The Risks of Digital Currencies to Our Society

(Minghui.org) The Minghui Editorial Board published an article in 2018 titled “A Notice on Digital Currency” that discouraged practitioners from becoming involved in digital currency.

Digital currencies pose several categories of risks:

1. No Legal Protection

Credit and debit cards have legal protections if something goes wrong. For example, if you need to dispute a purchase, your credit card company has processes in place to help you get your money back. Cryptocurrencies generally do not have any such protections.

2. Irreversible Payments

Once you pay with cryptocurrency, you can only get your money back if the person who accepted the payment sends it back. So before you make a purchase with cryptocurrency, be sure to do some research to ascertain the seller’s reputation.

3. Not Backed by Governments or Central Banks

Unlike most traditional currencies, such as the U.S. dollar, the value of cryptocurrencies is not tied to the promises of a government or central bank. The value of cryptocurrencies can change dramatically and constantly. An investment that might be worth thousands of dollars today might only be worth a few hundred dollars tomorrow, and vice versa. If the value drops, there is no guarantee it will rise again. Because of the ups and downs, it is closer to gambling than investing.

4. Potential for Fraud

With cryptocurrency, it may not be clear who is on the other side of the transaction. This provides cyber criminals with the opportunity to defraud others or conduct illegal activities, such as evading sanctions. Some cryptocurrencies may also be subject to internal manipulation.

5. Risks of Central Bank Digital Currencies (CBDCs)

Proposals to create central bank digital currencies (CBDCs) raise questions about data privacy, security, access, and technology dependence. Centralized databases can be targeted by hackers, threatening users’ financial security. The adoption of such currencies can be technically challenging for some users. Finally, increasing reliance on electronic systems for everyday transactions can be disastrous in the event of technology failures or cyberattacks.

CBDCs can also increase government monitoring and control over financial transactions and threaten democratic freedoms, as governments and central banks could track all user actions without judicial oversight.