Reject CBDCs and look to BTC and stablecoins instead
The US think tank Bitcoin Policy Institute is calling on the US to reject Central Bank Digital Currencies (CBDCs) and look at Bitcoin (BTC) and stablecoins as alternatives.
In a whitepaper shared on September 27, authors including Texas Bitcoin Foundation CEO Natalie Smolenski PhD, and former Kraken growth manager Dan Held argue that CBDCs would deprive the public of financial control, privacy and freedom.
#CBDCs not solve any problem.
They extend state control into the last remaining free areas of individual economic life.
My latest white paper for #Bitcoin Political Institute. ⬇️ https://t.co/PS4rOlvcOw
— Natalie Smolenski (@NSmolenski) 27 September 2022
Smolenski and Held argued that CBDCs would essentially “give governments direct access to every transaction […] carried out by any individual anywhere in the world and that it will only be a matter of time before “transactional data will eventually become available for global review” as government IT infrastructure is a “target of constant and escalating cyber-attacks.”
The pair also argued that CBDCs would also enable governments to “prohibit, require, disincentivize, incentivize or reverse transactions, making them tools of financial censorship and control.”
“As a direct responsibility of central banks, CBDCs become a new vanguard for imposing monetary policy directly on consumers: such policies include, but are not limited to, negative interest rates, penalties on savings, tax increases and currency confiscation.”
Smolenski and Held suggest that this greater focus on surveillance will mimic “the Chinese government’s surveillance efforts” to bring state visibility to all financial transactions not already observed through the digital banking system.
“When the world goes the way of China in the 21st century, the United States should stand for something else,” they argued.
The authors also say that many of the functions CBDC provides can already be solved with a combination of Bitcoin, privately issued stablecoins and even the US dollar, noting:
“For most people, a combination of physical cash, bitcoin, digital dollars, and well-secured stablecoins will cover virtually every use case.”
Smolenski argued that BTC and private stablecoins will allow instant, low-cost digital transactions both domestically and across borders, while “digital dollars and stablecoins will continue to be subject to AML/KYC compliance by the platforms that facilitate transactions with them,” adding :
“The creation of CBDCs is simply unnecessary.”
The whitepaper also argued that governments are often out of their depth with new technology, pointing to an incident earlier this year when the Eastern Caribbean Central Bank’s CBDC, DCash, went offline.
“In reality, where governments lead the implementation of CBDC, serious stability and reliability issues will arise,” they wrote.
CBDCs are already well on their way to development in some countries, such as China, but earlier this month President Joe Biden signaled that the US is considering following suit after asking the Office of Science and Technology Policy (OSTP) to submit a report analyzing 18 CBDC systems.
In the past, discussions surrounding CBDC use in the US have been characterized by division and confusion, which is one of the author’s main concerns with CBDCs, lack of expertise from authorities, along with potential privacy violations and control.
CBDCs are a threat to human freedom.
— Dan Held (@danheld) 27 September 2022
To combat what they see as concerns with CBDCs, Smolenski and Held propose cryptographic stablecoins tied to fiat currencies and backed 1:1 with hard collateral that can be issued by private banks worldwide.
Related: It’s now or never – the US must prepare for digital currency
“This would provide all the claimed benefits of CBDCs to end users, while excluding the levels of monitoring and control that CBDCs offer the government.”
“The US should stand for something else: it should stand for freedom. For this reason, the US should reject central bank digital currencies.”
The Bitcoin Policy Institute is a non-partisan, non-profit organization that researches the political and societal implications of Bitcoin and emerging monetary networks.
