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Will privacy coins like Monero, Dash, or Zcash rise if CBDCs are coming?

Will privacy coins like Monero, Dash, or Zcash rise if CBDCs are coming?

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  • European Central Bank Governor Says Bitcoin Is Worthless.
  • Many users rely on privacy protection as CBDCs become mainstream.

In a recent statement, Christine Lagarde (President of the European Central Bank, ECB) commented on Bitcoin saying that it is worthless. He says it goes to zero. “In my humble estimation, Bitcoin is worth nothing; it has no basis. There is no underlying asset that acts as safety amber.” Lagarde is not the only one with this belief. Billionaires Wallet Buffet, her business partner Charlie Munger and former Federal Reserve Chairman Ben Bernanke share similar views.

These fiat economists and billionaires have been making these claims since Bitcoin was $100, but they have been wrong about Bitcoin’s valuation. However, Lagarde’s comments contradict her previous comments that the crypto market needs to be properly regulated. The ECB president also says that the digital euro (the European Central Bank’s digital currency, CBDC) is a safer store of value than any of these cryptocurrencies.

CBDCs and Inflation

However, the authorities (be it the ECB or the US Federal Reserve) would oversee the printing of these CBDCs. Therefore, it is unlikely that these CBDCs will reduce inflation or be a better store of value than cryptocurrencies, especially Bitcoin. For example, inflation in European countries was eight percent last year.

At this rate of inflation, it is hard to believe that Lagarde is saying that the digital euro is a safer store of value than Bitcoin or other cryptocurrencies. A good interpretation of Lagarde’s comments is that the digital euro (or digital dollar) is not as volatile as Bitcoin in terms of price. But its value is guaranteed to decrease every year in the same way that your purchasing power decreases every year.

It means that inflation will remain high. The President of the ECB also stated: “The day the central bank’s digital currency (the digital euro) goes on sale, I will make sure that the central bank is fully behind it. It’s significantly different than a lot of these things (cryptocurrencies). In fact, CBDCs are centrally controlled.”

The truth is that CBDCs are still controlled by Lagarde and other central authorities. It is worth noting that CBDCs are very good for central bankers and politicians. But they are not suitable for everyday people. Unfortunately, CBDC means the end of privacy and freedom. It is a complete digital prison. A central bank under a CBDC system can freeze your money at any time at the request of politicians. They can spend your money whenever they want, take taxes without your permission, and even track your expenses.

This access is not possible in the current financial system. While that’s possible with credit card purchases, physical cash and in-person transactions aren’t as well monitored. Once CBDCs are on the blockchain, all transactions are visible to the central bank.

It won’t be visible to everyone. Only the central bank can see it. That’s why it’s the worst of all worlds, and this is not FUD. It is already happening in China. China is experimenting with people paying taxes by withdrawing them directly from their CBDC wallets. They are also experimenting with using CBDC to pay for bus tickets. Accordingly, the Chinese government will restrict or control your movement for any reason or no reason by denying your transportation fees with CBDC.

Inevitably, the US will also launch a CBDC. The Fed has been working on this for a few years. However, their progress is very slow. In March of this year, Fed Chairman Jerome Powell highlighted the characteristics of an ideal US dollar CBDC. He said it must have user privacy. It is private to others, but not to central bankers or politicians.

The good news is that younger generations care less about what their parents think about Bitcoin. For example, Lagarde publicly confirmed rumors that her son is investing in crypto, probably Bitcoin. The son of another famous Bitcoin critic, Peter Schiff, is also pro-Bitcoin. Schiff claims that gold is better than Bitcoin, even though gold continues to trade around $1,700.

Thus, we may have a very rosy future where younger generations like the younger Schiff and the younger Lagarde embrace Bitcoin and it becomes a global reserve. However, it is unlikely that the transition will be smooth.

Privacy coins to help

Meanwhile, a likely solution to CBDC’s lack of privacy is privacy coins like Monero, Dash, and Zcash. Privacy coins use different techniques to make transactions anonymous. Such technology includes cryptic addresses, zero-data credentials, and ringtones.

One of the earliest privacy coins, Monero, uses ring signatures to protect user privacy. The protocol allows multiple addresses (including yours) to accept a transaction. Thus, it would be impossible for anyone to associate that transaction with your account or any other account among the addresses.

It is worth noting that when the price of BTC fell, XMR (Monero’s original cryptocurrency) was barely affected. XMR is literally a 5 year cup & handle design. The use of the Monero network continues to grow, with everyone running to it to achieve transaction privacy as CBDCs become mainstream.

Zcash is another network that supports privacy. It uses the zk-SNARKS technique (an implementation of the zero-knowledge proofs technique). SNARKS stands for Concise Non-Interactive Argument Information. Zero-information proofs allow two parties to verify the validity of a statement, and neither has complete information about each other, except that they can confirm the statement.

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