If Republicans want to prevent the introduction of a central bank digital currency (CBDC) that would allow government to track and control your purchases, they’d better scrutinize the two anti-CBDC bills before Congress. There’s a huge difference between them.
One would prevent a CBDC surveillance token from replacing the American dollar. The other would actually greenlight a CBDC by government-chosen contractor.
It would be tragic if a China-style CBDC is forced on the American people by Republicans who, at best, didn’t understand what they voted for.
The idea of a CBDC is to replace the U.S. dollar with a government crypto-token tracking ledger that could surveil and control every dollar you spend. Bureaucrats could prevent you from buying the wrong thing, from raw milk to gas stoves to firearms. They could stop you from donating to the wrong person, like we saw with the Canadian truckers. They could even force you to buy whatever a government bureaucrat tells you to.
Florida Gov. Ron DeSantis (R) and Sen. Mike Lee (R-Utah) have come out strongly against a CBDC, both to protect our fundamental rights and because a CBDC represents an existential threat to our financial system and to the U.S. dollar itself. Rep. Alex Mooney (R-W.Va.), meanwhile, has introduced a bill to ban any CBDC pilot program.
But a very different kind of Republican CBDC bill is also making the rounds in Congress. This one, bizarrely, openly allows a CBDC so long so it’s run by a government-chosen company like Ripple or perhaps a Wall Street bank.
A contractor fixes nothing. Bank Secrecy Act requirements mean a CBDC run through a contractor will still have to collect your personal data — and turn it over to the government. The federal government would retain every power to surveil, control and mandate your spending.
Moreover, even a contractor-run CBDC obviously takes its orders from the government; the Federal Reserve and Treasury will not be outsourcing control of money to Ripple or JP Morgan. That means the broader financial and economic risks of a CBDC are all there, obediently executed by government contractors.
These risks include the ability to lock you into a failing bank, or to spark bank runs by draining deposits from regional or commercial banks toward a government-run “public option” for banking — a CBDC risk the Fed has directly admitted.
A CBDC run through a contractor could even help force you into that holy grail of economic central planners: negative interest rates. That means money that vanishes if you don’t spend it, perhaps to “stimulate” the economy in time for President Biden’s next election.
The crypto-token firm Ripple — currently locked in a legal battle with the SEC for making $1.3 billion as an unregistered security — has been very active in lobbying to build CBDCs for governments worldwide. After their recently announced CBDC pilot in now China-dominated Hong Kong, Ripple released a glitzy promotional video portraying their turnkey CBDCs running in China, in Taliban-run Afghanistan, and in military dictatorships from Myanmar to Uzbekistan. Given the profits involved, they would surely love to add America to that list.
While CBDC cheerleaders parrot China’s claim that a CBDC is an innocent project to keep up with new technologies, in fact we already have the “digital dollar” in the form of private stablecoins like those of Circle or Paxos that offer every transaction benefit of a CBDC but that are actually separate from government.
These stablecoins act like a true “digital dollar” that can be used online, and are wildly popular to the point that more than 99.5 percent of currency-based stablecoins are in U.S. dollars. The dollar is actually far more dominant in crypto than it is in the real world. Stablecoins already provide fast and cheap transactions, settling in seconds at near-zero cost, which safeguards the continued global dominance of the dollar and promotes American exports, especially of agricultural products where cost and speed are critical.
The federal government doesn’t run grocery stores, and it doesn’t run telephone companies. That’s partly because it’s bad at running things, but mostly because of the threats to civil liberties. Instead of promoting surveillance tokens using contractors with deep lobbying pockets, Congress should instead clarify that CBDCs are banned in every form, while fully backed non-government stablecoins are welcome.
Hiding a CBDC inside a government contractor changes none of its power to suppress and punish political opposition, to surveil and control the American people, to whipsaw our economy and threaten our banking system, or to provide a push-button remote control for central planners. Worse, spelling out a congressional roadmap to a CBDC via contractor provides congressional cover for CBDC promoters in Washington who are already champing at the bit to enslave the American people.
The federal government has no business running a CBDC, even if it hires contractors to do the dirty work.
Peter St. Onge, Ph.D., is the Mark A. Kolokotrones Fellow in Economic Freedom at The Heritage Foundation.