A central bank digital currency (CBDC) could deprive citizens of privacy and control over their own finances. In this context, stablecoins are a more attractive alternative.
The Bitcoin Policy Institute (BPI) presented a report called Why the U.S. Should Reject Central Bank Digital Currencies (CBDCs). The paper’s central theme is to criticize government control over the economic lives of citizens and consider ways of “preserving the American model of political economy.”
The report’s authors, Natalie Smolenski and Dan Held, argue that a major threat to the existing model of relations between market, state, and society comes from CBDCs, providing the government with direct access to any transaction. It allows the state to use financial tools to censor and control citizens.
“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 researchers call such a perspective “the way of China” and note that almost all the functions of digital currencies have already been implemented within cryptocurrencies in general and stablecoins in particular. These include:
- instant domestic transactions;
- low-cost and fast cross-border transfers;
- compliance with KYC/AML policies when intermediating processing platforms.
“The creation of CBDCs is quite simply unnecessary.”
Analysts also note that using digital currencies increases the risks associated with cyberattacks for ordinary users. In addition, there may be “serious stability and reliability issues” with the new financial instruments due to the lack of experience of government agencies with such technologies.
The authors see the main solution in cryptographic stablecoins pegged to fiat currencies issued by private commercial banks. This will enable the realization of all CBDC advantages for end users, excluding the possibility of surveillance and state control.
In March this year, U.S. President Joe Biden launched a research and development process of the digital dollar. Ripple was even involved in developing the Digital Dollar Project, but almost two-thirds of Americans are still concerned about the CBDC’s launch, fearing a loss of financial privacy.
