A central bank cryptocurrency? The US should reject it

[ad_1]

The introduction of bitcoin and other cryptocurrencies has prompted the US Treasury Department and the Federal Reserve to ask: Why shouldn’t America roll out digital cash – or Central Bank Digital Currency – using the same technology used for these privately issued currencies? After all, anyone can create a shared digital ledger and issue their own currency on it.

But not all cryptocurrencies are created equal. Some, like bitcoin, prioritize individual privacy and autonomy by enabling free transactions without trusted third parties. Other cryptos – including CBDCs – are built to be fully programmable – controllable – by the trusted third party that issues them. This is a big difference and governments are counting on most people not knowing it.

The goal of CBDCs is to eventually replace paper cash – the last vestige of private financial transactions. CBDCs are issued on centralized digital ledgers that give governments full visibility into every cash transaction made by anyone, anywhere in the world. Every transaction is fully identity verified. CBDCs can also be programmed to use only with publicly approved vendors for public purchases. Central banks can directly implement negative interest rates on CBDCs to punish savings — Americans, for example, could see 2% shaved off our cash balances every day, week or month — however often the Fed wants to “stimulate” spending. And of course, there’s nothing stopping the government from simply confiscating your cash at any time.

To be sure, the US dollar is already fully digital in today’s global banking system, and the government could simply ask private banks to implement all these policies already. But the fig leaf of separation between commercial bank money and central bank money makes this kind of control politically and procedurally more difficult. With a CBDC, these roadblocks would be removed and the government would have direct control over the cash in consumers’ bank accounts.

It is not surprising that authoritarian governments like China and Russia are implementing CBDCs. But liberal democracies also want to implement them.

In a lecture at Columbia University, said Minneapolis Federal Reserve President Neel Kashkari: “If they want to monitor every one of your transactions, you can do it with a central bank’s digital currency; you can’t do that with Venmo. If you want to impose negative interest rates, you can do it with a central bank’s digital currency; you can’t with Venmo. And if you want to tax customer accounts directly, you can do it with a central bank’s digital currency; you can’t with Venmo. So I understand why China would be interested. Why would the American people be for it?”

Former IMF official Eswar Prasad, now professor of economics at Cornell University, echoed Kashkari’s concerns: “If we all had CBDC accounts instead of cash, it could in principle be possible to implement negative interest simply by shrinking CBDC account balances. It will be much easier to take on helicopter drops.” He added that CBDCs would remove the last vestiges of central bank independence from elected officials – fully politicizing monetary policy.

As pointed out the Cato Institute“this brave new world of monetary policy is the equivalent of the government saying your money isn’t really your money. … This level of government control is not compatible with economic or political freedom.”

this year, Congressman Tom Emmer and Late. Ted Cruz introduced legislation to prevent the Federal Reserve from issuing CBDC accounts directly to retail customers. But The ECASH Act, also introduced in Congress this year, instead requires the Treasury Department to issue CBDC, with retail accounts to be managed by commercial banks. If a CBDC is implemented in America, it will likely be through the private banking system – but the back-end ledger will be fully controlled by the federal government.

Let’s be absolutely clear: people have rights. Governments do not have rights. The United States government has no right to watch and control how Americans spend their money or how much money they have. If Americans want to use cryptocurrency, they can already use bitcoin or other privacy-preserving coins that offer them virtually all the benefits of a CBDC without the drawbacks.

The United States must show that we are different from authoritarian governments around the world by rejecting a central bank digital currency.

Natalie Smolenski is a Dallas-based startup founder. She also founded Texas Bitcoin Foundationa public charity, and co-founded Texas Blockchain Council, a trade association. She is also a senior fellow at Bitcoin Policy InstituteShe wrote this column for The Dallas Morning News.

We welcome your thoughts in a letter to the editor. See the guidelines and submit your letter here,

We are now accepting reader nominations for the 2022 Texan of the Year. Please submit your contribution here,



[ad_2]

Source link

Leave a Comment