The U.S. should not approve a central bank digital currency (CBDC), a new Competitive Enterprise Institute report argues.
“CBDCs could hand the federal government a powerful tool for economic and social control and unprecedented intrusion into the private financial lives of billions of people,” warned Paul Jossey, author of the new report.
Despite claims that a CBDC would help with financial inclusion, stop criminal activity, improve monetary policy efficiency, and smoother cross-border payments, in reality, CBDCs would provide little benefit, particularly for mature financial systems like the U.S.
For example, said Jossey, “It is unclear that people who already lack back accounts or credit cards would trust a government digital currency. And it’s unclear why criminals would use a traceable government digital currency. Terrorists and money launderers would rely on virtually untraceable government currency — cash.”
In January, the Federal Reserve published a discussion paper on CBDCs, signaling policymakers’ interest in creating a Fed-run digital currency and opening a public comment period about it. Meanwhile, Rep Tom Emmer (R-Minn.), Co-Chair of the Congressional Blockchain Caucus, recently introduced legislation to prohibit the Fed from issuing a CBDC directly to individuals.
As the CEI report describes, private sector digital currencies are already revolutionizing financial transactions for people worldwide.
“The Fed should encourage the proliferation of stablecoins, which are already solving problems and offering payment innovations without all the political or economic risks posed by a CBDC,” said Jossey.
“Stablecoins enable the entire cryptocurrency ecosystem,” he explained. “They facilitate trading, allow ordinary people to collect exponentially high interest rates compared to regular savings accounts, aid political dissidents, and offer relief from central bank policies that disempower the world’s most vulnerable people.”
On Feb. 8, Jossey will discuss his paper at a CEI online event on the risk of CBDCs that also features Rep. Emmer.
> View the report, Central Bank Digital Currencies Threaten Global Stability and Financial Privacy by Paul H. Jossey