Digital Dollar “Threatens Americans’ Core Freedoms”


The release of a central bank digital currency in the U.S. could threaten citizens’ privacy, weaken cybersecurity, and undermine the dollar’s international status because CBDCs can only “solidify government control.”


CBDC Issue in U.S. Will Expand Financial Oversight of Citizens

Analysts at the Cato Institute, a policy research center in Washington, D.C., argue that CBDC use poses a clear and present danger to the financial privacy and economic freedoms of American citizens.

They argue that Congress should prohibit the Fed and the Department of the Treasury from creating CBDCs because issuing the digital dollar can only provide more financial oversight and destabilize the financial system. The Institute’s analysts also claim that the only reason for issuing CBDCs is the government’s desire to “solidify government control” over the payment systems.


Financial accessibility, which is considered one of the main advantages of the CBDC, was called “relative” and “nuanced” by analysts. Cato Institute analysts cited a 2021 survey by the Federal Deposit Insurance Corporation (FDIC), stating that over half of U.S. households simply didn’t have a bank account. And about 72% of them didn’t trust the banks at all because they believed they violated their privacy. The CBDC fails to provide a higher level of trust in banks as it’ll only exacerbate the concerns citizens have about privacy. Thus, the digital dollar can’t increase financial accessibility in the country.

Analysts also accused the government of hindering innovation in the private banking sector by all means in order to promote government initiatives. For example, back in 2017, a consortium of American private banks launched the Real-Time Payments (RTP) network, which has long met the needs of citizens for instant payments across the country and has been actively developing. This year, however, RTP faced obstacles from the Federal Reserve (FED). The thing is that the Fed planned to launch its own instant settlement network (FedNow) in 2023. 

The Institute’s experts say that politicians’ fears about maintaining “the dollar’s status as the world’s reserve currency” in the event that the country doesn’t have the CBDC are also unfounded. In their view, the U.S. dollar’s status is secured not by a particular technology but by “the strength of the American economy” and “its legal protections for private citizens,” which contrasts favorably with other countries. Therefore, Congress should focus on protecting financial privacy and ensuring “transparency in monetary governance” so that the dollar can strengthen its international status. And the CBDC issue won’t help in any way.

According to the Institute’s analysts, the CBDC can improve monetary and fiscal policy implementation in the United States. They believe that Congress can provide certain payments with zero liquidity or credit risks without issuing CBDCs. Such payments should only be fully contingent on government guarantees, with which the government can provide any existing private sector e-payment system. However, in that case, the Fed would lose the control it seeks.

Eventually, the CBDC would give the federal government complete visibility into every financial transaction. If that happens, Americans’ privacy rights would simply be abrogated, and the CBDC would become “a substantial threat to financial privacy.” The government, having access to all citizens’ financial transactions, will be able to control and manipulate transactions. For example, the government can prohibit citizens from buying certain goods and services, limit the amount of them, or even freeze funds. Therefore, the release of CBDCs could lead to “abuses of power.”

Another problem with CBDCs, highlighted by the Institute’s analysts, is the central storage of financial information. CBDCs can be an attractive target for cybercriminals, and since the federal government isn’t immune from hacking or data leakage, absolutely all U.S. citizens are at risk. At the same time, analysts don’t deny the fact that the private sector isn’t safe from cyberattacks either. But a higher level of decentralization of private financial institutions can provide protection for a large number of citizens, which CBDCs are unable to provide.

The U.S. government didn’t make a final decision on issuing CBDCs. Joe Biden approved the research and development of the digital dollar and instructed the U.S. Department of the Treasury to release a financial instrument, despite the concerns of the Fed analysts. The government believes that the CBDC can improve the stability of the banking system, but about 60% of American citizens expressed a negative attitude toward the idea of issuing a national digital currency.

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