CBDCs: The Anti-Sound-Money

There is a pattern in how power responds to threats. It does not simply resist the new thing; it absorbs the language of the new thing, hollows out its meaning, and offers a version that looks similar but operates in the opposite direction. Central Bank Digital Currencies are the monetary expression of this pattern. They borrow the vocabulary of digital innovation — efficiency, inclusion, modernization — while constructing something that is, by every meaningful measure, the antithesis of sound money.

We should be precise about what CBDCs are, what they enable, and why they matter. Not because dystopia is guaranteed, but because once certain infrastructure is built, the question of whether it will be misused becomes a question of when and how, not if.

What a CBDC Actually Is

A Central Bank Digital Currency is a digital form of a nation’s fiat currency, issued and backed directly by the central bank. This distinguishes it from the digital money most of us already use. When you check your bank balance online, you are looking at a commercial bank’s promise to pay you — a liability of your bank, not of the central bank. If your bank fails, that promise fails with it, absent deposit insurance.

A CBDC, by contrast, would be a direct liability of the central bank itself. Your digital dollars would be held not at JPMorgan or Bank of America but at the Federal Reserve, or in a wallet system administered by or on behalf of the central bank. This sounds like a minor technical distinction. It is not. It changes the relationship between the individual and the state in ways that deserve careful examination.

The critical feature is programmability. A CBDC can be designed so that the currency itself carries rules about how, when, where, and by whom it can be spent. This is not a theoretical capability; it is the explicitly stated design goal of several CBDC projects worldwide.

The Current Landscape

China’s digital yuan, the e-CNY, is the most advanced major CBDC program. It has been in pilot use across numerous Chinese cities, integrated into public transit, retail, and government disbursements.

The European Central Bank has been developing the digital euro.

In the United States, the political landscape around a potential digital dollar has been contentious.

Dozens of other nations are in various stages of research, pilot, or deployment. The trend is clear regardless of individual program details: central banks globally view digital currency not as a question of whether, but of how and under whose control.

What CBDCs Enable That Cash Does Not

Here is where the conversation becomes uncomfortable, and where precision matters most. Cash — physical currency — has properties that we take for granted until they are gone.

Cash is anonymous in practice. When you hand someone a twenty-dollar bill, no third party records that transaction. No database logs what you bought, where, from whom, or at what time. The transaction is final and private by default.

Cash is permissionless. No one can prevent you from spending the bills in your pocket. No algorithm evaluates whether your purchase is approved. No authority can disable your cash remotely.

Cash has no expiration date. A dollar bill from 1990 spends the same as one printed yesterday. It does not lose value on a schedule determined by someone other than you. Its purchasing power may decline through inflation, but the instrument itself does not expire.

A CBDC can be designed to eliminate every one of these properties.

Transaction surveillance. Every CBDC transaction can be logged, timestamped, and linked to a verified identity. This creates a complete financial profile of every citizen — what they buy, where they travel, who they associate with, what causes they support. This is not surveillance as a side effect; it is surveillance as a feature. The infrastructure that makes a CBDC work is the infrastructure that makes total financial surveillance possible.

Spending restrictions.Programmable money can carry rules. A government could restrict CBDC spending to approved merchants, approved categories, or approved geographic areas. During a declared emergency, your money could be limited to essential purchases as defined by the authority making the declaration. This is not speculation; Chinese pilot programs have already demonstrated geographic and temporal spending restrictions on the e-CNY.

Expiration dates. A CBDC can be programmed to lose value or expire after a set period. This is the digital enforcement of a concept economists have long fantasized about: eliminating the ability to save by making money perishable. The stated justification is stimulating economic activity. The practical effect is eliminating the individual’s ability to defer consumption — which is, as we have discussed, the foundation of sound financial behavior.

Negative interest rates, enforced. Central banks have long struggled with the “zero lower bound” — the fact that when interest rates go negative, people withdraw cash and hold it physically, escaping the penalty. A CBDC with no cash alternative eliminates this escape. If the central bank sets a negative rate, your balance declines automatically. There is nowhere to go.

The “Financial Inclusion” Argument

Proponents of CBDCs frequently invoke financial inclusion as a primary justification. Billions of people worldwide lack access to banking services, the argument goes, and a CBDC delivered through a smartphone could bring them into the financial system.

This argument deserves scrutiny, not because financial inclusion is unimportant, but because it does not require the specific architecture that CBDCs propose. Mobile money systems like M-Pesa have expanded financial access across Africa without central bank surveillance infrastructure. Cryptocurrency provides permissionless access without any institutional intermediary at all. Simpler banking regulations could achieve inclusion without building a panopticon.

The question to ask is not “could a CBDC provide financial inclusion?” but “does financial inclusion require the surveillance, programmability, and central control that a CBDC architecture provides?” The answer is plainly no. Financial inclusion is the justification, not the motivation. The motivation is control — not necessarily malicious control, not necessarily immediate control, but the construction of infrastructure that makes granular financial control possible for the first time in human history.

Friedrich Hayek, in Denationalisation of Money, argued that the government monopoly on currency issuance was itself the root problem — that competition among private currencies would produce better money than any single issuer could provide. CBDCs move in exactly the opposite direction. They do not merely preserve the government monopoly; they extend it into a domain where physical cash once provided a natural counterbalance. They close the last exit.

CBDCs Against the Sound Money Framework

Let us measure CBDCs against the properties we have identified as essential to sound money.

Scarcity. A CBDC is issued by the same central bank that issues the fiat currency it digitizes. There is no supply cap, no programmatic constraint on issuance, no external check on monetary expansion. The central bank can create as many digital units as it chooses, just as it can with physical currency. On the dimension of scarcity, a CBDC changes nothing — it is the same unsound monetary policy delivered through a new medium.

Permissionless access. A CBDC is, by design, a permissioned system. The central bank or its designated intermediaries control who can hold accounts, who can transact, and under what conditions. Access can be granted, restricted, or revoked. This is the opposite of permissionless; it is permission as prerequisite.

Verifiability. A CBDC’s ledger is maintained by the central bank, not by a distributed network of independent nodes. Citizens cannot independently audit supply, verify transactions, or confirm that the rules are being followed. You are trusting the issuer to report honestly about a system they exclusively control. This is precisely the trust dependency that sound money seeks to eliminate.

Censorship resistance. Zero. A CBDC provides the issuing authority with the technical capability to freeze, redirect, or confiscate any amount from any account at any time. This capability may be subject to legal constraints, but legal constraints can be changed far more easily than mathematical ones.

On every dimension that matters for sound money, CBDCs score not merely poorly but inversely. They are not a neutral technology; they are the architectural negation of the properties that make money sound.

Not Guaranteed Dystopia — But the Removal of Options

We should resist the temptation to frame this as inevitable catastrophe. Governments could implement CBDCs with strong privacy protections, meaningful limitations on programmability, and genuine legal safeguards against surveillance overreach. It is possible. Some proposals include these features.

But the history of surveillance infrastructure offers a consistent lesson: capabilities, once built, get used. The NSA’s mass surveillance programs were technically possible for years before they were revealed; the legal frameworks meant to prevent abuse were quietly reinterpreted to permit it. Financial surveillance under the Bank Secrecy Act has expanded steadily since 1970, with each expansion justified by a specific threat — drugs, terrorism, tax evasion — and none ever rolled back.

Ammous argues in The Bitcoin Standard that sound money is fundamentally about constraining the options available to those in power. Gold constrained governments because they could not create it. Bitcoin constrains because the protocol enforces rules that no single party can change. CBDCs operate on the inverse principle: they expand the options available to those in power while constraining the options available to everyone else.

The deepest problem with CBDCs is not any specific abuse they might enable. It is that they remove the exit option. With physical cash, you can hold value outside the banking system. With Bitcoin, you can hold value outside any institutional system. A CBDC paired with the elimination or marginalization of cash — which is already underway in several countries — creates a monetary environment with no outside. Every transaction is visible. Every balance is controllable. Every financial decision is, in principle, subject to approval.

Hayek understood that the value of competition is not that every competitor succeeds but that the option to choose a different provider disciplines all providers. When there is no option to choose differently — when the government’s money is the only money, and the government can see and control every unit of it — that discipline vanishes entirely.

What This Means for You

We are not telling you that CBDCs will be implemented in their most authoritarian possible form. We are telling you that the architecture being built makes that form possible, and that the track record of governments exercising restraint with surveillance capabilities is not encouraging.

The practical implication is straightforward: maintaining access to monetary instruments that exist outside centralized control is not paranoia. It is prudence. Physical cash, precious metals, and properly self-custodied cryptocurrency are not merely alternative assets. They are alternative systems — systems whose value increases precisely to the extent that the primary system becomes more surveilled, more programmable, and more controlled.

You do not need to oppose digital innovation to oppose CBDCs. You need to understand the difference between technology that distributes power and technology that concentrates it. Cryptocurrency distributes. CBDCs concentrate. The terminology is similar. The architecture is opposite. And the architecture is what matters, because promises about how power will be used are worth considerably less than structural limits on how power can be used.

Sound money has always been about structure over promise. CBDCs are promise without structure. That distinction should inform every decision you make about where and how you hold your wealth.