This week, the Human Rights Foundation launched its central bank digital currency tracker, an effort to chart the “development and implementation” of CBDCs worldwide. My Cato colleague, Nick Anthony, is the HRF fellow who led the project.

Their work shows that of the world’s 193 governments, at least 119 are currently researching, piloting, or deploying CBDCs. While other groups have launched similar efforts, the HRF’s tracker has a unique focus on “how CBDCs will impact the civil liberties and human rights of people living under authoritarian regimes.” The HRF points out that 46 percent of the world’s population lives under autocratic governments currently experimenting with CBDCs, including “Belarus, China, Iran, Russia, Saudi Arabia, Thailand, and Turkey.”

The HRF tracker website includes basic information on CBDCs, a full methodology for the tracker, and even “a way for whistleblowers to submit sensitive information about government CBDC projects in a privacy-protecting manner.”

As Nick has pointed out, CBDCs have not launched with much success. Even in autocratic countries, adoption and use rates have been dismal. Nigeria, for instance, restricted cash withdrawals to push citizens into using its CBDC, resulting in citizens protesting cash shortages. Even after a year of restricting alternative payments, the Nigerian CBDC adoption increased to only 6 percent of the population.

The dismal adoption rates are not very surprising. In more developed countries, electronic transactions are not a novelty, so a CBDC doesn’t really take anyone from the third world of finance to the digital age. And in autocratic countries, people tend to distrust the government. So, there’s really no reason to expect most people to sign up to have their lives tied directly to the central government.

Nor is it surprising that so few Americans support CBDCs.

Nonetheless, as HRF (and Nick and I) has pointed out, many of the world’s governments appear to be in some sort of race, where fear of missing out is pushing everyone to adopt a CBDC. This development is scary, though, because CBDCs are so inherently problematic regardless of whether they’re launched by an autocratic government.

CBDCs are not just another form of digital money. All one needs to do is listen to CBDC proponents, especially the government officials and bureaucrats from otherwise non-autocratic countries. Take, for example, the General Manager of the Bank of International Settlements, Agustín Carstens: “We don’t know who’s using a $100 bill today and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control on the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.”

As an alternative, listen to the International Monetary Fund’s Deputy Managing Director, Bo Li: “CBDC can allow government agencies and private sector players to program…targeted policy functions. By programming a CBDC, money can be precisely targeted for what people can own and what [people can do.]”

It is not a question of whether a country launches a CBDC with 100 percent of these kinds of features or none of them. The point is that a CBDC is, inherently, a tool for implementing these kinds of features.

In the American context, this experiment is even stranger.

Dollars are transferred digitally all the time, with great ease and efficiency for anyone with a bank account (or even a pre-paid card). And the overwhelming majority of Americans have a bank account. While there is unquestionably a close tie between private banks and the federal government, that relationship is mostly about overall control of the system, not individual Americans’ lives.

I say mostly because Americans’ financial privacy has been increasingly eroded ever since the passage of the Bank Secrecy Act of 1970. As it stands, Americans do not have the same constitutional protections for their financial data as for other types of personal effects. For example, while law enforcement needs to demonstrate probable cause that a crime was committed to obtain a valid search warrant for someone’s home, the same protection does not apply to someone’s financial records at a bank.

The Bank Secrecy Act is the foundation for an extensive anti-money laundering surveillance and regulatory framework, one that requires financial institutions to carefully identify their customers and monitor their transactions for “suspicious activity.” In the last 50 years, the federal government has consistently expanded this regime. In the last few weeks, 100 Senators signed a letter urging the Biden administration to investigate how terrorists might have used cryptocurrency to secretly fund their operations, with the implication that the BSA regime doesn’t go far enough.

The idea that any arm of the federal government would create a CBDC that doesn’t rely on any kind of identifying information, creating some kind of anonymous digital dollar, strains all reason.

Objectively, a fully functional CBDC is an instrument of autocratic control. It is not just another form of money. It cannot coexist, on a widespread basis, with alternative monetary instruments. It simply can’t provide the touted benefits if people are allowed to choose their preferred method of purchasing goods and services, and it can’t function as designed if it maintains users’ anonymity.

A CBDC fully usurps the private sector in the provisioning of money. For all these reasons, a CBDC is incompatible with a functioning democracy.