The Bitcoin Policy Institute, a U.S. think tank, is advising the United States to turn down Central Bank Digital Currencies (CBDCs) and explore Bitcoin (BTC) and stablecoins as viable alternatives.
In a whitepaper released on Sept. 27, authors, including Natalie Smolenski, Ph.D., executive director of the Texas Bitcoin Foundation, and Dan Held, former Kraken growth lead, argue that CBDCs could strip individuals of financial control, privacy, and freedom.
#CBDCs don’t solve any problem.
They do extend state control to the last remaining free areas of individual economic life.
My latest white paper for the #Bitcoin Policy Institute. ⬇️ https://t.co/PS4rOlvcOw
— Natalie Smolenski (@NSmolenski) September 27, 2022
Smolenski and Held warn that CBDCs could allow governments to monitor every transaction conducted globally, which could pose security risks due to cyberattacks on government infrastructure.
They further argue that CBDCs could give governments the power to control various financial transactions, potentially leading to financial censorship and control.
“As a direct liability of central banks, CBDCs become a new vanguard for the imposition of monetary policy directly on consumers: such policies include, but are not limited to, negative interest rates, penalties for saving, tax increases, and currency confiscation.”
The authors suggest that the surveillance capabilities of CBDCs could mirror those of the Chinese government, thereby increasing visibility into financial transactions not covered by existing digital banking systems.
They propose that a combination of physical cash, Bitcoin, digital dollars, and stablecoins could address most monetary needs.
“For most people, a combination of physical cash, bitcoin, digital dollars and well collateralized stablecoins will cover virtually all monetary use cases.”
Smolenski argues that Bitcoin and private stablecoins enable fast, low-cost digital transactions globally, while digital dollars and stablecoins are subject to AML/KYC regulations by facilitating platforms.
“The creation of CBDCs is, quite simply, unnecessary.”
The whitepaper also highlights potential stability and reliability issues with CBDCs, citing an incident involving the Eastern Caribbean Central Bank’s CBDC, DCash, going offline earlier this year.
While some countries, like China, are making progress in developing CBDCs, President Joe Biden recently signaled the U.S.’s consideration of following suit by directing a report analyzing 18 CBDC systems.
The discussion around CBDCs in the U.S. has been marked by division and confusion, with concerns about government expertise, privacy violations, and control being key issues highlighted by the authors.
CBDC’s are a threat to human freedom.
— Dan Held (@danheld) September 27, 2022
To address these concerns, Smolenski and Held propose using cryptographic stablecoins pegged to fiat currencies and backed by hard collateral issued by private banks worldwide.
Related: It’s now or never — The US has to prepare itself for digital currency
“This would provide all of the purported benefits of CBDCs for end users while precluding the levels of surveillance and control that CBDCs offer the state.”
“The United States should stand for something different: it should stand for freedom. For this reason, the United States should reject central bank digital currencies.”
The Bitcoin Policy Institute is a nonpartisan, nonprofit organization focused on researching the policy and societal implications of Bitcoin and emerging monetary networks.
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