US think tank Bitcoin Policy Institute is calling for the United States to reject central bank digital currencies (CBDCs) and consider Bitcoin (BTC) and stablecoins as alternatives.
In a white paper shared on September 27, authors including Texas Bitcoin Foundation Executive Director Natalie Smolensky, Ph.D., and former Kraken Development Lead Dan Held argue that CBDCs will push public financial control, privacy and freedom.
#CBDCs Do not solve any problem.
They extend state control to the last remaining areas of individual economic life.
My latest white paper b #Bitcoin Policy institute. ⬇️ https://t.co/PS4rOlvcOw
— Natalie Smolenski (@NSmolenski) September 27, 2022
Smolensky and Held argue that CBCCs essentially “give governments direct access to every transaction.” […] It’s only a matter of time before “transaction data is finally exposed to a global view” as the world’s individual and government IT infrastructure is the “target of constant and escalating cyberattacks.”
The pair also argued that CBCCs would allow governments to “prohibit, demand, encourage, encourage or reverse transactions” to become instruments of financial censorship and control.
“As a direct liability of central banks, CBCCs will be the new vanguard for imposing monetary policy directly on consumers: these policies include negative interest rates, savings penalties, tax increases and confiscation.”
Smolensky and Held say this increased focus on surveillance will mimic “the Chinese government’s surveillance efforts” and bring government visibility to all financial transactions that go undetected in the digital banking system.
“As the 21st century world goes China’s way, the United States must stand for something different,” he argued.
The authors say that many of the functions that CBCCs offer can be solved with Bitcoin, privately issued stablecoins, and even US dollars.
“For most people, physical cash, bitcoin, digital dollars and well-maintained stablecoins cover all financial use cases.”
Smolenski argued that BTC and private stablecoins allow fast, low-cost digital transactions both domestically and cross-border, “Digital dollars and platforms that facilitate transactions with them will continue to be subject to AML/KYC.”
“The creation of CBCCs is simply unnecessary.”
The white paper also argues that governments are often out of the depth of new technologies, citing an incident earlier this year when the Central Bank of the Eastern Caribbean, CBCC, went offline.
“Of course, serious stability and reliability issues arise when governments lead the implementation of CBDCs,” they wrote.
CBCCs are well on their way to development in some countries, such as China, but earlier this month, President Joe Biden indicated that the US is considering following suit after he ordered a report analyzing Science and Technology Policy (OSTP) 18. CBDC systems.
Previously, the discussion surrounding the use of CBDCs in the US has been characterized by division and confusion, with the author’s key issues with CBDCs being lack of government knowledge, potential privacy violations, and oversight.
CBCC is a threat to human freedom.
— Dan Held (@danheld) September 27, 2022
To combat what they see as a threat to CBCC, Smolenski and Held have created cryptographic stablecoins pegged to fiat currencies and backed 1:1 by strong collateral that can be issued by private banks around the world.
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“This provides all the benefits of CBDCs to end users while avoiding the levels of monitoring and control that CBDCs offer the state.”
“The United States must stand for something different: it must stand for freedom. For this reason, the United States must reject central bank digital currencies.”
The Bitcoin Policy Institute is a non-partisan, non-profit organization that studies the policy and societal implications of Bitcoin and emerging financial networks.