Distributed networks where no single entity controls everything

• Transparent protocols that anyone can verify

• Privacy by design, not by policy

Bitcoin demonstrates these principles:

• No central bank controls supply or freezes accounts

• Every transaction verified by distributed network

• Rules enforced by math and code, not discretion

• Privacy through pseudonymity, not surveillance

You might not like Bitcoin specifically. The details of any particular implementation matter less than the architectural principle: systems built on verification and distribution rather than extraction and centralization.

What Can Be Done?

If you're concerned about CBDC risks:

Individual Level:

1. Understand the stakes - These aren't technical details, they're fundamental architecture

2. Maintain alternatives - Hold some assets outside the banking system

3. Support privacy-preserving systems - Use and advocate for technologies that preserve economic freedom

4. Demand cash preservation - Physical currency must remain viable

Political Level:

1. Require legislative approval - CBDCs should not be implemented by regulatory fiat

2. Ban programmability - If digital currency exists, prohibit expiring balances and conditional transfers

3. Mandate privacy - Central banks should not have access to individual transaction data

4. Preserve cash - Legal tender laws must protect physical currency

Systemic Level:

1. Promote distributed alternatives - Support monetary systems without central points of control

2. Require transparency - Any CBDC implementation must be fully open-source and auditable

3. Enable exit - Maintain multiple monetary options so no single system becomes inescapable

The Choice Ahead

The fundamental question isn't whether digital currency is good or bad. It's about who controls the architecture and what becomes possible.

Systems built on centralized control and extraction from imagined futures:

• Enable rapid policy implementation

• Create comprehensive visibility

• Allow targeted intervention

• Make exit impossible

Systems built on distributed verification and building from verified positions:

• Develop more slowly but sustainably

• Preserve privacy through architecture

• Enable innovation through competition

• Maintain freedom through exit options

The danger of CBDCs isn't what they'll be used for initially. It's what becomes possible once the architecture is in place.

Every surveillance system, every control mechanism, every centralization of power begins with good intentions. They're created to solve real problems: crime, terrorism, inequality, instability.

But the architecture remains after the crisis passes. And it will be used.

The question is whether we build monetary systems that make abuse possible, or monetary systems that make abuse impossible.

That choice is still available. But the window is closing.

---

Appendix: Common Objections

"The government already knows about my transactions through banks."

No. Banks know your transactions. Government needs warrants to access that information. With CBDCs, government IS the bank—no warrant needed, no independent intermediary, no procedural protection.

"I have nothing to hide, so why should I care about privacy?"

Privacy isn't about hiding wrongdoing. It's about maintaining dignity, autonomy, and freedom from control. Would you accept cameras in your home because "you have nothing to hide"?

"We need to modernize the payment system."

Yes. But modernization doesn't require centralization. Credit cards modernized payments without central bank control. Cryptocurrencies enable instant settlement without central surveillance. Digital ≠ centralized.

"Other countries are doing it, so we have to compete."

China's digital yuan is a surveillance system integrated with social credit scores. "Competing" by copying their architecture means abandoning the freedoms that supposedly distinguish us. Race-to-the-bottom is not strategy.

"Won't this help include the unbanked?"

Creating dependency on a surveilled system doesn't help anyone. True inclusion means access to economic tools that preserve dignity and autonomy, not requiring submission to comprehensive monitoring as the price of participation.

"The government wouldn't abuse this power."

History suggests otherwise. Every government, regardless of initial intentions, eventually uses available powers for purposes beyond their original scope. The question isn't whether current leadership is trustworthy—it's whether you trust every future government with total economic control forever.

---

The Pattern Underneath

There's a deeper pattern at work here that explains why CBDCs are dangerous regardless of who implements them.

All coordination systems—governments, markets, organizations, societies—face a fundamental choice: build from what exists now, or extract from imagined futures.

Building from what exists:

• Start with verified resources and capabilities

• Expand only when you've demonstrated capacity

• Failures teach lessons without destroying the foundation

• Growth is sustainable because it's grounded in reality

Extracting from imagined futures:

• Borrow against projected growth

• Expand based on assumptions about what will happen

• Failures cascade because the foundation was never solid

• Growth can be rapid but fragile—when predictions fail, everything collapses

Both approaches exist in every society. The question is which one dominates the architecture.

CBDCs with programmability shift the entire monetary system toward extraction:

• Expiring money forces spending based on assumed future growth

• Negative interest rates extract value from savings to stimulate imagined demand

• Conditional transfers allocate resources based on central planning assumptions

• Mandated participation prevents building alternatives

This isn't just bad policy—it's architectural dependency on assumptions.

When those assumptions fail (and they always eventually do), the system lacks resilience because it never built from verified positions. It only extracted from imagined ones.

The alternative exists:

Monetary systems can be designed to reward building from verified positions:

• Currencies backed by actual assets, not projected growth

• Distributed networks that don't depend on any single entity being right

• Transparent rules that anyone can verify

• Freedom to exit when systems fail

These systems grow more slowly but sustain. They allow experimentation and innovation without betting the entire civilization on central planners being correct.

This isn't about fear. It's about understanding what we're building and choosing wisely.

The architecture of our monetary system determines the architecture of our freedom.

When we build systems that require extraction from imagined futures, we create fragility that eventually collapses.

When we build systems that enable building from verified positions, we create resilience that sustains.

CBDCs represent a choice to centralize extraction. That choice has consequences.

Choose carefully.