Ethan Lou is the author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.
Pierre Poilievre says a lot of things. And sometimes, Mr. Poilievre has a point.
Last week, the Conservative leadership candidate said that, if he becomes prime minister, he would bar the Bank of Canada from issuing a central-bank digital currency.
It’s not entirely a new idea. A Republican legislator has made the same pitch in the United States. A central-bank digital currency, which the Liberal government said in its recent budget it would consider, has grave implications for privacy.
It is true that, in an increasingly cashless economy, our payments are already tracked by all manner of private companies, such as banks and credit-card companies. But everyday transactions are not directly tracked by the government or law enforcement. If they want to see that data, they would need to approach these private companies with a good reason, such as a warrant or a court order.
A central-bank digital currency, on the other hand, cuts out the banks and credit-card companies. It’s essentially an electronic payment system directly controlled by the government.
The Bank of Canada would no doubt like that because it can thus implement its monetary policy, usually a blunt instrument, in a more micro-targeting way. Who knows – maybe that’s a good thing for fighting the inflation the federal institution has been trying so hard to tame.
But having all our financial data directly in the hands of the government is a frightening thought.
The leader in the world of central-bank digital currencies is China, which already has a working product in use by some of the population. Why has China been so eager to develop one? Critics of its human-rights record have long said that a digital currency would enable even greater surveillance and control.
Canada, of course, is not China. The Bank of Canada has said that a core feature of its digital currency would be privacy for its users. One of the bank’s deputy governors, Timothy Lane, said in 2021 that, in fact, the federal institution is a better custodian for people’s information than private companies because it has “no commercial motivation to harvest data.” Fair point.
But the word “commercial” seems to be carrying a lot of weight in that line. Look what Mr. Lane also said. He said the bank, in operating its digital currency, sees a need in “defending against criminal uses.” He also qualified the degree of privacy that the digital currency should provide – “some privacy.”
This brings to mind what the Singaporean government has said about its COVID-19 contact-tracing app, which it made everyone use during the worst waves of the pandemic. The government had also said a lot about how important privacy was. Later, a minister revealed in parliament that police used the data to solve a non-COVID-19 crime. Amid the backlash, the government came up with rules on how the contact-tracing data would be used – only for “serious offences.” Or so the government says.
Who even gets to define “serious offences,” and what’s stopping the government from simply changing its mind? It’s a good thing Singapore is now winding down the use of contact-tracing app. But look how quickly the government had shifted the premise from the previous idea that contact-tracing data would be used only for COVID control. So quickly, a form of mass surveillance got enshrined into law and normalized.
How does that relate to a central-bank digital currency? It’s basically induced demand, like how more lanes on a highway encourage people to drive more; like in Parkinson’s Law, when the amount of work always expands to fill the time allocated to it; or like what Denzel Washington’s character says in The Magnificent Seven: “Man carries a gun, he tends to use it.”
It’s like with the rampant cyberspying disclosed by the U.S. whistle-blower Edward Snowden. Simply having more data available encourages governments to want to peek at it.
In China, where the central-bank digital currency is starting to take hold, some people already have social credit ratings indicating their trustworthiness, and tracking by facial recognition and artificial intelligence is rampant. Last Thursday, the Chinese Twitter-equivalent Weibo told users their IP addresses would be automatically published.
Mr. Poilievre’s aversion to a central-bank digital currency, whatever the source of it, should be taken seriously.
For when considering a central-bank digital currency, there’s a lot more than monetary policy or financial technology that needs to be taken into account. Our government should look at the trends elsewhere and ask itself: Is this the sort of society we want to become?
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