Letter #67: CBDCs and the New World Order of Taxation
Read now to learn how CBDCs will forever change the face of government taxation, and not for the better.
The concept of surveillance is certainly not one with which modern humanity is unfamiliar. We are bombarded almost weekly with stories of companies, government agencies, and other organizations whose systems were hacked or otherwise compromised, which led to the release of our personal information that we weren’t aware was being collected. If one thing is certain, it’s that a lot more of our private information is floating around on the internet and in corporate and government databases than we would like.
Under that lens, it’s interesting to consider the fact that one of blockchain’s greatest strengths is its status as a public ledger recording all of its users’ activity. On the one hand, blockchain ensures that societies aren’t required to put their trust in a single entity or group at the center of the network. But on the other hand, the public nature of blockchain requires that we put our trust in everyone.
Regardless, it should hardly come as a surprise that governments are very interested in the information contained on blockchains and in the surveillance that such information enables. Conspiracy theorists have speculated for a long time that government agencies may have been involved in the creation of cryptocurrencies like Bitcoin and Ethereum. And we know that governments around the world are working to roll out their own pseudo-cryptocurrencies, Central Bank Digital Currencies (CBDCs), to further their own monopolization of citizens’ finances and data. What we didn’t know, at least until recently, was how deep into blockchain surveillance states really are.
The CIA, CBDCs, and You
Case in point: During a CEO Summit hosted earlier this week by the Wall Street Journal, the Director of the United States Central Intelligence Agency (CIA) indicated that his agency has several ongoing projects related to providing “solid intelligence” on crypto to other sections of the U.S. government. If an agency in one country is exploring how cryptocurrency can be used by governments, we can rest assured that similar agencies in many other countries are doing the same rather than risk falling behind.
Although this development shouldn't be surprising to most people, it should definitely be terrifying. Why’s that? Because the Central Bank Digital Currencies I mentioned before will enable a level of government surveillance and control over citizens the likes of which the world has never seen.
Lest you accuse me of being an alarmist, consider the following quote from the Center for New American Security, a U.S.-based think tank, regarding the CBDC that China is already in the process of rolling out:
[China’s CBDC] is likely to be a boon for [the Chinese Communist Party’s (CCP)] surveillance in the economy and for government interference in the lives of Chinese citizens. Transactions will contain precise data about users and their financial activity, all easily accessible to the [central bank]. The central bank—as the registrar and verifier of the digital currency—will likely be able to cut off access to [CBDC] funds in order to punish or coerce any user. The CCP has already begun to increase its punitive powers within the central bank, running an internal team from the Central Commission for Discipline Inspection within the [central bank] that investigates graft. [The CBDC] would help the CCP solidify authoritarian control and crackdowns on dissident groups.
While the above quote implies that the Chinese government’s surveillance is currently targeting criminals and dissidents, there is nothing stopping it and other governments from using the control granted by CBDCs for all sorts of actions against their citizens. Let’s take a look at one example that will hit close to home for everyone:
Taxation Under a CBDC Model
There are a few different ways that CBDCs can operate, and it’s likely that CBDCs will vary, even if only slightly, from country to country. That said, many governments are leaning towards a model in which citizens will either have CBDC accounts directly with the country’s central bank or will have accounts inside the existing banking and financial systems with extremely tight oversight and regulation by government regulators. Either way, the government will have direct access to your money and your information.
It’s been said that nothing in life is certain, except death and taxes. In the case of taxation, citizens experience it daily:
Go to work? Pay income taxes.
Own a house? Pay property taxes.
Bought some food? Pay sales taxes.
Just died? Pay estate taxes.
Governments around the world have set up extensive networks for assessing and collecting taxes and entire agencies to ensure you pay your taxes or punish you if you don’t. Under a CBDC model, however, the bulk of that infrastructure may no longer be necessary.
Why not? To put it bluntly, if the government has full visibility into the money you receive and the money you spend, and has the ability to reach into your account and take out your money at will, then taxation will be a much simpler process for the government. It will no longer need your employer, your mortgage company, or the retailers you shop at to collect taxes. The long arm of the government will just dip straight into your account and will take what you owe.
Perhaps this amount of control and oversight by the government doesn’t leave you all that concerned. Or perhaps you even believe that government control and oversight are good. In that case, I suppose you might be alright as long as the government never makes a mistake or does anything you disagree with. But if that happens, you’re at the mercy of the government or the courts to claw back the money you think is owed to you.
What are the chances that governments will make mistakes?
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