CBDC: Airdrops, Airtaxes and Agency
A few weeks ago, I was speaking at The World Government Summit in Dubai. The panel title was deliberately provocative – Are We Ready for a New World Order? A clip of my comments seems to have gone viral. Friends started calling saying Steve Bannon and the alt-right are going nuts over what you said. What did I say? Here is the clip. I said sovereign digital money, or CBDC, is coming and we are going to need a Bill of Human Rights or constitutional protections for citizens. Had I had more time on stage, I would have explained, as I have done many times before that CBDC can profoundly shift the balance of power between states and citizens. I would have repeated what I have long argued – CBDC is a surveillance system designed to look like money.
The danger and the benefits are clear. We could end up with something like the Social Credit System that has been implemented in China, if we are not careful. Except, a CBDC in a democracy is far more challenging. Autocracies are expected to control their populations. Democracies, in contrast, are expected to protect personal freedoms. Worse still, we could end up with a CBDC system that provides no transparency of government activities but creates full transparency for those of citizens. The combination of blockchain and CBDC will cause also a revolution in public finance because it will bring radical transparency to government spending. It should be the end of buying votes, the end of lobbying, and the end of pork-barrel politics.
But, what went viral was “Former White House Official Says CBDC is Coming”. Well, it is. It’s interesting that this is still a surprise. Are we ready for what it means? No.
So, what would a Bill of Digital Human Rights need to contain? here are some thoughts. The UN has a much longer list here:
1. The right to see all data that has been emitted by you (via all electronic devices including your phone, your car, your appliances at home, and cameras and speakers you pass by and public data collecting centers like voting booths).
2. The right to ask any organization to see all the data about you that they have collected.
3. The right to see the calculations arising from your data that are used to make decisions and judgments about you.
4. The right to contest data and/or conclusions arising from that data.
5. The right to contest being fired or de-platformed based on your data (as distinct from what you say).
The real problem is that algorithms and correlations are considered highly proprietary information. No firm will or can share them without destroying their market value. Yet, these are the measures by which all behavior is judged. I think of algorithms as software dogs. They can be sheepdogs that corral us into the behaviors and news feeds they think we want. They can be aggressive and dangerous pit bulls. Either way, you can’t ask for access to the algorithms and expect to get it. Correlations are the first cousin of algorithms. They are even worse because they are not based on what you do but rather on what your behaviors suggest about you. Wearing red? Living in a particular zip code? Preferring Macchiato to Green tea? Each will lead to beliefs about your affiliations and likely inclinations.
Companies and governments may have the right to collect or buy such data but humans should have the right to see what their digital twin looks like. Right now there is no Equifax for the digital space. But, there could be. It should be better than Equifax, though. After all, Equifax and other credit scoring mechanisms aim to assist the banks, not the citizen customers of the banks. But at least you get to see your financial score. In the digital world, people need to understand their overall digital scores.
The real question about CBDC has to do with social engineering and digital prisons. This process begins with the clampdown on civil protest. It has already become virtually illegal to even attend a protest in the UK for example. Simply attending a protest can land you in jail for 51 weeks under the most recent legislation. So, when you attend a protest, you are now considered the fair target of data surveillance. You self-identify as a problem by being there. Was this legislation prepared, knowing that waves of protests were likely to accelerate given what’s going on in the world economy?
This is exactly why CBDC is coming. It accomplishes a few important tasks. It allows the government to give you money and to take it away. It also allows the government access to everything on your phone, which means everything about you. You may say you have nothing to hide but that reveals you do not understand how modern society and technology work. The algorithms and correlations are not about finding out whether you have broken the law. Instead, their purpose is to discern information about you that will be used to decide whether you should be hired or given access to rationing, should that ever become a reality (hint, it’s already happening in G7 countries.)
Here is how it will work in practice:
Imagine that one day the news lands that if you download an app, you will be given access to $1000. It’s an official government program that will bring discounts and benefits. So, you download the app. Now, chances are that government has access to absolutely everything on your phone and in your email (think Pegasus). This is step one. We need to think about controls on the ability of the government to use information that is beyond the scope of the services conducted by the app. Already we see Australia, for example, passing legislation that allows the police to not only hack into your phone if you are arrested but to enter your social media. This means they have to power to modify or seize and even delete your social media data. This has meaning in a creator economy. One Senator in Australia called this "cyber-enabled abuse of power". The UK legislation I mentioned above has gone further and allows the police to stop and search without suspicion if they are carrying anything that could be used to promote a protest like “placards, flyers and banners” but this must also mean mobile phones.
After all, smartphones have become organizing infrastructure whether for protests or for unionization or almost any form of expressing collective power. This may be aimed at militant protesters but the definition of that is will be subject to change. Let’s keep in mind that societies across the world are facing epic and fast-growing social pressures that might cause protests to break out including a fast-rising cost of living, sudden upward movements in energy and food prices. But people are also protecting public health policies involving lockdowns and leadership failures caused by double standards. The list is too long to full outline but you get the gist of it.
You may say I have nothing to hide so it’s all fine. Now you go to spend the $1000 trying to get rid of the headache the world economy is giving you. You spend it at the bar buying whisky on ice, and hot deep fried chicken wings on the way home when you dive into KFC. Maybe you smoked a cigarette along the way. Could all that cause your eligibility for the program to cease? Or, could the money be distributed in such a way that it can only be spent on approved items? This would be social engineering rather than rationing.
The app will let the government airdrop you cash. An airdrop would be “helicopter money” on steroids. This would bring cash to Main Street instead of bringing it only to Wall Street. But, an airdrop capability could give the government centralized control over a decentralized population. Airdrop could be very convenient for establishing rationing regimes. This idea will raise alarms. Nobody wants rationing, of course. But, is it better to have rationing efficiently organized in this new way than the old way? What if you behave badly? In China, bad behaviors like paying bills late or expressing opinions that are contrary to the official government position will lead you right into a digital prison. Suddenly you won’t be able to buy a ticket for a plane or a train. Worse still, you may find that the authorities can take money away because they do not like how you voted.
Imagine a world where CBDC means your Senator or Congressman or The President can airdrop money to those who support them and “air tax” them for voting against them? An “air tax” goes along with an airdrop. This can be more than just a demand. The tax can simply be deducted from you.
These days we see more and more taxes or fines being applied automatically. You get taxed or fined for violating the speed laws just as speed limits are reduced to levels that are almost guaranteed to give a driver a heart attack. Chicago directed their army of 160-speed cameras to issue 2.8m tickets for people who went more than 6 mph over the speed limit. 10 mph over has been the norm in the past. Tightening the wriggle room over the acceptable speed above the speed limit from 10 mph to 6 mph generated $89m in revenue for the city. Wilmington Delaware dropped the speed limit on stretches of I-95, an Interstate Highway, to 45 mph (against the usual 65 mph). It’s not hard to imagine that speed limits will be tracked via smartphones now. If you speed at all, anywhere, at any time, suddenly your bank balance will be tapped. Now add in jaywalking and any other violations of the rules.
You can see why airtax is a powerful tool for social control. A conversation with the police could run something like this:
Police “hand over your driver’s license”
“Was I speeding?”
You are airtaxed for obstructing the officer’s efforts by speaking back. Your bank balance falls by $100. Remember that your mobile phone and the surveillance devices on your car (increasingly non-optional) have already got a perfect record of exactly when you started speeding.
Add to all this the introduction of biometrics and facial recognition. You won’t have to speak to the officer to make a statement. Your face may say it all with micro-facial movements and the tax or fine can be applied on the basis that your eyes rolled a little or you git a flush of anger in that moment. Note that owning non-compliant crypto will also flag you to the authorities. Your bank may de-platform you for owning the wrong kind of crypto assets. The bifurcation between “clean” and “dirty” crypto is coming too with CBDC. The ability to attribute your actions to your identity is the key. This is why identity attribution has become the hottest area for corporate research and for new startups. Check out Bitcoin’s new Curve which allows for fluid use of known identity.
My point here is not that we should be soft on criminals. It is that we should be soft on humans. After all, these new methodologies are all about holding people accountable for their behavior in a world where corporations spend trillions trying to influence behavior. What chance does a regular person have of refusing what the advertising industry feeds them? How can we expect people to make choices that are free of external influence? Go back and read Edward Bernays, the father of the modern advertising industry. He was freud’s nephew and certainly knew how to manipulate human decision-making. He said, “If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” Today the vendors can tap straight into your mind, causing the release of dopamine, serotonin, and other chemical compounds that no normal human can overrule.
Click on this embedded tweet to see exactly how easy it is to influence you. Humans are mimetic. We copy what we see. Do we want a world where we are held accountable for failing to decline the popcorn, ice cream, or whisky that Proctor & Gamble or Nestle or Diageo spent billions on, buying the best algorithms and techniques that make it nearly impossible for us not to buy it? CBDC can hold you accountable for being influenced and persuaded by forces that you are utterly unaware of.
There is an inherent “no-win” situation building here. CBDC could easily turn out to be a battering ram that crushes human agency and creativity. Are central bankers thinking about this? Most likely not. This is a problem that will spur antidisestablishmentarianism (I always wanted to write that word in an article!), the formation of pirate utopias, the creation of a society that is so disempowered and cannot solve the problems it faces.
The potential loss of personal agency is not consistent with democratic principles. CBDC is no problem in an autarky because the autarky is itself the problem. It’s a serious problem in a democracy.
This is exactly why the ever-elusive Satoshi Nakamoto suddenly reappeared in public on March 31st, 2022 after eleven years with this statement which was shown by Curve at The Bitcoin Summit in Miami last week:
Whoever he is, he sees a race between crypto and control. That may be true in autarchies but it should not have to be true in democracies.
Democratic governments need to understand that their efforts to exert control could kill the very golden goose of creativity and human agency that they were meant to be protecting.
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