- Deutsche Bank has echoed concerns that global CBDCs could reduce the dollar’s dominance
- The bank released a report that highlighted the benefits and drawbacks of CBDCs
- Privacy groups will not like the amount of power governments could gain overnight
Deutsche Bank has added its name to the growing list who believe that Central Bank Digital Currencies (CBDCs) threaten to undermine the power of the dollar. The bank released a report on CBDCs this week that discussed their positives and negatives, as well as how they might be implemented. One of the concerns they raised was the familiar topic of dollar hegemony, also highlighting privacy concerns.
Deutsche Bank Says CBDCs Could Give Governments A Power Boost
The Deutsche Bank report states that the implementation of CBDCs would allow governments to “enhance capital movement control” – in other words to track every transaction made using them:
Centrally-organized digital currencies would make it easier for regulatory authorities and commercial institutions to see and trace every transaction. Governments could spot certain behavioural patterns and identify users, making it easier to crackdown on money laundering or tax evasion.
CBDCs could also allow authorities to implement a “better control mechanism to manage social benefit transfers” which have come under scrutiny during the coronavirus pandemic.
Dollar Dominance (and Privacy) Diminishing
There are negatives to CBDCs however according to Deutsche Bank, prime among them being their use as “an external as well as internal political tool” as well as their potential to “erode the dollar’s primacy in the global financial market.”
This second perceived negative will only be considered so for a certain sector of the world however, with the likes of China pressing ahead with their digital yuan for that very reason. Deutsche Bank is by no means the first to warn of this possible outcome – plenty of others have cast worried looks at the likes of China and their CBDC progress over the past year or so.
Privacy advocates are another group who will be alarmed at the reinforcement from Deutsche Bank that governments will have greater surveillance powers, and with them a greater ability to spy and take unwarranted action against citizens. As Edward Snowdon can attest, this is far from being a trivial concern.