In a recent interview, Bridgewater Associates founder Ray Dalio discussed the future direction of Central Bank Digital Currencies (CBDCs). He pointed out that CBDCs possess advantages in transaction convenience and institutional operation, making their implementation highly probable from both a technological and policy perspective. However, he also highlighted several potential risks associated with CBDCs, including insufficient privacy protections, significantly increased government control over fund flows, and potential impacts on the trust base of international holders. Dalio did not make a value judgment on CBDCs but rather described the potential structural impacts of this institutional change from the perspectives of "monetary operating mechanisms" and "government control structures."
The probability of CBDC implementation is high, and there are incentives to promote it in terms of both system and efficiency.
When discussing the future direction of monetary systems, Dalio pointed out that CBDCs are highly attractive in practice, so the possibility of them being implemented is quite high.
He explained that the advantages of CBDC lie in its convenient and efficient transactions, with a user experience that may be similar to that of money market funds, offering rapid fund transfers and high liquidity. From the perspective of institutional design and administrative efficiency, governments and central banks around the world have real incentives to promote CBDC.
Whether or not interest is offered is crucial and will affect people's willingness to hold the stock.
Dalio pointed out that whether CBDCs offer interest will be a major point of contention in the system's design. He mentioned that current discussions suggest that CBDCs are unlikely to offer interest, and in this case, CBDCs would not be a suitable asset for long-term holding for the general public.
The reason is that in an inflationary environment, simply holding non-interest-bearing digital currency will result in a loss of real purchasing power over time. In this context, funds are more likely to flow to financial instruments that provide yield, such as money market funds and bonds, rather than being stored in CBDCs for the long term.
Privacy space has been significantly reduced, and the government's control over financial flows has increased.
Dalio further pointed out that one of the core risks of CBDC is the almost complete lack of privacy. He noted that once transactions are fully digitized, all financial transactions conducted through CBDC will theoretically fall under the government's control.
This design does offer the government an efficiency advantage in combating illegal transactions and tax evasion; however, it also significantly increases the government's control over citizens' financial activities. Dalio points out that under the CBDC framework, the government will find it easier to enforce measures such as taxation, direct deductions or asset freezes, restrictions on the use of funds, and foreign exchange controls, effectively establishing a highly effective financial control mechanism.
Political risks are emerging, and cash flows may become a tool for controlling power.
When discussing extreme scenarios, Dalio stated that under the CBDC framework, individuals who are politically unfavored by the government could theoretically face restrictions on their access to funds, or even have their financial flow cut off entirely.
In this framework, financial instruments will no longer be merely neutral payment mediums, but could become a component of political power operations. For groups that value financial autonomy and privacy, such risks will constitute a highly sensitive and controversial institutional issue.
This article, "Ray Dalio of Bridgewater: CBDC Has a High Chance of Being Implemented, But Institutional Risks and Privacy Controversies Remain Unresolved," first appeared on ABMedia .
