People are increasingly questioning the potential risks associated with central bank digital currencies (CBDCs), also known as digital currencies or cryptocurrencies. While transparency is crucial for gaining public trust, it is not a panacea to address the concerns surrounding CBDCs. The concept of open-source coding, which involves publicly publishing the source code behind a project, offers a potential solution to some of the problems that plague CBDCs, such as the potential for surveillance and control embedded within the code.
One of the advantages of making a project open source is the ability to conduct external audits. External audits can identify vulnerabilities that may not have been apparent to the original designers, such as potential security breaches or malicious code embedded within the project. This transparency helps to ensure that the CBDC is secure and trustworthy, as it allows users to verify the authenticity of the currency.
However, open-source coding is not a silver bullet for CBDCs, as it is not a panacea for all of the problems posed by a CBDC. The problems associated with CBDCs extend far beyond the often-obfuscated conduct of central banks and go right to the core question of how much power a government should have. For example, the Norwegian central bank’s pilot CBDC project in 2021 highlighted the potential for surveillance and control embedded within the code, as the government was able to effectively ignore the public’s right to financial privacy. This transparency is certainly helpful for understanding how the system works, but it does little by itself to help citizens who want to change the system.
Another example of why open-source code is not a silver bullet for fixing CBDCs can be seen in the United States, where the Federal Reserve has conducted CBDC research and pilots for years. However, one notable project was the collaboration with MIT, which led to the creation of an open-source CBDC model. However, nothing binds the Federal Reserve to the results of Project Hamilton or any open-source model. In fact, the Federal Reserve seems to have all but abandoned the project, as it has not committed to the use of open-source technology in its CBDC research and pilots.
In conclusion, while transparency is crucial for gaining public trust in CBDCs, it is not a panacea to address the concerns surrounding these digital currencies. Open-source coding offers a potential solution to some of the problems that plague CBDCs, such as the potential for surveillance and control embedded within the code. However, it is important to recognize that open-source coding alone is not enough to fix the problem, as it is not a panacea for all of the problems posed by a CBDC. Policymakers should embrace transparency in their CBDC initiatives, but the public should not be fooled into thinking that transparency is a panacea that fixes all of the problems posed by a CBDC. The right to financial privacy, crafting a better framework for financial privacy in the digital age, and the revolution in the way people think about money and finance are key factors that need to be addressed to ensure that CBDCs are a safe and trustworthy digital currency.
Government cannot be escaped by using 'open-source' CBDCs.