The Bank of Canada is the latest central bank to try to get in on the cryptocurrency movement. The central bank has decided that it, too, will look at issuing its own digital national currency. But its move isn’t to try to provide a more useful or better currency to consumers, it’s to track their spending habits in a way that the central bank can’t right now.
One of the most popular aspects of Bitcoin is the fact that it acts as digital cash. Individual Bitcoin addresses can’t easily be traced back to specific people, so Bitcoin allows them to purchase goods and services online without giving valuable personal information to vendors.
The Bank of Canada’s proposal for a cryptocurrency would specifically look at tracking users’ spending habits, as the Bank can’t currently do that with people who use cash. Ostensibly the reason for tracking spending habits is for research purposes, aggregating data so that central bank researchers can figure out trends in consumer behavior. That might help them in their conduct of monetary policy, or at least that’s what they would like to think.
The drawback to that, of course, is that while the data on individual purchases may be anonymized for researchers, it will still be compiled in a huge database somewhere, where it can be mined for any purpose, especially nefarious ones. If the government wants to find who has purchased certain items that it wants to ban, it has a list of people to contact readily available. Or if it wants to compile a list of people who can be blackmailed because of their purchases, that too can be done.
That’s why so many consumers and investors have trusted Bitcoin. The fact that it is at least quasi-anonymous, and the fact that no one can tie a particular transfer of Bitcoin to a particular good being purchased means that consumers can trust that their purchases won’t come under scrutiny. And investors, like those who invest in Bitcoin IRAs, can rest assured that their investments won’t come under scrutiny either.