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Central banks are looking to digital ID schemes as a means to achieve universal access to CBDC, according to a new report on Central Bank Digital Currencies (CBDCs) in Africa from the Bank for International Settlement (BIS).
âUniversal access to eNaira is a key goal of the CBN, and new forms of digital identification are being issued to the unbanked to help with accessâ â Central Bank Digital Currencies in Africa, BIS, November 2022
Digital ID is a mechanism by which the Central Bank of Nigeria (CBN) wants to achieve universal access to its CBDC â the eNaira â which is being carried out in the name of financial inclusion and helping the unbanked.
According to the BIS November 2022 report on Central Bank Digital Currencies in Africa, âUniversal access to eNaira is a key goal of the CBN, and new forms of digital identification are being issued to the unbanked to help with access.â
The report goes on to say that âAn eKYC-enabled CBDC that is integrated with the national ID schemes could greatly ease financial onboarding.â
âAn eKYC-enabled CBDC that is integrated with the national ID schemes could greatly ease financial onboardingâ â Central Bank Digital Currencies in Africa, BIS, November 2022
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âThe most promising way of providing central bank money in the digital age is an account-based CBDC built on digital ID with official sector involvementâ â Bank for International Settlements, Annual Economic Report, 2021
Central banks around the world have abandoned the idea of complete anonymity, favoring instead digital identity schemes as unique identifiers for onboarding people to their programmable CBDCs.
On September 27, Franceâs central bank â the Banque de France â held an international roundtable in which central bankers from the US and the EU also confirmed that digital dollars and euros, should they go forward, would not be anonymous.
The same goes for Indiaâs digital rupee, with the Reserve Bank of India announcing in October that its âCBDC would need to be compliant with AML [Anti-Money Laundering] regulations, which rules out truly anonymous payments.â
In the case of Nigeria, âWhen it comes to anonymity, the CBN has opted to not allow anonymity even for lower-tier wallets,â the BIS report reads.
âWhen it comes to anonymity, the CBN has opted to not allow anonymity even for lower-tier walletsâ â Central Bank Digital Currencies in Africa, BIS, November 2022
âThe informal sector â where most employment is in the continent favors the anonymity of cash. This is an obstacle to financial inclusion and eventually to the wide adoption of CBDCsâ â Central Bank Digital Currencies in Africa, BIS, November 2022
Across the African continent, the majority of workers favor the anonymity of cash.
The BIS November 2022 report sees this dilemma as âan obstacle to financial inclusion and eventually to the wide adoption of CBDCs.â
While the majority of people working in Africa prefer the anonymity of cash, the CBN eNaira regulatory guidelines from October, 2021, says that a Bank Verification Number and/or National Identification Number âshall be used as unique identifiersâ for individuals.
But once these individuals are uniquely identified, their purchasing power is then given over to the central bank, which limits how much they can spend and save on a daily basis.
In the case of Nigeriaâs CBDC, the central bank has even programmed âcaps on daily transaction limits.â
âThe individual and merchant wallets of the eNaira have different caps on daily transaction limits and the amount of eNaira that can be held in themâ â Central Bank Digital Currencies in Africa, BIS, November 2022
According to the BIS, âThe individual and merchant wallets of the eNaira have different caps on daily transaction limits and the amount of eNaira that can be held in them, depending on their customer due diligence tier.â
Why are people being restricted on how much money they can hold and spend on a daily basis?
The official reason is that âThe caps are intended to ensure that the eNaira is primarily used for smaller retail payments and that competition between eNaira and bank deposits is limited.â
âUsers of eNaira are subject to a tiered structure of KYC requirements based on transaction and
balance limitsâ â Central Bank Digital Currencies in Africa, BIS, November 2022
Central banks all over the world are not only looking to eliminate anonymous transactions through some form of digital ID, but also to make their CBDCs fully programmable.
In October, International Monetary Fund (IMF) deputy managing director Bo Li highlighted this programmability feature of CBDCs as a means of bolstering financial inclusion, stating that âBy programming CBDC, money can be precisely targeted for what kind of people can own and what kind of use this money can be utilized.âÂ
Likewise, the Reserve Bank of India announced in October, 2022 that it would explore programmability for its digital rupee, which included the possibility of setting expiry dates.
âBy programming CBDC, money can be precisely targeted for what kind of people can own and what kind of use this money can be utilizedâ â Bo Li, IMF, October 2022
âCentral bankers, academics, politicians, and an assortment of elites from over 100 countries [âŠ] used Nigeria [âŠ] as a Petri dish to test their nefarious plans to use CBDCs to enslave the people of North America, Europe, and beyondâ â Nick Giambruno, Financial Underground, November 2022
One year after launching in October, 2021, the eNaira has only achieved 0.5% adoption among Nigerians.
Financial Underground founder Nick Giambruno called the eNaira experiment a âmassive failure.â
âNigerians view the eNaira as âa symbol of distrust in the ruling eliteâ and that the people view the government as âhostile to them and therefore have no interest in anything it introduces,'â Giambruno wrote, paraphrasing a Bloomberg report.
Cointelegraph additionally reports that âthe naira has been devalued around six times since 2015, and economists expect a further 20% loss in value next year, as the economy has been further compounded by galloping inflation, which could make the push for a CBDC a hard sell to many of the countryâs citizens.â
âWe tend to establish the equivalence with cash, and there is a huge difference thereâ â Agustin Carstens, BIS, October 2020
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âA key difference with a 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 thatâ â Agustin Carstens, BIS, October 2020
Speaking at an International Monetary Fund (IMF) seminar on October 19, 2020, BIS general manager Augustin Carstens explained that a CBDC gives the central bank both âabsolute controlâ over the use of the CBDC, along with the technology to enforce that control.
âWe tend to establish the equivalence with cash, and there is a huge difference there,â Carsten said in 2020.
âFor example, in cash we donât know for example whoâs using a 100 dollar bill today. We donât know who is a 1,000 peso bill today.
âA key difference with a 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.
âThose two issues are extremely important, and that makes a huge difference with respect to what cash is.â
âGradual obsolescence of paper currencyâ is âcharacteristic of a well-designed CBDCâ â World Economic Forum Agenda, September 2017
Ultimately, a CBDC linked with digital ID could allow governments and corporations to put permissions on what you can buy with your own money, including expiration dates on when you can spend it.
Once digital ID and CBDC reach a certain level of acceptance and adoption by the general public, the option to go back to physical means can be quietly eliminated with little-to-no pushback.
In fact, a WEF Agenda blog post from September, 2017 lists the âgradual obsolescence of paper currencyâ as being âcharacteristic of a well-designed CBDC.â
âThis digital identity determines what products, services and information we can access â or, conversely, what is closed off to usâ â World Economic Forum, Insight Report, September 2018
Programming peopleâs access to products, services, and information with CBDCs and digital IDs lays the foundation for a system of social credit scoring like that of the Chinese Communist Party.
It is a system of control that can be used to manipulate, coerce, or otherwise incentivize changes in human behavior while eliminating individual agency, autonomy, and anonymity.
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