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Cryptocurrency enthusiasts largely oppose central bank digital currencies (CBDCs), yet leading industry firms such as Consensys, Ripple, and Stellar are actively supporting their development.
CBDCs enable governments to exercise unprecedented control over national currencies. While many blockchain leaders should stand against this potential overreach, some are choosing to embrace it.
In June 2023, the International Monetary Fund (IMF) acknowledged that most cryptocurrency innovations stemmed from the private sector, but it commended central banks for experimenting with CBDCs and creating state-controlled instant payment systems such as Brazil’s Pix.
CBDCs represent a new form of digital currency created by a country’s central bank. Typically managed through private networks, they are centralized and programmable, granting central banks the ability to track, monitor, and modify transactions.
This power includes imposing spending limits, setting expiration dates on consumers’ savings, and even freezing or seizing funds. By 2030, CitiGroup predicts CBDCs will account for $5 trillion in circulation worldwide.
While some crypto leaders voice concerns about the impact of CBDCs on privacy, democracy, and authoritarianism, others openly support them despite championing the advantages of decentralized technologies.
For instance, Consensys, the firm behind MetaMask and Infura, plays a key role in blockchain innovation but has embraced CBDCs. In partnership with Visa, Consensys is building infrastructure to connect central banks with traditional financial institutions. Other projects like Ripple and Stellar are also utilizing their blockchains to develop CBDCs.
Ripple’s native cryptocurrency, XRP, operates on a decentralized public ledger similar to Bitcoin and Ethereum. However, in 2021, Ripple introduced a CBDC platform on a separate private ledger specifically tailored for governments, central banks, and financial institutions. This setup offers these entities complete control over their digital currencies.
In contrast, Stellar proposes creating CBDCs on its public blockchain with customized adjustments that centralize governance. Stellar’s CBDC Guidebook recommends centralizing monetary policy and programmability while maintaining a decentralized approach to technology and service delivery.
Ideally, major blockchain firms like Ripple and Stellar—given their strong banking ties—would leverage their influence to oppose CBDCs on ethical grounds despite potential business opportunities. Even in less-than-ideal circumstances, openly discussing the long-term risks of CBDCs, including the threat of granting governments excessive financial authority, could be impactful.
Ideally, major blockchain firms like Ripple and Stellar—given their strong banking ties—would leverage their influence to oppose CBDCs on ethical grounds despite potential business opportunities. Even in less-than-ideal circumstances, openly discussing the long-term risks of CBDCs, including the threat of granting governments excessive financial authority, could be impactful.
Blockchain pioneers may be pleased to see their once marginalized technology discussed at high-profile events like the IMF and Davos. Yet, this recognition does not equate to a win for blockchain principles. In fact, CBDCs undermine the core values of blockchain, such as immutability and decentralization.