A long-time White House advisor and government official believes blockchain technology is likely to be used by the world’s central banks to create a “universal cashless system”.
Dr Harald Malmgren served in the administrations of Presidents John F Kennedy, Lyndon B Johnson, Richard Nixon and Gerald Ford, working as a trade negotiator and policy researcher, and for decades played a part in shaping US foreign policy in the post-World War II era. Malmgren today acts as a consultant for companies and governments on international trade issues.
In a recent interview published on Zero Hedge, Malmgren touched on the policy push by many governments worldwide to move transactional systems from those dominated by cash to those comprised of digital, trackable transactions. In his view, central banks, private companies and governments desire such systems because of the data that would be accessible to them.
He cites blockchain technology as a major technological aspect of this drive, citing the work of Blythe Masters and her blockchain startup, Digital Asset Holdings (DAH), in developing such systems.
Malmgren told Sinclair & Co’s Erico Matias Tavares:
“The people now intensively working on a mechanism for a cashless society are building it around the concept of blockchain technology. In essence, there would be a single ledger that records each expenditure or revenue event (the block), linking them chronologically with every other subsequent purchase, sale, or revenue event in a recorded chain.”
Such an arrangement, he continued, would give rise to an environment in which “significant financial flows and all debts and assets could be monitored in real time, enabling policies and regulations to be adapted to the realities of daily life”.
This, he asserted, was at the heart of the work of DAH.
“The objective of the blockchain that Blythe Masters is pursuing is ultimately to put together a global blockchain, which is consolidated at any moment in time. Everything you have and everything you owe are visible,” he stated.
Privacy risks
For Malmgren, the creation of a universal cashless system carries significant risks. Beyond fears related to data privacy, a no-cash framework could lend itself to sociological governance whereby regulators start trying to oversee daily activities more actively.
“If your funds are being used in a statistically abnormal manner then they can start routinely asking you for an explanation, if it was drug money or money laundering or purchases of regulated products like alcoholic beverages or firearms,” he said.
If used in that fashion, Malmgren noted, the blockchain would help create an environment in which regulators have vast troves of data with which to monitor, categorize and regulate spenders. This system, he argues, would also enable more direct financial engineering as central bankers saw fit.
“A complete ledger system would place everyone inside a precisely defined, monitorable box with defined set of rules of behavior,” he said.
Malmgren continued:
“If local or national governments found themselves in financial crisis, they would not be limited to European style bail-ins of savings accounts. They could tap personal or family assets directly through the ledger system. Your balance could be altered by government simply by adding one new block to a long chain.”
“One can understand the benefits, but there are potential negative consequences for individuals and businesses,” he concluded. “And the Social Contract between citizens and their governments would be threatened.”
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