Jake Chervinsky, head of policy at the cryptocurrency advocacy group Blockchain Association, said the United States should be careful to avoid a “totalitarian nightmare” in its potential launch of a central bank digital currency, or CBDC.
In his speech at the SXSW festival in Austin, on Tuesday, in a panel on “Financial Surveillance in a Cashless Society,” Chervinsky said that while US President Joe Biden had issued an executive order establishing a national strategy for cryptocurrencies in the United States, there were potential privacy issues in launching a CBDC. Empowering a government to surveil its citizens using a CBDC, “sounds like the kind of thing China would do” with its digital yuan, according to the Blockchain Association’s chief policy officer.
“It appears that a central bank digital currency would be under the full and complete control of the government,” Chervinsky said. “So at all times the government would know what you’re spending, where you’re spending it. They could program the central bank’s digital currency so they could put in restrictions and say ‘you can only spend these dollars in these certain places, but not in these others.’ They could freeze the accounts or take the money out of the accounts at any time.”
The Blockchain Association Policy Officer added:
“Our hope is that when the government does this study [como establece la orden ejecutiva] […] the conclusion they reach is that we are not going to compete against China – an authoritarian dictatorship – also acting like an authoritarian dictatorship. Instead, we will empower our private sector to deliver competitive solutions.”
In January, the US Federal Reserve published a long-awaited discussion paper on the benefits and risks of a digital dollar. The central bank said at the time that it would consider the potential privacy concerns of a CBDC, but added that a US-issued digital currency “could help preserve the international role of the dollar.”
The chairman of the Fed, Jerome Powell has spoken out in favor of stablecoins, stating that they could be a “useful and efficient part of the financial system serving the consumer if properly regulated” and that a digital dollar could eliminate the need for cryptocurrencies and stablecoins. However, some US lawmakers are opposed to the idea of a Fed-issued CBDC: in January, Minnesota Rep. Tom Emmer said he would introduce legislation aimed at limiting the “central bank’s authority to offer retail bank accounts.”
Some experts have claimed that China’s digital yuan could threaten the dominance of the US dollar if CBDC adoption continues to grow at home and abroad. Sheila Warren, CEO of the Crypto Council for Innovation, said on the same panel that while it was “theoretically possible” to issue a CBDC in the United States without the technology being used for digital surveillance, she envisioned the digital currency being used for wholesale transactions between banks and not for retail.
China has been testing its CBDC in major cities since April 2020 in an effort to eventually replace cash with the digital yuan. As of January, 261 million users were reported to have created digital wallets for e-CNY, with transactions worth more than $13 billion.
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