CBDCs should protect privacy, not be a surveillance tool: Former CFTC head
The US should lead the development of central bank digital currencies (CBDCs) away from being “surveillance coins” and towards being “freedom coins”, says the former head of the Commodity Futures Trading Commission.
In an article in The Hill on March 13, Christopher Giancarlo said the U.S. “must influence” CBDC development toward protecting “democratic values like free speech and the right to privacy,” leveraging current technology used by some cryptocurrency protocols.
My op-ed @bakken with @Jim Harper: The question is not whether #CBDCs can be stopped (they can’t) but about the sovereign AND the non-sovereign #digitalcurrency will enslave or free citizens in free societies. https://t.co/h1oT14NalK
— Chris Giancarlo (@giancarloMKTS) March 13, 2023
Nicknamed “Crypto Dad” for his pro-crypto perspective, Giancarlo is the co-founder of the Digital Dollar Project, which focuses on researching the implications of a US CBDC. He elaborated on his privacy concerns in a March 1 report for the policy think tank American Enterprise Institute that he co-authored with API Fellow Jim Harper.
He said the US needs to push for a “freedom coin” – a CBDC that guarantees a high level of privacy.
Giancarlo and Harper argued in the paper that CBDCs offer an opportunity “to rethink modern financial surveillance activities” and could potentially improve constitutional protections.
To achieve this, a CBDC could take advantage of crypto-technology, such as “zero-knowledge proof, homomorphic encryption and multi-party computation, which enable parties to prove that an encrypted proposition is true without revealing the underlying information,” they said.
My report today w/@AEI‘s @JimHarper: #CBDC & #stablecoins must preserve privacy and security, economic freedom, freedom of expression and personal autonomy. https://t.co/pB8uaA3KIT
— Chris Giancarlo (@giancarloMKTS) 28 February 2023
These technologies would make “intelligent enforcement” of crime prevention possible, the authors argued.
First, the United States must reconsider current financial surveillance policies. The authors took specific issue with a recent document published by the administration of US President Joe Biden:
“The White House Office of Science and Technology Policy’s (OSTP) recent technical evaluation for a Federal Reserve digital currency system shows that financial surveillance in the West is more similar to China’s than many would like to admit.”
The OSTP paper showed an “unwillingness to evolve beyond the current constitutionally suspect financial surveillance system,” they said.
Giancarlo and Harper singled out OSTP’s proposed anti-money laundering (AML) and Know Your Customer (KYC) measures as problematic, saying they allowed too much surveillance without probable cause.
Related: CBDCs threaten our future, so it’s time to take a stand
If a CBDC’s privacy is not guaranteed, there is a risk that it will be used as it is in China, they argued.
There, the e-yuan will “allow the Chinese government to link political compliance with individual prosperity and relegate political dissidents to poverty” by making all transactions visible to the People’s Bank of China, they said.
The authors’ thoughts have much in common with concerns expressed by US Senator Tom Emmer, a vocal opponent of a US CBDC who introduced the CBDC Anti-Surveillance Act of 2022.
Emmer has expressed concern about a CBDC that “tracks transaction-level data down to the individual user” and can be programmed “to shut out politically unpopular activity.” Emmer is also co-chair of the US Congressional Blockchain Caucus.
