Hand with eNaira symbol

How U.S. CBDCs Could Fail

The Nigerian CBDC Failure Was Spectacular

by Toby Esterhase

Nigeria has 2/3rds the population of the United States. Its local currency, the Naira, is almost worthless because the majority of Nigeria’s exports are in the form of crude oil, which is bought in US dollars and yuan. Since the government is the seller of the oil, the government has always put a large amount of its dollar oil receipts into treasury reserves. The local population uses foreign currency (mostly dollars) for transactions when they can get them, but dollars are often in short supply because the treasury hoards them.

Why the eNaira Failed

  • The eNaira CBDC never reached 5% acceptance before its use fell to near-zero.
  • The Naira’s government-established exchange rate is around 130% of the black market exchange rate.
  • The eNaira could not be used in cross-border trade because counter parties pay in dollars or yuan and demand payment in those currencies.
  • Nigeria’s shadow economy has been estimated by the IMF to be as high as 60% of the national GDP. Players in the shadow economy certainly don’t want their transactions recorded on a government ledger.
  • Nobody wants anything to do with the Naira in any form, digital or paper.

The “eDollar” Is Being Released Into Much More Favorable Conditions in the US Than Was the eNaira in Nigeria

  • People in the US still universally trade in dollars mostly because their income is paid in dollars. There really is no other common currency in use here.
  • The US technology infrastructure, in terms of smart phone penetration, and number of people who have bank accounts and credit cards, is far higher than in Nigeria.
  • The Bank of International Settlements (BIS) requires all member states to fully implement CBDCs by 2025. The US appears ready to do so by then. The CBDC payment rails started operation in the US on July 20, 2023. (Called Instant Pay at my credit union).

The U.S. Version of CBDCs Is Unlikely to Give the Globalists What They Want

The globalists want a number of things related to CBDCs. Their cause is to erase national, cultural, regional and personal identities. A global, centrally-controlled, programmable money provides a short-cut to controlling the population without the need to spend decades destroying societal identity through “wokeism” and wars. They want to use CBDCs to achieve these main goals:

  1. Issue currency in unlimited amounts directly from the government to voters, and be able to program it with an expiration date
  2. Prohibit the payment for energy in excess of a person’s carbon credit allowance
  3. Prohibit travel or even the ability to buy food to those with a low social credit score

Globalist objectives (2) and (3) are also problematic in a practical way. Point of sale terminals need the requisite software to conduct an electronic dialog with the buyer’s smart phone because the phone will know the purchaser’s social credit score and carbon allowance. There are still gas stations that have never installed credit card chip readers at their pumps, a decade after they were mandated to do so.

CBDCs require 100% adoption by all parties in order to meet the globalist goals, which means adoption must be forced by the elimination of cash. The all-or-nothing adoption strategy that CBDC advocates demand is the core weakness of the entire approach.

There are tens of millions of people who operate in the cash economy out of necessity, millions who are unbanked and therefore won’t be able to get a CBDC account, and many who do not have and cannot afford a smart phone.

One CBDC Threat That Won’t Go Away: Confiscation of Your Bank Balance

Even if the worst of the globalist restrictions on the use of your money never come to pass, the government’s ability to confiscate your money will be a core feature of all CBDCs worldwide.

The government’s ability to confiscate your money will be a core feature of all CBDCs worldwide.

Software developer Pedro Magalhaes reverse-engineered the code behind Brazil’s CBDC program. He found that the Brazilian CBDC system allows the government to transfer funds out of anyone’s bank account.

The government’s power to confiscate funds for tax payments, to satisfy child support orders, to implement civil forfeiture, and to freeze the funds in accounts as punishment for political crimes will be irresistible, as the Canadian government proved during the trucker strike.

No form of money that can be rescinded by its issuer will ever be accepted in international commerce unless the entire world is forced to use it; which isn’t going to happen.

This implies the US will have two currency systems: one for domestic use (CBDCs), and the other for international trade in conventional dollars.

Some investment analysts such as Lawrence Lepard of Equity Management Associates and a frequent guest on national television believes that the US version of the CBDC will fail in its entirety and take down the US dollar with it, leading to catastrophic inflation.

Cash can be phased out by simply stopping the printing presses and letting the bank notes wear out.

Parallel, censorship-free payment and credit systems have arisen to counter the CBDC threat. An example is Dan Bongino’s Parallel Economy credit card payment settlement system. Another is the Bitcoin Lightning network and the many payment apps that interface to it, such as Strike, Bitpay and others.

The cash-only Mexican drug cartels on our border, with their own 44-thousand strong armies, may have the final say as to whether CBDCs live or die.

(Toby Esterhase is the pseudonym of a Silicon Valley technology investor living in rural Washoe County Nevada.)

(The views expressed in this commentary are those of the author and do not necessarily reflect the official position of the Nevada Signal.)