Cryptocurrency was born from a vision of financial freedom. When Bitcoin emerged in 2009, it promised a world where money could move peer-to-peer, beyond the reach of governments, banks, and centralized intermediaries. It represented self-custody, censorship resistance, and an escape from the traditional system.
Now, more than a decade later, central banks are exploring their own digital currencies, known as CBDCs. Over 100 countries are researching or piloting CBDCs, and some — like China with its e-CNY — have already rolled them out. Advocates argue that CBDCs will modernize payments, reduce costs, and expand financial inclusion.
Yet skeptics see another story: CBDCs as a Trojan horse, promising convenience while embedding unprecedented control. Could CBDCs become the tool that governments use to limit the very freedoms cryptocurrencies were meant to protect?
What Are CBDCs?
A central bank digital currency is essentially a digital form of a nation’s fiat money, issued and backed by its central bank. Unlike Bitcoin or Ethereum, CBDCs are not decentralized. They are sovereign money in digital form, with full legal status as tender.
Two broad models exist:
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Retail CBDCs: Digital cash for everyday use by citizens, like swiping a card but directly linked to central bank systems.
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Wholesale CBDCs: Restricted to banks and institutions for settlement of large-scale payments and interbank transfers.
Most of the excitement — and concern — centers on retail CBDCs, because they would directly touch billions of people’s daily financial lives.
The Promise of CBDCs
Central banks present CBDCs as beneficial innovations:
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Financial Inclusion: CBDCs could provide digital wallets to the unbanked, giving them access to money without requiring bank accounts.
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Efficiency: Transactions could settle instantly and cheaply, especially across borders.
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Transparency and Anti-Fraud: CBDCs could reduce illicit activity by leaving digital trails.
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Monetary Policy Tools: Governments could, in theory, distribute stimulus or adjust interest directly at the individual level.
On the surface, CBDCs appear to solve problems of speed, cost, and access. This “public good” narrative is why many countries are racing to develop them.
The Trojan Horse Concerns
Crypto advocates worry that the very features touted as strengths of CBDCs could morph into tools of surveillance and control.
1. Programmability of Money
CBDCs could be coded to restrict how money is spent. Imagine digital dollars that cannot be used to buy alcohol, video games, or certain political books. Or funds that expire if not spent within a timeframe. This programmability risks turning money into a behavioral control tool.
2. Surveillance and Privacy
Unlike cash, which is anonymous, CBDCs could log every transaction. Governments could track what you buy, where, and with whom. Even if oversight is promised, the data would exist. For authoritarian regimes, this offers unprecedented power to monitor and suppress dissent.
3. Censorship and Freezing Funds
With CBDCs, freezing accounts could be as simple as pressing a button. Protesters, dissidents, or even ordinary citizens caught in political disputes could find their money switched off instantly. Unlike bank accounts, CBDCs would cut off access at the very root — the monetary system itself.
4. Eliminating Cash
If CBDCs replace physical cash, the last bastion of anonymous, peer-to-peer exchange disappears. This could force all transactions into digital surveillance systems.
5. Erosion of Crypto Alternatives
CBDCs could be used to delegitimize or regulate private cryptocurrencies more harshly. Governments might argue that since citizens already have digital cash, decentralized crypto is unnecessary or even dangerous.
Case Study: China’s Digital Yuan
China is furthest ahead with its digital yuan (e-CNY). The design already showcases features that worry crypto advocates:
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Wallets linked to national ID systems.
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Programmable expiration dates on stimulus payments.
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Ability to track spending patterns in real time.
While China presents this as modernization, critics see a surveillance tool integrated into its broader social credit framework. For many, China’s model is the nightmare scenario of what CBDCs could become elsewhere.
Western Democracies and CBDCs
Proponents argue that in democratic societies, CBDCs could be designed with privacy in mind — for example, by allowing small offline transactions without identification. However, history shows that surveillance tools, once available, often expand beyond their original scope.
Laws justified in times of crisis — from anti-terrorism to financial monitoring — rarely shrink afterward. The risk is that CBDCs, even in liberal democracies, drift toward surveillance once the infrastructure exists.
Why Crypto Advocates Call CBDCs a Trojan Horse
The metaphor of a Trojan horse captures the duality: CBDCs arrive bearing gifts of convenience and efficiency, but hidden inside is the potential to erode financial freedom.
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Gift: Fast payments, universal access, government efficiency.
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Hidden Risk: A centralized ledger of every citizen’s transactions, programmable restrictions, and the elimination of cash anonymity.
For the crypto movement, which was born out of distrust in central authority, CBDCs represent the opposite of what Bitcoin promised. They are not a bridge to decentralization but a reinforcement of control.
Could CBDCs Kill Crypto Freedom?
The question is whether CBDCs will coexist with cryptocurrencies or be used to suppress them.
Scenario 1: Coexistence
CBDCs operate as official digital cash, while cryptocurrencies continue as alternative assets, like digital gold. Governments allow both, with CBDCs for daily use and crypto for investment or innovation.
Scenario 2: Suppression
Governments push CBDCs aggressively, while tightening restrictions on decentralized cryptocurrencies — citing risks of money laundering, terrorism, or consumer harm. In this scenario, crypto freedom is severely curtailed.
Scenario 3: Backlash and Parallel Economies
Citizens distrust CBDCs, fearing surveillance, and flock instead to decentralized crypto for privacy. This creates a parallel economy where crypto thrives as a resistance currency.
Which path unfolds will depend on political will, public adoption, and how much citizens value privacy over convenience.
The Bigger Picture: Control vs. Freedom
CBDCs crystallize a larger debate about money itself. Is money a public utility under government control, or is it a form of speech and freedom that should resist censorship?
For governments, CBDCs offer tools to fight crime, improve efficiency, and maintain control over monetary policy. For individuals, especially those in authoritarian states, CBDCs may represent the loss of their last financial refuge.
In this context, decentralized cryptocurrencies become more than speculative assets. They become tools of resistance, a check against total control.
What Safeguards Could Protect Freedom?
If CBDCs are inevitable, several safeguards could mitigate the risks:
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Privacy by Design: Allow anonymous small transactions, mimicking the role of cash.
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Independent Oversight: Ensure democratic checks and balances on data use.
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Interoperability with Crypto: Guarantee that CBDCs do not criminalize decentralized alternatives.
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Public Education: Equip citizens to understand the trade-offs and push back against overreach.
Without these, the Trojan horse metaphor may prove prophetic.
Conclusion
CBDCs are coming. Whether in five years or ten, central bank digital currencies are likely to reshape money worldwide. They could bring efficiency and inclusion. But they also carry risks of surveillance, control, and the erosion of privacy.
For the crypto movement, CBDCs represent the greatest challenge yet. They are not a competitor in technology but in philosophy: centralized control versus decentralized freedom.
Could CBDCs kill crypto freedom? If deployed without safeguards, yes. They could absorb the narrative of digital money while criminalizing its decentralized roots. But if citizens demand transparency, preserve crypto’s legitimacy, and insist on checks against abuse, CBDCs might coexist with crypto instead of crushing it.
The Trojan horse metaphor is a warning, not a prophecy. Whether it rolls through the gates depends on how societies respond now — before the digital currency era fully arrives.
