The introduction of a Central Bank Digital Currency (CBDC) in the United States has become one of the hottest debates in Washington. While no technology is inherently good or bad, a technology as powerful as a CBDC holds immense potential for abuse, a consequence too great for a free society to risk. To preserve privacy and free market stability, Congress should explicitly reject the idea of issuing a CBDC in any form.
Supporters of a CBDC argue that it could advance financial inclusion and potentially improve payments efficiency, however any potential benefits risk being overshadowed by its disastrous misuse. With the potential “absolute control” governments would gain over their citizens’ ability to engage in commerce, such a system could be abused to spy on individuals, prohibit certain people from participating in the economy altogether, or “delete” assets of disfavored people or groups.
Not only are such misuses possible, but they are already being demonstrated using today’s (relative to a CBDC-based system) more decentralized financial system. In 2022, Chinese citizens lost access to their WeChat accounts after sharing pictures of a banner condemning Chinese Communist Party General Secretary Xi Jinping. In Canada, the government used emergency powers to order banks to freeze the accounts of protesters deemed unlawful. And these are just two of many misuse cases that must give pause to anyone who is or will ever potentially be on the “wrong side” of a government.
There are alternatives to a CBDC that could help accomplish the same objectives—such as decentralized finance (DeFi) protocols, and postal banks—which can still realize the benefits of financial inclusion, efficiency, and privacy with fewer risks. No longer should we entertain the idea that issuing a CBDC is the inevitable path forward, as a system such as this exposes individuals and societies to an unacceptable risk of misuse. Regardless of one’s political or ideological views, the risk of misuse of a CBDC should be unanimously rejected by policymakers.
A CBDC could grant governments extreme power over the lives of their citizens, and the consequences of such cannot be ignored. To defend the rights and freedoms of citizens across the world, an absolute risk too big to take is the issuing of a Central Bank Digital Currency by the U.S. government.
