The Nation State was always going to react adversely to the advent of The Bitcoin Age. And CBDCs, otherwise known as Central Bank Digital Currencies, look to be one particularly potent weapon of choice. Widely known to be on the roadmap of Central Banks worldwide, despite vehement claims to the contrary, they would allow for an unprecedented and perhaps irreversible attack on civil liberties and hard-fought for freedoms.

Recently at an event hosted by the British Venture Capital Association, we challenged the Legal Counsel for the Bank of England on the case for CBDCs. We are happy to share that our arguments carried the day, with over 60% of the audience ultimately agreeing that CBDCs are neither necessary nor desirable. We have also submitted an open letter reiterating these points to the BoE as they embark upon a CBDC consultation process with the business community. Our letter seeks to clarify the case against CBDCs and so we share it below as the subject of the latest Timechain newsletter.

CBDCs are not a threat to bitcoin. If anything, they bring its value proposition into sharper focus. Bitcoin was designed to grant private property rights to every human on the planet, in part through an immutable supply. CBDCs are designed to extend the power of the government by manipulating monetary energy at the level of the individual and of course they place no restrictions on the ability to print currency at will. Their supposed ‘digital’ nature is merely a desperate attempt to stay relevant. To the great shame of democratic countries who choose to pursue them, they are seeking relevance through coercion. It does not have to be this way.

The potential introduction of a central bank digital currency (CBDC) by the Bank of England is at best misguided and at worst corrosive to the values the Bank ought to uphold. The appeal of such a project relies on fuzzy – and unsupportable – claims about its potential utility, while overlooking the serious threats to a free and equal system that such a currency would pose.

On the former point, there is no credible argument to be made for the necessity of a CBDC. The pound is already digital in all the ways that matter. One can receive, send, and allocate money near-instantly with the existing sterling infrastructure. Proponents of a British CBDC argue that it will advance financial inclusion and other socially beneficial causes, but this is highly unlikely. A CBDC issued directly by the Bank of England to consumers would eliminate the need for the entire retail banking sector. Given the importance of this industry to the British economy (and tax intake), the Bank will almost certainly not be permitted to do so. If CBDCs are issued through banks in the “wholesale CBDC” model that is frequently discussed, then it does nothing to address financial inclusion or equivalent issues, as there is no noticeable difference for the consumer. The consumer will still have to hold a relationship with the banks after all.

As such, the only realistic purpose of a British CBDC is to increase control and surveillance of the population. Due to its programmatic nature, a CBDC would enable the application of a “social credit score,” CCP style, to “encourage” behaviours the political regime of the day consider desirable. For example, a salary paid in a CBDC could be constrained to exclude cigarettes or alcohol, justified by paternalistic well-being arguments. A future government controlled by more populist or fringe actors might indulge the temptation to leverage this power in yet more intrusive ways. When money is limited in how and on what it can be spent, it ceases to be money and is more akin to a coupon.

CBDCs are therefore an affront to the proud tradition of individual liberty enshrined in the British constitution since the Magna Carta. It is the responsibility of the Bank of England to recognise and avert this danger.

There is a decentralised, fair, and open monetary protocol available to the Bank of England. One that already exists and one that is growing ever stronger for over 14 years now – bitcoin. If the British government is serious about innovating its way out of the debt-laden mess it finds itself in, it should re-embrace the pioneering spirit it once embodied through bitcoin. Bitcoin is a natively digital monetary protocol whose architecture is inherently more performant, adaptable and capable than any CBDC can ever be. Owing to its open-source and permissionless nature, it is free for the private sector to innovate on – just like the internet.

The advantages of bitcoin are already clear and only continue to grow as its service ecosystem develops. It will be – and already has been – adopted by free peoples all over this planet, including a number of sovereign nations. Early adopter countries will be at the forefront of innovation and prosperity in the 21st century, whilst those that seek to restrict and curtail their populations via CBDCs will fade into insignificance and economic dysfunction – consider the capital controls implemented in the later years of the Soviet Union. As a proud subject of His Majesty, I will do my best to ensure that the United Kingdom remains a global centre of freedom and innovation. I hope that the Bank of England does the same.

This letter was submitted on the 7th June as part of the Bank of England Digital Pound Consultation Process

Timechain was featured on Daniel Prince’s ‘Once Bitten’ Podcast to discuss the Bitcoin Venture Capital Landscape!