People like to refer to Bitcoin as a trojan horse that we are going to smuggle into the legacy financial system and government. Stablecoins are a trojan horse into our system that has already been successfully smuggled in.
Stablecoins are heralded as some savior of the developing world, a positive escape hatch for them from decrepit financial systems and local currency risks. Well that’s the thing about traps, they have to entice you to wander into them or they don’t function very well as traps do they?
All of the stablecoin volume of significance happens on highly centralized blockchains, issued through highly centralized smart contracts that almost entirely (with rare exceptions like Liquid currently) have the power to arbitrarily freeze or confiscate any outstanding stablecoin tokens. A single party, the issuer, for the super majority of tokens they have issued, can freeze and seize their funds. Anywhere. Anyone. Globally.
These blockchains almost all function on an account model as well, meaning that default behavior associates every transaction a user makes with a single public address identifier, putting their entire transactional history in full view of the world with a single glance. No UTXO clustering, no fancy analysis needed, just look at the account address.
To compound things even further, because all of these chains are highly centralized, there is no software to speak of that general users interact with that is fully validating. Wallets connect to one of a few highly centralized servers every time they interact with their account and associate their IP address with that account.
This is a trap. Pure and simple. The United States does not need a CBDC, it has US Dollar stablecoins. They already function in a way that concentrates all private information that could connect individuals to their on-chain activity in a few hands. All it takes is one interaction with a KYC exchange, or an address posted online, connection to a social media account, and you’re identified.
Stablecoins are just as programmable as a CBDC. Just as capable of implementing restrictions like expiring money, or money that can only be spent in certain ways or certain places. What’s the only difference between the two that matters? Adoption. Stablecoins are viewed favorably, and highly used, whereas most places the sentiment is very against CBDCs.
All of the pieces are there. The central point of control to seize the tokens, the total lack of privacy that makes a single association of KYC data a permanent surveillance mark, and the complete concentration of where that private information will wind up. All there to be snatched up and collected by the US government whenever it wants, and used to coerce stablecoin issuers into acting how they see fit.
These stablecoins are US dollar proxies, they must interact with the legacy financial system, they have to hold actual dollars and treasuries. It is necessitated by how they work. They are under the government’s thumb, particularly the US government’s thumb, whenever the government wishes it.
It blows my mind that people not only accept the process of this happening, but some actively cheer it on. Bitcoin aims to be a truly sovereign and free money that enables anyone to do whatever they want with their own wealth. Yet we are now apparently cheering on the exact opposite of that riding Bitcoin’s coattails to adoption in parallel.
Help me make that make sense.
CBDCs are a bogeyman to keep us distracted from the very real threat of a financial surveillance system that’s already here, stablecoins. We should be confronting that, not sweeping it under the rug.
This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
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