The emergence of Central Bank Digital Currencies (CBDCs) has ignited concerns about government surveillance and censorship. However when judging CBDCs, we should not forget that there is existing massive and sophisticated surveillance and censorship of all financial transactions involving fiat currency. In fact, CBDCs could marginally improve the situation.
While critics argue that CBDCs enhance governmental oversight compared to cash, this comparison is increasingly outdated. The reality is that cash is virtually obsolete for all but minor transactions and is unusable online. The more relevant comparison is between CBDCs and bank accounts.
Traditional bank accounts are subject to both governmental regulations and arbitrary bank policies. In contrast, CBDC accounts would only have to comply with the former, making them potentially less restrictive.
Moreover, governments operate under more transparent, law-based frameworks. Actions like closing a CBDC account would require a formal process that could be legally challenged. Commercial banks, however, can unilaterally close or restrict accounts with no recourse.
Currently, with the decline of cash, individuals are at the mercy of commercial banks. CBDCs could fill this gap by offering basic utility-level financial services to all citizens.
Surveillance and censorship are unavoidable within any system based on fiat currency. The only way to reduce this is through non-fiat currencies like Bitcoin. But while fiat currency is still necessary, CBDCs will provide a marginal improvement.