CBDCs as financial game-changers: the good, the bad and the ugly.

ARYZE has spoken to Wealth Tech Professional, Educator, Advisor, Finance Professional, and Speaker Patrick Schueffel. He is highly skilled in Innovation Management, Banking, Fintech, Entrepreneurship, Venture Capital, and he is an Adjunct Professor at the School Of Management Fribourg in Switzerland. Schueffel shared his insights on CBDCs, especially in regards to privacy and autonomy for consumers.

cbdc map
Source: BIS (Bank Of International Settlements).

This article will examine the pros and cons of CBDCs for consumers inspired by Schueffel´s relevant points. Finally, it will showcase ARYZE´s full-reserve stablecoin – Digital Cash as the closest thing to a CBDC without it being issued by a central bank.

There are currently over 80 countries worldwide researching the implementation of CBDCs while stablecoins are under increasing scrutiny. The Bank Of International Settlements (BIS) argues that stablecoins share the same potential money laundering risks as other cryptocurrencies and revelations like Tether´s reserves, not being 100% backed, do not help counteract this narrative.

However, proponents of stablecoins believe that central bank digital currencies (CBDCs) are unlikely to significantly solve the problem of facilitating international cross-border online services unless central banks implement heavy regulations.

CBDCs according to Schueffel

1. How will CBDCs potentially affect consumers?

CBDCs will be introduced as an additional money and will eventually successfully replace cash. If you introduce a third payment channel system it will be incredibly costly and a major effort. Basically, once this is done it can only be justified by getting rid of cash, deemed as a major cost driver. Consumer privacy will be affected in the absence of cash as they will no longer be the custodians of their own money. With CBDCs the custodians of the cash will be the central banks, which can cause the infringement of autonomy or discretionary power over the consumer’s funds and may lead to financial repression.

2. What are the privacy risks involved in terms of data?

Having data stored on every financial transaction of every citizen from cradle to death bed, centrally, say at the ECB for example, poses the biggest privacy risk to consumers imaginable. There are many grey zones where you want to keep your privacy and autonomy. In the absence of cash, your money can be blocked even when you may think you are a lawful citizen.

3. Would it be right to claim that a lot of the consumer´s information is already available on Google?

Yes, but in this case, the information is fragmented amongst different players, never combined into the central depository of one particular player, and especially not the state. Although much can be said about Big Tech´s massive influence, if we look at history, the biggest threat to civil liberties were never private companies but the state.

4. Can CBDCs incorporate privacy features?

Yes, for example, The Swiss Central Bank is looking into designs for CBDCs that are privacy-preserving and incorporate anonymity. In this model, the CBDC is a genuine digital bearer instrument; its coin is stored locally on the computer or smartphone; there is no central account or ledger involved that would contain customer data. Inbuilt cash-like anonymity is essential,but most of the CBDCs being currently designed are not anonymous towards the government and transactions will thus be ultimately traceable.

5. What is your take on stablecoins?

Personally, I would prefer a trustworthy stablecoin backed by a dollar rather than a central bank digital dollar. CBDC is basically the biggest danger for civil liberties in our lifetime because every action in real life is mirrored somehow by a financial transaction in the background and essentially the state can obtain data on it and steer it as it sees fit. If you are no longer the custodian of your own money, you are prone to becoming a victim of financial repression and that can come in various forms : 1) negative interests – if the states needs money, the state can issue forced bonds and force you to loan your money to the state. This has happened before in history and with the technology of CBDCs it will be much easier. 2) Exclusion of any individual or groups of people from the financial system on the push of a button.

6. Are there any upsides for consumers, and are they aware of the implications it may have on their lives?

On the upside, CBDCs can foster financial inclusion, especially in developing countries because consumers can hold CBDCs without having a bank account. However, in view of the vast expenditure and the likelihood of massive risks to user privacy and autonomy, I do not see many upsides for consumers. Also, there is a lot of misleading information on this topic, for example on who has the decision power over introducing CBDC. In Europe the media portrays the central bank as the ones in the driver seat. But he ECB is part of the executive branch, they do not make laws. But the law states what is legal tender. If you want to introduce CBDCs you need to change the laws in every single country that operates with the euro. Parliaments need to do that, not the ECB. There seems to be an inherent lack of democracy in this process.

The good, the bad and the ugly.

The good

Central Bank Digital Currencies have the potential to reduce costs associated with cash handling and foster financial inclusion because consumers can hold CBDCs without having a bank account. Additionally, the programmability of CBDCs transforms the monetary industry by improving payment efficiency through programmable payments, overall modernizing payment infrastructures.

The bad

A study conducted by the ECB found that privacy is very important for EU residents when asked about their top priorities when it comes to how the digital euro should be designed (watch our Podcast Episode on the digital euro here). Having data stored on every financial transaction of every citizen centrally at the ECB poses an enormous privacy and safety risk to consumers.

The ugly

Programmable money has in-built rules that limit the user, for example imposing restrictions on certain goods or services. This feature can give governments the option to exclude any individual or group of people from the financial system. The discretionary power over spending will be with the government, as the central bank will be the custodian of the money and not the consumer.

What does it mean for the average citizen when totalitarian governments such as Venezuela develop their own CBDCs?

Under certain design and implementation specifications, CBDCs can hold the capacity to reduce both economic freedom and economic welfare, regardless of where they are implemented. Economists Steve Cecchetti and Kim Schoenholtz, claim there are enormous risks in allowing governments to have such a high level of detailed information about our activities and warn that such large concentrations of power can pose severe risks to democracy.

ARYZE´S full reserve stablecoin

Central banks, together with regulators and politicians, only have control over the risks associated with money creation to a certain extent. The alternative to fractional reserve banking is what is called full reserve banking. Its’ proposition is not to facilitate loans, but purely to facilitate core banking operations like payments and deposits, where 100% of the liabilities are backed up at all times in the bank.

Recreating The Chicago Plan

ARYZE will obtain direct access to banking infrastructure in multiple jurisdictions, and thereby a direct link into various central banks. Moreover, we will recreate The Chicago Plan, proposing full reserve banking and thus guarantee a much more risk-free environment for the core management of money.


Despite potential benefits, CBDCs also pose a grave danger given that under certain design specifications, they can provide governments and central banks with the ability to deploy totalitarian systems of state surveillance and control which undermine basic freedoms and economic welfare in general.

There needs to be a balance between legacy financial systems and modern technology in the same way that there needs to be a balance between public and private monetary innovations. As a Danish company, considerations regarding human rights and data security (GDPR) are vital to us. Digital Cash is the closest thing to a CBDC without it being issued by a central bank and is both automated and decentralized while maintaining these fundamental values.

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