From China to Canada, it’s clear that governments around the world are salivating at the prospect of introducing currencies they can manipulate hassle-free.
Arguing over the prudence and implications of issuing a central bank digital currency (CBDC) in the United States has seemingly become one of Washington’s favorite icebreakers. As Congress considers the question, it is critical that Americans clearly understand and soberly consider the immense power a CBDC could grant governments as well as the unacceptable risk of that power’s potential abuse.
In March, Florida Governor Ron DeSantis introduced a proposal to ban CBDC use in his state, arguing that total monetary control by the federal government is dangerous for American society. Shortly after, the White House released its economic report in which it argued in favor of a CBDC as a mechanism for advancing “human rights, democratic values, and privacy.” The fact that many countries and monetary systems have begun to develop and issue their own CBDCs colors the domestic debate as well.
While no technology is inherently evil, the consequences of various technologies’ potential misuse varies considerably. So too a CBDC system is, at heart, merely a tool — not inherently good or bad on its own. But the downside risk of a CBDC’s misuse is so immense that the concept should be rejected. The idea of completely centralizing “absolute control” over people’s ability to engage in commerce via a CBDC should be anathema to free societies — even if the prospect of that power’s misuse seems outlandish today.
But in the United States, at least, it’s not outlandish. It would be naive to ignore America's long journey of developing an increasingly pervasive financial surveillance system, as well as the possibility of a CBDC being used for the same purpose. America’s policymakers have a chance now to arrest that trajectory and build a better system that more consistently respects citizens’ right to privacy.
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Proponents of a CBDC argue that it could advance financial inclusion and improve the efficiency of payments. They’re right, but the key issues here are what potential cost this might come with and whether or not there are alternatives available to accomplish the same objectives with fewer risks. Luckily, in this case, alternatives are numerous and extraordinarily varied: Ideas range from decentralized finance (DeFi) protocols to postal banks.
Critically, these alternatives can accomplish many of the core benefits that proponents of a CBDC point to while avoiding the downside risk of creating a system that, if abused, could undermine individual rights in a way few technologies ever could. A CBDC could not only grant a government total, unchecked surveillance into someone’s financial life — down to every cent spent — but also allow a government to, for example, prohibit an individual from engaging in commerce altogether or literally delete the assets of some disfavored individual or group of individuals. No government should have that power accessible via a few keyboard strokes.
Examples leveraging the (relative to a CBDC-based system) decentralized financial system we rely on today also warrant caution. In 2022, Chinese citizens who shared pictures of a banner condemning Chinese Communist Party General Secretary Xi Jinping lost access to their WeChat accounts. WeChat is a “do-everything app” that is commonly used as a method of payment, which means suspended users were unable to accomplish basic tasks such as calling taxis or purchasing groceries.
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Similarly, the Canadian government last year used emergency powers to order banks to freeze the accounts of people participating in protests the government deemed unlawful. Regardless of whether one believes that invoking such potent powers was justified in either particular case, these instances must give pause to anyone who is — or expects to ever potentially be — on the “wrong side” of a government. And, importantly, these actions were taken using a system that is unwieldy compared to the brutal efficiency of a CBDC.
Americans across the political and ideological spectrum should find common cause in rejecting the issuance of a CBDC, whether one is concerned about a CBDC’s power to grant the government “absolute control” over extremely personal life choices or because one is concerned about the federal government targeting disfavored individuals or groups writ large. A completely centralized monetary system almost begs to be abused. The mere possibility of such a powerful tool being used for unlawful, immoral or restrictive reasons on a societal scale means that the idea of issuing one warrants extreme suspicion, if not outright rejection.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
