Open permissionless blockchains aren’t, however, the only show in town. Governments are starting to recognise that some of the elements of transparency provided by blockchains might actually enable them to exert more control over central bank issued money. This is leading to the rapid development of Central Bank Digital Currencies (CBDCs).
No surprises that some of the most authoritarian governments are leading the way in developing digital versions of their analogue currencies as they will have much greater control of the money supply of the national currency, visibility of who owns it and most importantly, what they do with it.
It might be that both types of blockchains, and the money they support, can exist side by side but equally CBDCs may start competing with each other, given the ease with which crypto can flow across borders, which will certainly mean less transparency and more scrutiny of what you do with your money.
Sufficient privacy is necessary for digital currencies – government and private – to be valuable, but adequate visibility is also required for society to be held accountable. Getting this balance right will prove a huge challenge to authorities and as the crypto industry matures and becomes more relevant, this tension will play out and become increasingly important to our lives.
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