Many citizens in the US do not like CBDCs, so much so that calls are coming in from various quarters for new regulation to ban the central bank from issuing a natively digital dollar.
The controversy over CBDCs and their regulation in the US
CBDCs, or Central Bank Digital Currencies, are not cryptocurrencies, but trivially natively digital versions of ordinary fiat currencies.
Since they are for all intents and purposes the same fiat currencies already in use every day, it can be difficult to understand this controversy.
The key point is that a CBDC, unlike traditional versions of fiat currencies that are traded with digital instruments but without being natively digital, requires that all transactions be recorded on a single central ledger held, guarded and managed by the central bank.
Up to this point there might not even be any particular problem: Bitcoin for instance records all legacy on-chain transactions on a single and public central ledger.
The problem is that CBDC transactions will not be anonymous.
In fact, for anti-money laundering compliance, it is required by law that any service provider in CBDC must authenticate and verify the identity of its customers.
In other words with a CBDC, the Fed not only has access to the information of all transactions, but can also trace the senders and recipients quite easily.
Moreover, it can theoretically block or restrict any wallet and any transaction at will, even going so far as to be able to cancel those already executed.
To many such power in the hands of an entity that is not directly controlled by the state seems excessive, and even if it were controlled by the state, it would still seem excessive.
The difference with cryptocurrencies
Bitcoin also records all transactions on a single central ledger.
This ledger is public, unlike that of CBDCs, but the personal information of the senders and recipients is not recorded there.
That is, the transactions recorded on Bitcoin’s blockchain are anonymous, since only the public addresses of the senders and recipients are publicly recorded.
It is worth mentioning that nowadays there are various tools and methodologies that make it possible in some cases to trace the senders and recipients, but these are private techniques, used only by some and only in some cases, and they do not always prove effective.
Moreover, now there is also the Lightning Network, where transactions are simply not public.
Furthermore, true cryptocurrencies are based on decentralized protocols that do not allow any specific entity (not even states) to intervene to block, limit or cancel transactions.
In other words, CBDCs are not cryptocurrencies at all, but even more centralized fiat currencies than traditional ones.
The possible ban in the US
The first US politician to promise to ban the issuance of a natively digital dollar, i.e., the US CBDC, was Ron DeSantis.
A few months ago the Florida governor promised that if he became president he would ban the Fed from issuing its own CBDC.
He also issued an order prohibiting the use of the possible natively digital dollar in the state of Florida.
It is worth mentioning that, as of today, DeSantis’ chances of becoming President of the United States of America next year do not seem at all high, and that since there is still no US CBDC, his ordinance in its present state is a dead letter. Moreover, it can always be suppressed by future governors.
However, the US Congress, which is the body that has the power to legislate in the country, is now making a move as well.
It has done so thanks to Republican Congressman Tom Emmer, who has proposed a bill expressly prohibiting the Fed from issuing a CBDC.
BREAKING:
US Congressman, Tom Emmer, introduces bill to ban the Federal Reserve from creating a CBDC. pic.twitter.com/vAaAlk59HD
— Whale (@WhaleChart) September 13, 2023
Republicans are right now the politicians most concerned about privacy issues in finance, so much so that they even support cryptocurrencies. They are also the most skeptical of the Fed’s actions, if only because the current Gov. Biden is a Democrat and there is a presidential election next year.
For all intents and purposes, Emmer’s initiative looks like political propaganda in the run-up to the 2024 elections, and is unlikely to lead to an actual ban on the natively digital dollar before the new government takes office.
However, it does make it even more blatant that there will still be much talk about cryptocurrencies and CBDCs during the long election campaign that will end only in November next year.
