Typing ‘central bank’ into Twitter’s search window can be a shocking experience. On the one hand, the site will return tweets from the European Central Bank, Bloomberg and the International Monetary Fund’s number-two, Gita Gopinath.

However, it will also return alarmist tweets about central bank digital currency. An April 18 post by Harris Samaras (@HarrisSamaras) can stand as an example:

“If you thought that the Vaccine Passports were a violation of your privacy, if you were worried that your Digital ID could be used by Government to surveil [sic] and control you, wait until the Central Bank Digital Currency stratagem comes into force.”

And Robert F. Kennedy, anti-vaccine activist and scion of the US political dynasty, commented on April 5:

“The Fed just announced it will introduce its “FedNow” Central Bank Digital Currency (CBDC) in July. CBDCs grease the slippery slope to financial slavery and political tyranny.”

Almost all suggestions for retail CBDC have quite detailed accounts of how the central bank intends to maintain transaction privacy ... [although] many may remain suspicious

Charles Goodhart, London School of Economics

FedNow is, as the Federal Reserve pointed out a week later, not a CBDC, but a system for banks to process certain retail payment transactions. The Fed also stated it is not releasing a CBDC.

Other posts refer to China’s social credit system as a harbinger of a dystopian future. A few claim the IMF has created a global digital ‘Unicoin’. (It has not.)

Only a very few countries issue CBDCs. The People’s Bank of China is running large-scale pilots of its CBDC. However, it is alone among G20 central banks in doing so.

Of the 28 central banks that responded in the Fintech Benchmarks 2023 that they are working on a retail CBDC, only two said they had deployed a retail CBDC to the general public. Two more said they were piloting CBDC. The ECB is investigating a ‘digital euro’, but board member Fabio Panetta does not see it in circulation before 2026, even if it received the necessary approvals.

‘You fool! Can’t you see it’s a massive government conspiracy?’

Most people reading this article know to discount these sorts of social media posts. As Oonagh MacDonald, a British academic who has written on cryptocurrency, says: “Robert Kennedy has no idea what he is talking about” when he talks about FedNow.

However, these narratives have drifted from conspiratorial subcultures and obscure corners of social media, and into the statements of public figures.

Perhaps the most prominent Western political figure to denounce CBDCs is Florida governor Ron DeSantis. In March, he announced plans for new legislation that would deny a US CBDC the status of ‘money’ under state law. The Florida legislature is now considering the measure.

On April 1, DeSantis, a potential Republican presidential candidate, told an audience in Pennsylvania that CBDCs would allow federal authorities to control individual purchases.

“Use too much gas, they are going to try and stop it. They are not going to honour the transaction because you have bought more than they say. You buy a rifle, they say you have too many, you cannot do it,” DeSantis said.

This fear that the digital currency is a vehicle for government repression is appearing elsewhere on the political right, in the US and abroad. Ralph Babet, an Australian senator from a small political party, warned an Australian CBDC could be used to prevent red meat purchases on environmental grounds on April 26.

In an April 11 segment of his show, former Democratic representative Tulsi Gabbard told then Fox News host Tucker Carlson that CBDC “is just the latest effort by those in power in our country who are intent on undermining and taking away our own freedoms and liberties”. Carlson called it “dystopian”.

In the European Parliament, a debate on the digital euro on April 19 produced similar fears of government manipulation. Bert-Jan Ruissen, a member of the European Parliament for the small Dutch Christian-fundamentalist party, later worried on Twitter that an ECB digital currency could “only allow spending that the government approves”.

Gerolf Annemans, of the radical right Vlaams Belang party in Belgium, warned “a political coin like this will limit or eliminate your behaviour and opinion through your spending at the touch of a button”.

It is hardly unusual for some people to be dismissive, suspicious or even fearful of new technologies, or to be sceptical of central banks. However, the degree of hostility CBDCs are attracting reflects many key traits of contemporary Western politics. Specifically, rhetoric like DeSantis’s raises themes of surveillance fears, conspiracy theory and populism.

Seeing like a state

The development of an internet-based service economy has vastly expanded the ability of states, corporations and other actors to monitor, gather and monetise data. In a 2019 book, Shoshana Zuboff outlined what she called “surveillance capitalism”, in which data is exploited for its predictive power in the marketplace.

Central bank digital currencies – or at least, retail CBDCs that individuals might use day to day – invite concerns about privacy. DeSantis’s statement reflects fears that the state might invigilate consumer spending and restrict freedom. Gunnar Beck, a member of the European Parliament for the radical-right Alternative for Germany party, warned that a digital euro “threatens total surveillance”.

Central bankers and government officials are aware that consumers want privacy. In an April 2023 speech, Fed governor Michelle Bowman affirmed that policy-makers “must also consider … the risk that a CBDC would provide not only a window into, but potentially an impediment to, the freedom Americans enjoy in choosing how money and resources are used and invested”.

Any central bank would want transactions using its digital money to be traceable and auditable, rather than leaving its money open to illegitimate uses

Eswar Prasad, Cornell University

In the same month, EU financial services commissioner Mairead McGuinness told the European Parliament that “there is a delicate balance to be struck between privacy and anti-money laundering requirements”.

Are privacy concerns warranted? Some argue that these fears are groundless. Darrell Duffie, a professor of management and finance at Stanford University, says privacy worries “are not valid, as far as I can tell”.

When asked whether worries about surveillance through CBDCs are valid, he says: “There are no apparent plans to do this and Americans would not stand for it. I don’t have any idea why anyone would suggest this.”

Charles Goodhart, an emeritus professor of finance and banking at the London School of Economics, tells Central Banking that “almost all suggestions for retail CBDC have quite detailed accounts of how the central bank intends to maintain transaction privacy”. However, “many may remain suspicious”.

Eswar Prasad, a professor of trade policy at Cornell University and the author of a book on digital currency, says: “Here are design choices that could mitigate privacy concerns” about CBDC. But central banks will be unable or unwilling to replicate the complete anonymity that cash affords, “since any central bank would want transactions using its digital money to be traceable and auditable, rather than leaving its money open to illegitimate uses”.

MacDonald, the British academic, says “the main threat to privacy at present is cyber attacks”, adding that “much depends on the design of CBDC”. She adds that the US Bank Secrecy Act “is not up to date and needs revision” – a problem that Congress could address.

Paul Krugman, the Nobel economics laureate and columnist, detects a more venal motive behind some Republican privacy concerns. He argued in The New York Times that a CBDC would attract law-abiding users of private cryptocurrency. That would “suggest that those still using private digital currencies are probably up to no good”, Krugman continued. He tied DeSantis’s opposition to CBDC to Republican opposition to funding tax enforcement.

‘Or have they gotten to you, too?’

Globalisation has created new impetus for conspiracy theories, as people struggle to understand larger and more complicated systems of transnational production, finance and governance. Because central banks – through their superintendence of currency, monetary policy and finance – are so central to this globalised system, they are easy targets of anti-globalisation criticism and misinformation.

Clare Birchall, a professor of contemporary culture at King’s College London, says “centralised digital currency is one of the red flags for the ‘super-conspiracy theory’ (or umbrella theory) known as ‘the great reset’”. The Covid-19 pandemic “turbo-charged the tendency to converge different fears and anxieties under an overarching narrative”, she adds.

The World Economic Forum launched a project called ‘the great reset’ in 2020 to call for reforms to global capitalism and governance in the wake of the pandemic.

This quickly evolved into a conspiracy theory. The term now covers a diverse portfolio of what Birchall calls “perceived threats to freedom of movement and personal sovereignty”.

The main aspect of populism at play here is the engendering of an anti-elite position by framing the state (and by extension, the central bank) as a tool of ‘the elite’

Benjamin Moffitt, Australian Catholic University

Mike Rothschild, a US journalist who writes about conspiracy theories, said that “opposition and conspiracy theories about the Fed have been a constant in fringe culture since the early 1930s”. These portrayed the Fed as an agent “of powerful Jewish families”. “It makes sense that the old conspiracy theories about the Fed would be recycled into new ones about CBDC. It’s the same bogeyman,” Rothschild says.

Over the past several years, the US radical right has embraced extremists and conspiracy theorists. One prominent Republican member of Congress, Marjorie Taylor Greene, was once publicly associated with the QAnon conspiracy theory. Birchall adds: “The populist culture wars in the US borrow concerns from conspiracy talk but often stop short of spelling out a plot. There’s a symbiotic relationship between right-wing populist culture-wars talking points and conspiracy theories.”

Not every central bank need worry about conspiracy theorists to the same degree. David Lööv, a senior economist in Sveriges Riksbank’s CBDC unit, tells Central Banking that there has been “some misinformation and claims that the e-krona is intended as a tool for surveillance of the population and controlling the population and their money and how they spend it”. However, Swedish institutions do not engender the sort of fear and disaffection that breeds conspiracy theories. “In general, the Swedish population has quite high trust in government agencies,” Lööv says.

‘Populism’

That question of trust is integral to another source of anti-CBDC sentiment – the cluster of political ideology and behaviour often called ‘populism’.

Many political scientists complain that populism is poorly defined. Some academics criticise journalists for using the term as a lazy synonym for strong opposition, or as a euphemism for ‘authoritarian’ or ‘racist’.

With these limitations in mind, populism can still be a useful concept for central bankers. This is because it grows from and illustrates the distrust and alienation between many governments and their citizens.

Cas Mudde, a Dutch political scientist at the University of Georgia and a prominent scholar of populism, defines it as “an ideology that considers society to be separated into two homogeneous and antagonistic groups, ‘the pure people’ versus ‘the corrupt elite’”. Populists further believe “that politics should be an expression of the volonté générale [general will] of the people”.

What ‘people’ and ‘elite’ mean varies by context and is often inconsistent and unverifiable. However, the ‘elite’ almost always includes the political and administrative classes. Most importantly, the elite can never be trusted.

Benjamin Moffitt, an associate professor of politics at Australian Catholic University and a populism expert, says “the main aspect of populism at play here is the engendering of an anti-elite position by framing the state (and by extension, the central bank) as a tool of ‘the elite’ that is not answerable to ‘the people’, and should thus be resisted”.

Populists tend to reject any sort of independent, technocratic institution, Moffitt says, “whether it be courts, election bodies or central banks, for example”.

The increasingly complex, globalised world that fuels conspiracy theory also contributes to broader anti-elitism. Moffitt stresses that conspiracy theorists and populists are different groups. However, he adds “that the complexity and global nature of contemporary finance systems do indeed alienate ordinary citizens”. “They are not understandable, they are distant and there is very little civic education in many places about their role,” Moffitt says.

Like conspiracy theories, populism has a long history, especially in the United States. Kaleb Nygaard, a Federal Reserve specialist at the University of Pennsylvania, says “central banking has inspired populist outrage in the US from the very early days of the first central banks of the 18th and 19th centuries”. “This continued with the 1913 incarnation,” Nygaard continues, referring to the contemporary Federal Reserve.

Since the global financial crisis, “there’s been a pretty steady drumbeat of populist anger at the Fed from both the right and the left”, Nygaard adds.

Some distrust of elites is simply a judgement on their policy mistakes. Populist sentiment and activism frequently derives from policy failures. There is research tying austerity to Brexit, while the eurozone crisis gave birth to populist leftist movements like Syriza in Greece and Podemos in Spain.

Anne Krueger, a former first deputy managing director of the International Monetary Fund, says “the Fed’s failure to foresee strength of inflation has hurt [its credibility] all across the spectrum”, which could fuel distrust of a CBDC.

What can central banks do?

Central banks do take care to explain themselves to the public. One of the major trends in central banking in recent decades has been the expansion and intensifying of central bank communications with the public.

An ECB spokesperson tells Central Banking that it maintains “dedicated pages (eg hub, FAQ) on our website that explain the latest state of play regarding a possible introduction of the digital euro”. “Executive board members and most notably Mr Fabio Panetta very often explain in great detail (also at the European Parliament) the progress related to the investigation phase.”

Lööv, at the Riksbank, says his institution does not have a specific policy to combat misinformation. However, the Riksbank has “from the start been very open and transparent” about its objectives, he says. The central bank also publicly stated “that any programmability features that an e-krona might offer should not be to restrict or control how an e-krona could be used”.

In a 2020 speech to the Jackson Hole conference, delivered virtually, Bank of Canada governor Tiff Macklem acknowledged that “we need to spend more effort speaking and listening to the citizens we serve”. He stressed the importance of direct communication with the public, using simply put, consistent messaging.

Central bank openness is vitally important for political and practical reasons. However, creating a new digital currency is a political act, and that requires reservoirs of trust and coalition-building skills.

“It would be sensible, if not essential, for a central bank to garner broad political and public support for a CBDC before going forward with such an initiative,” Prasad tells Central Banking. “This will require a clear articulation of the benefits and disadvantages of a CBDC and an open debate about the trade-offs involved in switching to a digital form of central bank retail money.”

Central banks can – and do – make themselves more accessible and transparent to their publics. This may limit the impact of misinformation and reduce public concerns about privacy, legitimacy and control.

However, central banks are not political institutions, and their leaders are not necessarily well placed to “garner broad political and public support”. They can adapt to, but not remedy, the broad erosion of public trust that marks 21^st century societies – a gulf that has widened so greatly that even a deadly pandemic could not span it.